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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
[_] Transition Report Pursuant to Section 13 or
15(d) of the
Securities Exchange Act of 1934
for the transition period from to
Commission file number 0-26640
SCP POOL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3943363
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
109 Northpark Boulevard, Covington, LA 70433-5001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 504/892-5521
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
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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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 16, 1998 was approximately $176,198,068.
As of March 16, 1998 the Registrant had 7,744,970 shares of Common Stock
outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Proxy Statement to be mailed to stockholders
on or about April 13, 1998 for the Annual Meeting to be held on May 13, 1998,
are incorporated by reference in Part III.
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PART I
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Item 1. Business.
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General
SCP Pool Corporation (the "Company") distributes swimming pool supplies and
related products to swimming pool remodelers and builders, independent retail
stores and swimming pool repair and service companies. The Company distributes
more than 34,000 national brand and private label products to approximately
23,000 customers. These products include both non-discretionary pool maintenance
products, such as chemicals and replacement parts, packaged pools (kits to build
swimming pools which include walls, liners, bracing and other materials), and
pool equipment, such as cleaners, filters, heaters, pumps and lights.
The Company is a successor to a business founded in 1980 by the Company's
current President and Chief Executive Officer, Frank J. St. Romain. The Company
and its wholly owned subsidiary, South Central Pool Supply, Inc. ("SCP Supply"),
were organized by Code, Hennessy & Simmons Limited Partnership ("CHS") and
members of the management of the Predecessor (as defined below) for the purpose
of acquiring substantially all of the assets and business of Lake Villa
Corporation (formerly known as South Central Pool Supply, Inc.), a Louisiana
corporation (the "Predecessor"). CHS had no relationship with the Predecessor
prior to such acquisition. On December 31, 1993, SCP Supply acquired
substantially all of the assets and business of the Predecessor in a leveraged
buyout (the "SCP Acquisition").
The Company currently operates 88 service centers in 31 states. Included in
this amount are 11 service centers added in January 1988 through the Bicknell
Acquisition (defined below). During 1997, the Company opened five new service
centers, while during 1996, the Company added 23 service centers through the BLN
Acquisition (as defined below), after giving effect to the consolidation of
certain service centers acquired in connection therewith, and opened two new
service centers.
The Company's net sales have grown from approximately $32.1 million in 1990
to $335.0 million in 1997. Operating income has increased from $2.1 million in
1990 to $15.7 million in 1997. The Company expects to continue its growth
strategy by opening service centers in new locations, increasing sales at
existing service centers and making strategic acquisitions.
The Acquisitions
In January 1994, the Company substantially increased its operations by
acquiring certain assets of Aqua Fab Industries, Inc. ("Aqua Fab"), including
eight service centers (three of which the Company subsequently closed and
consolidated into existing service centers) in the midwest and southeast regions
of the United States (the "Aqua Fab Acquisition").
In February 1995, the Company acquired all of the outstanding capital stock
of Orcal Pool Supplies, Inc. ("Orcal") (the "Orcal Acquisition"). In March 1995,
the Company acquired certain assets of Aqua Chemical Sales and Delivery, Inc.,
primarily inventory and a service center in Illinois. In October 1995, the
Company acquired certain assets, primarily inventory and one service center in
each of Oregon and Washington, of Crest Distribution, a division of Aman
Enterprises, Inc. In November 1995, the Company acquired the capital stock of
Steven Portnoff Corporation, which operated a service center in Scottsdale,
Arizona, and in December 1995, the Company acquired certain assets, primarily
inventory and a service center in Las Vegas, Nevada, of Pool Mart of Nevada,
Inc., an affiliate of Steven Portnoff Corporation.
In September 1996, the Company acquired certain assets (primarily
inventory, property and equipment) of The B-L Network, Inc. ("BLN"), a
wholesaler of swimming pool supplies with 39 service centers in 12 states (the
"BLN Acquisition"), for an aggregate purchase price of approximately $34.5
million. The Company subsequently consolidated
<PAGE>
16 of the BLN service centers into existing service centers. The purchase price
for the BLN Acquisition was financed primarily through the issuance of
promissory notes payable to BLN, a portion of which have since been repaid. In
connection with the BLN Acquisition, the Company sold the chemical manufacturing
and repackaging assets of Alliance Packaging, Inc ("Alliance Packaging"), a
subsidiary of SCP Supply, to Bio-Lab, Inc. ("Bio-Lab"), the parent of BLN, for
approximately $5.4 million (the "Alliance Sale"). In addition, the Company and
Bio-Lab entered into two five-year supply agreements pursuant to which Bio-Lab
agreed to supply the Company with certain chemical products previously supplied
to it by Alliance Packaging and with certain chemical products previously
supplied to BLN by Bio-Lab (the "Bio-Lab Supply Agreements").
In January, 1998, the Company acquired certain assets of Bicknell Huston
Distributors, Inc. ("Bicknell"), a wholesaler of swimming pool supplies with
eleven service center locations in six northeastern states (the "Bicknell
Acquisition"), for an aggregate purchase price of approximately $21 million,
subject to certain adjustments. The purchase price for the Bicknell Acquisition
was financed through the offering to the public of 1,350,000 shares of the
Company's Common Stock in December 1997 (the "1997 Public Offering"). In
connection with the Bicknell Acquisition, the Company entered into a long-term
supply agreement with Pacific Industries, Inc. ("Pacific"), the sole stockholder
of Bicknell (the "Pacific Supply Agreement"). Under the terms of the Pacific
Supply Agreement, Pacific will supply the Company with polymer panels, braces,
steps, liners and other products used in the construction of in-ground vinyl
pools. The Pacific Supply Agreement has a term of eight years and is subject to
renewal options. Mr. DeMichele, a director of the Company, is also a director of
Pacific and holds certain executive positions with affiliates of Pacific. See
"Certain Relationships and Related Transactions."
Industry Overview
The swimming pool supply industry can be divided into four categories by
pool type: residential in-ground swimming pools, above-ground swimming pools,
commercial swimming pools and spas or hot tubs. The Company's strategy has been
to focus on distributing products to the residential in-ground and above-ground
and small commercial pool markets.
Management believes approximately 60% of total pool industry revenues are
based upon numerous ongoing maintenance and repair requirements associated with
pool ownership. The maintenance of proper chemical balance and the related
maintenance and repair of swimming pool equipment, such as pumps, heaters,
filters and cleaners, create a non-discretionary demand for pool chemicals and
other swimming pool supplies and services. The balance of pool supply industry
revenues is derived from sales of the parts and equipment required for pool
remodeling, overhaul and repair and from the sales and installation of new
swimming pools. Although the installation of new pools and, to a lesser extent,
the remodeling and overhaul of existing pools are affected by general economic
conditions, particularly new housing construction, management believes that most
continuing repair requirements are not as sensitive to these changes in economic
conditions.
The pool supply distribution industry is fragmented, with the majority of
sales spread among over 170 companies. The six largest distributors operate on a
national or regional basis, while the remaining distributors tend to be family-
owned operations with one to three distribution sites, typically serving a
highly localized customer base with a limited geographic focus.
During the last ten years, the industry has experienced consolidation as
certain larger distributors have acquired smaller local and regional
distributors. Such consolidation has permitted the larger pool supply
distributors to benefit from various economies of scale. Larger distributors
also have been able to take advantage of more sophisticated management
techniques and the development of management information systems specifically
designed to enhance customer service and increase operating efficiency.
Management anticipates further consolidation in the industry and increased
competition as a result.
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Growth Strategy
The Company intends to continue to make strategic acquisitions to further
penetrate existing markets and to expand into new geographic markets. The
Company continuously seeks out appropriate acquisition candidates and is
frequently engaged in discussions regarding potential acquisitions. The Company
completed one acquisition in 1994, five acquisitions in 1995, one acquisition in
1996 and one acquisition in January 1998.
The Company intends to open service centers in geographic areas which are
not currently served by, or are underserved by, the Company. In each of the last
five years, the Company has opened between one and five service centers in new
locations. Each new service center requires approximately $75,000 of capital
expenditures for leasehold improvements and office and warehouse equipment and a
minimum of $250,000 of inventory. The Company also intends to open satellite
service centers that are smaller than the Company's typical service center,
stock fewer inventory items and have fewer employees and a lower cost structure,
yet have access to the Company's full inventory through its information systems.
The Company intends to capitalize on opportunities to expand sales at its
existing service centers. Comparable service center sales increased 12%, 15%,
16%, 19% and 11% in 1993, 1994, 1995, 1996 and 1997, respectively. The Company
believes that it can increase its market share by expanding its private label
marketing programs for chemicals and in-ground vinyl pools with swimming pool
remodelers and builders and repair and service companies and by further
developing its joint marketing programs with its customers. The Company also
plans to increase the breadth of its replacement parts product offering and
periodically to add to its outside sales force.
Products
The Company offers more than 34,000 national brand and private label
products to approximately 23,000 customers. These products include both non-
discretionary pool maintenance products, such as chemicals and replacement
parts, packaged pools (kits to build swimming pools which include walls, liners,
bracing and other materials), and pool equipment, such as cleaners, filters,
heaters, pumps and lights. The Company supplies a substantial majority of the
national brand products offered by swimming pool equipment manufacturers. Sales
of national brands accounted for a majority of the Company's net sales in 1997.
Management believes that national brands are attractive to many of the Company's
customers who seek consistent product quality throughout their operations,
particularly for heaters, pumps, filters and cleaners. The Company believes it
has good relationships with all of its major suppliers of national brands, many
of which provide important sales and marketing support to the Company.
