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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
-------------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____________________TO___________________
COMMISSION FILE NO. 0-23442
CAMERON ASHLEY BUILDING PRODUCTS, INC.
--------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-1984957
------------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number )
11651 PLANO ROAD, DALLAS TX 75243
---------------------------------
(Address of principal executive offices)
(Zip Code)
214-860-5100
------------
(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 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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The number of shares of Registrant's Common Stock outstanding at May 26,
1998 was 9,362,000.
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
INDEX
<TABLE>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheets as of April 30, 1998 and
October 31, 1997 3
Consolidated Condensed Statements of Income for the three months
and the six months ended April 30, 1998 and 1997 4
Consolidated Condensed Statement of Stockholders' Equity for the
six months ended April 30, 1998 5
Consolidated Condensed Statements of Cash Flows for the six months
ended April 30, 1998 and 1997 6
Notes to Consolidated Condensed Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
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<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
April 30, October 31,
1998 1997
--------- ---------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 30,914 $ 899
Accounts receivable, net 112,112 115,687
Notes receivable held for sale, net 10,282 16,462
Inventories 102,333 82,298
Prepaid expenses and other assets 2,373 2,257
Deferred income taxes 4,094 4,527
--------- ---------
Total current assets 262,108 222,130
PROPERTY, PLANT AND EQUIPMENT, NET 39,759 38,683
INTANGIBLES, NET 28,318 28,732
OTHER ASSETS 4,789 3,706
--------- ---------
TOTAL $ 334,974 $ 293,251
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 67,004 $ 66,792
Accrued expenses 16,458 21,628
Warehouse line of credit 4,808 12,189
Current maturities of debt 465 973
--------- ---------
Total current liabilities 88,735 101,582
LONG-TERM DEBT, LESS CURRENT MATURITIES 131,847 79,480
DEFERRED INCOME TAXES 1,442 3,262
--------- ---------
Total liabilities 222,024 184,324
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock; authorized 100,000 shares, no shares issued
and outstanding
Common stock; no par value; authorized 20,000,000 shares; 9,797,283 shares
issued and 9,356,762 shares outstanding at April 30, 1998,
9,744,717 shares issued and 9,304,196 shares outstanding
at October 31, 1997 63,644 62,947
Retained earnings 53,850 50,462
Treasury stock, at cost, 440,521 shares (4,296) (4,296)
Cumulative foreign currency translation adjustment (248) (186)
--------- ---------
Total stockholders' equity 112,950 108,927
--------- ---------
TOTAL $ 334,974 $ 293,251
========= =========
</TABLE>
See notes to consolidated condensed financial statements
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- --------------------
April 30, April 30, April 30, April 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUE $196,896 $175,463 $363,986 $316,347
COST OF SALES 157,349 140,696 290,521 253,380
-------- -------- -------- --------
GROSS PROFIT 39,547 34,767 73,465 62,967
OPERATING EXPENSES 32,217 28,517 63,541 53,221
RE-ENGINEERING AND SYSTEM
CONVERSION COSTS 923 -- 923 --
-------- -------- -------- --------
INCOME FROM OPERATIONS 6,407 6,250 9,001 9,746
INTEREST EXPENSE 1,765 1,449 3,421 2,542
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 4,642 4,946 5,580 7,204
PROVISION FOR INCOME TAXES 1,894 1,888 2,192 2,723
-------- -------- -------- --------
NET INCOME $ 2,748 $ 3,058 $ 3,388 $ 4,481
======== ======== ======== ========
NET INCOME PER SHARE:
BASIC $ 0.29 $ 0.33 $ 0.36 $ 0.49
======== ======== ======== ========
DILUTED $ 0.29 $ 0.32 $ 0.35 $ 0.48
======== ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 9,350 9,239 9,336 9,151
======== ======== ======== ========
DILUTED 9,637 9,437 9,608 9,392
======== ======== ======== ========
</TABLE>
See notes to consolidated condensed financial statements.
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
COMMON STOCK CURRENCY
---------------------- RETAINED TREASURY TRANSLATION
SHARES VALUE EARNINGS STOCK ADJUSTMENT TOTAL
--------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF NOVEMBER 1, 1997 9,745 62,947 $ 50,462 $ (4,296) $ (186) $ 108,927
Proceeds from exercise of stock options, 45 514 -- -- -- 514
including tax benefits of $124,000
Proceeds from employee stock purchase plan 7 108 -- -- -- 108
Management and director stock plan
compensation expense -- 75 -- -- -- 75
Net income -- -- 3,388 -- -- 3,388
Foreign currency translation adjustment -- -- -- -- (62) (62)
--------- --------- --------- --------- --------- ---------
BALANCE AS OF APRIL 30, 1998 9,797 $ 63,644 $ 53,850 $ (4,296) $ (248) $ 112,950
========= ========= ========= ========= ========= =========
</TABLE>
See notes to consolidated condensed financial statements
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six months ended
April 30, April 30,
1998 1997
-------- --------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 3,388 $ 4,481
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 4,393 3,553
Management and director stock compensation 75 --
(Gain) on sale of property, plant and equipment (2) (23)
Deferred income taxes (1,387) (588)
Foreign currency translation adjustment (62) --
Changes in operating assets and liabilities, net of acquisitions:
Accounts Receivable 3,569 3,939
Notes receivable held for resale 6,180 (4,155)
Inventories (19,796) (19,919)
Prepaid and deferred expenses (336) (2,060)
Accounts payable and accrued expenses (6,267) (1,246)
Warehouse line of credit (7,381) 2,129
Other assets/liabilities 882 (1,403)
-------- --------
Net cash used in operating activities (16,744) (15,292)
INVESTING ACTIVITIES:
Payment for acquisitions (660) (16,572)
Purchases of property, plant and equipment, net (3,995) (6,321)
Investment in affiliate (193) --
Other (3) (8)
-------- --------
Net cash used in investing activities (4,851) (22,901)
FINANCING ACTIVITIES:
Net borrowings under senior note 80,071 --
Debt issuance costs (871) (183)
Net (repayment) borrowings under revolving lines of credit (26,780) 34,286
Repayments of seller financing of acquired business (1,252) (273)
Proceeds from employee stock purchase plan 108 71
Exercise of stock options 514 1,300
Purchase of treasury stock -- (121)
Other (180) (175)
-------- --------
Net cash provided by financing activities 51,610 34,905
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 30,015 (3,288)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 899 5,078
-------- --------
END OF PERIOD $ 30,914 $ 1,790
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 2,932 $ 2,210
======== ========
Cash paid for income taxes $ 2,475 $ 2,817
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
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CAMERON ASHLEY BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1998
1. INTERIM FINANCIAL STATEMENTS
The accompanying consolidated condensed financial statements of Cameron Ashley
Building Products, Inc. and its subsidiaries (the "Company") have not been
audited; however, the balance sheet at October 31, 1997 has been derived from
the Company's audited financial statements. In the opinion of the Company's
management, the financial statements reflect all adjustments necessary to
present fairly the results of operations for the three month and six month
periods ended April 30, 1998 and 1997, the Company's financial position at April
30, 1998 and October 31, 1997, and the cash flows for the six month periods
ended April 30, 1998 and 1997. These adjustments are of a normal recurring
nature.
Foreign Currency Translation in stockholders' equity reflects the unrealized
adjustments resulting from translating the financial statements of foreign
subsidiaries. The functional currency of the Company's foreign subsidiaries is
the local currency of the country. Accordingly, assets and liabilities of the
foreign subsidiaries are translated to U.S. dollars at quarter-end exchange
rates. Income and expense items are translated at the average rates prevailing
during the periods. Changes in exchange rates which affect cash flows and the
related receivables or payables are recognized as transaction gains and losses
in the determination of net income.
Certain notes and other information have been condensed in or omitted from the
interim financial statements presented in the Quarterly Report on Form 10-Q.
Therefore, these financial statements should be read in conjunction with the
Company's 1997 Annual Report on Form 10-K.
The operating results for the second quarter and for the six month period ended
April 30, 1998 are not necessarily indicative of the results that may be
expected for the entire year.
Certain prior year amounts have been reclassified to conform to current year
presentation.
2. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
On January 31, 1998, the Company adopted SFAS No. 128, "Earnings Per Share",
which established new standards for computing and presenting earnings per share
("EPS") by replacing the presentation of primary EPS with a presentation of
basic EPS. Primary EPS included common stock equivalents while basic EPS
excludes them. This change simplifies the computation of EPS and requires the
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures. Prior year amounts have been
restated to reflect the new method of calculation.
3. LONG-TERM DEBT
Long-term debt consists of the following at April 30, 1998:
<TABLE>
(In thousands)
<S> <C>
Senior Debt:
Unsecured Senior Notes with maturities and interest rates as follows:
$10,000 due April 15, 2001 bearing interest at 6.79% $15,000 due
April 15, 2002 bearing interest at 6.79%
(The Company is required to make prepayments of $5.0 million
on April 15, 2000 and April 15, 2001)
$10,000 due April 15, 2003 bearing interest at 7.21%
$15,000 due April 15, 2006 bearing interest at 7.61%
$3,000 due April 7, 2004 bearing interest at 6.71%
$63,000 due April 7, 2010 bearing interest at 6.90%
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C>
(The Company is required to make annual prepayments of $12.6
million beginning April 7, 2006)
$10,000 CDN due October 7, 2004 bearing interest at 6.45%
$7,000 USD due October 7, 2004 bearing interest at 6.71%
Interest is due semi-annually, with an average interest rate of 6.93% $130,072
NationsBank of Texas, N.A. (as agent):
Revolving credit note due January 15, 2002; unsecured; interest is due
quarterly at the LIBOR rate or Banker's acceptance rate plus 0.50%
to 1.0%, or at a base rate (defined in the agreement as prime)
At April 30, 1998, the interest was 5.52% 1,478
Seller financing of acquired businesses:
Various terms, interest rates ranging from 7% to 9%,
collateralized by certain land and buildings 450
Other, including capital leases 312
--------
132,312
Less current maturities (465)
--------
Long-term debt $131,847
========
</TABLE>
The seller notes payable are subordinated to the obligations under the
NationsBank agreement.
At April 30, 1998, the Company had $1,586,000 of letters of credit issued under
the NationsBank revolving credit facility.
NOTE 4. ACQUISITIONS - COMPLETED AND PENDING
On March 16, 1998, the Company acquired certain assets and liabilities of J&L
Services, Inc., a distributor of residential roofing products serving the
southern metropolitan Chicago market for a purchase price of $721,000. The
purchase price is subject to certain post-closing adjustments and was funded by
the NationsBank revolving credit note.
On April 6, 1998, the Company acquired Oakmont Industries Ltd. Of Vancouver,
British Columbia for a purchase price of $1,496,000. The purchase price is
subject to certain post-closing adjustments and was funded by the NationsBank
revolving credit note.
The Company recently entered into a letter of intent to acquire certain assets
and liabilities of APi Supply Company, headquartered in Minneapolis, Minnesota.
APi Supply Company, which had annual revenues of approximately $135 million in
its most recent fiscal year, is a wholesale distributor of roofing, siding,
insulation and millwork products, and sells primarily to retail lumber dealers
and home centers throughout the Midwest. APi Supply Company has nine locations
in Minnesota, Wisconsin, North Dakota, South Dakota, Iowa, Montana, and
Illinois. This acquisition is expected to close in June 1998.
In addition, the Company recently entered into letters of intent to acquire
three other companies with combined annual revenues in their latest fiscal years
of approximately $45 million.
NOTE 5. COMMITMENTS AND CONTINGENCIES
The Company entered into a letter of intent dated October 2, 1997, to acquire
Bradco Supply Corporation ("Bradco"), subject to due diligence and negotiation
of a definitive agreement. Prior to the completion of the Company's due
diligence procedures, negotiations were discontinued by Bradco. On November 3,
1997, Branco filed suit claiming a breach of the letter of intent and claimed
damages of $3 million. Management believes the case is without merit and intends
to vigorously defend the Company against such claim; however, an adverse
resolution could result in an after-tax charge to income of up to $2 million.
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<PAGE> 9
In January 1998, a subsidiary of the Company and several of its employees were
subpoenaed to provide information to a grand jury of the United States District
Court, Northern District of Texas, in connection with an investigation of
possible violations of federal antitrust laws in the aluminum building products
industry, including possible violations of Section 1 of the Sherman Act. No
allegations of wrongdoing have been made against the subsidiary, the employees
or the Company. In February 1998, information was provided in response to the
subpoenas, and the Company is not aware of any subsequent activity in the
matter.
From time to time, the Company is also involved in litigation and proceedings in
the ordinary course of its business. Management believes that such ordinary
course litigation will not have a material adverse effect on the Company's
financial condition or results of operations.
NOTE 6. SUBSEQUENT EVENTS
On May 28, 1998, the Company sold $9.8 million of notes receivable held for sale
associated with Cameron Ashley Financial Services, Inc. ("CAFS"). This sale,
representing substantially all of such notes, will result in a pre-tax loss of
$0.6 million in the third quarter of fiscal 1998.
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<PAGE> 10
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth items from Cameron Ashley Building Products,
Inc.'s Consolidated Condensed Statements of Income as percentages of revenue.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------------- ----------------------------------
April 30, 1998 April 30, 1997 April 30, 1998 April 30, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0%
Cost of Sales 79.9 80.2 79.8 80.1
----- ----- ----- -----
Gross Profit 20.1 19.8 20.2 19.9
Operating Expenses 16.4 16.2 17.5 16.8
Re-engineering and System
Conversion Costs 0.5 0.0 0.3 0.0
----- ----- ----- -----
Income from Operations 3.2 3.6 2.4 3.1
Interest Expense 0.9 0.8 0.9 0.8
----- ----- ----- -----
Income Before Income Taxes 2.3 2.8 1.5 2.3
Provision for Income Taxes 0.9 1.1 0.6 0.9
----- ----- ----- -----
Net Income 1.4% 1.7% 0.9% 1.4%
===== ===== ===== =====
</TABLE>
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
SECOND QUARTER ENDED APRIL 30, 1998 COMPARED TO SECOND QUARTER ENDED
APRIL 30, 1997
Revenue increased 12.2% from $175.5 million in the three months ended April 30,
1997 to $196.9 million in the three months ended April 30, 1998, an increase of
$21.4 million. Revenue growth in the quarter was primarily due to additional
sales from acquisitions, combined with same-branch sales growth of 3.7% compared
to 1.7% in the quarter ended April 30, 1997.
Gross profit for the second quarter increased $4.8 million or 13.7% on higher
sales, and as a percentage of revenue increased 0.3% to 20.1% compared to the
same period in 1997. Gross profit percentage was affected positively during the
quarter as a result of improved selling margins and favorable purchasing
economies.
Operating expenses increased 13.0% from $28.5 million in the 1997 period to
$32.2 million in the 1998 period and increased modestly as a percentage of
revenue from 16.2% to 16.4%. Operating expenses include both branch operations
expenses as well as corporate overhead costs. The dollar and percentage
increases in operating expenses during the quarter were primarily due to higher
costs associated with CAFS and new acquisitions.
Operating expenses of $0.9 million from re-engineering and system conversion
costs incurred in the second quarter are primarily associated with business
process re-engineering and new data processing systems training related to the
implementation of the Company's new information system in its Cameron division.
These expenses were 0.5% of revenue for the quarter and effectively reduced
income from operations by 12.6% in the quarter ended April 30, 1998. In
recognizing these expenses, the Company applied Emerging Issues Task Force
Consensus 97-13 "Accounting for Costs Incurred in Connection with a Consulting
Contract or an Internal Project That Combines Business Processing Re-engineering
and Information Technology Transformation" and the recently issued AICPA
Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". Total operating expenses, including
costs associated with re-engineering and system conversion, were $33.1 million
in the quarter ended April 30, 1998, compared with $28.5 million in the prior
year quarter.
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Income from operations increased 2.5% from $6.3 million in the 1997 period to
$6.4 million in the 1998 period, and decreased as a percentage of revenue from
3.6% to 3.2% primarily due to the re-engineering and system conversion costs
described above.
As a result of the above factors and an increase in interest expense of $0.3
million, income before income taxes decreased 6.1% from $4.9 million in the 1997
period to $4.6 million in the 1998 period. Net income decreased 10.1% from $3.1
million in the 1997 period to $2.7 million in the 1998 period. Net income as a
percentage of revenue decreased from 1.7% in the 1997 period to 1.4% in the 1998
period. Diluted earnings per share decreased $.03 to $.29 per share on 2.1% more
shares outstanding.
SIX MONTHS ENDED APRIL 30, 1998 COMPARED TO SIX MONTHS ENDED APRIL 30, 1997
Revenue increased 15.1% from $316.3 million in the six months ended April 30,
1997, to $364.0 million in the six months ended April 30, 1998, an increase of
$47.7 million. Revenue growth for the six month period was primarily due to
additional sales from acquisitions, combined with same-branch sales growth of
1.5% for the six months ended April 30, 1998 compared to 0.9% in the 1997
period.
Gross profit for the six month period increased $10.5 million or 16.7%, and as a
percentage of revenue increased from 19.9% in the 1997 period to 20.2% in the
1998 period. Gross profit percentage was affected positively during the six
month period as a result of improved selling margins and favorable purchasing
economies.
Operating expenses increased 19.4% from $53.2 million in the 1997 period to
$63.5 million in the 1998 period, and increased as a percentage of revenue from
16.8% to 17.5%. Operating expenses include both branch operations expenses as
well as corporate overhead costs. The dollar and percentage increases in
operating expenses during the six month period were primarily due to higher
costs associated with CAFS and new acquisitions.
Operating expenses of $0.9 million from re-engineering and system conversion
costs were incurred as discussed above. These expenses were 0.3% of revenue for
the six months ended April 30, 1998 and effectively reduced income from
operations by 9.3% in the 1998 period. Total operating expenses, including costs
associated with re-engineering and system conversion, were $64.5 million in the
six months ended April 30, 1998, compared with $53.2 million in the 1997 period.
Income from operations decreased 7.6% from $9.7 million in the 1997 period to
$9.0 million in the 1998 period and decreased as a percentage of revenue from
3.1% to 2.4%. The decrease in income from operations as a percentage of revenue
is primarily due to the re-engineering and system conversion costs of $0.9
million recognized in the second quarter of 1998 and the operating results of
CAFS.
As a result of the above factors and increased interest expense, income before
income taxes decreased 22.5% from $7.2 million in the 1997 period to $5.6
million in the 1998 period. Net income decreased 24.4% from $4.5 million in the
1997 period to $3.4 million in the 1998 period, and net income as a percentage
of revenue decreased from 1.4% in the 1997 period to 0.9% in the 1998 period.
Diluted EPS decreased from $0.48 per share in the 1997 period to $0.35 per share
in the 1998 period.
EFFECTS OF INFLATION
Management does not believe that inflation has had a material impact on results
of operations for the periods presented. Substantial increases in costs,
however, could have a significant impact on the Company and the industry.
Management believes that, to the extent inflation affects its costs in the
future, the Company can generally offset inflation by increasing prices if
competitive conditions permit.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary needs for capital resources are to finance acquisitions,
working capital and capital expenditures. Borrowings for working capital
typically increase during periods of sales expansion when higher levels of
inventory and receivables are needed and decrease as inventories and receivables
are converted to cash which is then used to pay down debt. The Company had
$131.8 million of long-term debt, less current maturities, outstanding as of
April 30, 1998, consisting of the facilities described in the 1997 Annual
Report, Form 10-K and in the notes to the accompanying interim financial
statements.
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<PAGE> 12
Included in the long-term debt at April 30, 1998 was $80 million in senior
notes that the Company issued in a private placement to institutional
investors during April 1998. These notes have an average interest rate of
6.85% and average term of 9.5 years.
Net cash used in operating activities was $15.3 million and $16.7 million for
the six months ended April 30, 1997 and 1998, respectively. The cash used in
operating activities is primarily due to increased seasonal inventory purchases
during the first and second quarters.