Approximately one-half of the Company's chemical products, which include
chlorine, algicides, water clarifiers and Ph adjusters, are sold under the
Company's private brands. These brands include Regal(R) for small retail and
professional customers, Clear Choice(R) for larger retail customers and EZ-
Clor(R) for pool remodelers and builders, pool service and repair companies and
larger retail customers. Most of these chemical products are converted from bulk
to retail form by Bio-Lab and sold to the Company under the Bio-Lab Supply
Agreements. See "--Purchasing and Suppliers." The Company sells packaged in-
ground vinyl pools (which consist of prefabricated in-ground pool structures
with a vinyl liner) under the Company's Weatherking(R), Heldor(R), Signature
Pools/TM/ and Regatta Pools/TM/ brands. The Company also sells a private label
line of above-ground pool kits under the name Dream Line/TM/ and pool covers
under the Cool Covers/TM/ brand name.
Marketing
The Company's principal marketing activities are conducted by a dedicated
sales force of 67 employees and by its service center managers. The Company's
dedicated sales force has responsibility for developing and maintaining customer
relationships. These salespersons and service center managers make calls on
customers, distribute the Company's product catalog and parts manual and provide
promotional literature in the display areas of the service center. The Company's
commission program is designed to reward account profitability and promote sales
growth. Under the
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Company's incentive program, salespersons may earn bonuses of up to 50% of their
annual salaries, based on attainment of certain sales and profitability targets.
Customers
The Company sells its products to approximately 23,000 customers, primarily
swimming pool remodelers and builders, retail swimming pool stores and swimming
pool repair and service companies. No customer accounted for more than 3% of the
Company's sales during 1997. The Company estimates that in 1997, sales to
swimming pool remodelers and builders accounted for approximately 40% of its
sales, while sales to retail pool stores accounted for approximately 30% of
sales, and sales to repair and service companies accounted for the remainder.
Swimming pool remodelers and builders purchase products to refurbish, retrofit
or overhaul existing pools and to build new pools. Customers that operate retail
pool stores tend to have a single outlet and typically purchase a relatively
broad range of products from the Company, including chemicals, maintenance
supplies, repair parts and other related products. Repair and service companies
tend to provide on-site repair and cleaning services for residential pools.
These customers tend to be very small and typically purchase chemical products,
maintenance supplies and repair parts. A substantial portion of the Company's
sales are derived from "walk-in" business, in which a customer selects the
products at the service center and transports the purchased products from the
service center immediately following the purchase. The Company also offers local
delivery service in many of the markets it serves.
The Company maintains a credit policy for qualified customers. Credit
policies and terms are established at the corporate level, and each service
center manager is responsible for overseeing and collecting from local accounts.
During each of the last three years, the Company's bad debt expense was less
than 0.25% of net sales.
Purchasing and Suppliers
The Company has a good relationship with its suppliers which generally
offer competitive pricing, rebates, return policies and promotional allowances.
The Company works closely with many of its suppliers to develop joint marketing
plans. In addition, it is common in the swimming pool supply industry for
manufacturers to offer extended dating terms on their products to qualifying
purchasers, such as the Company. Such terms are typically available to the
Company for pre-season or early season purchases.
Prior to October 31, 1996, a substantial portion of the Company's chemical
products were supplied by its subsidiary, Alliance Packaging. On October 31,
1996, Alliance Packaging sold certain of its assets to Bio-Lab and Bio-Lab and
the Company entered into the Bio-Lab Supply Agreements. Under the Bio-Lab Supply
Agreements, Bio-Lab supplies the Company with certain chemical products
previously supplied to it by Alliance Packaging and with certain chemical
products previously supplied to BLN by Bio-Lab. In addition, in connection with
the Bicknell Acquisition, the Company entered into the Pacific Supply Agreement
with Pacific, the sole stockholder of Bicknell. Under the terms of the Pacific
Supply Agreement, Pacific will supply the Company with polymer panels, braces,
steps, liners and other products used in the construction of in-ground pools.
The Pacific Supply Agreement has a term of eight years, subject to renewal
options.
The principal chemical raw materials used in the products sold by the
Company are granular chlorine compounds, which are commodity materials. The
prices of granular chlorine compounds are a function of, among other things,
manufacturing capacity and demand. Although price increases in granular chlorine
compounds generally result in higher costs of supplies to the Company, the
Company generally has passed through such increased costs to its customers.
There can be no assurance that the price of granular chlorine compounds will not
increase in the future or that the Company will be able to pass on any such
increase to its customers. The Company believes that reliable alternate sources
of supply are available for all of its products, including chlorine products.
The Company regularly evaluates supplier relationships and considers
alternate sourcing as appropriate to assure competitive costs and quality
standards. The Company's largest non-affiliated suppliers are Pac-Fab, Inc.,
Hayward Pool Products, Inc. and Bio-Lab, and these suppliers provided
approximately 15%, 11% and 10%, respectively, of the
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Company's material purchases in 1997. Pacific is expected to supply
approximately 5% of the Company's purchases in 1998. See "Certain Relationships
and Related Transactions." The Company currently has long-term contracts with
Bio-Lab and Pacific, but does not have contracts with Pac-Fab, Inc. or Hayward
Pool Products, Inc. The Company believes that it has good relationships with all
of its suppliers.
Decisions relating to pricing, suppliers and product selection are
centralized at the Company's headquarters, with significant input from each of
the Company's service centers. Decisions relating to purchases and inventory
management are made independently by each of the Company's service center
managers using the data provided by the Company's information systems.
Competition
The Company faces intense competition from many regional and local
distributors in its markets, from several companies that distribute swimming
pool supplies on a national basis and, to a lesser extent, from mass market
retailers and large pool supply retailers. The Company believes that there are
five swimming pool supply distributors which compete with the Company on a
national or regional basis: Pool Water Products, Superior Pool Products, Inc. (a
subsidiary of Olin Corporation) Fort Wayne Pools, Hughes Supply and Benson Pump
Co. Barriers to entry in the swimming pool supply industry are relatively low.
Certain of the Company's competitors have substantially greater capital
resources than the Company.
The Company competes with other distributors for rights to distribute
brand-name products, and the loss of, or inability to obtain such rights could
have a material adverse effect on the Company. Management believes that the
competition for such distribution rights results in a competitive advantage to
larger distributors, such as the Company, and a disadvantage to small
distributors.
The Company believes that the principal competitive factors in pool supply
distribution are the quality and level of customer service, product pricing,
breadth and quality of products offered and consistency and stability of
business relationships with customers. The Company believes it competes
favorably with respect to each of these factors. Some geographic markets
serviced by the Company, particularly California, Arizona, Texas and Florida,
tend to be more competitive than others. In response to competitive pressures
from any of its current or future competitors, the Company may be required to
lower selling prices in order to maintain or increase market share, and such
measures could adversely affect the Company's gross margins and operating
results.
Seasonality and Weather
The Company's business is highly seasonal. In 1997, approximately 67% of
the Company's net sales were generated in the second and third quarters of the
year, which represent the peak months of swimming pool use, installation,
remodeling and repair, and approximately 117% of the Company's operating income
was generated in such period. Sales are substantially lower during the first and
fourth quarters of the year, when the Company typically incurs net losses. The
principal external factor affecting the Company's business is weather.
Unseasonably late warming trends can decrease the length of the pool season and
unseasonably cool weather or extraordinary rainfall during the peak season can
decrease swimming pool use, installation and maintenance, each of which
adversely affects the Company's sales and operating profit. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality and Quarterly Fluctuations."
Environmental, Health and Safety Regulation
The Company's business is subject to regulation under federal, state, and
local environmental and health and safety requirements, including the Emergency
Planning and Community Right-to-Know Act, the Hazardous Materials Transportation
Act and the Occupational Safety and Health Act. Most of these requirements
govern the packaging, labeling, handling, transportation, storage and sale of
pool chemicals by the Company. In addition, the algicides sold
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by the Company are regulated as pesticides under the Federal Insecticide,
Fungicide and Rodenticide Act and state pesticide laws, which primarily relate
to labeling and annual registration. While the Company expends considerable
resources to operate in substantial compliance with environmental, health and
safety requirements, there can be no assurance that it will not be determined to
be out of compliance with, or liable under, such requirements. Such an instance
of noncompliance or liability could have a material adverse effect on the
Company and its operating results. In addition, such requirements are frequently
changing, and, depending upon the nature of any such changes, could require
material capital expenditures by the Company in the future.
The demand for the pool chemicals sold by the Company may also be affected
by changes in consumer attitudes toward pool chemical products for environmental
or safety reasons. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Fire, Safety and Casualty Issues
The Company stores chemicals at each of its service centers. Certain
chemicals the Company stores are combustible oxidizing compounds and the storage
of such chemicals is strictly regulated by local fire codes. The Company
maintains strict policies and procedures regarding chemical handling and fire
and safety regulations, and has never incurred any material liability related to
its handling of chemicals. A fire, explosion or flood affecting one of the
Company's facilities could give rise to liability claims against the Company.
Employees
As of March 1, 1998, the Company employed approximately 939 persons on a
full-time basis, of whom 190 engaged in management, administration and
accounting, and credit and collections, 67 engaged in outside sales, 191 engaged
in service center management and 491 engaged in warehouse, production and
distribution operations. Of these employees, 77 are employed at the Company's
corporate headquarters in Covington, Louisiana. In January, 1998, 150 of these
employees were added to the Company in connection with the Bicknell Acquisition.
No employees are covered by collective bargaining agreements. The Company
believes it has good relations with its employees. In connection with the peak
summer selling season, the Company typically employs additional warehouse,
production and distribution personnel during the months from May through August.
Trademarks
The Company maintains registered trademarks in the United States, primarily
for its private label products, and intends to maintain the trademark
registrations which it deems important to its business operations.
Item 2. Properties.
As of March, 1998, the Company conducted operations through 88 service
center locations located in 31 states. Service centers are located near customer
concentrations, typically in industrial, commercial or mixed-use zones. The
Company's executive offices are located in approximately 22,000 square feet of
leased space in Covington, Louisiana.
The Company's service centers range in size from approximately 7,200 square
feet to 50,000 square feet and consist of warehouse, counter, display and office
space. The Company owns a service centers in Phoenix, Arizona. In February,
1998, the Company sold a facility in Fresno, California and leased it back from
the purchaser for a three-year period beginning March 1, 1998. All of the
Company's other properties are leased for terms which expire between 1998 and
2009, and many of such leases may be extended. In certain instances, the
Company's service centers are leased from the former owners of businesses
acquired by the Company. The Company believes that no single lease is material
to its operations, and that alternate sites are presently available at market
rates. See Item 13, "Certain Relationships and Related Transactions" and Note 7
to the Company's Consolidated Financial Statements.
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Item 3. Legal Proceedings.
From time to time, the Company is involved in litigation and proceedings
arising in the ordinary course of its business. There are no pending material
legal proceedings to which the Company is a party or to which the property of
the Company is subject.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
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Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters.
The Common Stock of the Company began trading on the Nasdaq National Market
under the symbol "POOL" in October 1995. At March 16, 1998, there were 56
holders of record of Common Stock.
The following table sets forth, for the period indicated, the range of high
and low bid prices for the Common Stock as reported by the Nasdaq National
Market, as adjusted to reflect a three-for-two stock split in September 1997.
<TABLE>
<CAPTION>
Fiscal Year High Low
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<S> <C> <C>
1996
First Quarter................. $10.167 $ 6.667
Second Quarter................ 13.333 9.333
Third Quarter................. 14.333 11.500
Fourth Quarter................ 13.833 12.000
1997
First Quarter................. 16.000 13.172
Second Quarter................ 16.672 13.000
Third Quarter................. 17.328 13.672
Fourth Quarter................ 24.000 16.500
</TABLE>
The bid information set forth above reflects inter-dealer prices, without
retail mark-ups, markdowns or commissions and may not necessarily represent
actual transactions.
The Company currently intends to retain its earnings for use in its
business and therefore does not anticipate paying any cash dividends in the
foreseeable future. The Third Amended and Restated Credit Agreement dated as of
December 31, 1997, by and among SCP Supply, the institutions from time to time
party thereto as lenders, LaSalle National Bank as Agent and Co-Arranger and
Hibernia National Bank as Co-Arranger (the "Senior Loan Facility") restricts the
Company's ability to pay dividends. Any future determination to pay cash
dividends will be made by the board of directors of the Company ("the Board") in
light of the Company's earnings, financial position, capital requirements,
credit agreements and such other factors as the Board deems relevant at such
time. See Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and Note 3 of the
Notes to the Company's Consolidated Financial Statements.
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Item 6. Selected Financial Data.
The following table sets forth selected financial data of the Company and
its Predecessor. This information should be read in conjunction with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and with the Consolidated Financial Statements of the Company and
the Predecessor and related Notes thereto included herein.
<TABLE>
<CAPTION>
The Company The Predecessor(1)
----------------------------------------------------- ------------------
Year Ended December 31,
---------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------------------------------------------------------------------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Net sales............................... $335,022 $235,844 $161,095 $101,977 $67,282
Cost of sales........................... 261,645 183,814 123,974 77,488 50,861
-------- -------- -------- -------- -------
Gross profit......................... 73,377 52,030 37,121 24,489 16,421
Warehouse expense....................... 14,416 9,611 6,957 3,610 2,107
Selling and administrative expenses..... 42,355 31,139 19,907 13,518 8,618
Goodwill amortization................... 885 793 735 683 --
-------- -------- -------- -------- -------
Operating income..................... 15,721 10,487 9,522 6,678 5,696
Other income (expense):
Interest expense..................... (4,482) (3,176) (5,113) (4,171) (100)
Amortization expense................. (708) (698) (610) (498) --
Management fees paid to stockholder.. -- -- (208) (250) --
Miscellaneous income................. 852 823 228 118 121
-------- -------- -------- -------- -------
(4,338) (3,051) (5,703) (4,801) 21
-------- -------- -------- -------- -------
Income before income taxes and.......... 11,383 7,436 3,819 1,877 5,717
extraordinary loss
Provision for income taxes (1)(2)....... 4,327 2,903 1,490 770 --
-------- -------- -------- -------- -------
Income before extraordinary loss (1)(2). $ 7,056 $ 4,533 $ 2,329 $ 1,107 $ 5,717
======== ======== ======== ======== =======
Income before extraordinary loss per share
common stock
Basic (3)............................ 1.10 0.72 0.78 0.53
Diluted (3).......................... 1.07 0.70 0.75 0.50
Balance Sheet Data:
Working capital......................... $ 63,387 $ 34,602 $ 21,187 $ 8,493 $ 5,817
Total assets............................ 136,452 113,245 75,397 50,675 11,306
Total debt, including current portion... 39,889 51,277 26,476 38,025 124
Stockholders' equity.................... 66,635 36,810 32,277 3,037 6,767
</TABLE>
(1) The Predecessor elected to be treated as an S corporation for income tax
purposes, and accordingly did not pay federal and state (except in certain
states) income taxes during such period. The Company is, and has been since
its formation, a C corporation.
(2) The Company recognized an extraordinary loss, net of tax, in 1995 of
$750,000, or $0.26 per share on a diluted basis, in connection with the
write-off of loan financing fees and a prepayment premium associated with
the application of the proceeds of the Company's initial public offering to
reduce indebtedness.
(3) Earnings per share information has been restated to reflect the three-for-
two split in September, 1997 and the adoption of FASB 128, Earnings per
Share.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
The Company was formed in December 1993 to acquire substantially all of the
assets and assume certain liabilities of its Predecessor. From its inception in
1980 through the end of 1993, the Predecessor steadily increased its sales by
opening new service center locations and by increasing sales to new and existing
customers. Since the Company's acquisition of the Predecessor in December 1993
(the "SCP Acquisition"), the Company has grown through strategic acquisitions,
by opening new service centers and by increasing sales to new and existing
customers. From January 1990 to March 1998, the Company expanded from 8 service
centers in 6 states to 88 service centers in 31 states, primarily through
acquisitions. See "The Acquisitions."
The Company derives its revenues primarily from the sale of swimming pool
supplies and related products, including chemicals, cleaners, packaged pools and
liners, filters, heaters, pumps, lights, repair parts and other equipment
required to build, maintain, install and overhaul residential and small
commercial swimming pools. The Company sells its products primarily to swimming
pool remodelers and builders, independent swimming pool retailers and swimming
pool repair and service companies. These customers tend to be small, family
owned businesses with relatively limited capital resources. Losses from customer
receivables have historically been less than 0.25% of net sales.
The Company's business is highly seasonal. In general, sales and net income
are highest during the second and third quarters, which represent the peak
months of swimming pool use and installation. Sales are substantially lower
during the first and fourth quarters, when the Company may incur net losses.
The swimming pool supply industry is affected by various factors, including
general economic conditions, consumer saving and discretionary spending levels,
the level of new housing construction, weather and consumer attitudes towards
pool products for environmental or safety reasons. Although management believes
that the Company's geographic diversity could mitigate the effect of a regional
economic downturn and that the continuing maintenance and repair needs for
existing swimming pools could mitigate the effect of a general economic
downturn, there can be no assurance that the Company's results of operations and
expansion plans would not be materially adversely affected by any of such
downturns.
The principal components of the Company's expenses include the cost of
products purchased from manufacturers and sold during the year, and operating
expenses, which are primarily related to labor, occupancy, commissions and
marketing. Some geographic markets serviced by the Company, particularly
California, Arizona, Texas and Florida, tend to be more competitive than others.
In response to competitive pressures from any of its current or future
competitors, the Company may be required to lower selling prices in order to
maintain or increase market share, and such measures could adversely affect the
Company's gross margins and operating results.
The Company completed an initial public offering of its common stock in
October 1995. The net proceeds of the offering were used primarily to reduce
indebtedness and resulted in an extraordinary charge, net of tax, in the
Company's results of operations in the fourth quarter of 1995 of approximately
$750,000 to account for the write-off of deferred financing costs and the
payment of a prepayment premium associated with extinguishing such indebtedness.
In connection with the initial public offering, the management agreement between
the Company and its principal stockholder was terminated as of the consummation
of the offering and, as a result, no management fees have been paid with respect
thereto after such time.
9
<PAGE>
Results of Operations
The following table shows, for the periods indicated, information derived
from the consolidated statements of operations of the Company expressed as a
percentage of net sales for such year.
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
--------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 78.1 77.9 77.0
--------------------------
Gross profit 21.9 22.1 23.0
Warehouse expense 4.3 4.1 4.3
Selling and administrative expenses 12.6 13.2 12.4
Goodwill amortization 0.3 0.3 0.4
--------------------------
Operating income 4.7 4.5 5.9
Interest expense (1.3) (1.3) (3.2)
Amortization expense (0.3) (0.3) (0.4)
Other income (expense): 0.3 0.3 -
--------------------------
Income before income taxes and extraordinary loss 3.4% 3.2% 2.3%
==========================
</TABLE>
The following discussions compare the results of operations for the year
ended December 31, 1997 to the year ended December 31, 1996 and the results of
operations for the year ended December 31, 1996 to the year ended December 31,
1995.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales increased by $99.2 million, or 42.1%, to $335.0 million in the
year ended December 31, 1997 from $235.8 million in the comparable 1996 period.
This increase was primarily due to sales at service centers acquired from BLN,
sales at newly opened service centers and increased sales at existing service
centers. Service centers acquired from BLN in September 1996 contributed $79.8
million to the increase, sales at newly opened centers accounted for $12.7
million of the total increase and an increase of approximately 11.4% in sales at
service centers open at least 15 months contributed $12.4 million to the
increase. These increases were partially offset by the loss of revenue from the
assets of Alliance Packaging, Inc., which were sold in October 1996.