Capital expenditures were $4.0 million and $6.3 million for the six months ended
April 30, 1998 and 1997, respectively. The Company intends to spend
approximately $9.0 million for capital expenditures in the third and fourth
quarters of fiscal 1998. Included in this amount are capital expenditures for
property, plant and equipment additions and replacements and capital costs for
the Company's new information system. Excluded in this estimate are capital
expenditures that may be attributable to future acquisitions.
Management estimates the total project cost of the new enterprise information
system to be approximately $11 million, of which approximately $8.4 million will
be capitalized in fiscal 1998 and 1999.
The Company believes that its current cash position, funds from operations, and
the availability of funds under its credit agreements will be sufficient to meet
anticipated liquidity requirements for the next twelve months.
SEASONALITY
The Company's first and, to a lesser extent, its second quarter, are typically
adversely affected by winter construction cycles and weather patterns as the
level of activity in both the home improvement and new construction markets
decreases. Management closely monitors operating expenses and inventory levels
during seasonal periods and, to the extent possible, controls variable operating
costs to match seasonally adjusted revenues in both the U.S. and Canada.
FORWARD-LOOKING INFORMATION
The matters discussed in this Report on Form 10-Q, other than historical
information, and, in particular, information regarding future revenue, earnings
and business plans and goals, consist of forward-looking information under the
Private Securities Litigation Reform Act of 1995, and are subject to and involve
risks and uncertainties which could cause actual results to differ materially
from the forward-looking information. Forward-looking statements may be
indicated by phrases such as "believes", "anticipates", "expects", "intends",
"foresees", "projects", "predicts", "forecasts" or similar words and involve
known and unknown risks and uncertainties which may cause the Company's actual
results in future periods to differ materially from forecasted results. Among
the factors that could cause results to differ materially are the following: (i)
business and economic conditions in North America, (ii) business and economic
conditions in the regional markets in which the Company operates, (iii) adverse
homebuilding conditions including those related to weather and interest rates,
(iv) the ability to make acquisitions at reasonable prices and achieve synergies
upon integration, (v) reliable and cost-effective supply of products from
manufacturers, and (vi) technology risks in integrating information systems.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have any material exposure to market risk
associated with activities involving derivative financial instruments, other
financial instruments and derivative commodity instruments.
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<PAGE> 13
CAMERON ASHLEY BUILDING PRODUCTS, INC.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company entered into a letter of intent dated October 2, 1997, to
acquire Bradco Supply Corporation ("Bradco"), subject to due diligence and
negotiation of a definitive agreement. Prior to the completion of the Company's
due diligence procedures, negotiations were discontinued by Bradco. On November
3, 1997, Bradco filed suit claiming a breach of the letter of intent and claimed
damages of $3 million. Management believes the case is without merit and intends
to vigorously defend the Company against such claim; however, an adverse
resolution could result in an after-tax charge to income of approximately $2
million.
In January 1998, a subsidiary of the Company and several of its
employees were subpoenaed to provide information to a grand jury of the United
States District Court, Northern District of Texas, in connection with an
investigation of possible violations of federal antitrust laws in the aluminum
building products industry, including possible violations of Section 1 of the
Sherman Act. No allegations of wrongdoing have been made against the subsidiary,
the employees or the Company. In February 1998, information was provided in
response to the subpoenas and the Company is not aware of any subsequent
activity in the matter.
From time to time, the Company is also involved in litigation and
proceedings in the ordinary course of its business. Management believes that
such ordinary course litigation will not have a material adverse effect on the
Company's financial condition or results of operations.
Reference is also made to Item 3 in the Company's Report on Form 10-Q
for the fiscal quarter ended January 31, 1998 with respect to other legal
proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders
(a)-(b) At the Company's Annual Meeting of Shareholders on March 3,
1998, the following directors were elected for a term of three years:
Class I
Ronald R. Ross
Edwin A. Wahlen, Jr.
Donald S. Huml
The following directors continued their terms of office as directors of
the Company after the Annual Meeting:
Class II Class III
Walter J. Muratori J. Veronica Biggins
Alan K. Swift Richard L. Cravey
Charles C. Schoen III Allen J. Keesler
Harry K. Hornish
(c) The following matters were voted upon at the Annual Meeting:
<TABLE>
<CAPTION>
For Against Votes Withheld
--- ------- --------------
<S> <C> <C> <C>
1. Directors
Ronald R. Ross 7,528,724 0 458,785
Edwin A. Wahlen, Jr. 7,528,724 0 458,785
Donald S. Huml 7,528,724 0 458,785
</TABLE>
- 13 -
<PAGE> 14
<TABLE>
<S> <C> <C> <C>
2. Ratification of Deloitte & Touche LLP
as independent certified public
accountants for fiscal year ended
10/31/98 7,986,909 50 550
</TABLE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits required to be filed with this Report on Form 10-Q are listed
on the Exhibit Index following the signature page hereof.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the Registrant during the
quarter ended April 30, 1998.
- 14 -
<PAGE> 15
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.
CAMERON ASHLEY BUILDING PRODUCTS, INC.
(Registrant)
Date: /s / J. Andrew Kerner
---------------------------- -------------------------------------
J. Andrew Kerner
Executive Vice President/Chief
Financial Officer
- 15 -
<PAGE> 16
CAMERON ASHLEY BUILDING PRODUCTS, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
10.18.5 Third Amendment to Second Restated Credit Agreement dated
March 18, 1998 among the Company, Cameron Ashley Canada, Inc.,
NationsBank of Texas, National Association, as Agent and
Issuing Bank, ABN AMRO Bank, N.V., as Co-Agent, Canadian
Imperial Bank of Commerce, as Canadian Issuing Bank and
Canadian Agent, and other Lenders
10.25 Form of Note Purchase Agreement between the Company and various Note
Purchasers dated as of April 7, 1998.
10.25.1 Form of Note Purchase Agreement between Cameron Ashley Canada, Inc. and various
Note Purchasers dated as of April 7, 1998.
10.26 Employment Agreement dated March 30, 1998 between Wm. Cameron & Co. dba
Cameron Ashley Building Products and J. Andrew Kerner.
11 Computation of Earnings per Share
</TABLE>
<PAGE> 1
EXHIBIT 10.18.5
THIRD AMENDMENT
TO SECOND RESTATED CREDIT AGREEMENT
This Third Amendment to Second Restated Credit Agreement (this "Third
Amendment"), dated as of March 18, 1998, is entered into among Cameron Ashley
Building Products, Inc., a Georgia corporation, Wm. Cameron & Co., a Georgia
corporation, Ashley Aluminum, Inc., a Georgia corporation, CABP, Inc., an
Arizona corporation, Cameron Ashley Canada, Inc., a Canadian corporation,
NationsBank of Texas, National Association, as Issuing Bank and Agent, ABN AMRO
Bank, N.V., as Co-Agent, Canadian Imperial Bank of Commerce, as Canadian Issuing
Bank and Canadian Agent, and each Lender.
BACKGROUND
Borrowers, Agent, Co-Agent, Issuing Bank, Canadian Agent, Canadian
Issuing Bank and Lenders have entered into the Second Restated Credit Agreement
dated as of January 29, 1997 (such agreement, together with all amendments and
restatements thereof, the "Credit Agreement"). Borrower has requested that
Lenders, Agent, Issuing Bank, Co-Agent, Canadian Agent and Canadian Issuing Bank
amend the Credit Agreement to, among other things, modify certain covenants.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, Borrowers, Agent,
Co-Agent, Issuing Bank, Canadian Agent, Canadian Issuing Bank, Lenders and
Guarantors covenant and agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein have the meaning given to them in the Credit Agreement.
2. Amendments. The Credit Agreement is amended as follows:
(a) Section 1.01 is amended by adding the following in
alphabetical order:
"Currency Swap (1998)" means the ISDA Agreement dated
effective March 16, 1998, together with all schedules, between ABN AMRO
Bank, N.V., Chicago Branch, and CA Canada.
"Note Purchase Agreement (1996 Series)" means the Note
Purchase Agreement dated as of April 1, 1996, among Parent and each
Senior Holder (1996 Series), as amended by the First Amendment dated as
of January 15, 1997, among Parent and each Senior Holder (1996 Series).
<PAGE> 2
"Note Purchase Agreement (1998 Series)" means each Note
Purchase Agreement dated as of March 1, 1998, between either Parent or
CA Canada, respectively, and each Senior Holder (1998 Series).
"Senior Holder (1996 Series)" means each Person named on
Schedule 4.08- a under the "Note Purchase Agreement (1996 Series)"
heading, and each permitted successor and assign.
"Senior Holder (1998 Series)" means each Person named on
Schedule 4.08- a under the "Note Purchase Agreement (1998 Series)"
heading, and each permitted successor and assign.
(b) The definition of "CAFS Credit Agreement" is deleted, and the
following is substituted in lieu thereof:
"CAFS Credit Agreement" means the Restated Credit Agreement
dated as of January 22, 1998, between CAFS and Bank One, Texas, N.A.,
as from time to time amended or restated.
(c) The definition of "Funded Debt to EBITDA Ratio" is deleted,
and the following is substituted in lieu thereof:
"Funded Debt to EBITDA Ratio" means, for any date of
determination, the ratio of (a) the amount of Funded Debt of Parent and
its Subsidiaries as at the date of determination, to (b) EBITDA for the
365-day period ended on the date of determination; provided, (i) with
respect to any calculation which includes the results for Parent's
fourth quarter of fiscal 1997, each determination of EBITDA shall have
added to it, without duplication for any non-cash charges used in such
determination of "EBITDA", $5,600,000; and (ii) with respect to any
calculation which includes results for the period beginning on the date
of issuance of the first note pursuant to the Note Purchase Agreement
(1998 Series), through June 30, 1998, each determination of Funded Debt
of Parent and its Subsidiaries shall have deducted from it an amount
equal to the difference between (y) the amount of all cash of Parent
and its Subsidiaries (other than CAFS) not subject to any Lien (other
than Liens in favor of Agent or any Lender or general rights of offset
in favor of institutions holding such funds), minus (z) $5,000,000.
(d) The definition of "Note Purchase Agreement" is deleted, and
the following is substituted in lieu thereof:
"Note Purchase Agreement" means each Note Purchase Agreement
(1996 Series) and each Note Purchase Agreement (1998 Series).
-2-
<PAGE> 3
(e) The definition of "Senior Holder" is deleted.
(f) Section 3.03 is deleted and the following is substituted in
lieu thereof:
3.03 Conditions Precedent to Certain Advances, Letters of
Credit and Canadian Letters of Credit. The obligation of each Lender to
make each Advance in excess of United States $75,000,000 (including the
Initial Advance) and of Issuing Bank or Canadian Issuing Bank to issue
each Letter of Credit or Canadian Letter of Credit to the extent that
Borrowers' collective Obligations under this Agreement and the other
Loan Papers shall in the aggregate exceed United States $75,000,000
shall be subject to the further condition precedent that on the date of
such Advance or the issuance of such Letter of Credit or Canadian
Letter of Credit, the Borrowers shall have received the consent of the
Senior Holders (1996 Series) holding no less than 66 2/3% of the
principal amount of the Senior Notes issued pursuant to a Note Purchase
Agreement (1996 Series) allowing each Guarantor to guarantee the entire
amount of the Commitment.
(g) The second sentence of Section 4.08 is deleted and the
following is substituted in lieu thereof:
Schedule 4.08-a is a complete and correct description of each
Note Purchase Agreement, each Senior Note, each other Senior Note
Paper, each Senior Holder (1996 Series) and each Senior Holder (1998
Series).
(h) Section 5.07 is deleted and the following is substituted in
lieu thereof:
5.07 Debt. Parent and Subsidiaries other than CAFS. Parent
shall not, and shall not permit any of its Subsidiaries (other than
CAFS) to, create, incur, assume, become, or be liable in any manner in
respect of, or suffer to exist, any Debt, except (a) Debt under the
Loan Papers, (b) Funded Debt under each Note Purchase Agreement and
guaranties of such Debt made by Parent and Subsidiaries of Parent, (c)
other Debt in existence on the date hereof, as shown on Schedule
4.08-a, (d) purchase money Debt incurred for the acquisition of
tangible assets, provided the aggregate principal amount of such Debt
incurred in any fiscal year shall not exceed $1,000,000, (e) trade
payables incurred and paid in the ordinary course of business, (f)
Contingent Liabilities under or relating to the Loan Papers, (g)
Contingent Liabilities in existence on the date hereof, as shown on
Schedule 4.08-a, (h) guarantees by Parent and its Subsidiaries (other
than CAFS) of obligations in respect of Interest Hedge Agreements
permitted under Section 5.19, (i) Debt of each Subsidiary of Parent
(other than CAFS) to Parent or to another Subsidiary of Parent, (j)
Contingent Liabilities resulting from the endorsement of negotiable
instruments for collection in the ordinary course of business, (k)
Convertible Subordinated Debt in an aggregate principal amount not
-3-
<PAGE> 4
to exceed at any time $25,000,000, (l) as to Parent and its
Subsidiaries (other than CAFS) on a consolidated basis, other Debt not
to exceed at any time, in the aggregate principal amount, the
difference between (i) $10,000,000, minus (ii) the sum of all
Attributable Debt in respect of all Sale and Leasebacks occurring on
and after the Effective Date, (m) renewals and restatements of any Debt
described in Sections 5.07(a) through (l), provided the principal
amount of the Debt renewed or restated does not exceed the principal
amount of such Debt immediately prior to such renewal or restatement,
and (n) as to Parent, only, its obligations under the CAFS Guaranty.
(i) Section 5.09 is amended by deleting "and" immediately
preceding "(k)" and by adding the following immediately preceding the period:
, and (l) Debt of CAFS payable to Cameron permitted by
Section 5.20(b).
(j) Section 5.18(a) is amended by deleting each "Effective Date"
and substituting "March 1, 1998", in lieu thereof.
(k) Section 5.19 is deleted and the following is substituted in
lieu thereof:
5.19 Swap Exposure. Parent shall not, and shall not permit any
of its Subsidiaries to, enter into or become liable in respect of any
Interest Hedge Agreement other than (a) with respect any Interest Hedge
Agreement entered into solely to manage risk associated with interest
to accrue with respect to Funded Debt of Parent or such Subsidiary of
Parent, Interest Hedge Agreements pursuant to which the aggregate
notional amount (together with the aggregate notional amount of all
other Interest Hedge Agreements) does not exceed the aggregate
principal amount of all Funded Debt, (b) the Currency Swap (1998)
(excluding any amendment which increases the obligations of CA Canada),
and (c) other Interest Hedge Agreements entered into by Parent or any
of its Subsidiaries solely to manage risk associated with interest rate
and currency value fluctuations (and not for any speculative purpose
such as making a profit (or incurring a loss) solely as a result of
interest rate or currency value fluctuations or timing of payments).
(l) Section 5.20(b) is deleted and the following is substituted
in lieu thereof:
(b) Neither Parent nor any Subsidiary of Parent shall be
liable at any time for any CAFS Liability or extend credit to or for
the benefit of CAFS or any CAFS Subsidiary; provided, (i) Parent may
(A) acquire for cash equity of CAFS (in addition to all equity of CAFS
owned by Parent on December 3, 1996), and (B) execute and perform under
the CAFS Guaranty, and (C) make loans to CAFS, or (D) do any
combination of activities described in clauses (A), (B) and (C), and
(ii) Cameron may make advances to CAFS, the proceeds of which advances
will be
-4-
<PAGE> 5
used by CAFS to pay corporate overhead expenses of CAFS; provided,
that, the sum of (1) the aggregate gross cash purchase price of equity
acquired on and prior to December 3, 1996 and pursuant to clause
(i)(A), plus (2) the aggregate amount for which Parent may be liable
under the CAFS Guaranty, plus (3) the aggregate amount paid by Parent
and the fair market value of property of Parent transferred with
respect to all other CAFS Liabilities, plus (4) the aggregate amount of
all other liabilities of Parent in respect of CAFS Liabilities (valued
based on the reasonable determination of Parent (including in such
valuation the probability of any claim maturing) or, if Agent disagrees
with any such determination, based on the reasonable determination of
Agent), plus (5) the aggregate amount of all unpaid principal of and
accrued interest on all loans made by Parent to CAFS, plus (6) the
aggregate amount of all unpaid principal of and accrued interest on all
loans made by Cameron to CAFS, shall not exceed at any time
$18,500,000; provided, that, Parent may not make or have outstanding
any loan to or other extension of credit to or for the benefit of CAFS
if at any time (y) Parent is not the sole owner of all equity and
rights to acquire any equity of CAFS and (z) Parent does not have a
perfected, first priority security interest in all Consumer Notes (as
defined in the CAFS Credit Agreement) which do not qualify as Eligible
Consumer Notes (as defined in the CAFS Credit Agreement) solely due to
their non-conformity with the then-applicable requirements related to
Warehousing Period (as defined in the CAFS Credit Agreement).
(m) Schedule 4.08-a is deleted and a new Schedule 4.08-a, in the
form of Schedule 4.08-a to this Third Amendment, is substituted in lieu thereof.
(n) Exhibit C is deleted and a new Exhibit C, in the form of
Exhibit A to this Third Amendment, is substituted in lieu thereof.
3. Representations and Warranties. Borrowers and Guarantors, jointly and
severally, represent and warrant to Agent, Issuing Bank, Co-Agent, Canadian
Agent, Canadian Issuing Bank and each Lender that, as of the date hereof and
after giving effect to the amendments in Section 2, the following are true and
correct:
(a) The representations and warranties contained in the Credit
Agreement and each of the other Loan Papers are true and correct in all material
respects on and as of the date hereof as though made on and as of such date
(except as to representations and warranties which (i) refer to a specific date,
(ii) have been modified by transactions permitted pursuant to the Credit
Agreement or any other Loan Paper, or (iii) have been specifically waived in
writing by Agent).
(b) Each Borrower and each Guarantor has full power and authority
to execute, deliver and perform this Third Amendment, and this Third Amendment,
the Credit Agreement and each other Loan Paper, constitute the legal, valid and
binding obligation of such Borrower and such
-5-
<PAGE> 6
Guarantor (with respect to Loan Papers to which it is a party), enforceable in
accordance with their terms (subject as to enforcement of remedies to any
applicable Debtor Relief Laws).
(c) No authorization, approval, consent or other action by, notice
to, or filing with, any Tribunal or other Person, is required for the execution,
delivery or performance by either Borrower or any Guarantor of this Third
Amendment.
(d) No Obligor has made a material misstatement of fact, or failed
to disclose any fact necessary to make the facts disclosed not misleading, to
Agent, Issuing Bank, Co-Agent, Canadian Agent, Canadian Issuing Bank or any
Lender during the course of negotiation of this Third Amendment.
4. Conditions of Effectiveness. This Third Amendment shall be
effective on the date Agent delivers to Borrower written notice that each of the
following has occurred or exists ("Amendment Date"):
(a) The effectiveness of this Third Amendment shall not contravene
any Law applicable to Agent, Issuing Bank, Co-Agent, Canadian Agent, Canadian
Issuing Bank or any Lender.
(b) No Material Adverse Change, as determined by Agent, shall have
occurred and be continuing since December 31, 1997.
(c) No Default or Event of Default shall exist.
(d) Agent, Issuing Bank, Co-Agent, Canadian Agent, Canadian
Issuing Bank, each Lender and each Obligor shall have executed and received
counterparts of this Third Amendment.
(e) Agent shall have received a complete and correct copy of each
of the documents described in Sections 4.1(b), (c), (d) and (e) of the CAFS
Credit Agreement.
(f) Agent shall have received a complete and correct copy of the
executed Note Purchase Agreement (1998 Series) and each related note.
(g) Agent shall have received a complete and correct copy of the
ISDA Agreement dated effective March 16, 1998, together with all schedules,
between ABN AMRO Bank, N.V., Chicago Branch, and CA Canada and each guaranty and
other agreements assuring the obligations of CA Canada under such agreements.
(h) Agent shall have received, contemporaneously with Borrowers'
execution of this Third Amendment, payment of all fees (including attorneys'
fees) incurred by Agent prior to execution of this Third Amendment in the
preparation, negotiation and execution of this Third Amendment.
-6-
<PAGE> 7
(i) Agent shall have received, in form and substance satisfactory
to Agent and its counsel, such other approvals, documents, certificates, and
instruments as Agent shall require.
Agent, Issuing Bank, Co-Agent, Canadian Agent, Canadian Issuing Bank and each
Lender may conclusively rely on the certificates delivered pursuant to Section
3.01 of the Credit Agreement until Agent receives notice in writing to the
contrary.
5. Ratification. Each Borrower and each Guarantor each (a) represents and
warrants that it has received and reviewed this Third Amendment and (b) ratifies
and affirms its obligations under the Loan Papers, as amended by this Third
Amendment.
6. Reference to the Credit Agreement.
(a) On the Amendment Date, each reference in the Credit Agreement
to "this Agreement", "hereunder", or words of like import shall mean and be a
reference to the Credit Agreement, as affected and amended hereby.
(b) The Credit Agreement, as affected by the amendments referred
to above, shall remain in full force and effect and is hereby ratified and
confirmed.
(c) THE CREDIT AGREEMENT, AS AFFECTED BY THE AMENDMENTS CONTAINED
IN THIS THIRD AMENDMENT, TOGETHER WITH EACH OTHER LOAN PAPER, REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
7. Execution in Counterparts. This Third Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
8. Governing Law; Binding Effect. This Third Amendment shall be governed
by and construed in accordance with the laws of the State of Texas and be
binding upon the parties hereto and their respective permitted successors and
assigns.
9. Headings. Section headings in this Third Amendment are included herein
for convenience of reference only and shall not constitute part of this Third
Amendment for any other purpose.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment as of March 18, 1998.
PARENT:
CAMERON ASHLEY BUILDING PRODUCTS,
INC.
By: /s/ F. Dixon McElwee
-------------------------------------
F. Dixon McElwee, VP, CFO & Treasurer
-------------------------------------
(Print Name) (Print Title)
CA CANADA:
CAMERON ASHLEY CANADA, INC.
By: /s/ F. Dixon McElwee
-------------------------------------
F. Dixon McElwee, EVP
-------------------------------------
(Print Name) (Print Title)
GUARANTORS:
ASHLEY ALUMINUM, INC.
By: /s/ F. Dixon McElwee
-------------------------------------
F. Dixon McElwee, Vice President
-------------------------------------
(Print Name) (Print Title)
WM. CAMERON & CO.
By: /s/ F. Dixon McElwee
-------------------------------------
F. Dixon McElwee, EVP, CFO & Treasurer
-------------------------------------
(Print Name) (Print Title)
-8-
<PAGE> 9
CABP, INC.
By: /s/ Ross Goolsby
-------------------------------------
Ross Goolsby , Vice President
-------------------------------------
(Print Name) (Print Title)
AGENT:
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION
By: /s/ Daniel M. Killian
-------------------------------------
Daniel M. Killian, Vice President
CANADIAN AGENT:
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Terry F. Fraser
-------------------------------------
Terry F. Fraser, Commercial Lending
Specialist
-------------------------------------
(Print Name) (Print Title)
CO-AGENT:
ABN AMRO BANK, N.V.
By: /s/ Patrick Thom
-------------------------------------
Patrick Thom , Vice President
-------------------------------------
(Print Name) (Print Title)
By: /s/ Larry K. Kelley
-------------------------------------
Larry K. Kelley , Group Vice
President
-------------------------------------
(Print Name) (Print Title)
-9-
<PAGE> 10
ISSUING BANK:
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION
By: /s/ Daniel M. Killian
-------------------------------------
Daniel M. Killian, Vice President
CANADIAN ISSUING BANK:
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Terry F. Fraser
-------------------------------------
Terry F. Fraser, Commerical Lending
Specialist
-------------------------------------
(Print Name) (Print Title)
LENDERS:
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION
By: /s/ Daniel M. Killian
-------------------------------------
Daniel M. Killian, Vice President
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Terry F. Fraser
-------------------------------------
Terry F. Fraser, Commercial Lending
Specialist
-------------------------------------
(Print Name) (Print Title)
-10-
<PAGE> 11
ABN AMRO BANK, N.V.
By: /s/ Patrick Thom
-------------------------------------
Patrick Thom , Vice President
-------------------------------------
(Print Name) (Print Title)
By: /s/ Larry K. Kelley
-------------------------------------
Larry K. Kelley , Group Vice
President
-------------------------------------
(Print Name) (Print Title)
WELLS FARGO BANK (TEXAS), N.A.
By: /s/ Juan T. Sanchez
-------------------------------------
Juan T. Sanchez, Relationship
Manager
-------------------------------------
(Print Name) (Print Title)
SUNTRUST BANK, ATLANTA
By: /s/ John A. Fields, Jr.
-------------------------------------
John A. Fields, Jr., Vice President
-------------------------------------
(Print Name) (Print Title)
By: /s/ John P. Frazer
-------------------------------------
John P. Frazer , Vice President
-------------------------------------
(Print Name) (Print Title)
-11-
<PAGE> 1
EXHIBIT 10.25
================================================================================
CAMERON ASHLEY BUILDING PRODUCTS, INC.
U.S. $3,000,000 6.71% Senior Notes due October 7, 2004
U.S. $63,000,000 6.90% Senior Notes due April 7, 2010
--------------
NOTE PURCHASE AGREEMENT
--------------
Dated as of April 1, 1998
================================================================================
<PAGE> 2
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 4. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 4.1. Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 4.2. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.3. Performance; No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.4. Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.5. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.6. Purchase Permitted by Applicable Law, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.7. Sale of Other Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.8. Payment of Special Counsel Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.9. Private Placement Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.10. Changes in Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.11. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.17. Status under Certain Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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SECTION 6. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.1. Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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 10. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.1. Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.2. Limitation on Consolidated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.3. Limitation on Debt of Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 20
Section 10.4. Fixed Charges Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 10.5. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 10.6. Sale-and-Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10.7. Restricted Payments and Restricted Investments . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.8. Sale of Assets, Etc.; Creation of Minority Interests . . . . . . . . . . . . . . . . . . . 25
Section 10.9. Merger, Consolidation, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10.10. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 10.11. Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.12. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10.13. Guarantors To Remain Wholly-Owned Restricted Subsidiaries . . . . . . . . . . . . . . . . . 28
SECTION 11. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
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SECTION 12. REMEDIES ON DEFAULT, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 12.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 12.2. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.3. Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc . . . . . . . . . . . . . . . . . . . . . 31
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 13.1. Registration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 13.2. Transfer and Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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
SECTION 17. AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 17.1. Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 17.2. Solicitation of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 17.3. Binding Effect, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 17.4. Notes Held by Company, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 18. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 19. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 20. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 21. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 22. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 22.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 22.2. Payments Due on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 22.3. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Section 22.4. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 22.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 22.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<PAGE> 6
CAMERON ASHLEY BUILDING PRODUCTS, INC.
11651 PLANO ROAD
DALLAS, TEXAS 75243
U.S. $3,000,000 6.71% Senior Notes due October 7, 2004
U.S. $63,000,000 6.90% Senior Notes due April 7, 2010
Dated as of
April 1, 1998
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
CAMERON ASHLEY BUILDING PRODUCTS, INC., a Georgia corporation (the
"Company"), agrees with you as follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company has authorized the issue and sale of the U.S. $3,000,000 6.71%
Senior Notes due October 7, 2004 and the U.S. $63,000,000 6.90% Senior Notes
due April 7, 2010 (respectively, the "2004 Notes" and the "2010 Notes" and
collectively the "Notes", such term to include any such notes issued in
substitution therefor pursuant to Section 13 of this Agreement or the Other
Agreements (as hereinafter defined)). The Notes shall be substantially in the
form set out in Exhibit 1.1.1 or 1.1.2, as the case may be, with such changes
therefrom, if any, as may be approved by you 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. Payment of the Notes will be
unconditionally guaranteed by the Guarantors under and pursuant to separate
Guaranty Agreements (the "Guaranty Agreements") each substantially in the form
set out in Exhibit 1.2.
SECTION 2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amount and the Series
specified opposite your name in Schedule A at the purchase price of 100% of the
principal amount thereof. Contemporaneously with entering into this Agreement,
the Company is entering into separate Note Purchase Agreements (the "Other
Agreements") identical with this Agreement with each of the other purchasers
named in Schedule A (the "Other Purchasers"), providing for the sale at such
Closing to each of the Other Purchasers of Notes in the principal amount and of
the Series specified opposite its name in Schedule A. Your obligation
<PAGE> 7
Cameron Ashley Building Products, Inc. Note Purchase Agreement
hereunder, and the obligations of the Other Purchasers under the Other
Agreements, are several and not joint obligations, and you shall have no
obligation under any Other Agreement and no liability to any Person for the
performance or nonperformance by any Other Purchaser thereunder.
SECTION 3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers 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 April 7, 1998, or on such other Business Day
thereafter on or prior to April 10, 1998, as may be agreed upon by the Company
and you and the Other Purchasers. At the Closing the Company will deliver to
you the Notes to be purchased by you in the form of a single Note (or such
greater number of Notes in denominations of at least U.S. $1,000,000 as you
may request) dated the date of the Closing and registered in your name (or in
the name of your nominee), against delivery by you 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 to DDA # 1292833788 at NationsBank
of Texas, N.A., ABA Number 111000012, Beneficiary: Cameron Ashley Building
Products. If at the Closing the Company shall fail to tender such Notes to you
as provided above in this Section 3, or any of the conditions specified in
Section 4 shall not have been fulfilled to your satisfaction, you shall, at
your election, be relieved of all further obligations under this Agreement,
without thereby waiving any rights you may have by reason of such failure or
such nonfulfillment.
SECTION 4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
Section 4.1. Certain Agreements. (a) The Guaranty Agreements
shall have been duly authorized, executed and delivered by the Guarantors and
shall be in full force and effect.
(b) The Company shall have entered into a Second Amendment to the
1996 Note Purchase Agreements with the holders of at least 66-2/3% in principal
amount of the notes outstanding thereunder (exclusive of notes then owned by
the Company or any of its Affiliates) expressly permitting the execution and
delivery of the Guaranty Agreements and the CA Canada Note Purchase Agreement
Guaranties.
(c) The Company shall have entered into a Third Amendment to
Second Restated Credit Agreement in form and substance reasonably satisfactory
to the Required Holders expressly permitting the issuance of the Notes and the
execution and delivery of this Agreement and the Other Agreements.
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
Section 4.2. Representations and Warranties. The representations
and warranties of the Company in this Agreement and of the Guarantors in the
Guaranty Agreements shall be correct when made and at the time of the Closing.
Section 4.3. Performance; No Default. The Company, and each
Guarantor, shall have performed and complied with all agreements and conditions
contained in this Agreement and the Guaranty Agreements, as the case may be,
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 Section 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 4.4. Compliance Certificates.
(a) Officer's Certificate. The Company and each Guarantor shall
have delivered to you an Officer's Certificate, dated the date of the Closing,
certifying that the conditions specified in Sections 4.2, 4.3 and 4.10 have
been fulfilled.
(b) Secretary's Certificate. The Company and each Guarantor shall
have delivered to you a certificate certifying as to the resolutions attached
thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Notes and the Agreements or, as the case may be,
the Guaranty Agreements.
Section 4.5. Opinions of Counsel. You shall have received
opinions in form and substance satisfactory to you, dated the date of the
Closing (a) from Stieber Campbell, P.C., special counsel for the Company and
the Guarantors, and John S. Davis, General Counsel of the Company, covering the
matters set forth in Exhibit 4.5(a) and covering such other matters incident to
the transactions contemplated hereby as you or your counsel may reasonably
request (and the Company hereby instructs its counsel to deliver such opinion
to you) and (b) from Chapman and Cutler, your special counsel in connection
with such transactions, substantially in the form set forth in Exhibit 4.5(b)
and covering such other matters incident to such transactions as you may
reasonably request.
Section 4.6. Purchase Permitted by Applicable Law, Etc. On the
date of the Closing your purchase of Notes shall (i) be permitted by the laws
and regulations of each jurisdiction to which you are 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, (ii) not violate any applicable law
or regulation (including, without limitation, Regulation U, T or X of the Board
of Governors of the Federal Reserve System) and (iii) not subject you 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 you, you shall have received an Officer's Certificate certifying
as to such matters of fact as you may reasonably specify to enable you to
determine whether such purchase is so permitted.
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<PAGE> 9
Cameron Ashley Building Products, Inc. Note Purchase Agreement
Section 4.7. Sale of Other Notes. Contemporaneously with the
Closing, the Company shall sell to the Other Purchasers, and the Other
Purchasers shall purchase, the Notes to be purchased by them at the Closing as
specified in Schedule A.
Section 4.8. 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 your special counsel referred to
in Section 4.5 to the extent reflected in a statement of such counsel rendered
to the Company at least one Business Day prior to the Closing.
Section 4.9. 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 4.10. Changes in Corporate Structure. 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 4.11. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and the Guaranty Agreements and all documents and instruments incident to such
transactions shall be satisfactory to you and your special counsel, and you and
your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you 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 Other Agreements and the Notes and to perform the provisions hereof and
thereof.
Section 5.2. Authorization, Etc. (a) This Agreement, the Other
Agreements 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,
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(b) Each of the Guaranty Agreements has been duly authorized by
all necessary corporate action on the part of each Guarantor, and each of the
Guaranty Agreements, upon execution and delivery thereof, will constitute, a
legal, valid and binding joint and several obligation of each Guarantor
enforceable against such Guarantor in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) 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 agents, SBC
Warburg Dillon Read Inc. and NationsBanc Montgomery Securities LLC, has
delivered to you and each Other Purchaser a copy of a Private Placement
Offering Memorandum, dated January 1998 (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. This Agreement, the Other Agreements, the
Memorandum, the documents, certificates or other writings delivered to you 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. Since October 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.
Section 5.4. Organization and Ownership of Shares of Subsidiaries;
Affiliates. (a) Schedule 5.4 contains complete and correct lists (i) of the
Company's Subsidiaries, showing, as to each 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 other Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and clear
of any Lien.
(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
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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) Except as set forth in Schedule 5.4, no Subsidiary is a party
to, or otherwise subject to any legal restriction (other than restrictions
imposed by the corporate law of the jurisdiction under which such Subsidiary
exists) or any agreement (other than this Agreement, the Other Agreements and
the Guaranty Agreements) 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.
(e) Those Subsidiaries listed in Section IA of said Schedule 5.4
constitute Restricted Subsidiaries.
(f) Each Guarantor is a Wholly-Owned Restricted 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).
Section 5.6. Compliance with Laws, Other Instruments, Etc. The
execution, delivery and performance by the Company of this Agreement, the Other
Agreements and the Notes and the execution, delivery and performance by each
Guarantor of its Guaranty Agreement will not (i) 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 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 Subsidiary is bound or by which the Company or any Subsidiary or
any of their respective properties may be bound or affected, (ii) conflict with
or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any 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
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
the execution, delivery or performance by the Company of this Agreement, the
Other Agreements or the Notes or the execution, delivery or performance by any
Guarantor of its Guaranty Agreement.
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 Subsidiary or any property of the Company or
any 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 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 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 (i) the amount of which is not individually or in the aggregate
Material or (ii) 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 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
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 determined by the Internal Revenue Service and paid for
all fiscal years up to and including the fiscal year ended October 31, 1993.
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), 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. (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;
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
(b) to the best knowledge of the Company, no product of the
Company infringes in any Material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or other
right owned by any other Person; and
(c) to the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its 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 Subsidiaries.
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 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 such liabilities or
Liens as would not be individually or in the aggregate Material.
(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. The term "benefit
liabilities" has the meaning specified in section 4001 of ERISA and the terms
"current value" and "present value" have the meaning 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 are Material.
(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 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 your 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 you.
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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 you,
the Other Purchasers and not more than 100 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 to the repayment of
Indebtedness of the Company to banks and for working capital. 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 207), 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). The Company does not
presently own any margin stock and the Company does not have any present
intention to acquire any margin stock in the future. As used in this Section,
the term "margin stock" and the phrase "purpose of buying or carrying" shall
have the meanings assigned to them in said Regulation U.
Section 5.15. Existing Indebtedness; Future Liens. (a) Except as
described therein, Schedule 5.15 sets forth a complete and correct list of all
outstanding Indebtedness of the Company and its Restricted Subsidiaries as of
January 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) 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.
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.
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
Section 5.17. Status under Certain Statutes. Neither the Company
nor any 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 Interstate Commerce Act, as amended, or the Federal Power Act, as amended.
Section 5.18. Environmental Matters. Neither the Company nor any
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 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 you in writing:
(a) neither the Company nor any 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 Subsidiaries has
stored any Hazardous Materialson real properties now or formerly
owned, leased or operated by any of them and 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 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.
Section 6.1. Purchase for Investment. You represent that you are
purchasing the Notes for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to the distribution thereof, provided that the disposition of
your or their property shall at all times be within your or their control. You
understand 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.
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
Section 6.2. Source of Funds. You represent that you are an
insurance company and that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you 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 exceed 10% of the total
reserves and liabilities of such general account (exclusive of
separate account liabilities) plus surplus, as set forth in your most
recent annual statement in the form required by the National
Association of Insurance Commissioners as filed with your 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 PTE 91-38 (issued July 12, 1991) and, except as you have 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 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
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
(f) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
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.
Section 7.1. Financial and Business Information. The Company
shall deliver to each Holder of Notes that is an Institutional Investor:
(a) Quarterly Statements -- within 45 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) consolidated and consolidating balance sheets
of the Company and its Restricted Subsidiaries as of the close
of such quarterly fiscal period, setting forth in comparative
form the consolidated figures for the fiscal year then most
recently ended,
(ii) consolidated and consolidating statements of
income of the Company and its Restricted Subsidiaries for such
quarterly fiscal period and for the portion of the fiscal year
ending with such quarterly fiscal period, in each case setting
forth in comparative form the consolidated figures for the
corresponding periods of the preceding fiscal year, and
(iii) consolidated and consolidating statements of
stockholders' equity and cash flows of the Company and its
Restricted Subsidiaries for such quarterly fiscal period and
for the portion of the fiscal year ending with such quarterly
fiscal period, setting forth in comparative form the
consolidated figures for the corresponding period of the
preceding 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, provided that so long as the
consolidated gross revenue, consolidated total assets or consolidated
net income of the Unrestricted Subsidiaries included in the Company's
Quarterly Report on Form 10-Q does not exceed 25% of the consolidated
gross revenue, consolidated total assets or consolidated net income of
the Company, as the case may be, 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);
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
(b) Annual Statements -- within 90 days after the end of
each fiscal year of the Company, duplicate copies of,
(i) consolidated and consolidating balance sheets
of the Company and its Restricted Subsidiaries, as at the end
of such year, and
(ii) consolidated and consolidating statements of
income, changes in stockholders' equity and cash flows of the
Company and its Restricted Subsidiaries, for such year,
setting forth in each case in comparative form the consolidated figures for the
previous fiscal year, all in reasonable detail, prepared in accordance with
GAAP, and accompanied
(A) by an opinion thereon of independent
certified public accountants of recognized national standing,
which opinion shall state that such financial 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, and
(B) a certificate of such accountants stating
that they have reviewed this Agreement and stating further
whether, in making their audit, they have become aware of any
condition or event that then constitutes a Default or an Event
of Default, and, if they are aware that any such condition or
event then exists, specifying the nature and period of the
existence thereof (it being understood that such accountants
shall not be liable, directly or indirectly, for any failure
to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted auditing
standards or did not make such an audit),
provided that so long as the consolidated gross revenue, consolidated
total assets or consolidated net income of the Unrestricted
Subsidiaries included in the Company's Annual Report on Form 10-K does
not exceed 25% of the consolidated gross revenue, consolidated total
assets or consolidated net income of the Company, as the case may be,
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, together with the accountant's certificate described in
clause (B) above, shall be deemed to satisfy the requirements of this
Section 7.1(b);
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
(c) SEC and Other Reports -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or
proxy statement sent by the Company or any Subsidiary to public
securities holders generally, and (ii) each regular or periodic
report, each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all
amendments thereto filed by the Company or any Subsidiary with the
Securities and Exchange Commission and of all press releases and other
statements made available generally by the Company or any 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
five 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, a Guarantor 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 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, any Guarantor 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, any Guarantor 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, any Guarantor 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 Subsidiary from any
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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;
(g) Unrestricted Subsidiaries -- Within the respective
periods provided in paragraphs (a) and (b) above, financial statements
of the character and for the dates and periods as in said paragraphs
(a) and (b) provided covering each Unrestricted Subsidiary (or groups
of Unrestricted Subsidiaries on a consolidated basis); and
(h) 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 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 10.8 hereof, 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 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 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,
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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, 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) In addition to paying the
entire outstanding principal amount and the interest due on the 2010 Notes on
the maturity date thereof, on April 7, 2006, April 7, 2007, April 7, 2008, and
April 7, 2009, the Company will prepay U.S. $12,600,000 principal amount (or
such lesser principal amount as shall then be outstanding) of the 2010 Notes at
par and without payment of the Make-Whole Amount or any premium, provided that
(i) upon any partial prepayment of the 2010 Notes pursuant to Section 8.2 or
purchase of the 2010 Notes permitted by Section 8.5 the principal amount of
each required prepayment of the 2010 Notes becoming due under this Section
8.1(a) 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 2010 Notes
is reduced as a result of such prepayment or purchase.