Gross profit increased by $21.4 million, or 41.2%, to $73.4 million in the
year ended December 31, 1997 from $52.0 million in the comparable 1996 period.
Gross profit as a percentage of net sales remained relatively unchanged at 21.9%
in the 1997 period compared to 22.1% in the 1996 period.
Operating expenses increased by $16.2 million, or 38.8%, to $57.7 million
in the year ended December 31, 1997 from $41.5 million in the comparable 1996
period. This increase is reflective of salaries, occupancy expense and other
costs associated with new service centers, and, to a lesser extent, payroll and
other operating costs required to support the increased sales volume at existing
service centers. Operating expenses as a percentage of net sales decreased to
17.2% in the 1997 period compared to 17.6% in the 1996 period, primarily as the
result of cost savings efforts instituted by management during 1997.
Interest and other expenses increased to $4.3 million in the year ended
December 31, 1997 from $3.1 million in the comparable 1996 period. The increase
was primarily attributable to the increase in the Company's debt as a result of
the acquisition of BLN in September 1996 and to the financing of seasonal
inventory levels for a larger number of branches in the comparable 1996 period.
10
<PAGE>
The provision for income taxes increased $1.4 million, or 49.1%, to $4.3
million for 1997 compared to $2.9 million for 1996. The Company's effective tax
rate decreased to 38.0% for 1997 from 39.0% for 1996 to reflect decreases in the
Company's blended state tax rate.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales increased by $74.7 million, or 46.4%, to $235.8 million in 1996
from $161.1 million in 1995. An increase in sales at service centers opened at
least 15 months of approximately 19.0% accounted for $26.8 million of the
increase. Service centers acquired from BLN accounted for $21.2 million of the
increase, with the remaining increase resulting from sales at service centers
acquired in 1995.
Gross profit increased by $14.9 million, or 40.2%, to $52.0 million in 1996
from $37.1 million in 1995. Gross profit as a percentage of net sales, however,
declined .9% to 22.1% in 1996 from 23.0% in 1995. A majority of the decline in
gross profit margin was attributed to lower margins realized at the service
centers in California and Florida due to the more competitive nature of those
markets. The Company significantly expanded its presence in Florida through the
BLN Acquisition. Service centers in California and Florida generated gross
profit margins of 17.2% and 17.6%, respectively, compared to 24.3% for service
centers outside these areas. The number of service centers located in California
and Florida increased from 2 on January 1, 1995 to 25 on December 31, 1996.
Operating expenses increased by $13.9 million, or 50.5%, to $41.5 million
in 1996 from $27.6 million in 1995. This increase is reflective of (i) salaries,
occupancy expense and other costs associated with the acquired service centers,
and (ii) payroll and other operating costs required to support the increased
sales volume at existing service centers. Operating expenses as a percentage of
sales increased to 17.6% in 1996 compared to 17.1% in 1995. This increase was
primarily attributable to an increase in bonuses as a percentage of sales.
Interest and other expenses decreased to $3.1 million in 1996 from $5.7
million in 1995. The decrease was primarily attributable to the reduction in the
Company's debt with the proceeds from the Company's initial public offering in
October 1995, which resulted in a decrease in interest expense in 1996.
The provision for income taxes was $2.9 million in 1996 compared to $1.5
million in 1995. The increase is consistent with the increase in income before
income taxes.
Seasonality and Quarterly Fluctuations
The Company's business is highly seasonal. In general, sales and net income
are highest during the second and third quarters, which represent the peak
months of swimming pool use and installation. Sales are substantially lower
during the first and fourth quarters, when the Company may incur net losses.
The Company experiences a build-up of inventory and accounts payable during
the first and second quarters of the year in anticipation of the peak swimming
pool supply selling season. The Company's peak borrowing occurs during the
second quarter, primarily because dated accounts payable offered by the
Company's suppliers typically are payable in April, May and June, while the
Company's peak accounts receivable collections typically occur in June, July and
August.
The principal external factor affecting the Company's business is weather.
Hot weather can increase purchases of chemicals and supplies and pool
installations. Unseasonably cool weather or extraordinary amounts of rainfall
during the peak sales season can decrease purchases of chemicals and supplies
and pool installations. In addition, unseasonably early or late warming trends
can increase or decrease the length of the pool season and, therefore, the
Company's sales.
To encourage preseason orders, the Company, like many other swimming pool
supply distributors, utilizes preseason sales programs which provide for
extended dating terms and other incentives to its customers. Some of the
Company's
11
<PAGE>
suppliers also offer extended dating terms on certain products to the Company
for preseason or early season purchases. In offering extended dating terms to
its customers and accepting extended dating terms from its suppliers, the
Company effectively finances a portion of its receivables with extended
payables.
The Company expects that its quarterly results of operations will fluctuate
depending on the timing and amount of revenue contributed by new service centers
and acquisitions. The Company attempts to open its new stores at the end of the
fourth quarter or the beginning of the first quarter to take advantage of
preseason sales programs and the peak season.
The following table sets forth certain unaudited quarterly data for 1996
and 1997 which, in the opinion of management, reflects all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of such data. Results of any one or more quarters are not
necessarily indicative of results for an entire fiscal year or of continuing
trends.
<TABLE>
<CAPTION>
1997 1996
--------------------------------------- -------------------------------------
1st 2nd 3rd 4th 1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- -------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Net sales.......................... $63,565 $124,790 $98,492 48,175 $41,145 $85,867 $62,344 $46,488
Gross profit....................... 13,960 28,159 21,460 9,798 9,273 20,042 13,531 9,184
Operating income (loss)............ 104 11,496 6,847 (2,726) 743 9,843 4,176 (4,275)
Net sales as a percentage of
annual net sales.................. 19% 37% 29% 15% 18% 36% 26% 20%
Gross profit as a percentage of
annual gross profit............... 19% 39% 29% 13% 18% 38% 26% 18%
Operating income as a percentage
of annual operating income........ 1% 73% 44% (18%) 7% 94% 40% (41%)
</TABLE>
Liquidity and Capital Resources
Currently, the Company's primary sources of working capital are cash flow
from operations and borrowings under the Senior Loan Facility. As of March 1998,
the Senior Loan Facility consisted of a term loan and a revolving line of
credit. The Senior Loan Facility was amended and restated as of December 31,
1997, to, among other things, increase the total amount of borrowings available
under the Senior Loan Facility from $80 million to $85 million, subject to a
borrowing base availability formula. In addition, in January 1998, the Company's
borrowing base increased as compared to December 1997 as a result of the
Bicknell Acquisition. As a result, considering the Company's borrowing base and
amounts outstanding as of March 1, 1998, the Company has approximately $45
million available for borrowing under the Senior Loan Facility, which amount
represents the only additional credit source currently available to the Company.
The Company's borrowings under its credit facility, together with cash flow from
operations and seller financing historically have been sufficient to support the
Company's growth and to finance acquisitions.
Borrowings under the Senior Loan Facility may, at the Company's option,
bear interest at either (i) the agent's corporate base rate or the federal funds
rate plus 0.5%, whichever is higher, plus a margin ranging from 0.0% to 0.5% or
(ii) LIBOR plus a margin ranging from 0.75% to 2.0%, in each case depending on
the Company's leverage ratio. Substantially all of the assets of the Company
(other than inventory acquired from BLN, which secures the Company's obligations
to BLN), including the capital stock of SCP Supply, secure the Company's
obligations under the Senior Loan Facility. The Senior Loan Facility has
numerous restrictive covenants which require the Company to maintain minimum
levels of interest coverage and fixed charge coverage and which also restrict
the Company's ability to pay dividends and make capital expenditures. As of
December 31, 1997, the Company was in compliance with all such covenants and
financial ratio requirements. The Senior Loan Facility expires on December 31,
2002.
12
<PAGE>
In December 1997, the Company completed a public offering of 1,350,000
shares of Common Stock at a public offering price of $18.00 per share, resulting
in net proceeds to the Company of approximately $22.6 million. Approximately $21
million of these proceeds were used to finance the Bicknell Acquisition in
January 1998.
In connection with the BLN Acquisition, the seller of BLN provided $31.8
million of financing to the Company. This financing, which bears interest at 6%,
is due in varying monthly installments through September 1998. Approximately
$30.0 million of this financing was repaid through March 1, 1998.
During the year ended December 31, 1997, the Company borrowed $68.0 million
to meet seasonal working capital requirements and made payments of $63.9 million
under its revolving credit facility.
Excluding acquisitions, the Company made capital expenditures of
$1,105,000, $788,000 and $866,000 in the years ended December 31, 1997, 1996 and
1995, respectively.
The Company believes that its cash flow from operations and the credit
available under its line of credit will be sufficient to finance its operations
for at least the next twelve months.
To date, the Company's acquisitions have been financed primarily by
borrowings under the Senior Loan Facility and seller notes. To finance future
acquisitions, the Company expects to utilize its ability to borrow additional
funds. Depending on market conditions, the Company may also incur additional
indebtedness or issue common or preferred stock (which may be issued to third
parties or to sellers of acquired businesses).
Year 2000 Issue
The Company continues to assess and review its computer systems devices,
software applications and equipment (collectively, "Computer Systems") to
identify those areas that could be affected by Year 2000 noncompliance. Based on
such review, management believes that the Company's Computer Systems will
function properly when handling date-related data in the Year 2000 and
thereafter, although there can be no such assurances. The total cost to the
Company of complying with Year 2000 requirements is not known at this time,
although management does not currently expect such costs to have a material
adverse effect on the Company's business, operations or financial condition. The
Company is in the process of communicating with suppliers, service providers,
and large customers (collectively, "Third Party Businesses") regarding
compliance with Year 2000 requirements. If the Third Party Businesses fail to
comply in a timely manner with Year 2000 requirements, such failures by Third
Party Businesses could have an adverse impact on the Company's business,
operations or financial condition.