(b) Other than paying the entire outstanding principal amount and
the interest due on the 2004 Notes on the maturity date thereof, no prepayment
of the 2004 Notes is required pursuant to this Section 8.1.
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
10% 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 of
Notes being so prepaid. The Company will give each Holder of Notes to be
prepaid 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
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
(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 of all Series at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.
Section 8.4. Maturity; Surrender, Etc. In the case of each
prepayment of Notes pursuant to this Section 8, 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 Restricted Subsidiary or 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 all Notes
acquired by it or any Restricted Subsidiary or 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.
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
"Reinvestment Yield" means, with respect to the Called
Principal of any Note, 0.5% plus 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 United States Governmental Securities) for actively
traded on-the-run 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 on-the-run U.S.
Treasury securities having a constant maturity equal to the Remaining
Average Life of such Called Principal as of such 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 on-the-run U.S. Treasury security with
the maturity closest to and greater than the Remaining Average Life
and (2) the actively traded on-the-run 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.
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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 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 Restricted 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 Restricted Subsidiary, provided that neither the
Company nor any Restricted Subsidiary need pay any such tax or assessment or
claim if (i) the amount, applicability or validity thereof is contested by the
Company or such Restricted Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Restricted Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Company or such Restricted 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.
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
Section 9.5. Corporate Existence, Etc. The Company will at all
times preserve and keep in full force and effect its corporate existence.
Subject to Sections 10.8 and 10.9, the Company will at all times preserve and
keep in full force and effect the corporate existence of each of its Restricted
Subsidiaries (unless merged into the Company or a Restricted Subsidiary) 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 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, in any
fiscal year, permit Consolidated Net Worth to be less than (i) in the case of
its fiscal year ending October 31, 1997, U.S. $75,000,000, and (ii) in the case
of each fiscal year thereafter, an amount equal to the sum of the amount
required to be maintained in the immediately previous fiscal year plus 50% of
Consolidated Net Income for such immediately previous fiscal year (but without
deduction in the event of a deficit in Consolidated Net Income).
Section 10.2. Limitation on Consolidated Debt. The Company will
not, and will not permit any Restricted Subsidiary, directly or indirectly, to
create, incur, assume, guarantee, or otherwise become directly or indirectly
liable with respect to, any Debt, unless on the date the Company or such
Restricted Subsidiary becomes liable with respect to any such Debt and
immediately after giving effect thereto and the concurrent retirement of any
other Debt,
(a) no Default or Event of Default exists, and
(b) Consolidated Debt as of such date does not exceed 60%
of Consolidated Total Capitalization as of the end of the then most
recent fiscal quarter of the Company; provided, however, that, if such
Debt is incurred by the Company concurrently with and for the purpose
of an acquisition of a Person or the assets of a Person or a line of
business of a Person, then Consolidated Debt may be as much as 65% of
Consolidated Total Capitalization for the period commencing on the
date of the incurrence of such Debt and the consummation of such
acquisition and ending nine months thereafter.
Section 10.3. Limitation on Debt of Restricted Subsidiaries. The
Company will not permit any Restricted Subsidiary, directly or indirectly, to
create, incur, assume, guarantee, or otherwise become directly or indirectly
liable with respect to, any Debt, except:
(a) Debt of a Restricted Subsidiary to the Company or to
a Wholly-Owned Restricted Subsidiary,
(b) Debt of the Guarantors evidenced by the Credit
Agreement Guaranties, the 1996 Note Purchase Agreement Guaranties and
the Guaranty Agreements, and
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
(c) Debt of a Restricted Subsidiary consisting of:
(i) Debt of a Person existing at the time such
Person is merged into or consolidated with a Restricted
Subsidiary or such Restricted Subsidiary acquires all or
substantially all the properties of such Person,
(ii) Debt of a Person existing at the time such
Person becomes a Restricted Subsidiary,
(iii) Debt of a Restricted Subsidiary outstanding
on the date hereof and reflected in Schedule 5.15,
(iv) Debt of a Restricted Subsidiary incurred in
connection with, or with a view to, compliance by such
Restricted Subsidiary with the requirements of any program
adopted by any federal, state or local governmental authority
and applicable to such Restricted Subsidiary and providing
financial or tax benefits to such Restricted Subsidiary which
are not available without the incurrence of such Debt and are
not available directly to the Company,
(v) Debt of a Restricted Subsidiary incurred to
pay all or any part of the purchase price or the cost of
construction of property or equipment acquired by a Restricted
Subsidiary, provided such Debt is incurred within one year
after such acquisition or the completion of such construction,
whichever is later,
(vi) Debt of a Restricted Subsidiary incurred to
pay all or any part of the cost to construct additions,
substantial repairs or alterations or substantial improvements
to properties of such Restricted Subsidiary, provided (x) the
amount of such Debt does not exceed the expense incurred to
construct such additions, substantial repairs or alterations
or substantial improvements, and (y) such Debt is incurred
within one year after completion of construction and full
operation,
(vii) Debt of CA Canada in an aggregate amount of
up to Cdn. $25,000,000 owing under the Bank Credit Agreement,
(viii) Debt of CA Canada evidenced by the Cdn.
$10,000,000 Senior Note due October 7, 2004 and the U.S.
$7,000,000 Senior Note due October 7, 2004 issued to The Paul
Revere Life Insurance Company and Nationwide Life Insurance
Company, respectively (collectively the "CA Canada
Purchasers") pursuant to those certain Note Purchase
Agreements, each dated as of April 1, 1998 between CA Canada
and the CA Canada Purchasers (the "CA Canada Note Purchase
Agreements"),
(ix) Debt of the Guarantors evidenced by the CA
Canada Credit Agreement Guaranties and the CA Canada Note
Purchase Agreement Guaranties,
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
(x) Debt of a Restricted Subsidiary owing to the
seller or sellers of such Restricted Subsidiary or of
substantially all the assets thereof, to the Company or such
Restricted Subsidiary and incurred by such Restricted
Subsidiary to finance the acquisition of either (A) the
capital stock of such Restricted Subsidiary by the Company or
another Restricted Subsidiary or (B) such assets by such
Restricted Subsidiary, and
(xi) any extension, renewal or replacement (or
successive extensions, renewals or replacements), in whole or
in part, of any Debt referred to in the foregoing clauses (i)
through (ix), inclusive, provided the principal amount of the
Debt so extended, renewed or replaced shall not exceed the
principal amount thereof immediately prior to such extension
renewal or replacement,
provided that, after giving effect thereto and to the application of
the proceeds thereof the aggregate amount of Priority Obligations does
not exceed 25% of Consolidated Net Worth as at the end of the
Company's fiscal year then most recently ended.
Section 10.4. Fixed Charges Coverage Ratio. The Company will not,
at any time, permit the Fixed Charges Coverage Ratio to be less than 1.05 to 1.
Section 10.5. 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 existing on the date of this Agreement and
securing the Debt of the Company and its Restricted Subsidiaries so
identified in Schedule 5.15 (other than Liens designated in Section
5.15 to be discharged at or before the Closing);
(b) any Lien created 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, constructed or improved 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, constructed or improved and, if required by the
terms of the instrument originally creating such Lien, other
property (or
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
improvement thereon) which is an improvement to or is acquired
for specific use in connection with such acquired or
constructed property (or improvement thereon) or which is real
property being improved by such acquired or constructed
property (or improvement thereon),
(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) any such Lien shall be created
contemporaneously with, or within 180 days after, the
acquisition of such property (or in the case of property
constructed or improved, after the later of (y) the completion
of such construction or improvement or (z) the commencement of
commercial operation of such property),
(iv) the property subject to such Lien was not
acquired in connection with a Property Reinvestment
Application, and
(v) in the case of any such construction or
improvement such Lien shall not apply to any property
theretofore owned by the Company or any Restricted Subsidiary,
other than any theretofore unimproved real property on which
the property so constructed, or the improvement, is located;
(c) 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 Restricted 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 and, if required by the terms of the instrument
originally creating such Lien, other property which is an improvement
to or is acquired for specific use in connection with such acquired
property;
(d) any Lien renewing, extending or refunding any Lien
permitted by paragraphs (a), (b) or (c) of this Section 10.5, 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;
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
(e) Liens for taxes, assessments or other governmental
charges which are not yet due and payable or the payment of which is
not at the time required by Section 9.4;
(f) statutory Liens of landlords and Liens of 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 which are being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of
the property subject to such Lien or any material interference with
the use thereof by the Company or any Restricted Subsidiary and book
reserves have been set aside with respect thereto in an amount deemed
adequate by the Company;
(g) 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, 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;
(h) any attachment or judgment Lien, unless the judgment
it secures shall not, within 60 days after the entry thereof, have
been discharged or execution thereof stayed pending appeal, or shall
not have been discharged within 60 days after the expiration of any
such stay; and
(i) other Liens not otherwise permitted by paragraphs (a)
through (h), provided that, after giving effect thereto and to the
Debt secured thereby and to the application of the proceeds of such
Debt, the aggregate amount of Priority Obligations does not exceed 25%
of Consolidated Net Worth as at the end of the Company's fiscal year
then most recently ended.
Section 10.6. Sale-and-Leasebacks. The Company will not, and will
not permit any Restricted Subsidiary to, enter into any Sale-and-Leaseback
Transaction, unless
(a) immediately after giving effect thereto (i)
Consolidated Debt does not exceed the amount then permitted to be
incurred under Section 10.2, and (ii) the aggregate amount of Priority
Obligations does not exceed 25% of Consolidated Net Worth as at the
end of the Company's fiscal year then most recently ended; or
(b) the Net Proceeds Amount received by the Company or
such Restricted Subsidiary in respect of such Sale-and-Leaseback
Transaction is applied within 180 days of the consummation thereof to
a Debt Prepayment Application; provided that, any Debt Prepayment
Application with respect to the Notes shall be made in accordance with
the provisions of Section 8.2.
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
Section 10.7. Restricted Payments and Restricted Investments.
(a) Limitation. The Company will not, and will not permit any of
its Restricted Subsidiaries to, declare, make or incur any liability to make
any Restricted Payment or make or authorize any Restricted Investment unless
immediately after giving effect to such action:
(i) the sum of (x) the aggregate value of all Restricted
Investments of the Company and its Restricted Subsidiaries (valued
immediately after such action), plus (y) the aggregate amount of
Restricted Payments of the Company and its Restricted Subsidiaries
declared or made during the period commencing on November 1, 1997, and
ending on the date such Restricted Payment or Restricted Investment is
declared or made, inclusive, would not exceed the sum of
(A) U.S. $10,000,000, plus
(B) 60% of Consolidated Net Income (or minus 100%
of Consolidated Net Income if Consolidated Net Income for
such period is a loss) for each full fiscal year beginning
with the fiscal year ending October 31, 1998, to and
including the date such Restricted Payment or Restricted
Investment is declared or made, plus
(C) the aggregate amount of Net Proceeds of
Capital Stock for such period; and
(ii) no Default or Event of Default would exist.
(b) Time of Payment. The Company will not, nor will it permit any
of its Restricted Subsidiaries to, authorize a Restricted Payment that is not
payable within 90 days of authorization.
Section 10.8. Sale of Assets, Etc.; Creation of Minority Interests.
(a) Except as permitted under Section 10.9 the Company will not, and will not
permit any of its Restricted Subsidiaries to, make any Asset Disposition
unless:
(i) in the good faith opinion 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;
(ii) immediately after giving effect to the Asset
Disposition, no Default or Event of Default would exist; and
(iii) immediately after giving effect to the Asset
Disposition, (A) the Disposition Value of all the property of the
Company and its Restricted Subsidiaries that was the subject of any
Asset Disposition occurring in the period of four fiscal quarters of
the Company then next ending would not exceed 15% of Consolidated
Assets as of the end of the then most
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
recently ended fiscal quarter of the Company, and (B) the Disposition
Value of all property that was the subject of all Asset Dispositions
occurring on or after the Closing Date would not exceed 30% of
Consolidated Assets as of the end of the then most recently ended
fiscal quarter of the Company.
If the Net Proceeds Amount for any Transfer is applied to a Debt Prepayment
Application or a Property Reinvestment Application within 180 days after such
Transfer, then such Transfer, only for the purpose of determining compliance
with subsection (a)(iii) of this Section 10.8 as of any date, shall be deemed
not to be an Asset Disposition; provided that, any Debt Prepayment Application
with respect to the Notes shall be made in accordance with the provisions of
Section 8.2.
(b) The Company will not permit any Restricted Subsidiary to issue
or sell any shares of stock of any class (including as "stock" for the purposes
of this Section 10.8, any warrants, rights or options to purchase or otherwise
acquire stock or other Securities exchangeable for or convertible into stock)
of such Restricted Subsidiary to any Person other than the Company or a
Wholly-Owned Restricted Subsidiary, except for the purpose of qualifying
directors, or except in satisfaction of the validly pre-existing preemptive
rights of minority shareholders in connection with the simultaneous issuance of
stock to the Company and/or a Restricted Subsidiary whereby the Company and/or
such Restricted Subsidiary maintain their same proportionate interest in such
Restricted Subsidiary.
c) The Company will not sell, transfer or otherwise dispose of
any shares of stock of any Restricted Subsidiary (except to qualify directors)
or any Indebtedness of any Restricted Subsidiary, and will not permit any
Restricted Subsidiary to sell, transfer or otherwise dispose of (except to the
Company or a Wholly-Owned Restricted Subsidiary) any shares of stock or any
Indebtedness of any other Restricted Subsidiary, unless:
(i) simultaneously with such sale, transfer, or
disposition, all shares of stock and all Indebtedness of such
Restricted Subsidiary at the time owned by the Company and by every
other Restricted Subsidiary shall be sold, transferred or disposed of
as an entirety;
(ii) the Board of Directors of the Company shall have
determined, as evidenced by a resolution thereof, that the proposed
sale, transfer or disposition of said shares of stock and Indebtedness
is in the best interests of the Company;
(iii) said shares of stock and Indebtedness are sold,
transferred or otherwise disposed of to a Person, for a cash
consideration and on terms reasonably deemed by the Board of Directors
to be adequate and satisfactory; and
(iv) the Restricted Subsidiary being disposed of shall not
have any continuing investment in the Company or any other Restricted
Subsidiary not being simultaneously disposed of.
Section 10.9. 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 convey,
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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 Wholly-Owned Restricted Subsidiary 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, the Other Agreements
and the Notes pursuant to such agreements and instruments as shall be
reasonably satisfactory to the Required Holders, 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 Required Holders, to the effect
that all agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the terms
hereof; and
(c) immediately after giving effect to such transaction:
(i) no Default or Event of Default would exist,
and
(ii) the Successor Corporation would be permitted
by the provisions of Section 10.2 hereof to incur at least
U.S. $1.00 of additional Debt owing to a Person other than a
Restricted Subsidiary of the 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 10.10. 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 the
Company or another Restricted Subsidiary), 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
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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 10.11. 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 10.12. Guaranties. The Company will not, and will not
permit any Restricted Subsidiary to, become or be liable in respect of any
Guaranty except (i) Guaranties by the Company which are limited in amount to a
stated maximum dollar exposure or which constitute Guaranties of obligations
incurred by any Restricted Subsidiary in compliance with the provisions of this
Agreement and (ii) Permitted Guaranties.
Section 10.13. Guarantors To Remain Wholly-Owned Restricted
Subsidiaries. The Company will not permit the Guarantors to cease to be
Wholly-Owned Restricted Subsidiaries.
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 Section 7.1(d) or in Sections
10.1 through 10.9, both inclusive; 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) 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
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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
Debt that is outstanding in an aggregate principal amount of at least
U.S. $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 Debt in an aggregate outstanding principal amount of
at least U.S. $5,000,000 or of any mortgage, indenture or other
agreement relating thereto beyond any period of grace provided with
respect thereto, or (iii) as a consequence of the occurrence or
continuation of any event or condition (other than the passage of time
or the right of the holder of Debt to convert such Debt into equity
interests), (x) the Company or any Restricted Subsidiary has become
obligated to purchase or repay Debt before its regular maturity or
before its regularly scheduled dates of payment in an aggregate
outstanding principal amount of at least U.S. $5,000,000, or (y) one
or more Persons have the right to require the Company or any
Restricted Subsidiary so to purchase or repay such Debt; 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 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 days;
or
(i) a final judgment or judgments for the payment of
money aggregating in excess of U.S. $3,000,000 (excluding any
judgment, or portion thereof, as to which a solvent insurer shall have
accepted responsibility) are rendered against one or more of the
Company and its Restricted Subsidiaries and which judgments are not,
within 30 days after entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within 30 days after the
expiration of such stay; or
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
(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 U.S. $3,000,000, (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 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 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 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 more than 50% 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
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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 not less than 66-2/3% in principal amount of the Notes then
outstanding, by written notice to the Company, may rescind 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 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.
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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.
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 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, 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 Exhibit 1.1. 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 U.S. $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 U.S. $100,000.
Any transferee, by its acceptance of a Note registered in its name (or the name
of its nominee), shall be deemed to have made the representation set forth in
Section 6.2.
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 or admitted assets of at
least U.S. $100,000,000, 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,
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
the Company at its own expense shall execute and deliver, in lieu thereof, a
new Note of the same Series, 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 New York, New York, at the principal office of
Citibank, N.A., in such jurisdiction.
Section 14.2. Home Office Payment. So long as you or your 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 below your
name in Schedule A, or by such other method or at such other address as you
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, you shall surrender such Note for 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. Prior to any sale or other disposition of any Note held by you
or your nominee you will, at your election, either endorse thereon the amount
of principal paid thereon and the last date to which interest has been paid
thereon or surrender such Note to the Company in exchange for a new Note or
Notes pursuant to Section 13.2. 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 you under this Agreement and that has made
the same agreement relating to such Note as you have 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 you and each
Other 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, the Other Agreements 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, the Other
Agreements or the Notes or in responding to any subpoena or other legal process
or informal investigative demand issued in connection with this Agreement, the
Other Agreements 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 Restricted
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
Company will pay, and will save you and each other Holder of a Note harmless
from, all claims in respect of any fees, costs or expenses, if any, of brokers
and finders (other than those retained by you).
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, the Other Agreements 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 you 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 you or any
other Holder of a Note. All statements contained in any certificate or other
instrument delivered by or 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 you 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 you unless
consented to by you 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
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each Holder of Notes then outstanding
even if such Holder did not consent 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 you or your nominee, to you or it at the
address specified for such communications in Schedule A, or at such
other address as you or it 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
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
(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 you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or
other similar process and you 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 you
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 you by or on behalf of the Company or any Restricted
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 in writing when received
by you as being confidential information of the Company or such Restricted
Subsidiary, provided that such term does not include information that (a) was
publicly known or otherwise known to you prior to the time of such disclosure,
(b) subsequently becomes publicly known through no act or omission by you or
any person acting on your behalf, (c) otherwise becomes known to you other than
through disclosure by the Company or any Restricted Subsidiary or (d)
constitutes financial statements delivered to you under Section 7.1 that are
otherwise publicly available. You will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by you in good
faith to protect confidential information of third parties delivered to you,
provided that you may deliver or disclose Confidential Information to (i) your
directors, trustees, officers, employees, agents, attorneys and affiliates (to
the extent such disclosure reasonably relates to the administration of the
investment represented by your Notes), (ii) your 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
you sell or offer to sell such Note or any part thereof or any participation
therein (if such
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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 you offer 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 you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your 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 you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing,
to the extent you 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 your 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), such Holder will
enter into an agreement with the Company embodying the provisions of this
Section 20.
SECTION 21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and
such Affiliate, shall contain such Affiliate's agreement to be bound 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 "you" is used in this Agreement (other than
in this Section 21), such word shall be deemed to refer to such Affiliate in
lieu of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" 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 you, and you 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 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.
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
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.
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.
* * * * *
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Cameron Ashley Building Products, Inc. Note Purchase Agreement
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you and the Company.
Very truly yours,
CAMERON ASHLEY BUILDING PRODUCTS, INC.
By /s/ F. Dixon McElwee
---------------------------------------
Name: F. Dixon McElwee
Title: Vice President, CFO & Treasurer
The foregoing is hereby agreed
to as of the date thereof.
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By /s/ Mark A. Ahmed
---------------------------------------
Name: Mark A. Ahmed
Title: Managing Director
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By /s/ Loren S. Archibald
---------------------------------------
Name: Loren S. Archibald
Title: Managing Director-Private
Placements
THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY
By /s/ Richard A. Strait
---------------------------------------
Its Authorized Signatory
<PAGE> 45
Cameron Ashley Building Products, Inc. Note Purchase Agreement
THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK
By /s/ Suzanne E. Walton
---------------------------------------
Name: Suzanne E. Walton
Title: Managing Director
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By /s/ Donald Bertrand
---------------------------------------
Name: Donald Bertrand
Title: Vice President
PROVIDENT LIFE AND ACCIDENT INSURANCE
COMPANY
By /s/ James T. Rogers
---------------------------------------
Name: James T. Rogers
Title: Vice President
NORTHERN LIFE INSURANCE COMPANY
By /s/ James V. Wittich
---------------------------------------
Name: James V. Wittich
Title: Assistant Treasurer
WASHINGTON SQUARE ADVISERS PRIVATE
PLACEMENT TRUST FUND
By /s/ Frank P. Pintens
---------------------------------------
Name: Frank P. Pintens
Title: Senior Vice President
<PAGE> 1
EXHIBIT 10.25.1
================================================================================
CAMERON ASHLEY CANADA, INC.
Cdn. $10,000,000 6.45% Senior Guaranteed Notes, Series A, due October 7, 2004
and
U.S. $7,000,000 6.71% Senior Guaranteed Notes, Series B,
Due October 7, 2004
--------------
NOTE PURCHASE AGREEMENT
--------------
Dated as of April 1, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C>
SECTION 1. AUTHORIZATION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. SALE AND PURCHASE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1. Sales and Purchase of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.2. Parent Guaranty and Constituent Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 4. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.2. Performance; No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.3. Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4.4. Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.5. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.6. Purchase Permitted by Applicable Law, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.7. Sale of Other Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.8. Payment of Special Counsel Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.9. Private Placement Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.10. Changes in Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.11. Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.12. Consent of Holders of Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.1. Organization; Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.2. Authorization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5.3. Organization and Ownership of Shares of Subsidiaries; Affiliates . . . . . . . . . . . . . . . . 6
Section 5.4. Compliance with Laws, Other Instruments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.5. Governmental Authorizations, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5.6. Litigation; Observance of Agreements, Statutes and Orders . . . . . . . . . . . . . . . . . . . . 8
Section 5.7. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.8. Title to Property; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.9. Licenses, Permits, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.10. Compliance with Pension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.11. Private Offering by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.12. Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.13. Existing Indebtedness; Future Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5.14. Pari Passu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
-i-
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<TABLE>
<S> <C>
SECTION 6. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.1. Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.2. Source of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 7. PREPAYMENT OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.1. Required Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.2. Optional Prepayments with Make-Whole Amount . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.3. Redemption for Reasons of Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.4. Allocation of Partial Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.5. Maturity; Surrender, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.6. Purchase of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.7. Make-Whole Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 8. AFFIRMATIVE COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.1. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.2. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.3. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.4. Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.5. Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.6. Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.7. Notes to Rank Pari Passu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.8. Mergers and Consolidations and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 9. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 10. REMEDIES ON DEFAULT, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 10.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 10.2. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 10.3. Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 10.4. No Waivers or Election of Remedies, Expenses, Etc . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 11. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.1. Registration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.2. Transfer and Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 11.3. Replacement of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 12. PAYMENTS ON NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.1. Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.2. Home Office Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 12.3. Gross-Up of Payments Subject to Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
SECTION 13. EXPENSES, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 13.1. Transaction Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 13.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 15. AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 15.1. Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 15.2. Solicitation of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 15.3. Binding Effect, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 15.4. Notes Held by Company, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 16. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 17. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 18. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 19. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 19.1. Currency of Payments, Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 19.2. Interest Act of Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 19.3. Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 19.4. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 19.5. Payments Due on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 19.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 19.7. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 19.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 19.9. Maximum Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 19.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 19.11. Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
-iii-
<PAGE> 5
CAMERON ASHLEY CANADA, INC.
C/O CAMERON ASHLEY BUILDING PRODUCTS, INC.
11651 PLANO ROAD
DALLAS, TEXAS 75243
CDN. $10,000,000 6.45% SENIOR GUARANTEED NOTES,
SERIES A, DUE OCTOBER 7, 2004
and
U.S. $7,000,000 6.71% SENIOR GUARANTEED NOTES,
SERIES B, DUE OCTOBER 7, 2004
Dated as of April 1, 1998
TO THE PURCHASER LISTED IN THE ATTACHED
SCHEDULE A WHO IS A SIGNATORY HERETO:
Ladies and Gentlemen:
CAMERON ASHLEY CANADA, INC. a Canadian corporation (the "Company"),
hereby agrees with you as follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company has authorized the issue and sale of Cdn. $10,000,000
aggregate principal amount of its 6.45% Senior Guaranteed Notes, Series A, due
October 7, 2004 (the "Series A Notes") and its U.S. $7,000,000 6.71% Senior
Guaranteed Notes, Series B, due October 7, 2004 (the "Series B Notes", the
Series A Notes and the Series B Notes being collectively referred to as the
"Notes", such term to include any such notes issued in substitution therefor
pursuant to Section 11 of this Agreement or the Other Agreements (as
hereinafter defined)). The Notes shall be substantially in the form set out in
Exhibit 1.1 or Exhibit 1.2, as the case may be, with such changes therefrom, if
any, as may be approved by you and the Company in accordance with Section 15.1.
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; SECURITY.
Section 2.1. Sales and Purchase of Notes. Subject to the terms
and conditions of this Agreement, the Company will issue and sell to you and
you will purchase from the Company, at the Closing provided for in Section 3,
Notes in the principal amount specified opposite your name in Schedule A at the
purchase price of 100% of the principal amount thereof. Contemporaneously with
entering into this Agreement, the Company is entering into separate Note
Purchase Agreements (the "Other Agreements") identical with this Agreement with
each
<PAGE> 6
of the other purchasers named in Schedule A (the "Other Purchasers"), providing
for the sale at such Closing to each of the Other Purchasers of Notes in the
principal amount specified opposite its name in Schedule A. Your obligation
hereunder, and the obligations of the Other Purchasers under the Other
Agreements, are several and not joint obligations, and you shall have no
obligation under any Other Agreement and no liability to any Person for the
performance or nonperformance by any Other Purchaser thereunder.
Section 2.2. Parent Guaranty and Constituent Guaranties. Without
limiting Section 4.7 of the Parent Guaranty, the payment by the Company of all
amounts due with respect to the Notes and the performance by the Company of its
obligations under this Agreement and the Other Agreements will be absolutely
and unconditionally guaranteed by the Parent Guarantor pursuant to a Guaranty
Agreement substantially in the form of Exhibit 2 attached hereto and made a
part hereof (as the same may be amended, modified, extended or renewed, the
"Parent Guaranty") and the payment by the Company of all amounts due with
respect to the Notes and the performance by the Company of its obligations
under this Agreement and the Other Agreements will be absolutely and
unconditionally guaranteed by the existing Subsidiaries of the Parent Guarantor
which are listed as guarantors on Schedule 2.4 to the Parent Guaranty (together
with any other Subsidiary which may from time to time become a party to a
Constituent Guaranty, collectively the "Constituent Guarantors") pursuant to
separate Guaranty Agreements, each substantially in the form of Exhibit 3
attached hereto and made a part hereof (as the same may be amended, modified,
extended or renewed, each, a "Constituent Guaranty", and collectively, the
"Constituent Guaranties").
SECTION 3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois, at 10:00 A.M. Chicago time, at a closing (the
"Closing") on April 7, 1998 or on such other Business Day thereafter on or
prior to April 30, 1998 as may be agreed upon by the Company and you and the
Other Purchasers. At the Closing the Company will deliver to you the Notes to
be purchased by you in the form of a single Note of the series of Notes to be
purchased by you (or such greater number of Notes of such series in
denominations of at least Cdn. $1,000,000 in the case of the Series A Notes and
U.S. $1,000,000 in the case of the Series B Notes, as the case may be, as you
may request) dated the date of the Closing and registered in your name (or in
the name of your nominee), against delivery by you to the Company or its order
of immediately available Cdn. funds in the case of the Series A Notes and
immediately available U.S. Federal Reserve or other current and immediately
available funds in the case of the Series B Notes, in each such case in the
amount of the purchase price therefor by wire transfer of immediately available
funds for the account of the Company to account number 2115018, Transit No. 9
of the Company on the books of Canadian Imperial Bank of Commerce. If at the
Closing the Company shall fail to tender such Notes to you as provided above in
this Section 3, or any of the conditions specified in Section 4 shall not have
been fulfilled to your satisfaction, you shall, at your election, be relieved
of all further obligations under this Agreement, without thereby waiving any
rights you may have by reason of such failure or such nonfulfillment.
-2-
<PAGE> 7
SECTION 4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
Section 4.1. Representations and Warranties. (a) The
representations and warranties of the Company in this Agreement shall be
correct when made and at the time of the Closing.
(b) The representations and warranties of the Parent Guarantor in
the Parent Guaranty shall be correct when made and at the time of the Closing.
(c) The representations and warranties of the Constituent
Guarantors in the Constituent Guaranties shall be correct when made and at the
time of the Closing.
Section 4.2. Performance; No Default. (a) 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 Section 5.12), no
Default or Event of Default shall have occurred and be continuing. The Company
shall not have entered into any transaction since the date of the Memorandum
that would have been prohibited by Section 8 had such Section applied since
such date.
(b) The Parent Guarantor shall have performed and complied with
all agreements and conditions contained in the Parent Guaranty required to be
performed and complied with by it prior to or at the Closing, and after giving
effect to the issuance and sale of the Notes (and the application of the
proceeds thereof as contemplated by Section 5.12), no Default or Event of
Default shall have occurred and be continuing. Neither the Parent Guarantor
nor any Subsidiary shall have entered into any transactions since the date of
the Memorandum that would have been prohibited by Sections 4 and 5 of the
Parent Guaranty had such Sections applied since such date.
(c) Each Constituent Guarantor shall have performed and complied
with all agreements and conditions contained in the Constituent Guaranty to
which it is a party required to be performed and complied with by it prior to
or at the Closing, and after giving effect to the issuance and sale of the
Notes (and the application of the proceeds thereof as contemplated by Section
5.12), no Default or Event of Default shall have occurred and be continuing.
Section 4.3. Compliance Certificates.
(a) Officer's Certificate. (i) The Company shall have delivered
to you an Officer's Certificate, dated the date of the Closing, certifying that
the conditions specified in Sections 4.1(a), 4.2(a) and 4.10(a) have been
fulfilled.
-3-
<PAGE> 8
(ii) The Parent Guarantor shall have delivered to you an Officer's
Certificate, dated the date of the Closing, certifying that the conditions
specified in Sections 4.1(b), 4.2(b) and 4.10(b) have been fulfilled.
(iii) Each Constituent Guarantor shall have delivered to you a
certificate of an authorized officer, dated the date of the Closing, certifying
that the conditions specified in Section 4.1(c), 4.2(c) and 4.10(c) have been
fulfilled with respect to such Constituent Guarantor.
(b) Secretary's Certificate. (i) The Company shall have delivered
to you a certificate certifying as to the resolutions attached thereto and
other corporate proceedings relating to the authorization, execution and
delivery of the Notes and the Agreements.
(ii) The Parent Guarantor shall have delivered to you a certificate
certifying as to the resolutions attached thereto and other corporate
proceedings relating to the authorization, execution and delivery of the Parent
Guaranty.
(iii) Each Constituent Guarantor shall have delivered to you a
certificate certifying as to the resolutions attached thereto and other
corporate proceedings relating to the authorization, execution and delivery of
the Constituent Guaranties.
Section 4.4. Certain Agreements. The Parent Guaranty and the
Constituent Guaranties shall have been duly executed and delivered by the
parties thereto, shall be in full force and effect, shall be in form and
substance satisfactory to you and you shall have received true, correct and
complete copies of each thereof.
Section 4.5. Opinions of Counsel. You shall have received
opinions in form and substance satisfactory to you, dated the date of the
Closing (a) from Stieber Campbell, P.C., independent counsel for the Parent
Guarantor and the United States Subsidiaries, and John S. Davis, General
Counsel of the Parent Guarantor, covering the matters set forth in Exhibit
4.5(a) and covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request (and the
Parent Guarantor and the Company each hereby instructs its counsel to deliver
such opinion to you), (b) from Blake, Cassels & Graydon independent counsel for
the Company and the Canadian Subsidiaries, covering the matters set forth in
Exhibit 4.5(b) and covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to you and (c)
from Chapman and Cutler, your special counsel in connection with such
transactions, substantially in the form set forth in Exhibit 4.5(c) and
covering such other matters incident to such transactions as you may reasonably
request.
Section 4.6. Purchase Permitted by Applicable Law, Etc. On the
date of the Closing your purchase of Notes shall (a) be permitted by the laws
and regulations of each jurisdiction to which you are 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
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<PAGE> 9
or regulation (including, without limitation, Regulation U, T or X of the Board
of Governors of the Federal Reserve System) and (c) not subject you 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
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine
whether such purchase is so permitted.
Section 4.7. Sale of Other Notes. Contemporaneously with the
Closing, the Company shall sell to the Other Purchasers, and the Other
Purchasers shall purchase, the Notes to be purchased by them at the Closing as
specified in Schedule A.
Section 4.8. Payment of Special Counsel Fees. Without limiting
the provisions of Section 13.1, the Company or the Parent Guarantor shall have
paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.5 to the extent reflected in a
statement of such counsel rendered to the Company or the Parent Guarantor at
least three Business Days prior to the Closing.
Section 4.9. Private Placement Number. 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 4.10. Changes in Corporate Structure. (a) Except as
specified in Schedule 4.10, 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 2.5 to the Parent Guaranty.
(b) The Parent Guarantor 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 2.5 of the Parent Guaranty.
(c) No Constituent Guarantor shall have changed its jurisdiction
of incorporation or been a party to any merger or consolidation or 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 2.5 of the Parent Guaranty.
Section 4.11. 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 you and your special counsel, and you and your special counsel
shall have received all such counterpart originals or certified or other copies
of such documents as you or they may reasonably request.
Section 4.12. Consent of Holders of Other Securities. Any consents
or approvals required to be obtained from any Holder or Holders of any
outstanding Security of the Parent
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Guarantor, the Company or any Constituent Guarantor and any amendments or
agreements pursuant to which any such Securities may have been issued which
shall be necessary to permit the consummation of the transactions contemplated
hereby on the date of the Closing shall have been obtained and all such
consents or amendments shall be satisfactory in form and substance to you and
your special counsel.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you 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 Other Agreements and the Notes and to perform the provisions hereof and
thereof. The Company is subject to the relevant commercial law and civil law
and is generally subject to suit and it is not, nor do any of its properties or
revenues, enjoy any right of immunity from any judicial proceedings, including
attachment prior to judgment, attachment in aid of execution, execution of the
judgment or otherwise. The Company represents that the execution and delivery
of this Agreement and the Other Agreements and the Notes constitute private and
commercial acts rather than governmental or public acts of the Company.
Section 5.2. Authorization, Etc. This Agreement, the Other
Agreements 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 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. Organization and Ownership of Shares of Subsidiaries;
Affiliates. (a) Schedule 5.3 contains complete and correct lists (i) of the
Company's Subsidiaries, showing, as to each 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 5.3 as being owned by the
Company and its other Subsidiaries
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have been validly issued, are fully paid and nonassessable and are owned by the
Company or another Subsidiary free and clear of any Lien.
(c) Each Subsidiary identified in Schedule 5.3 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 (other than restrictions imposed by the corporate law of the
jurisdiction under which such Subsidiary exists) or any agreement (other than
this Agreement and the Other Agreements) 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 5.4. Compliance with Laws, Other Instruments, Etc. (a)
The execution, delivery and performance by the Company of this Agreement, the
Other Agreements and the Notes will not (i) 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 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 is bound or by which
the Company or any of its properties may be bound or affected, (ii) conflict
with or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or (iii) violate any provision of any
statute or other rule or regulation of any Governmental Authority applicable to
the Company.
(b) The Notes and all other obligations under this Agreement and
the Other Agreements of the Company are direct and unsecured obligations of the
Company ranking pari passu as against the assets of the Company with all other
existing unsecured Indebtedness of the Company (actual or contingent) which is
not expressed to be subordinated or junior in rank to any other unsecured
Indebtedness of the Company.
(c) All obligations under the Constituent Guaranties are direct
and unsecured obligations of the Constituent Guarantors ranking pari passu as
against the assets of the Constituent Guarantors with all other present and
future unsecured Indebtedness (actual or contingent) of the Constituent
Guarantors which is not expressed to be subordinated or junior in rank to any
other unsecured Indebtedness of the Constituent Guarantors.
Section 5.5. Governmental Authorizations, Etc. No consent,
approval or authorization of, or registration, filing or declaration with, any
Governmental Authority is required in
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connection with the execution, delivery or performance by the Company of this
Agreement, the Other Agreements or the Notes.
Section 5.6. Litigation; Observance of Agreements, Statutes and
Orders. (a) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or any property of the Company or any 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 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.
Section 5.7. Taxes. The Company and its Subsidiaries have filed
all tax returns that are required to have been filed in any jurisdiction, and
has paid all taxes shown to be due and payable on such returns and, to its
knowledge, all other taxes and assessments levied upon it or its properties,
assets, income or franchises, to the extent such taxes and assessments have
become due and payable and before they have become delinquent.
Section 5.8. Title to Property; Leases. The Company and its
Subsidiaries have good and sufficient title to their respective properties that
individually or in the aggregate are Material.
Section 5.9. Licenses, Permits, Etc. The Company and its
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.
Section 5.10. Compliance with Pension Laws. (a) Each pension plan
maintained by the Company and its Subsidiaries complies with all applicable
statutes and governmental rules and regulations, except where noncompliance,
individually or in the aggregate, would not have a Material Adverse Effect.