Inflation
The Company does not believe that inflation has had a significant impact on
its results of operations for the periods presented.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995
With the exception of historical matters, the matters discussed in this
Annual Report on Form 10-K are forward-looking statements that involve risks and
uncertainties, including but not limited to factors related to (i) the Company's
ability to identify appropriate acquisition candidates, complete acquisitions on
satisfactory terms, or successfully integrate acquired businesses; (ii) the
sensitivity of the swimming pool supply business to cool or rainy weather; (iii)
the intense competition and low barriers to entry in the swimming pool supply
industry; (iv) the Company's ability to obtain financing on satisfactory terms
and the degree to which the Company is leveraged; (v) the sensitivity of the
swimming pool supply business to general economic conditions; (vi) the Company's
ability to remain in compliance with the numerous environmental, health and
safety requirements to which it is subject; (vii) the risk of fire, safety and
casualty
13
<PAGE>
losses and related liabilities claims inherent in the storage and repackaging of
chemicals sold by the Company; and (viii) the other factors discussed in the
Company's filings with the Securities and Exchange Commission. Such factors
could affect the Company's actual results and could cause such results to differ
materially from the Company's expectations described above.
Item 8. Financial Statements.
See the attached Consolidated Financial Statements (pages F-1 through
F-20).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
Incorporated by reference to the Company's 1998 Proxy Statement to be filed
with the Commission.
Item 11. Executive Compensation.
Incorporated by reference to the Company's 1998 Proxy Statement to be filed
with the Commission.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Incorporated by reference to the Company's 1998 Proxy Statement to be filed
with the Commission.
Item 13. Certain Relationships and Related Transactions.
Incorporated by reference to the Company's 1998 Proxy Statement to be filed
with the Commission.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
The following documents are filed as a part of this report:
(a) (1) The Consolidated Financial Statements included in Item 8 hereof
and set forth on pages F-1 through F-20.
(2) Financial Statement Schedules. All schedules are omitted, because
they are not applicable or are not required, or because the
required information is included in the consolidated financial
statements or notes thereto.
(3) The exhibits listed in the Index to the Exhibits.
14
<PAGE>
(b) Reports on Form 8-K.
On November 12, 1997, the Company filed a report on Form 8-K/A
(the "Form 8-K/A") in connection with the acquisition by SCP
Supply of substantially of the assets of The B-L Network, Inc.
and the sale of certain assets by the Company's indirect wholly
owned subsidiary, Alliance Packaging, Inc. to Bio-Lab, Inc. as
originally reported on Form 8-K on October 9, 1996 (the "Form
8-K"). The Form 8-K/A was filed to present certain financial
statements and pro forma unaudited financial information required
by the Form 8-K. The sale of assets by Alliance Packaging was
completed on October 31, 1996.
15
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of SCP Pool Corporation
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors.............................................. F-2
Consolidated Balance Sheets - December 31, 1997 and 1996.................... F-3
Consolidated Statements of Income - Years Ended December 31, 1997, 1996
and 1995................................................................... F-4
Consolidated Statements of Stockholders' Equity - Years Ended December 31,
1997, 1996 and 1995........................................................ F-5
Consolidated Statements of Cash Flows - Years Ended December 31,
1997, 1996 and 1995........................................................ F-6
Notes to Consolidated Financial Statements.................................. F-7
</TABLE>
F-1
<PAGE>
Report of Independent Auditors
The Board of Directors
SCP Pool Corporation
We have audited the consolidated balance sheets of SCP Pool Corporation as of
December 31, 1997 and 1996, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of SCP
Pool Corporation at December 31, 1997 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
New Orleans, Louisiana
February 16, 1998
F-2
<PAGE>
SCP Pool Corporation
Consolidated Balance Sheets
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31
1997 1996
------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 22,296 $ 4,621
Receivables 24,775 25,293
Inventory 48,261 42,112
Prepaid expenses 562 632
Deferred income taxes 580 392
------------------------
Total current assets 96,474 73,050
Property and equipment, net 4,792 4,413
Goodwill, net 32,614 33,009
Other assets, net 2,572 2,773
------------------------
Total assets $ 136,452 $ 113,245
========================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 20,266 $ 15,132
Accrued expenses and other current liabilities 6,078 7,907
Current portion of long-term debt 6,743 15,409
------------------------
Total current liabilities 33,087 38,448
Deferred income taxes 3,584 2,119
Long-term debt, less current portion 33,146 35,868
Stockholders' equity:
Preferred stock, $.01 par value; 100,000 shares authorized;
no shares issued and outstanding -- --
Common stock, $.001 par value; 10,000,000 shares authorized;
7,740,060 and 6,334,214 shares issued and outstanding at
December 31, 1997 and 1996, respectively 8 6
Additional paid-in capital 52,352 29,585
Retained earnings 14,275 7,219
------------------------
Total stockholders' equity 66,635 36,810
------------------------
Total liabilities and stockholders' equity $ 136,452 $ 113,245
========================
</TABLE>
See accompanying notes.
F-3
<PAGE>
SCP Pool Corporation
Consolidated Statements of Income
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
-----------------------------------------
<S> <C> <C> <C>
Net sales $335,022 $235,844 $161,095
Cost of sales 261,645 183,814 123,974
-----------------------------------------
Gross profit 73,377 52,030 37,121
Warehouse expense 14,416 9,611 6,957
Selling and administrative expenses 42,355 31,139 19,907
Goodwill amortization 885 793 735
-----------------------------------------
Operating income 15,721 10,487 9,522
Other income (expense):
Interest expense (4,482) (3,176) (5,113)
Amortization expense (708) (698) (610)
Management fees paid to majority stockholder - - (208)
Miscellaneous income, net 852 823 228
-----------------------------------------
(4,338) (3,051) (5,703)
-----------------------------------------
Income before income taxes and extraordinary loss 11,383 7,436 3,819
Income taxes 4,327 2,903 1,490
-----------------------------------------
Income before extraordinary loss 7,056 4,533 2,329
Extraordinary loss, net of applicable income taxes of $499 - - 750
-----------------------------------------
Net income $ 7,056 $ 4,533 $ 1,579
=========================================
Income per share of common stock:
Basic:
Income before extraordinary loss $ 1.10 $ .72 $ .78
Extraordinary loss - - .25
-----------------------------------------
Net income $ 1.10 $ .72 $ .53
=========================================
Diluted:
Income before extraordinary loss $ 1.07 $ .70 $ .75
Extraordinary loss - - .24
------------------------------------------
Net income $ 1.07 $ .70 $ .51
=========================================
Weighted average shares outstanding:
Basic 6,418 6,334 2,972
=========================================
Diluted 6,591 6,510 3,114
=========================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
SCP Pool Corporation
Consolidated Statements of Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Class A Class B Additional
Common Stock Common Stock Common Stock Paid-In Retained
Shares Amount Shares Amount Shares Amount Capital Earnings Total
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 - $- 1,275,361 $ 1 72 - $ 1,929 $ 1,107 $ 3,037
Common stock issued - - 36,730 - - - 300 - 300
Recapitalization 3,104 3 (1,312,091) (1) (72) - 7,198 - 7,200
Initial public offering 3,080 3 - - - - 19,181 - 19,184
Exercise of overallotment
option 150 - - - - - 977 - 977
Net income - - - - - - - 1,579 1,579
--------------------------------------------------------------------------------------------
Balance at December 31, 1995 6,334 6 - - - - 29,585 2,686 32,277
Net income - - - - - - - 4,533 4,533
--------------------------------------------------------------------------------------------
Balance at December 31, 1996 6,334 6 - - - - 29,585 7,219 36,810
Common stock issued 1,350 2 - - - - 22,556 - 22,558
Exercise of stock option 27 - - - - - 182 - 182
Conversion of convertible debt 29 - - - - - 29 - 29
Net income - - - - - - - 7,056 7,056
--------------------------------------------------------------------------------------------
Balance at December 31, 1997 7,740 $8 - $ - - - $52,352 $14,275 $66,635
============================================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
SCP Pool Corporation
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
--------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 7,056 $ 4,533 $ 1,579
Adjustments to reconcile net income to net cash provided by
operating activities:
Write-off of loan financing fees - - 1,249
Depreciation and amortization 2,553 2,503 2,069
Provision for doubtful accounts receivable, net of write-offs 544 388 506
Provision for inventory obsolescence, net of write-offs 447 (86) 678
Provision for deferred income taxes 1,277 1,029 935
Loss (gain) on sale of property and equipment (28) 155 13
Changes in operating assets and liabilities, net of effects
of acquisitions and disposals:
Accounts receivable (26) (12,571) (3,686)
Inventory (7,086) 4,877 (3,667)
Prepaid expenses and other assets (437) 31 (790)
Accounts payable 5,115 2,638 1,981
Accrued expenses and other current liabilities (2,143) 4,129 (88)
--------------------------------
Net cash provided by operating activities 7,272 7,626 779
Investing activities
Acquisition of businesses - (1,664) (11,108)
Purchase of property and equipment (1,105) (788) (866)
Proceeds from sale of property and equipment 127 73 127
--------------------------------
Net cash used in investing activities (978) (2,379) (11,847)
Financing activities
Net borrowings (repayments) of revolving loan 4,050 (1,000) 6,615
Proceeds from long-term debt - - 7,200
Payments on long-term debt (15,409) (1,669) (21,799)
Issuance of common stock 22,740 - 20,461
Payment of debt prepayment premium - - (210)
--------------------------------
Net cash provided by (used in) financing activities 11,381 (2,669) 12,267
--------------------------------
Change in cash and cash equivalents 17,675 2,578 1,199
Cash and cash equivalents at beginning of year 4,621 2,043 844
--------------------------------
Cash and cash equivalents at end of year $ 22,296 $ 4,621 $ 2,043
================================
Supplemental cash flow information
Cash paid (received) during the year for:
Interest $ 4,424 $ 3,279 $ 5,883
================================
Income taxes, net of refunds $ 4,508 $ (561) $ (33)
================================
Supplemental disclosure of noncash investing and financing
activities
Long-term debt issued to acquire businesses $ - $ 31,846 $ 2,650
================================
Long-term debt reduced through sale of business $ - $ 4,376 $ -
================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements
December 31, 1997
1. Organization and Summary of Significant Accounting Policies
Description of Business
SCP Pool Corporation and its wholly owned subsidiaries (collectively referred to
as the Company), after considering the affects of the January 1998 acquisition
discussed below, maintain 85 service centers in 30 states located throughout
the United States, from which they sell swimming pool equipment and supplies to
pool builders, retail stores, and service firms.