The Company and its Subsidiaries have satisfied their respective funding
obligations as required by applicable law for all pension plans maintained by
them, except where a failure to satisfy such obligations would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
and its Subsidiaries have not incurred a liability in connection with the
winding-up of a pension plan or the withdrawal from a multiemployer plan which
would have a Material Adverse Effect. There are no controversies pending or,
to the knowledge of the Company, threatened or anticipated between the Company
and its Subsidiaries and any of their respective employees which would have a
Material Adverse Effect and there are no Material labor disputes, grievances,
arbitration proceedings or any strikes, work stoppages or slow downs pending
or, to the Company's knowledge, threatened by the Company's or any
Subsidiaries' employees and representatives which would have a Material Adverse
Effect.
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(b) 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 5.10 is
made in reliance upon and subject to the accuracy of your 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 you.
Section 5.11. 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 you,
the Other Purchasers and not more than 100 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 5.12. Use of Proceeds; Margin Regulations. The Company
will apply the proceeds of the sale of the Notes to the repayment of
Indebtedness of the Company and for working capital. 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
207), 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
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 5.13. Existing Indebtedness; Future Liens. (a) Schedule
5.13 sets forth a complete and correct list of all outstanding Indebtedness of
the Company and its Subsidiaries as of the date of the Closing. Neither the
Company nor any 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 any Subsidiary and no event or condition exists with respect to
any Indebtedness of the Company or any 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) Neither the Company nor any 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 5.5 of the Parent Guaranty.
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Section 5.14. Pari Passu. The obligation of the Company under this
Agreement ranks at least pari passu in right of payment with all other
unsecured Indebtedness (actual or contingent) of the Company, including,
without limitation, all unsecured Debt of the Company described in Schedule
5.13 hereto.
SECTION 6. REPRESENTATIONS OF THE PURCHASER.
Section 6.1. Purchase for Investment. You represent that you are
purchasing the Notes for your own account or for one or more separate accounts
maintained by you or for the account of one or more pension or trust funds and
not with a view to the distribution thereof; provided that the disposition of
your or their property shall at all times be within your or their control. You
understand 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. You
further represent that you are not a resident of Canada and you will not resell
the Notes to any resident of Canada, except in compliance with Canadian
securities laws. You also understand that the Notes have not been registered
to qualify for sale under any Canadian securities laws.
Section 6.2. Source of Funds. You represent that at least one of
the following statements is an accurate representation as to each source of
funds (a "Source") to be used by you to pay the purchase price of the Notes to
be purchased by you 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, exceed 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 filed with your 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 you have 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
investment fund, when combined with the assets of all other employee benefit
plans established or maintained by the same employer or by an affiliate
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(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 is an insurance company separate account maintained
solely in connection with the fixed contractual obligations of the insurance
company under which the amounts payable, or credited, to an employee benefit
plan (or its related trust) and to any participant or beneficiary of such plan
(including any annuitant) are not affected in any manner by the investment
performance of the separate account; or
(g) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
If you or any subsequent transferee of the Notes indicates that you or
such transferee are relying on any representation contained in paragraph (b),
(c) or (e) above, the Company shall deliver on the date of Closing and on the
date of any applicable transfer a certificate, which shall either state that
(i) it 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 paragraphs (b) or (e) above, or (ii) with respect to any plan,
identified pursuant to paragraph (c) above, neither it nor 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
said 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. PREPAYMENT OF THE NOTES.
Section 7.1. Required Prepayments. The Notes are not subject to
required prepayments.
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Section 7.2. Optional Prepayments with Make-Whole Amount. The
Company may, at its option, upon notice as provided below, prepay at any time,
or from time to time any part of, the Notes, in an amount not less than 10% 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 such prepayment, plus the Make-Whole Amount
determined for the prepayment date with respect to such principal amount of
Notes being so prepaid. The Company will give each Holder of Notes to be
prepaid written notice of each optional prepayment under this Section 7.2 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
7.4), 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 7.3. Redemption for Reasons of Taxation. If in the good
faith opinion of the Board of Directors of the Company (which determination
shall be accompanied by a written opinion of an independent tax counsel of
recognized national standing to the same such effect), the Company would be
obligated to pay a Tax Reimbursement Amount of more than a de minimus amount
(i.e., more than 0.5% of the amount of interest due) pursuant to Section 12.3
as a result of a change of tax law after the date of this Agreement, then and
in such event, but only in such event, on the occasion of any payment pursuant
to Section 12.3, the Company may, by giving written notice to each holder of
the Notes not less than 30 days nor more than 60 days before the date fixed for
a prepayment pursuant to this Section 7.3, prepay all (but not less than all)
of the outstanding Notes with respect to which any such amounts will be payable
by payment of the principal amount of the Notes and accrued interest thereon to
the date of such prepayment, together with any Tax Reimbursement Amount then
due and owing pursuant to Section 12.3, and a premium equal to the Make-Whole
Amount, determined as of two Business Days prior to the date of such prepayment
pursuant to this Section 7.3. At any time on or after the date on which any
holder of the Notes receives notice pursuant to this Section 7.3 that the
Company intends to prepay the Notes held by such holder pursuant to this
Section 7.3, but not less than two Business Days prior to the date scheduled
for such prepayment, such holder may, by notice delivered to the Company in the
manner provided in Section 16, irrevocably waive any and all right to any
payment of any Tax Reimbursement Amount, such waiver to be effective as of the
date of delivery by the Company of such notice of prepayment and to survive
termination of this Agreement and payment in full of the Notes, provided that
no such waiver shall be deemed to constitute a waiver of any right to receive
payment Tax Reimbursement Amount in full under Section 12.3 in respect of any
other event or condition that shall have given rise to the Company's prepayment
right under this Section 7.3, including, without limitation, any increase in
the Tax Reimbursement Amount that a holder of any Note would be entitled to
receive under Section 12.3 notwithstanding any waiver previously delivered
pursuant to this Section 7.3. Effective upon receipt of notice of
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such waiver, the Company shall then cease to have any right of prepayment with
respect to such Notes under this Section 7.3 in respect of the Relevant Tax to
which the notice relates. True, correct and complete copies of any
determination by the Board of Directors of the Company as to the existence of
any such obligation to pay a Relevant Tax as hereinabove contemplated and the
opinion of independent tax counsel of recognized standing to the same such
effect shall be furnished to each holder of the Notes which accepts prepayment
thereof pursuant to this Section 7.3 concurrently with such prepayment.
Section 7.4. Allocation of Partial Prepayments. In the case of
each partial prepayment of the Notes pursuant to Section 7.2, the principal
amount of the Notes to be prepaid shall be allocated among all of the Notes of
each series at the time outstanding in proportion, as nearly as practicable, to
the respective unpaid principal amounts thereof not theretofore called for
prepayment. All partial prepayments made pursuant to Section 7.3 shall be
applied as therein provided.
Section 7.5. Maturity; Surrender, Etc. In the case of each
prepayment of Notes pursuant to this Section 7, 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 7.6. 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 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 7.7. Make-Whole Amount. (a) The term "Make-Whole Amount"
means, with respect to any Series A 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 Series A 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 Series A Note,
the principal of such Series A Note that is to be prepaid pursuant to
Section 7.2 or 7.3 or has become or is declared to be immediately due
and payable pursuant to Section 10.1, as the context requires.
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"Discounted Value" means, with respect to the Called Principal
of any Series A 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 Series A Note, 0.50% over the Government of Canada
Bond Yield.
"Government of Canada Bond Yield" means, with respect to the
Called Principal of any Series A Note, the mid-market yield on the
Government of Canada 6-1/2% coupon bond maturing October 7, 2004 (the
"Canadian Bond"), as quoted on the Bloomberg Financial Markets Service
Screen (or, if not available, any other nationally recognized trading
screen reporting on intra-day trading in Canadian Bonds) at 11:00 a.m.
(New York, New York time) on the date of determination of the
Make-Whole Amount.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (a) such Called Principal into (b) the sum
of the products obtained by multiplying (i) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (ii) 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 Series A 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 Series A 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 7.2,
7.3 or 10.1.
"Settlement Date" means, with respect to the Called Principal
of any Series A Note, the date on which such Called Principal is to be
prepaid pursuant to Section 7.2 or 7.3 or has become or is declared to
be immediately due and payable pursuant to Section 10.1, as the
context requires.
(b) The term "Make-Whole Amount" means, with respect to
any Series B 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 Series B Note over the amount of such
Called Principal; provided that the Make-Whole Amount may in no
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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 Series B Note,
the principal of such Series B Note that is to be prepaid pursuant to
Section 7.2 or 7.3 or has become or is declared to be immediately due
and payable pursuant to Section 10.1, as the context requires.
"Discounted Value" means, with respect to the Called Principal
of any Series B 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 Series B Note, .50% over the yield to maturity
implied by (a) 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 national recognized trading screen reporting
on-line intraday trading in the United States Governmental Securities)
for actively traded on-the-run U.S. Treasury securities having a
maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date, or (b) 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
on-the-run U.S. Treasury securities having a constant maturity equal
to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield will be determined, if necessary,
by (i) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (ii)
interpolating linearly between (1) the actively traded on-the-run U.S.
Treasury security with the maturity closest to and greater than the
Remaining Average Life and (2) the actively traded on-the-run 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 (a) such Called Principal into (b) the sum
of the products obtained by multiplying (i) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (ii) 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.
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"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Series B 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 Series B 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 7.2,
7.3 or 10.1.
"Settlement Date" means, with respect to the Called Principal
of any Series B Note, the date on which such Called Principal is to be
prepaid pursuant to Section 7.2 or 7.3 or has become or is declared to
be immediately due and payable pursuant to Section 10.1, as the
context requires.
SECTION 8. AFFIRMATIVE COVENANTS OF THE COMPANY.
The Company covenants that so long as any of the Notes are
outstanding:
Section 8.1. Compliance with Law. (a) 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 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.
(b) Without limiting clause (a) of this Section 8.1, the Company
will not, and will not permit any of its Subsidiaries, to take any action that
would cause any supplemental pension plan, any employee pension arrangement or
any employee benefit plan maintained by it to be terminated in a manner which
could reasonably be anticipated to result in the imposition of a Material Lien
on any property of the Company or any Subsidiary pursuant to any Canadian
Federal or Provincial law, nor will the Company or any of its Subsidiaries
withdraw from any multiemployer plan if such withdrawal would subject the
Company or any of its Subsidiaries to a liability that would have a Material
Adverse Effect.
Section 8.2. Insurance. The Company will, and will cause each of
its 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.
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Section 8.3. Maintenance of Properties. The Company will, and
will cause each of its 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 8.3 shall not prevent the Company or any 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 8.4. 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 claim if (a) 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 (b) the
nonpayment of all such taxes and assessments in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
Section 8.5. Corporate Existence, Etc. The Company will at all
times preserve and keep in full force and effect its corporate existence.
Subject to Section 8.8, the Company will at all times preserve and keep in full
force and effect the corporate existence of each of its Subsidiaries (unless
merged into the Company or a Subsidiary) and all rights and franchises of the
Company and its 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 8.6. Nature of Business. Neither the Company nor any
Subsidiary will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Company and its Subsidiaries would be substantially changed from the
general nature of the business engaged in by the Company and its Subsidiaries,
taken as a whole, on the date of this Agreement.
Section 8.7. Notes to Rank Pari Passu. The Notes and all other
obligations under this Agreement of the Company are and at all times shall
remain direct and unsecured obligations of the Company ranking pari passu as
against the assets of the Company with all other Notes from time to time issued
and outstanding hereunder without any preference among themselves and pari
passu with all other present and future unsecured Indebtedness (actual or
contingent) of the Company which is not expressed to be subordinate or junior
in rank to any other unsecured Debt of the Company.
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Section 8.8. Mergers and Consolidations and Sales of Assets. The
Company will not, and will not permit any of its Subsidiaries to, consolidate
or amalgamate with or be a party to a merger with any other Person (except that
a Subsidiary of the Company may consolidate with, amalgamate 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 Wholly-Owned
Subsidiary of the Company), or sell, lease or otherwise dispose of all or
substantially all of its assets; provided that the Company may consolidate,
merge or amalgamate with or into any other corporation if (a) the corporation
which results from such consolidation, merger or amalgamation (the "surviving
corporation") is organized under the laws of Canada or any Province thereof or
any state of the United States or the District of Columbia, (b) the due and
punctual payment of the principal of and premium, if any, and interest on all
of the Notes, according to their tenor, and the due and punctual performance
and observation of all of the covenants in the Notes and this Agreement to be
performed or observed by the Company are expressly assumed in writing by the
surviving corporation and the surviving corporation shall furnish to the
Holders of the Notes an opinion of counsel satisfactory to such Holders to the
effect that the instrument of assumption has been duly authorized, executed and
delivered and constitutes the legal, valid and binding contract and agreement
of the surviving corporation enforceable in accordance with its terms, except
as enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles, (c) the Parent
Guarantor confirms in writing its obligations under the Parent Guaranty, (d)
each Constituent Guarantor confirms in writing its obligations under and
pursuant to the Constituent Guaranty to which it is a party, and (e) at the
time of such consolidation, merger or amalgamation and immediately after giving
effect thereto, no Default or Event of Default would exist.
SECTION 9. 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 Section 8.8 or the Parent
Guarantor defaults in the performance of or compliance with any term
contained in Section 3.1(d) of the Parent Guaranty or in Sections 5.1
through 5.9 of the Parent Guaranty; 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 9) or the Parent
Guarantor defaults in the performance of or compliance with any term
contained in the Parent Guaranty (other than those referred to in
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paragraph (c) of this Section 9) and in any such case such default is
not remedied within 30 days after the earlier of (i) a Responsible
Officer of the Company or the Parent Guarantor obtaining actual
knowledge of such default and (ii) the Company or the Parent Guarantor
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 9); or
(e) any representation or warranty made in writing by or
on behalf of the Company, the Parent Guarantor or any Constituent
Guarantor or by any officer of the Company, the Parent Guarantor or
any Constituent Guarantor in this Agreement, the Parent Guaranty or
the Constituent Guaranties, as the case may be, or in any writing
furnished in connection with the transactions contemplated hereby or
thereby proves to have been false or incorrect in any material respect
on the date as of which made; or
(f) (i) the Parent Guarantor or any Restricted Subsidiary
(including, without limitation, the Company) 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 U.S. $5,000,000 (or the Canadian Equivalent Amount) beyond
any period of grace provided with respect thereto, or (ii) the Parent
Guarantor or any Restricted Subsidiary (including, without limitation,
the Company) 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 U.S. $5,000,000 (or the
Canadian Equivalent Amount) 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 Parent Guaranty shall cease to be in full force
and effect for any reason whatsoever, including, without limitation, a
determination by any Governmental Authority that such Parent Guaranty
is invalid, void or unenforceable or the Parent Guarantor shall
contest or deny in writing the enforceability of any of its
obligations under the Parent Guaranty; or
(h) Any Constituent Guaranty delivered by a Constituent
Guarantor shall cease to be in full force and effect for any reason
whatsoever, including, without limitation, a determination by any
Governmental Authority that such agreement is invalid, void or
unenforceable or any Constituent Guarantor shall contest or deny in
writing the validity or enforceability of any of its respective
obligations under the Constituent Guaranties; or
(i) the Parent Guarantor or any Restricted Subsidiary
(including, without limitation, the Company) (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
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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
(j) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the Parent
Guarantor or any of its Restricted Subsidiaries (including, without
limitation, the Company), 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 Parent Guarantor or any
of its Restricted Subsidiaries (including, without limitation, the
Company), or any such petition shall be filed against the Parent
Guarantor or any of its Restricted Subsidiaries (including, without
limitation, the Company) and such petition shall not be dismissed
within 60 days; or
(k) a final judgment or judgments for the payment of
money aggregating in excess of U.S. $3,000,000 (or the Canadian
Equivalent Amount) (excluding any judgment, or portion thereof, as to
which a solvent insurer shall have accepted responsibility) are
rendered against one or more of the Parent Guarantor and its
Restricted Subsidiaries (including, without limitation, the Company)
and which judgments are not, within 30 days after entry thereof,
bonded, discharged or stayed pending appeal, or are not discharged
within 30 days after the expiration of such stay; or
(l) 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 Parent Guarantor or any ERISA Affiliate that a Plan may
become a subject of any such proceedings, (iii) the aggregate "amount
of unfounded 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 U.S. $3,000,000 (excluding any
judgment, or portion thereof, as to which a solvent insurer shall have
accepted responsibility), (iv) the Parent Guarantor 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
Parent Guarantor or any ERISA Affiliate withdraws from any
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Multiemployer Plan, or (vi) the Parent Guarantor or any 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 Parent Guarantor or any 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 9(l), 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 10. REMEDIES ON DEFAULT, ETC.
Section 10.1. Acceleration. (a) If an Event of Default with
respect to the Parent Guarantor or the Company described in paragraph (i) or
(j) of Section 9, 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 at least 25% 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 and the Parent Guarantor, 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 9 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 and the Parent Guarantor,
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 10.1,
whether automatically or by declaration, such Note will forthwith mature and
the entire unpaid principal amount of such Note, plus (i) all accrued and
unpaid interest thereon and (ii) 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
and the Parent Guarantor acknowledge, 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 or the Parent Guarantor (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 10.2. 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 10.1,
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
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the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
Section 10.3. Rescission. At any time after any Notes have been
declared due and payable pursuant to clause (b) or (c) of Section 10.1, the
Holders of not less than 66-2/3% in principal amount of the Notes then
outstanding, by written notice to the Company and the Parent Guarantor, may
rescind 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 15, 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 10.3 will extend to or affect any subsequent Event
of Default or Default or impair any right consequent thereon.
Section 10.4. 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 13,
the Company will pay to the Holder of each Note on demand such further amount
as shall be sufficient to cover all costs and expenses of such Holder incurred
in any enforcement or collection under this Section 10, including, without
limitation, reasonable attorneys' fees, expenses and disbursements.
SECTION 11. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
Section 11.1. 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.
Section 11.2. 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 instrument of transfer duly
executed by the registered Holder of such Note or its attorney duly
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authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Company shall execute and within
5 Business Days of receipt of such Note or instrument of transfer, as the case
may be, deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the Holder thereof) 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 Exhibit 1.1 or
Exhibit 1.2, 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 Cdn. $1,000,000 in the case of the Series A Notes and U.S. $1,000,000 in
the case of the Series B Notes; 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 Cdn. $1,000,000 or U.S. $1,000,000, as
the case may be. Any transferee, by its acceptance of a Note registered in its
name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.2.
Section 11.3. 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 U.S.
$100,000,000, 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, in lieu thereof, a new Note of the same series, 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 12. PAYMENTS ON NOTES.
Section 12.1. Place of Payment. Subject to Section 12.2, payments
of principal, Make-Whole Amount, if any, and interest becoming due and payable
on the Notes shall be made in New York, New York at the principal office of
Citibank, N.A. in such jurisdiction.
Section 12.2. Home Office Payment. So long as you or your nominee
shall be the registered Holder of any Note, and notwithstanding anything
contained in Section 12.1 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 below
your name in Schedule A, or by such other method or at such
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other address as you 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, you shall surrender such Note for 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 12.1. Prior to any sale or other disposition of
any Note held by you or your nominee you will, at your election, either endorse
thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in
exchange for a new Note or Notes pursuant to Section 11.2. The Company will
afford the benefits of this Section 12.2 to any Institutional Investor that is
the direct or indirect transferee of any Note purchased by you under this
Agreement and that has made the same agreement relating to such Note as you
have made in this Section 12.2.
Section 12.3. Gross-Up of Payments Subject to Taxes. In the event
of the imposition by or for the account of any Governmental Authority (the
"Taxing Authority") of Canada or any other country or jurisdiction from or
through which any payment in respect of any Series B Note or this Agreement, as
it relates to any Series B Note, is made by the Company or which is a
jurisdiction of residence of the Company for tax purposes (any such Authority
or jurisdiction is hereinafter a "Taxing Jurisdiction") of any Tax which
requires the Company to make a deduction or withholding in respect of such Tax
from any payment in respect of any Series B Note or this Agreement, as it
relates to any Series B Note (each such payment is referred to herein as a
"Note-Related Payment"), the Company hereby agrees to pay, as additional
interest, forthwith from time to time in connection with such Note-Related
Payment to the Holder of the Note entitled to such Note-Related Payment such
amount (the "Tax Reimbursement Amount") as shall be required so that such
Note-Related Payment received by such Holder will, after the deduction or
withholding of or other payment for or on account of such Tax and any interest
or penalties relating thereto as well as any additional Taxes to be withheld or
deducted in respect of such Tax Reimbursement Amount, be equal to the amount
due and payable to such Holder in respect of such Note-Related Payment before
the imposition or assessment of such Tax, provided that:
(i) in the case where such Holder is not resident (for
the purposes of the US/Canada Tax Treaty or any other applicable
double tax treaty between the United States of America and the Taxing
Jurisdiction) in the United States of America, the Company shall not
be obligated to pay any such Tax Reimbursement Amount to such Holder
in excess of the hypothetical Tax Reimbursement Amount which the
Company would have been obligated to pay hereunder if authorization
could have been obtained under the double tax treaty between the
United States of America and the Taxing Jurisdiction in force at the
relevant time in order for the Company to make the Note-Related
Payment to such Holder either with no deduction or withholding of such
Taxes or with a deduction or withholding of a lesser amount in respect
of such Taxes as if the Notes held by such Holder were beneficially
owned at all relevant times by Persons who were resident in the United
States of America for the purposes of such treaty and were otherwise
eligible in full for all benefits and exceptions available under such
treaty with respect to interest received from the Company in respect
of the Notes;
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(ii) the Company shall not be obligated to pay any such
Tax Reimbursement Amount to such Holder in respect of any Taxes which
would not have been imposed but for the existence of any present or
former connection (other that the mere holding of a Note) between such
Holder and Canada or any political subdivision or territory or
possession thereof or therein or area subject to its jurisdiction,
including, without limitation, such Holder's being or having been a
citizen or resident thereof, being or having been present or engaged
in trade or business therein or having or having had a permanent
establishment or fixed base therein;
(iii) the Company shall not be obligated to pay any such
Tax Reimbursement Amount to such Holder in respect of any Taxes that
constitute estate, inheritance, gift, sale, transfer, personal
property, capital gains or similar tax, assessments or governmental
charges;
(iv) the Company shall not be obligated to pay any such
Tax Reimbursement Amount to such Holder to the extent of the
imposition of any Tax by reason of:
(A) such Holder's not being eligible in
full for the benefits and exemptions available under
the double taxation treaty then in effect between the
Taxing Jurisdiction and the United States of America
in relation to interest received by such Holder from
the Company (including, without limitation, in
respect of the Notes (x) being exempt from the
United States of America taxes on income with respect
to interest on the Notes of such Holder, or (y) as a
result of a connection between the Holder and the
Company (other than through holding the Notes)) if
authorization could have been obtained under the
double tax treaty then in effect between the United
States of America and the Taxing Jurisdiction for the
Company to make the payment from which such Tax was
deducted or withheld without deduction or withholding
of such Tax had the Notes held by such Holder been
beneficially owned at all relevant times by a Person
who was (1) a resident of the United States of
America for the purposes of such treaty, and (2)
otherwise eligible in full for all benefits and
exemptions available under such treaty with respect
to interest received from the Company, assuming that
the Company and such Holder had made and obtained all
relevant claims and authorizations required under
such treaty,
(B) that failure to comply by such
Holder with a written request of the Company
addressed to such Holder to provide information
concerning the nationality, residence, domicile or
identity of such Holder or information as to if, and
where, any declaration of residence, domicile or
other similar claim or reporting requirement
described in subclause (C) hereof has been made by
such Holder,
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(C) the failure by such Holder after
written request by the Company to make any aforesaid
declaration of residence, domicile or other claim or
reporting requirement, or to provide such
commercially customary information or certification
to a taxation authority, as is required by a statute,
treaty or regulation of the Taxing Jurisdiction
(including a claim (or a requirement to provide
information relating to such a claim) under any
international treaty between the United States of
America and such Taxing Jurisdiction providing for
the avoidance of double taxation) as a precondition
to exemption from all or part of such Tax, in the
case of you, within 60 days after the date of the
Closing, in the case of any payment hereunder, at
least 90 days prior to the date of such payment, and
in respect of any subsequent Holder of Notes, at
least 90 days prior to the date of the next payment
in respect of such Holder, provided that no Holder of
a Note shall be considered to have delayed or failed
to make any such declaration or to file any form (x)
that would involve the disclosure of confidential or
proprietary tax return or other information, (y) if
such Holder has filed the appropriate forms in
respect of such declaration with the United States
Internal Revenue Service or Revenue Canada (or other
appropriate authority) at least 60 days prior to the
payment in question or (z) in the case of forms or
declarations whether or not required under existing
law and practices as of the date of the Closing,
unless the Company has requested that such forms or
declarations be filed (and has furnished such forms
or declarations to such Holder) and such Holder has
had a reasonable period of time (not less than 90
days) to file such forms or declarations, or
(D) any combination of subclauses (A),
(B) and (C) above;
nothing in this clause (iv) shall be construed to
impose any obligation on you or any other such Holder
(or any other Person mentioned in subclause (A)
above) to contest any determination by the Taxing
Authority in respect of such declarations, reports or
forms or to require, or be deemed to require, the
disclosure by you or any other such Holder of any
confidential or proprietary information.
Not later than 30 days after the date of the Closing, the Company will furnish
you with copies of the appropriate form currently required to be filed in
Canada pursuant to paragraph (C) above, and in connection with the transfer of
any Note pursuant to Section 11.2, the Company will furnish the transferee of
such Note with copies of all forms then required.
(b) Receipt of Taxes. As soon as reasonably practicable after the
date of any payment by the Company of any Tax required by law to be deducted or
withheld in respect of any Note-Related Payment, the Company shall furnish to
each affected Holder of a Note a certified copy of the original tax receipt (if
such a receipt has been issued and, if such tax receipt has not then been
issued, the Company shall furnish a copy thereof to such affected Holder as
soon as reasonably practicable after such tax receipt is so issued). If the
Company
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shall have determined, with respect to any Holder of Notes, that a deduction or
withholding of Tax from Note-Related Payments shall be required to be made to
such Holder and that no Tax Reimbursement Amount will be payable to such Holder
under this Section 12.3 in respect of such Tax, the Company will use its best
efforts to inform such Holder of the imposition or withholding of such Tax and
of the applicable exemption set forth in this Section 12.3 that releases the
Company from the obligation to pay a Tax Reimbursement Amount in respect
thereof.
(c) Payment of Taxes to Taxing Jurisdiction. If any deduction or
withholding for Tax shall at any time be required by the laws of a Taxing
Jurisdiction in respect of any Note-Related Payments to a Holder of Notes, the
Company will promptly pay over to the Taxing Authority imposing such Tax the
full amount required to be deducted or withheld in respect thereof (including,
without limitation, the full amount of any Tax required to be deducted or
withheld from or otherwise paid in respect of any related Tax Reimbursement
Amount).
(d) Refunds of Tax Reimbursement Amounts. If the Company makes
payment of any Tax Reimbursement Amount and a recipient thereof subsequently
receives a refund, credit, benefit or allowance in respect thereof (a "Tax
Refund"), and such recipient determines in its sole discretion that a Tax
Refund is attributable to the Taxes with respect to which such Tax
Reimbursement Amount was paid, then such recipient shall promptly reimburse the
Company such amount as such recipient shall determine, its sole discretion, to
be the proportion of the Tax Refund as will leave such recipient, after such
reimbursement, in no better or worse position than that in which such recipient
would have been if payment of such Tax Reimbursement Amount had not been
required. The foregoing notwithstanding, nothing in this clause (d) shall
restrict the right of any recipient to arrange the tax affairs of such
recipient as such recipient shall think fit. Nothing in this clause (d) shall
require any recipient to disclose any information regarding the tax affairs of
such recipient.
(e) Survival of Obligations. The obligations of the Company under
this Section 12.3 will survive the payment or transfer of any Note and the
termination of this Agreement.
SECTION 13. EXPENSES, ETC.
Section 13.1. Transaction Expenses. Whether or not the
transactions contemplated hereby are consummated, the Company agrees to pay all
costs and expenses (including reasonable attorneys' fees of a special counsel
and, if reasonably required, local or other counsel) incurred by you and each
Other 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, the Other Agreements, the Notes, the Parent Guaranty or the
Constituent Guaranties (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, the Other Agreements, the Notes, the
Parent Guaranty or the Constituent Guaranties or in responding to any subpoena
or other legal process or informal investigative demand issued in connection
with this Agreement, the Other Agreements, the Notes, the
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Parent Guaranty or the Constituent Guaranties, 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 Parent
Guarantor or any Subsidiary (including, without limitation, the Company) or in
connection with any work-out or restructuring of the transactions contemplated
hereby and by the Notes or by the Parent Guaranty or by any Constituent
Guaranty. The Company and the Parent Guarantor jointly and severally agree to
pay, and will save you and each other Holder of a Note harmless from, all
claims in respect of any fees, costs or expenses, if any, of brokers and
finders (other than those retained by you).
Section 13.2. Survival. The obligations of the Company under this
Section 13 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement, the Other Agreements,
the Notes, the Parent Guaranty or the Constituent Guaranties, and the
termination of this Agreement.
SECTION 14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement, the Notes, the Parent Guaranty and
the Constituent Guaranties, the purchase or transfer by you 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, the Parent Guaranty and the
Constituent Guaranties, regardless of any investigation made at any time by or
on behalf of you or any other Holder of a Note. All statements contained in
any certificate or other instrument delivered by or on behalf of the Company,
the Parent Guarantor or any Constituent Guarantor pursuant to this Agreement
shall be deemed representations and warranties of the Company, the Parent
Guarantor or such Constituent Guarantor, as the case may be, under this
Agreement, the Parent Guaranty or the Constituent Guaranties, as the case may
be. Subject to the preceding sentence, this Agreement, the Notes, the Parent
Guaranty and the Constituent Guaranties embody the entire agreement and
understanding between you and the Company and supersede all prior agreements
and understandings relating to the subject matter hereof.
SECTION 15. AMENDMENT AND WAIVER.
Section 15.1. Requirements. This Agreement, the Notes, the Parent
Guaranty and the Constituent Guaranties 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, the
Parent Guarantor and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of Section 1, 2, 3, 4, 5 or 6 hereof, or any
defined term (as it is used therein), will be effective as to you unless
consented to by you 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 10 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 7, 9(a), 9(b), 10 or 15.
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<PAGE> 33
Section 15.2. 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 Parent Guaranty or the Constituent Guaranties. The
Company will deliver executed or true and correct copies of each amendment,
waiver or consent effected pursuant to the provisions of this Section 15 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. Neither the Parent Guarantor nor any of its
Subsidiaries(including, without limitation, the Company) will directly or
indirectly pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, or grant any security,
to any Holder of Notes as consideration for or as an inducement to the entering
into by any Holder of Notes of any waiver or amendment of any of the terms and
provisions hereof or of the Parent Guaranty or the Constituent Guaranties
unless such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each Holder of Notes then outstanding
even if such Holder did not consent to such waiver or amendment.
Section 15.3. Binding Effect, Etc. Any amendment or waiver
consented to as provided in this Section 15 applies equally to all Holders of
Notes and is binding upon them and upon each future Holder of any Note and upon
the Parent Guarantor and its Subsidiaries (including, without limitation, 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 Parent Guarantor or any of its Subsidiaries (including, without
limitation, 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 15.4. 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 Parent Guarantor or any of its Subsidiaries (including,
without limitation, the Company) or any of the Affiliates of the Parent
Guarantor shall be deemed not to be outstanding.
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SECTION 16. 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 you or your nominee, to you or it at the
address specified for such communications in Schedule A, or at such
other address as you or it shall have specified to the Company and the
Parent Guarantor 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
and the Parent Guarantor in writing,
(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, or
(iv) if to the Parent Guarantor, to the Parent Guarantor
at 11651 Plano Road, Dallas, Texas 75243, to the attention of Chief
Financial Officer, or at such other address as the Parent Guarantor
shall have specified to the Holder of each Note in writing.
Notices under this Section 16 will be deemed given only when actually received.
SECTION 17. 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 you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or
other similar process and you 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 you
in the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
This Section 17 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.
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SECTION 18. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company and the Parent Guarantor, which notice shall be
signed by both you and such Affiliate, shall contain such Affiliate's agreement
to be bound 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 "you" is used in
this Agreement (other than in this Section 18), such word shall be deemed to
refer to such Affiliate in lieu of you. In the event that such Affiliate is so
substituted as a purchaser hereunder and such Affiliate thereafter transfers to
you all of the Notes then held by such Affiliate, upon receipt by the Company
and the Parent Guarantor of notice of such transfer, wherever the word "you" is
used in this Agreement (other than in this Section 18), such word shall no
longer be deemed to refer to such Affiliate, but shall refer to you, and you
shall have all the rights of an original Holder of the Notes under this
Agreement.
SECTION 19. MISCELLANEOUS.
Section 19.1. Currency of Payments, Indemnification. (a) Series A
Notes. Any payment made by the Company to any Holder of the Series A Notes or
for the account of any such Holder in respect of any amount payable by the
Company shall be made in Cdn. Dollars. Any amount received or recovered by
such Holder other than in Cdn. Dollars (whether as a result of, or of the
enforcement of, a judgment or order of any court, or in the liquidation or
dissolution of the Company or otherwise) in respect of any such sum expressed
to be due hereunder or under the Series A Notes shall constitute a discharge of
the Company only to the extent of the amount of Cdn. Dollars which such Holder
is able, in accordance with normal banking procedures, to purchase with the
amount so received or recovered in that other currency on the date of the
receipt or recovery (or, if it is not practicable to make that purchase on such
date, on the first date on which it is practicable to do so). If the amount of
Cdn. Dollars so purchased is less than the amount of Cdn. Dollars expressed to
be due hereunder or under the Series A Notes, the Company shall indemnify such
Holder against any loss sustained by such Holder as a result, and in any event,
the Company shall indemnify such Holder against the cost of making any such
purchase. These indemnities shall constitute a separate and independent
obligation from the other obligations herein and in the Series A Notes, shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by any such Holder, shall continue in
full force and effect despite any judgment, order, claim or proof for a
liquidated amount in respect of any such sum due hereunder or under any Series
A Note or any judgment or order and shall survive the payment of the Series A
Notes and the termination of this Agreement.
(b) Series B Notes. Any payment made by the Company to any Holder
of the Series B Notes or for the account of any such Holder in respect of any
amount payable by the Company shall be made in U.S. Dollars. Any amount
received or recovered by such Holder other than in U.S. Dollars (whether as a
result of, or of the enforcement of, a judgment or order of any court, or in
the liquidation or dissolution of the Company or otherwise) in respect of any
such sum expressed to be due hereunder or under the Series B Notes shall
constitute a
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<PAGE> 36
discharge of the Company only to the extent of the amount of U.S. Dollars which
such Holder is able, in accordance with normal banking procedures, to purchase
with the amount so received or recovered in that other currency on the date of
the receipt or recovery (or, if it is not practicable to make that purchase on
such date, on the first date on which it is practicable to do so). If the
amount of U.S. Dollars so purchased is less than the amount of U.S. Dollars
expressed to be due hereunder or under the Series B Notes, the Company shall
indemnify such Holder against any loss sustained by such Holder as a result,
and in any event, the Company shall indemnify such Holder against the cost of
making any such purchase. These indemnities shall constitute a separate and
independent obligation from the other obligations herein and in the Series B
Notes, shall give rise to a separate and independent cause of action, shall
apply irrespective of any indulgence granted by any such Holder, shall continue
in full force and effect despite any judgment, order, claim or proof for a
liquidated amount in respect of any such sum due hereunder or under any Series
B Note or any judgment or order and shall survive the payment of the Series B
Notes and the termination of this Agreement.
Section 19.2. Interest Act of Canada. Solely for purposes of the
Interest Act of Canada (R.S.C., c.I-15) and in respect of all or any portion of
a calendar year, the annual rate of interest to which any interest rate herein
is equal is such rate multiplied by a fraction, the numerator of which is the
total number of days in such year and the denominator of which is 360.
Section 19.3. Time. Time shall be of the essence of this
Agreement. The mere lapse of the time provided for the Company to perform its
obligations or the arrival of the term shall automatically create a default,
without any notice being required.
Section 19.4. 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 assigns
(including, without limitation, any subsequent Holder of a Note) whether so
expressed or not.
Section 19.5. 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 19.6. 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 19.7. 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
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<PAGE> 37
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.
Section 19.8. 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 19.9. Maximum Interest. Notwithstanding any provision to
the contrary contained in this Agreement, in no event shall the aggregate
"interest" (as defined in Section 347 of the Criminal Code (Canada), as amended
from time to time) payable under this Agreement exceed the effective annual
rate of interest on the "credit advanced" (as defined in that Section) under
this Agreement lawfully permitted under that Section and, if any payment,
collection or demand pursuant to this Agreement in respect of such "interest"
is determined to be contrary to the provisions of Section 347, such payment,
collection or demand over the amount lawfully permitted under such Section
shall be deemed to have been made by mutual mistake of the Company and the
Holders and the amount of such payment or collection shall be refunded to the
Company or deducted from the interest paid or payable by the Company, and this
Agreement shall be deemed modified accordingly without the necessity of any
further act or deed of the Holders and the Company to give effect to the above.
For purposes hereof the effective annual rate of interest shall be determined
in accordance with generally accepted actuarial practices and principles over
the term of this Agreement on the basis of annual compounding of the rate
lawfully permitted under that Section, and in the event of dispute, a
certificate of a Fellow of the Canadian Institute of Actuaries appointed by the
Holders will be conclusive for the purposes of determination.
Section 19.10. 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 19.11. Submission to Jurisdiction. The Company hereby
irrevocably submits and consents to the jurisdiction of the federal court
located within the County of New York, State of New York (or if such court
lacks jurisdiction, the State courts located therein), and irrevocably agrees
that all actions or proceedings relating to this Agreement and the Notes may be
litigated in such courts, and the Company waives any objection which it may
have based on improper venue or forum non conveniens to the conduct of any
proceeding in any such court and waives personal service of any and all process
upon it, and consents that all such service of process be made by delivery to
it at the address of the Company set forth in Section 16 above or to its agent
referred to below at such agent's address set forth below (with a courtesy copy
to the Company at the address set forth in Section 16) and that service so made
shall be deemed to be completed upon actual receipt. The Company hereby
irrevocably appoints CT Corporation System, with an office on the date hereof
at 1633 Broadway, New York, New York, 10019, as its agent for the purpose of
accepting service of any process within the State of New York. Nothing
contained in this section shall affect the
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right of any holder of Notes to serve legal process in any other manner
permitted by law or to bring any action or proceeding in the courts of any
jurisdiction against the Company or to enforce a judgment obtained in the
courts of any other jurisdiction.
* * * * *
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<PAGE> 39
Cameron Ashley Canada, Inc. Note Purchase Agreement
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you, the Company and the Parent Guarantor.
Very truly yours,
CAMERON ASHLEY CANADA, INC.
By /s/ F. Dixon McElwee
-----------------------------------
Name: F. Dixon McElwee
Title: Executive Vice President
The foregoing is hereby agreed
to as of the date thereof.
THE PAUL REVERE LIFE INSURANCE
COMPANY
By: Provident Investment Management,
LLC Its Agent
By /s/ James T. Rogers
-----------------------------------
Name: James T. Rogers
Title: Vice President
NATIONWIDE LIFE INSURANCE COMPANY
By /s/ Edwin P. McCausland, Jr.
-----------------------------------
Name: Edwin P. McCausland, Jr.
Title: Vice President/Fixed-Income
Securities
<PAGE> 1
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 30th day of March, 1998, between WM.