In September 1996, the Company acquired certain assets, primarily inventory and
property and equipment, of The B-L Network, Inc. (BLN), a wholesaler of swimming
pool supplies with 39 service centers in 12 states. $31.8 million of the
aggregate purchase price was financed by BLN, with the remaining $2.7 million
representing liabilities assumed (see Note 6) and other costs incurred by the
Company. This acquisition has been accounted for using the purchase method of
accounting and the results of operations have been included in the accompanying
consolidated financial statements since the date of acquisition.
Unaudited pro forma results of operations of the Company for the years ended
December 31, 1996 and 1995, giving effect to the BLN acquisition as if it had
occurred as of January 1, 1995, are as follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
1996 1995
-------------------------
<S> <C> <C>
Net sales $364,702 $301,983
Gross profit $ 74,388 $ 64,512
Operating income $ 10,095 $ 9,619
Income before extraordinary loss $ 3,098 $ 1,198
Net income $ 3,098 $ 448
Net income per share:
Basic $ .49 $ .15
Diluted $ .48 $ .15
</TABLE>
The unaudited pro forma consolidated results of operations for the years ended
December 31, 1996 and 1995 include pro forma adjustments for the incremental
increase or decrease in amortization of goodwill and other intangible assets,
interest expense, and income taxes associated with the acquisition. It does not
reflect the anticipated savings in purchasing costs at BLN during the periods
presented, nor does it reflect cost savings from the closure of certain BLN
service centers.
F-7
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
In January 1998, the Company acquired substantially all of the assets and
assumed certain liabilities of Bicknell Huston Distributors, Inc. (Bicknell),
which distributes swimming pool supplies and related products through its eleven
service centers in six northeastern states, for a purchase price of
approximately $21.0 million, which was paid in cash. This acquisition was
accounted for using the purchase method of accounting.
Principles of Consolidation
The consolidated financial statements include the accounts of SCP Corporation
and its wholly owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated in consolidation.
Seasonality and Weather
The Company's business is highly seasonal. Sales are substantially lower during
the first and fourth quarters of the year, when the Company may incur net
losses. The principal external factor affecting the Company's business is
weather. Unseasonably early or late warming trends can increase or decrease the
length of the pool season and unseasonably cool weather or extraordinary
rainfall during the peak season can decrease swimming pool use, installation and
maintenance, each of which can adversely affect the Company's sales and
operating profit.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
F-8
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Credit Risk
The Company performs periodic credit evaluations of its customers and generally
does not require collateral. Receivables are generally due within 30 days,
except for winter sales under early-buy programs for which extended terms are
given. Credit losses have been within management's expectations.
Inventory
Inventory consists primarily of goods purchased for resale and are carried at
the lower of cost, using the average cost method, or market. At December 31,
1997 and 1996, the reserve for inventory obsolescence was approximately
$2,161,000 and $1,714,000, respectively. The reserve for inventory obsolescence
at each service center is based upon a number of factors, including the
experience of the manager at the service center, the previous inventory
management operating performance of the service center, geographical location,
product offerings, and other factors. The Company believes that the reserve for
inventory obsolescence may periodically require adjustment as the factors
identified above change.
Property and Equipment
Property and equipment is stated at cost. The Company provides for depreciation
principally by the straight-line method over estimated useful lives of three
years for autos and trucks, five to ten years for leasehold improvements, and
ten years for furniture and fixtures and machinery and equipment. Depreciation
expense was approximately $990,000, $1,012,000 and $724,000 in 1997, 1996 and
1995, respectively.
Goodwill
Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized over 40 years. At December 31, 1997 and 1996,
accumulated amortization was approximately $3,096,000 and $2,211,000,
respectively. The recoverability of goodwill is assessed periodically and takes
into account whether the goodwill should be completely or partially written off
or the amortization period accelerated. In evaluating the value and future
benefits of goodwill, the recoverability from operating income is measured.
Under this approach, the carrying value of goodwill would be reduced if it is
probable that management's best estimate of future operating income before
goodwill amortization will be less than the carrying amount of goodwill over the
remaining amortization period. The Company assesses long-lived assets for
impairment under FASB Statement No. 121, "Accounting for Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of" (FAS 121). Under those
rules, goodwill associated with assets acquired in a purchase business
combination is included in impairment evaluations when events or circumstances
exist that indicate the carrying amounts of those assets may not be recoverable.
F-9
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Other Assets
Loan financing fees are being amortized over the term of the related debt. The
noncompete agreement and organization costs are being amortized over five years.
Income Taxes
Deferred income taxes are determined by the liability method in accordance with
Statement of Financial Accounting Standards (FAS) No. 109, "Accounting for
Income Taxes." Under this method, deferred tax assets and liabilities are
determined based on differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes and are measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
Stock Compensation Arrangements
The Company accounts for its stock compensation arrangements under the
provisions of APB 25, "Accounting for Stock Issued to Employees."
F-10
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
2. Details of Certain Balance Sheet Accounts
Additional information regarding certain balance sheet accounts is presented
below (in thousands):
<TABLE>
<CAPTION>
December
1997 1996
-----------------------
<S> <C> <C>
Receivables:
Trade accounts, less allowance of $1,938 in 1997
and $1,394 in 1996 $ 19,300 $21,578
Vendor rebates 4,274 1,451
Other 1,201 2,264
-----------------------
$ 24,775 $25,293
=======================
Property and equipment:
Land $ 429 $ 475
Building 1,001 622
Autos and trucks 156 264
Machinery and equipment 1,485 1,411
Furniture and fixtures 3,434 2,648
Leasehold improvements 508 565
-----------------------
7,013 5,985
Less accumulated depreciation 2,221 1,572
-----------------------
$ 4,792 $ 4,413
=======================
Other assets:
Loan financing fees $ 2,453 $ 2,071
Noncompete agreement 500 500
Organization costs 1,366 1,168
Other 282 347
-----------------------
4,601 4,086
Less accumulated amortization 2,029 1,313
-----------------------
$ 2,572 $ 2,773
=======================
Accrued expenses and other current liabilities:
Salaries, bonuses, and commissions $ 2,880 $ 3,586
Income taxes payable 310 1,883
Other 2,888 2,438
-----------------------
$ 6,078 $ 7,907
=======================
</TABLE>
F-11
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
3. Debt
The components of the Company's debt were as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996
---------------------
<S> <C> <C>
Senior Revolving Note, variable rate (effective
interest rate of 8.5% at December 31, 1997), due in
2002 $16,050 $12,000
Senior Term Note, variable rate (effective interest
rate of 8.5% at December 31, 1997), payable in
quarterly installments of variable amounts through
2002 21,000 24,000
Promissory Notes to BLN, interest rate of 6%, payable
in monthly installments of variable amounts through
1998 1,859 13,384
8% Subordinated Notes, payable in annual installments
of $884,000 through 1998 884 1,768
10% Convertible Notes, due in 2002 96 125
---------------------
Less current portion 39,889 51,277
6,743 15,409
---------------------
$33,146 $35,868
=====================
</TABLE>
Maturities of long-term debt for the five succeeding years are $6,743,000 in
1998, $5,000,000 in 1999, $5,000,000 in 2000, $5,000,000 in 2001 and $18,146,000
in 2002.
The credit agreements include, among other things, covenants which require the
Company to maintain minimum levels of interest coverage and fixed charge
coverage and restrict the Company's ability to pay dividends and make capital
expenditures. At December 31, 1997, the Company was in compliance with all such
covenants. Substantially all of the assets of the Company are pledged as
collateral for the Senior Revolving Note and the Senior Term Note. Available
credit under the Senior Revolving Note considering amounts currently
outstanding, is approximately $49.0 million, subject to an accounts receivable
and inventory borrowing base limit. At December 31, 1997, the unused available
credit under the Senior Revolving Note was approximately $15.5 million. The
Company pays a quarterly commitment fee of .5% per annum of the unused portion
of available credit under the Senior Revolving Note.
F-12
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
3. Debt (continued)
The Convertible Notes may be converted at any time through December 31, 2002
into shares of the Company's common stock at a conversion price of $.98 per
share. At December 31, 1997, the conversion of these notes would result in the
issuance of 98,166 shares of the Company's common stock. Such shares have been
reserved by the Company.
The carrying amount of long-term debt approximates fair value. The fair value of
long-term debt was estimated using a discounted cash flow analysis based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements.
The net proceeds of the Company's initial public offering were used primarily to
reduce indebtedness and resulted in an extraordinary charge, net of tax in 1995
of approximately $750,000 ($.25 per share) for the write-off of loan financing
fees and a prepayment premium associated with extinguishing such indebtedness.
4. Income Taxes
Significant components of the Company's deferred tax liabilities and assets were
as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996
-----------------
<S> <C> <C>
Deferred tax liabilities: $3,544 $2,094
Goodwill 157 45
Trade discounts on purchases 205 119
Prepaid expenses 906 383
Other -----------------
4,812 2,641
Total deferred tax liabilities
Deferred tax assets: 764 134
Inventory 736 544
Allowance for doubtful accounts 308 236
-----------------
Other 1,808 914
Total deferred tax assets -----------------
$3,004 $1,727
Net deferred tax liabilities =================
</TABLE>
F-13
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
4. Income Taxes (continued)
Significant components of income taxes, before the income tax effect of the
extraordinary loss, were as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996 1995
---------------------
<S> <C> <C> <C>
Current:
Federal $2,644 $1,634 $ 484
State 406 240 70
----------------------
3,050 1,874 554
Deferred:
Federal 1,142 898 816
State 135 131 120
----------------------
1,277 1,029 936
----------------------
Total $4,327 $2,903 $1,490
======================
</TABLE>
The reconciliation of income taxes computed at the federal statutory rates to
income taxes, before the income tax effect of the extraordinary loss,
was (in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996 1995
----------------------
<S> <C> <C> <C>
Tax at statutory rates $3,884 $2,528 $1,298
Other, primarily state income taxes 443 375 192
----------------------
Total $4,327 $2,903 $1,490
======================
</TABLE>
5. Common Stock and Earnings Per Share
In September 1997, the board of directors declared a three-for-two stock split
of the Company's common stock, which was paid in the form of a stock
distribution on September 29, 1997 to the stockholders of record at the close of
business on September 15, 1997. Accordingly, shares, per-share data and
related capital amounts for all periods presented reflect the effects of this
split.
In connection with the Company's initial public offering of its common stock in
October 1995, a recapitalization occurred which included (i) the conversion of
all outstanding shares of the Company's Class B common stock to Class A common
stock, (ii) the exchange of $7,200,000 of Junior Subordinated Notes for Class A
common stock, (iii) reclassification of the Company's Class A common stock to
common stock, and (iv) a stock split in the ratio of approximately 2.04-to-1.
F-14
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
5. Common Stock and Earnings Per Share (continued)
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share." Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements.
In accordance with FAS 128, the Company has presented basic earnings per share,
computed on the basis of the weighted average number of shares outstanding
during the period, and diluted earnings per share, computed on the basis of the
weighted average number of shares and all dilutive potential shares outstanding
during the year. A reconciliation between basic and diluted weighted average
number of shares outstanding and the related earnings per share calculation is
presented below for each of the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------
<S> <C> <C> <C>
Numerator:
Net income before extraordinary loss $7,056 $4,533 $2,329
Adjustment for interest expense, net of tax,
on convertible notes 8 8 8
-------------------------------------
Numerator for diluted earnings per share $7,064 $4,541 $2,337
=====================================
Denominator:
Denominator for basic earnings per share--
weighted-average shares 6,418 6,334 2,972
Effect of dilutive securities:
Employee stock options 62 48 14
Convertible notes 111 128 128
-------------------------------------
Denominator for diluted earnings per share 6,591 6,510 3,114
=====================================
Basic earnings per share before extraordinary loss $ 1.10 $ .72 $ .78
=====================================
Diluted earnings per share before extraordinary loss $ 1.07 $ .70 $ .75
=====================================
</TABLE>
F-15
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
6. Commitments and Contingencies
The Company leases facilities for its service centers and corporate office and
vehicles under noncancelable operating leases that expire in various years
through 2009 but which have options to extend for various terms. Rental expense
under such operating leases was approximately $7,747,000 in 1997, $4,815,000 in
1996 and $3,174,000 in 1995. The future minimum lease payments as of December
31, 1997 related to noncancelable operating leases with initial terms of one
year or more are set forth below (in thousands):
<TABLE>
<S> <C>
1998 $ 5,591
1999 4,799
2000 3,320
2001 1,617
2002 903
Thereafter 1,489
-------
$17,719
=======
</TABLE>
In connection with the acquisition of BLN, the Company recorded liabilities at
the date of acquisition of approximately $1,200,000 for lease buyouts, occupancy
costs and employee termination costs related to the planned closing of 16
acquired facilities. During 1997, the Company recorded an additional increase of
approximately $333,000 to goodwill for expected additional lease buyouts and
occupancy costs related to these acquired facilities. As of December 31, 1997,
the Company has closed all of the above-mentioned facilities, having paid
$513,000 of such liabilities, and has a remaining accrual of approximately
$1,020,000 to settle the remaining leases.
In connection with the acquisition of BLN in 1996, the Company entered into
certain vendor supply agreements which require the Company to purchase a
certain percentage of its annual requirements for certain products at prices
defined by the supply agreement. These supply agreements have an initial term
which expires September 26, 2001, with an indefinite number of three-year
renewal periods until terminated by either party.
In the normal course of business, the Company becomes involved as a defendant or
plaintiff in various lawsuits. Although a successful claim for which the Company
is not fully insured could have a material effect on the Company's financial
condition, management is of the opinion that it maintains insurance coverage at
levels generally consistent with industry standards to insure itself against the
normal risks of operations.
F-16
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
7. Employee Benefit Plans
The Company's employees participate in a Company-sponsored savings and
retirement plan which provides for discretionary Company contributions under a
profit-sharing provision. Employees who are eligible to participate in the
savings plan are able to contribute a percentage of their base compensation not
to exceed 10%, subject to a dollar limit. The Company contributes an amount
equal to 25% of employee contributions up to 6% of their base compensation.
Employee contributions are invested in certain equity and fixed income
securities based on employee elections. Matching contributions and profit-
sharing contributions made by the Company were $197,000 and $934,000,
respectively, in 1997, $113,000 and $650,000, respectively, in 1996, and $77,000
and $485,000, respectively, in 1995.
8. Stock Option Plans
In 1995, the Company's board of directors adopted the 1995 Stock Option Plan
under which the board of directors is authorized to grant, at its discretion, to
employees, agents, consultants or independent contractors of the Company,
options to purchase shares of common stock. The number of shares granted under
this plan is limited to an aggregate amount of 600,000. Granted options have an
exercise price of not less than the fair market value of the stock on the date
of grant. Options generally are exercisable two years after the date of grant
and expire December 31, 2003.
In April 1996, the Company's board of directors adopted the SCP Pool Corporation
Non-Employee Directors Equity Incentive Plan, under which the Company grants to
each nonemployee director options to purchase shares of the Company's common
stock. The number of shares granted under this plan is limited to an aggregate
amount of 300,000. The options will have an exercise price of not less than the
fair market value of the stock on the date of grant, and generally are
exercisable one year after the date of grant and expire December 31, 2003.
F-17
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
8. Stock Option Plans (continued)
FASB Statement No. 123,"Accounting for Stock-Based Compensation", requires the
Company to disclose pro forma information regarding net income and earnings per
share as if the Company had accounted for its employee stock options under the
fair value method. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following weighted
average assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------
<S> <C> <C> <C>
Risk-free interest rate 6.2% 6.7% 5.9%
Expected dividend yield - - -
Expected volatility .38 .32 .32
Weighted average expected life 4.1 years 3.4 years 2.5 years
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. As the Company
accounts for stock compensation under APB 25, no compensation cost has been
recognized for its stock options in the financial statements. Had the Company's
stock-based compensation plan been determined based on the fair value at the
grant dates, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below (in thousands, except per share
data):
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Pro forma net income $6,632 $4,392 $1,568
Pro forma earnings per share:
Basic Primary $ 1.03 $ .69 $ .53
Diluted Fully diluted $ 1.01 $ .68 $ .51
</TABLE>
F-18
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
8. Stock Option Plans (continued)
A summary of the Company's stock option activity and related information for the
plans described above is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding--Beginning of year 168,801 $ 6.82 46,926 $3.43 - $ -
Granted 150,750 13.87 121,875 8.13 46,926 3.43
Exercised 26,523 3.43 - - - $ 3.43
------- ------- ------
Outstanding--End of year 293,028 $10.75 168,801 $6.82 46,926 $ -
======= ======= ======
Exercisable at end of year 110,403 $ 9.06 45,000 $7.50 -
======= ======= ======
Weighted average fair value of
options granted during the year $ 5.46 $ 2.41 $ 0.92
======= ======= ======
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$3.43 to $15.25, and had a weighted average remaining contractual life of 5.9
years.
F-19
<PAGE>
SCP Pool Corporation
Notes to Consolidated Financial Statements (continued)
9. Quarterly Financial Data (Unaudited)
The following is a tabulation of the Company's unaudited quarterly results of
operations for the years ended December 31, 1997 and 1996 (in thousands, except
per share data):
<TABLE>
<CAPTION>
Quarter Ended
3/97 6/97 9/97 12/97 3/96 6/96 9/96 12/96
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $63,565 $124,907 $98,492 $48,175 $41,145 $85,867 $62,344 $46,488
Gross profit 13,960 28,159 21,460 9,798 9,273 20,042 13,531 9,184
Net income (loss) (603) 6,394 3,471 (2,206) 78 5,615 2,168 (3,328)
Net income (loss)
per share:
Basic $ (.10) $ 1.01 $ .54 $ (.33) $ .01 $ .89 $ .34 $ (.53)
Diluted (.10) .99 .53 (.33) .01 .87 .34 (.53)
</TABLE>
The 1996 and first three quarters of 1997 earnings per share amounts have been
restated to comply with Statement of Financial Accounting Standards No. 128,
"Earnings per Share." As a result of differences in the way in-the-money stock
options are considered from quarter-to-quarter under the requirements of FAS
128, diluted EPS for annual periods may not equal the sum of the individual
quarter's diluted EPS amount.
F-20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March 25, 1998.