CAMERON & CO., a Georgia corporation dba Cameron Ashley Building Products (the
"Company"), and J. Andrew Kerner, a resident of the State of Texas ("Employee").
BACKGROUND
The Company desires to employ Employee on the terms and conditions set
forth below. Employee desires to accept employment on the terms and conditions
set forth below.
AGREEMENT
In consideration of the employment and continued employment of Employee
by the Company, the premises, and the mutual agreements hereinafter set forth,
the parties agree:
1. Definitions. The following terms used herein shall have the
definitions set forth below:
(a) "Business" or "Business of the Company" means the business of
the wholesale distribution, sale and marketing of building materials, building
supplies and mill work.
(b) "Cause" means conduct amounting to fraud or dishonesty against
the Company; Employee's violation of Sections 2(a) or (b) hereof, or any of the
Company's work rules or policies, or absences from work without a reasonable
excuse, if the President and Chief Executive Officer notifies Employee of such
violation or absence in writing and Employee fails to cure such violation or
absenteeism within five (5) days after written notice has been given, provided
that written notice relating to such violation or absenteeism shall only be
given once as it relates to a particular manner of conduct; intoxication with
alcohol or drugs while on Company business during regular business hours; a
conviction or plea of guilty or nolo contendere to a felony or a crime involving
dishonesty against the Company; or Employee's failure to observe the
requirements of Sections 2(c), 5 and 6 hereof.
(c) "Disability" means (i) the inability of Employee to perform the
duties of Employee's employment due to physical or emotional incapacity or
illness, where such inability is expected to be of long-continued and indefinite
duration or (ii) Employee shall be entitled to (x) disability retirement
benefits under the federal Social Security Act or (y) recover benefits under any
long-term disability plan or policy maintained by the Company. In the event of a
dispute, the determination of Disability shall be made reasonably by the Board
of Directors of the Company and shall be supported by advice of a physician
competent in the area to which such Disability relates.
<PAGE> 2
(d) "Effective Date" means the date hereof.
2. Terms of Engagement; Duties
(a) The Company hereby employs Employee, commencing on the Effective
Date, and Employee hereby accepts employment by the Company subject to the terms
and conditions hereof. Employee shall report to, shall have the title assigned
by, and shall perform the duties assigned by the Chairman and CEO of the Company
and Cameron Ashley Building Products, Inc. (the "Parent") or other senior
executive of the Company from time to time in connection with the conduct of the
Business of the Company. Employee is engaged initially with the title and
functions of Executive Vice President and Chief Financial Officer (CFO) of the
Company and the Parent. Nothing herein shall preclude the Chairman and CEO of
the Company from changing the Employee's title and duties if the Chairman and
CEO of the Company has concluded in his reasonable judgment that such change is
in the Company's best interests. Employee shall not be required to reside
outside the Area (as defined in Section 6 hereof).
(b) Throughout the term of this Agreement, Employee shall:
(i) devote all of Employee's business effort, time, energy and
skill (reasonable vacations and reasonable absences due to illness
excepted) to the duties of Employee's employment hereunder assigned by
the senior officers of the Company;
(ii) faithfully, loyally, and industriously perform such duties,
subject to the control and supervision of the senior officers of the
Company; and
(iii) diligently follow and implement all lawful management
policies and decisions of the Company that are communicated to Employee.
(c) During the term of this Agreement, Employee shall not be engaged
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage; but this shall not be construed as preventing
Employee from (i) investing his personal assets in businesses which do not
compete with the Company in such form or manner as will not require any services
on the part of Employee in the operation or the affairs of the companies in
which such investments are made and in which his participation is solely that of
an investor, (ii) purchasing securities in any corporation whose securities are
regularly traded provided that such purchase shall not result in his
collectively owning beneficially at any time five percent (5%) or more of the
equity securities of any corporation engaged in a business competitive to that
of the Company, or (iii) participating in conferences, preparing or publishing
papers or books or teaching so long as the Employee's supervisor approves of
such activities prior to Employee's engaging in them.
2
<PAGE> 3
3. Compensation.
(a) In consideration of the services rendered by Employee pursuant
to this Agreement, the Company shall provide the following:
(i) A base salary of Two Hundred Fifteen Thousand Dollars
($215,000) per annum (the "Base Salary") which Base Salary will be
reviewed periodically and may be increased by the Company from time to
time. The Base Salary shall be paid in accordance with the Company's
standard payroll practices in effect from time to time, and shall be
subject to such deductions and withholdings as are required by law or
by policies of the Company.
(ii) Reimbursement for all reasonable business expenses
(including a $600.00 per month car allowance) incurred by Employee in
connection with the Business of the Company subject to compliance with
the expense reimbursement policies established by the Company and in
sufficient detail to comply with Internal Revenue Service Regulations.
(b) Employee shall be eligible to be considered for an annual cash
performance bonus, which may consist of an amount of up to sixty percent (60%)
of the Base Salary in the applicable year based on the attainment of performance
objectives established by the Board of Directors of the Company and the Parent
in good faith and Employee's contributions to the attainment of those
objectives, and shall be in such amount and payable in such manner and on such
terms as are determined by the Board of Directors of the Company and the Parent.
Nothing contained in this subsection (b) shall obligate the Company to pay a
bonus to Employee, unless the Board of Directors of the Company and the Parent
determines to award such a bonus to Employee.
(c) Employee shall have the right to participate in (i) any
insurance plans maintained by the Company from time to time to the extent that
Employee's position, tenure, salary, age, health and other qualifications make
him eligible to participate, and (ii) such other fringe benefit plans or
programs as are provided to the other senior management employees of the
Company, provided that the Company shall not be required to adopt or continue
any insurance plans or fringe benefit plans or programs.
(d) Employee shall receive options to purchase 100,000 shares of
Common Stock of the Parent pursuant to the terms of a Non-Qualified Stock Option
Agreement ("Option Agreement"). Such options will have a term of ten years and
will vest in one-fifth increments over five years from the date of grant. The
exercise prices of such options shall be the exercise prices set forth in the
Option Agreement and the date of grant shall be the Effective Date.
(e) The remuneration and benefits set forth in this Section 3 shall
be the only compensation payable to Employee with respect to his employment
hereunder, and Employee shall not be entitled to receive any compensation in
addition to that set forth in this Section 3 for any
3
<PAGE> 4
services rendered by him in any capacity to the Company or any affiliated
corporation unless agreed to in writing by the Company or such affiliated
corporation.
4. Term and Termination of this Agreement. The term of employment of
Employee pursuant to this Agreement shall commence on the Effective Date and
shall continue for a term of five (5) years, or until sooner terminated as
provided herein.
(a) Employee's employment hereunder may be terminated:
(i) By the Company, upon the death or Disability of Employee;
(ii) By the Company, immediately for Cause;
(iii) By Employee upon ninety (90) days prior written notice to
the Company;
(iv) By mutual agreement between Employee and the Company; and
(v) By the Company, without Cause.
(b) In the event the Company terminates the employment of the
Employee without Cause, then, during the twelve (12) month period immediately
following the effective date of the termination of his employment, the Employee
shall continue to receive his base salary under this Agreement as in effect on
the date that his employment terminates subject to employee signing a Settlement
and Release Agreement agreeable to the Company. The payments described in this
Section 4(b) are hereinafter referred to as "Severance Pay," and shall be made
to the Employee without any obligation on his part to render services hereunder
after the effective date of the termination of Employee's employment, in full
settlement of all of the obligations of the Company hereunder. No Severance Pay
shall be paid to the estate or personal representative of the Employee in the
event of his death during the term of this Agreement.
(c) Except as set forth above, upon termination of Employee's
employment hereunder pursuant to this Section 4, the Company shall have no
further obligation to Employee or his personal representative with respect to
remuneration due under this Agreement, except for Base Salary earned but unpaid
at date of termination; provided however, Employee's covenants in Sections 5 and
6 of this Agreement shall survive the termination of Employee's employment
hereunder. If Employee fails to observe the requirements of Sections 5 or 6
hereof, then the Company shall have no obligation to pay any portion of the Base
Salary remaining unpaid to Employee and the Company shall have no obligation to
pay any portion of the Severance Pay. It is understood that Employee's coverage
under the Company's disability, accidental death or dismemberment and group life
insurance plans shall cease as of the date of termination.
4
<PAGE> 5
5. Ownership, Non-Disclosure, and Non-Use of Trade Secrets.
(a) The following terms used in this Section 5 shall have the
definitions set forth below:
(i) "Excluded Information" means any data or information that is
a Trade Secret hereunder (1) that has been voluntarily disclosed to
the public by the Company or has become generally known to the public
(except where such public disclosure has been made by or through the
Employee or by a third person or entity with the knowledge of the
Employee without authorization by the Company); (2) that has been
independently developed and disclosed by parties other than the
Employee or the Company to the Employee or to the public generally
without a breach of any obligation of confidentiality by any such
person running directly or indirectly to the Company; or (3) that
otherwise enters the public domain through lawful means.
(ii) "Trade Secrets" means information which derives economic
value, actual or potential, from not being generally known and not
being readily ascertainable to other persons who can obtain economic
value from its disclosure or use and which is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy or
confidentiality. Trade Secrets may include either technical or
non-technical data, including without limitation, (1) any useful
process, machine, chemical formula, composition of matter, or other
device which (A) is new or which Employee has a reasonable basis to
believe may be new, (B) is being used or studied by the Company and is
not described in a printed patent or in any literature already
published and distributed externally by the Company, and (C) is not
readily ascertainable from inspection of a product of the Company; (2)
any engineering, technical, or product specifications including those
of features used in any current product of the Company or to be used,
or the use of which is contemplated, in a future product of the
Company; (3) any application, operating system, communication system,
or other computer software (whether in source or object code) and all
flow charts, algorithms, coding sheets, routines, subroutines,
compilers, assemblers, design concepts, test data, documentation, or
manuals related thereto, whether or not copyrighted, patented or
patentable, related to or used in the Business of the Company; or (4)
information concerning the customers, suppliers, products, pricing
strategies of the Company, personnel assignments and policies of the
Company, or matters concerning the financial affairs and management of
the Company or any parent, subsidiary, or affiliate of the Company;
provided however, that Trade Secrets shall not include any Excluded
Information.
(b) Employee acknowledges and agrees that all Trade Secrets, and all
physical embodiments thereof, are confidential to and shall be and remain the
sole and exclusive property of the Company and that any Trade Secrets produced
by the Employee during the period of Employee's employment by the Company shall
be considered "work for hire" as such term is defined in 17 U.S.C. Section 101,
the ownership and copyright of which shall be vested solely in the Company.
Employee agrees (i) immediately to disclose to the Company all Trade Secrets
developed in whole or part by Employee during the term of Employee's employment
by the Company, and (ii) at the request and expense of the Company, to do all
things and sign all documents or instruments
5
<PAGE> 6
reasonably necessary in the opinion of the Company to eliminate any ambiguity as
to the rights of the Company in such Trade Secrets including, without
limitation, providing to the Company Employee's full cooperation in any
litigation or other proceeding to establish, protect, or obtain such rights.
Upon request by the Company, and in any event upon termination of Employee's
employment by the Company for any reason, Employee shall promptly deliver to the
Company all property belonging to the Company including, without limitation, all
Trade Secrets (and all embodiments thereof) then in Employee's custody, control,
or possession.
(c) Employee agrees that all Trade Secrets of the Company received
or developed by Employee as a result of Employee's employment with the Company
will be held in trust and strictest confidence, that Employee will protect such
Trade Secrets from disclosure, and that Employee will make no use of such Trade
Secrets, except in connection with Employee's employment hereunder, without the
Company's prior written consent. The obligations of confidentiality contained in
this Agreement shall apply during Employee's employment by the Company and (i)
with respect to all Trade Secrets consisting of scientific or technical data, at
any and all times after expiration or termination (for whatever reason) of such
employment; and (ii) with respect to all other Trade Secrets, for a period of
two (2) years after such expiration or termination, unless a longer period of
protection is provided by law.
6. Noncompete; Nonsolicitation Covenants.
(a) The following terms used in this Section 6 shall have the
definitions set forth below:
(i) "Affiliate" means any person or entity directly or
indirectly controlling, controlled by, or under common control with
Employee. As used herein, the word "control" means the power to direct
the management and affairs of a person.
(ii) "Area" means the United States of America and Canada.
(iii) "Competing Enterprise" means any person or any business
organization of whatever form, engaged directly within the Area in the
Business of the Company.
(b) Employee covenants that Employee shall, during the term of this
Agreement, and for a period of nine (9) months following termination for any
reason of Employee's employment by the Company, observe the following separate
and independent covenants:
(i) Neither Employee nor any Affiliate will, without the prior
written consent of the Company, within the Area, either directly or
indirectly, (A) become financially interested in a Competing
Enterprise (other than as a holder of less than five percent of the
outstanding voting securities of any entity whose voting securities
are listed on a national securities exchange or quoted by the National
Association of Securities Dealers, Inc. automated quotation system),
or, (B) engage in or be employed by any
6
<PAGE> 7
Competing Enterprise as a consultant, officer, director, or Employee
or managerial employee.
(ii) Neither Employee nor any Affiliate will, without the prior
written consent of the Company, either directly or indirectly, on
Employee's own behalf or in the service or on behalf of others,
solicit, divert, or appropriate, or attempt to solicit, divert, or
appropriate, to any Competing Enterprise within the Area, any person
or entity whose account with the Company was serviced by or under
Employee's direction or supervision during the term of this Agreement.
(iii) Neither Employee nor any Affiliate will, without the
Company's prior written consent, either directly or indirectly, on
Employee's own behalf or in the service or on behalf of others,
solicit, divert, or hire away, or attempt to solicit, divert, or hire
away, to any Competing Enterprise, any person employed by the Company,
whether or not such employee is a full-time or a temporary employee of
the Company and whether or not such employment is pursuant to written
agreement and whether or not such employment is at will.
7. Remedies. Employee acknowledges and agrees that the Company is
engaged in the Business of the Company in and throughout the Area, and that by
virtue of the training, duties, and responsibilities attendant with Employee's
employment by the Company and the special knowledge of the business and
operations of the Company that Employee will have as a consequence of Employee's
employment by the Company, great loss and irreparable damage would be suffered
by the Company if the Employee should breach or violate any of the terms or
provisions of the covenants and agreements set forth herein. Employee further
acknowledges and agrees that each such covenant and agreement is reasonably
necessary to protect and preserve the interest of the Company. Therefore, in
addition to all the remedies provided at law or in equity, Employee agrees and
consents that the Company shall be entitled to a temporary restraining order and
a permanent injunction to prevent a breach of any of the covenants or agreements
of Employee contained herein and to collect from Employee reasonable attorney's
fees incurred by the Company in the enforcement hereof. The existence of any
claim, demand, action or cause of action of Employee against the Company shall
not constitute a defense to the enforcement by the Company of any of the
covenants or agreements herein whether predicated upon this Agreement or
otherwise, and shall not constitute a defense to the enforcement by the Company
of any of its rights hereunder.
8. General Provisions.
(a) In the event that any one or more of the provisions, or parts of
any provisions, contained in the Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed and
shall be construed as a separate and independent covenant and should any part or
provision of any of such covenants be held or declared invalid by any court of
competent
7
<PAGE> 8
jurisdiction, such invalidity shall in no way render invalid or unenforceable
any other part or provision thereof or any other covenant of the parties not
held or declared invalid.
(b) This Agreement and the rights and obligations of the Company
hereunder may be assigned by the Company to any subsidiary of or successor to
the Company, and shall inure to the benefit of, shall be binding upon, and shall
be enforceable by any such assignee, provided that
any such assignee shall agree to assume and be bound by this Agreement. This
Agreement and the rights and obligations of Employee hereunder may not be
assigned by Employee.
(c) The waiver by the Company of any breach of this Agreement by
Employee shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
(d) This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Texas.
(e) This Agreement embodies the entire agreement of the parties
relating to the employment of Employee by the Company. No amendment,
modification extension or renewal of this Agreement shall be valid or binding
upon the Company or Employee unless made in writing and signed by the parties.
All prior understandings and agreements relating to the employment of Employee
by the Company are hereby expressly terminated.
(f) Employee acknowledges and affirms that the employment agreement
between Employee and the Predecessor has been terminated and that (i) he is not
a party to any other employment agreement, (ii) he is not entitled to any
severance benefits arising out of or in connection with his employment by the
Predecessor which may cause the Company to incur any obligations either to
Employee or the Predecessor, and (iii) the only severance benefits to which he
will be entitled are those contained herein.
(g) Any notice, request, demand, or other communication required to
be given hereunder shall be made in writing and shall be deemed to have been
fully given if personally delivered or if mailed by overnight delivery (the date
on which such notice, request, demand, or other communication is received shall
be the date of delivery) to the parties at the following addresses (or at such
other addresses as shall be given in writing by any party to the other party
hereto):
If to Employee:
J. Andrew Kerner
2924 Stanford Avenue
Dallas, Texas 75225
8
<PAGE> 9
If to Company:
Wm. Cameron & Co. dba Cameron Ashley Building Products
11651 Plano Road, Suite 100
Dallas, Texas 75243
Attention: Ronald Ross, Chairman and Chief Executive Officer
Telecopy: (214) 860-5148
(h) This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, and it shall not be necessary for
the same counterpart of this agreement to be signed by all of the undersigned in
order for the agreements set forth herein to be binding upon all of the
undersigned in accordance with the terms hereof.
IN WITNESS WHEREOF, the Company and Employee have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
WM. CAMERON & CO. dba Cameron Ashley
Building Products
By: /s/ Ronald R. Ross
------------------------------------
Ronald R. Ross
Chairman and CEO
EMPLOYEE:
/s/ J. Andrew Kerner
---------------------------------------
J. Andrew Kerner
9
<PAGE> 1
EXHIBIT 11
CAMERON ASHLEY BUILDING PRODUCTS, INC.
COMPUTATION OF EARNINGS PER SHARE
(THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------------------
April 30, 1998 April 30, 1997
----------------------------------- ---------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------- ------------- --------- ----------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common
stockholders $2,748 9,350 $ 0.29 $ 3,058 9,239 $ 0.33
====== ======
EFFECT OF DILUTIVE SECURITIES
Average options outstanding 1,366 1,012
Effects of treasury stock method
(based on exercise proceeds and
tax benefits) (1,079) (814)
------- ------- ------- -------
DILUTED EPS
Income available to common
stockholders assuming dilution $ 2,748 9,637 $ 0.29 $ 3,058 9,437 $ 0.32
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------------------------------------------------------------
April 30, 1998 April 30, 1997
----------------------------------- ---------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------- ------------- --------- ----------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common
stockholders $3,388 9,336 $ 0.36 $ 4,481 9,151 $ 0.49
====== ======
EFFECT OF DILUTIVE SECURITIES
Average options outstanding 1,311 1,071
Effects of treasury stock method
(based on exercise proceeds and
tax benefits) (1,039) (830)
------ ------ ------ -----
DILUTED EPS
Income available to common
stockholders assuming dilution $3,388 9,608 $ 0.35 $ 4,481 9,392 $ 0.48
====== ====== ====== ======= ===== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> FEB-01-1998
<PERIOD-END> APR-30-1998
<CASH> 30,914
<SECURITIES> 0
<RECEIVABLES> 116,020
<ALLOWANCES> 3,908
<INVENTORY> 102,333
<CURRENT-ASSETS> 262,108
<PP&E> 63,977
<DEPRECIATION> 24,218
<TOTAL-ASSETS> 334,974
<CURRENT-LIABILITIES> 88,735
<BONDS> 0
0
0
<COMMON> 63,644
<OTHER-SE> 49,306
<TOTAL-LIABILITY-AND-EQUITY> 334,974
<SALES> 363,986
<TOTAL-REVENUES> 363,986
<CGS> 290,521
<TOTAL-COSTS> 62,208
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,256
<INTEREST-EXPENSE> 3,421
<INCOME-PRETAX> 5,580
<INCOME-TAX> 2,192
<INCOME-CONTINUING> 3,388
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,388
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.35
</TABLE>