SCP POOL CORPORATION
By: /S/ WILSON B. SEXTON
--------------------------------
Wilson B. Sexton, Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on March 25, 1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/S/ WILSON B. SEXTON Chairman and Director
- ------------------------
Wilson B. Sexton
/S/ FRANK J. ST. ROMAIN President, Chief Executive Officer and Director
- ------------------------
Frank J. St. Romain
/S/ CRAIG K. HUBBARD Chief Financial Officer, Treasurer and Secretary
- ------------------------
Craig K. Hubbard
/S/ ANDREW W. CODE Director
- ------------------------
Andrew W. Code
/S/ PETER M. GOTSCH Director
- ------------------------
Peter M. Gotsch
/S/ DOMINICK DEMICHELE Director
- ------------------------
Dominick DeMichele
/S/ ROBERT C. SLEDD Director
- ------------------------
Robert C. Sledd
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Document Description Number
- ------- -------------------- ------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company. (1)
3.2 Restated Bylaws of the Company. (1)
4.1 Form of certificate representing shares of Common Stock of the Company. (1)
4.2 Credit Agreement, dated as of December 31, 1993, by and among South Central Pool (1)
Supply, Inc. (previously known as SCP Acquisition Corp.), The First National Bank of
Chicago, as agent, and various lenders from time to time party thereto.
4.3 Amendment No. 1 to Credit Agreement, dated as of September 1, 1994, by and among (1)
South Central Pool Supply, Inc. ("SCP Supply"), The First National Bank of Chicago,
as agent, and various lenders from time to time party thereto.
4.4 Amendment No. 2 to Credit Agreement, dated as of January 20, 1995, by and among (1)
SCP Supply, The First National Bank of Chicago, as agent, and various lenders from
time to time party thereto.
4.5 Amendment No. 3 to Credit Agreement, dated as of February 28, 1995, by and among (1)
South Central Pool Supply, Inc., The First National Bank of Chicago, as agent, and
various lenders from time to time party thereto.
10.1 Asset Purchase Agreement, dated as of December 31, 1993, by and among the (1)
Company, SCP Acquisition Corp., and South Central Pool Supply, Inc.
10.2 Registration Agreement, dated as of December 31, 1993, by and among the Company, (1)
CHS, various management and outside investors, Berkeley Atlantic Income Limited,
BG Services Limited, and PNC Equity Management Corp.
10.3 Asset Purchase Agreement, dated as of January 4, 1994, by and between Aqua Fab (1)
Industries, Inc. and South Central Pool Supply, Inc.
10.4 Amendment No. 1 to Asset Purchase Agreement, dated as of January 7, 1994, by and (1)
among Aqua Fab Industries, Inc. and South Central Pool Supply Industries, Inc.
10.5 Amendment No. 2 to Asset Purchase Agreement, dated as of January 18, 1994, by and (1)
among Aqua Fab Industries, Inc. and South Central Pool Supply, Inc.
10.6 Amendment No. 3 to Asset Purchase Agreement, dated as of February 17, 1994, by and (1)
among Aqua Fab Industries, Inc. and South Central Pool Supply, Inc.
10.7 Asset Purchase Agreement, dated as of January 20, 1995, by and among Alliance (1)
Packaging, Inc., York Chemical Corporation and Wexco Incorporated.
10.8 Stock Purchase Agreement, dated as of February 15, 1995, by and among the Company, (1)
Orcal Pool Supplies, Inc. and Ronald Hetzner.
10.9 Agreement, dated as of March 31, 1992, by and between Wexco and W.B. Sexton. (1)
10.10 Patent Assignment, dated as of January 20, 1995, between Wexco Incorporated and (1)
Alliance Packaging, Inc.
10.11 Management Agreement, dated as of December 31, 1993, by and between CHS (1)
Management Limited Partnership, an Illinois limited partnership, and SCP Acquisition
Corp.
10.12 Management Agreement, dated as of February 28, 1995, by and between SCP Supply (1)
and Ronald Hetzner.
10.13 SCP Pool Corporation 1995 Stock Option Plan.* (1)
10.14 Form of Individual Stock Option Agreement.* (1)
10.15 Form of Convertible Subordinated Note dated as of December 31, 1993 issued by SCP (1)
Holding Corp.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Document Description Number
- ------- -------------------- ------
<S> <C>
10.16 Form of Junior Subordinated Note, dated as of December 31, 1993, issued by SCP (1)
Holding Corp.
10.17 Form of Executive Securities Agreement, dated as of December 31, 1993, among SCP (1)
Holding Corp., Code Hennessy & Simmons Limited Partnership and certain executives.
10.18 Form of Lease, dated as of February 28, 1995, by and between Ronald Hetzner and (1)
South Central Pool Supply, Inc.
10.19 Lease, dated as of November 8, 1993, by and between Northpark Alliance, LLC and (1)
South Central Pool Supply, Inc.
10.20 Lease, dated as of November 7, 1991, by and between St. Romain Children's Trust and (1)
South Central Pool Supply, Inc.
+10.21 Sales Agreement, dated as of October 1, 1993, between PPG Industries, Inc. and SCP (1)
Supply.
10.22 Asset Purchase Agreement, dated as of September 7, 1995, by and among SCP Supply, (2)
Aman Enterprises, Inc., Stephen Aman and Walter Aman.
10.23 Stock Purchase Agreement, dated as of November 10, 1995, by and among SCP (2)
Supply, Steven Portnoff Corporation and Steven Portnoff
10.24 Asset Purchase Agreement, dated as of December 12, 1995, by and among SCP Supply, (2)
Pool Mart of Nevada, Inc., Robert Portnoff, Sarah Portnoff and Steven Portnoff
10.25 SCP Pool Corporation 1996 Non-Employee Director Equity Incentive Plan* (2)
10.26 Second Amended and Restated Credit Agreement, dated as of September 26, 1996, (3)
among South Central Pool Supply, Inc., the First National Bank of Chicago and the
Institutions party thereto as lenders
10.27 Asset Purchase Agreement, dated as of September 26, 1996, among South Central Pool (3)
Supply, Inc., SCP Pool Corporation, The B-L Network, Inc. and Bio-Lab, Inc.
10.28 Asset Purchase Agreement, dated as of September 26, 1996, among Alliance (3)
Packaging, Inc., SCP Pool Corporation, South Central Pool Supply, Inc. and Bio-Lab,
Inc.
+ 10.29 Supply Agreement, among Bio-Lab, Inc., South Central Pool Supply, Inc., and SCP (3)
Pool Corporation
+ 10.30 Supply Agreement, dated as of September 26, 1996, among Bio-Lab, Inc., South (3)
Central Pool Supply, Inc., and SCP Pool Corporation
++10.31 Asset Purchase Agreement, dated as of November 13, 1997, among SCP Pool (4)
Corporation, South Central Pool Supply, Inc., Bicknell Huston Distributors, Inc.,
Pacific Industries, Inc. and Cookson America, Inc.
10.32 Third Amended and Restated Credit Agreement, dated as of December 31, 1997, by and
among South Central Pool Supply, Inc., the institutions from time to time party thereto
as lenders, LaSalle National Bank, as Agent and Co-Arranger and Hibernia National
Bank as Co-Arranger.
10.33 Amendment, dated December 31, 1997, to the Asset Purchase Agreement, dated as of
November 13, 1997, among SCP Pool Corporation, South Central Pool Supply, Inc.,
Bicknell Huston Distributors, Inc., Pacific Industries, Inc. and Cookson America, Inc.
21.1 Subsidiaries of the registrant.
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
</TABLE>
<PAGE>
- ----------
+ Confidential Treatment Granted.
++ Confidential Treatment Granted for portions of Exhibit C to this Agreement.
* Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 33-92738.
(2) Incorporated by reference to the respective exhibit to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995.
(3) Incorporated by reference to the respective exhibit to the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1996.
(4) Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 333-40245.
<PAGE>
EXHIBIT 10.32
EXECUTION COPY
================================================================================
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of December 31, 1997
among
SOUTH CENTRAL POOL SUPPLY, INC.,
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS,
and
LASALLE NATIONAL BANK,
as Agent and as Co-Arranger
and
HIBERNIA NATIONAL BANK
as Co-Arranger
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I: DEFINITIONS.........................................................1
1.1 Certain Defined Terms................................................1
1.2 Subsidiary References...............................................28
1.3 Supplemental Disclosure.............................................28
1.4 Amendment and Restatement of Second Restated Credit Agreement.......29
ARTICLE II: THE CREDITS.......................................................29
2.1. Term Loans..........................................................29
2.2 Revolving Loans.....................................................30
2.3 Ratable Loans.......................................................31
2.4 Rate Options for all Advances.......................................31
2.5 Optional Payments; Mandatory Prepayments............................31
(A) Optional Payments.............................................31
(B) Mandatory Prepayments.........................................31
2.6 Reduction of Commitments............................................33
2.7 Method of Borrowing.................................................33
2.8 Determination of Applicable Margins, Applicable Letter of Credit
Fee and Applicable Commitment Fee.................................33
2.9 Method of Selecting Types and Interest Periods for Advances.........35
2.10 Minimum Amount of Each Advance.....................................35
2.11 Method of Selecting Types and Interest Periods for Conversion
and Continuation of Advances......................................36
(A) Right to Convert..............................................36
(B) Automatic Conversion and Continuation.........................36
(C) No Conversion Post-Default or Post-Unmatured Default..........36
(D) Conversion/Continuation Notice................................36
2.12 Default Rate.......................................................36
2.13 Method of Payment..................................................36
2.14 Notes, Telephonic Notices..........................................37
2.15 Promise to Pay; Interest and Fees; Interest Payment Dates;
Interest and Fee Basis; Taxes; Loan and Control Accounts..........37
(A) Promise to Pay................................................37
(B) Interest Payment Dates........................................37
(C) Commitment Fees; Closing Fees; Agent's and Arranger's Fees....37
(D) Interest and Fee Basis........................................38
(E) Taxes.........................................................38
(F) Loan Account..................................................41
(G) Control Account...............................................41
(H) Entries Binding...............................................41
2.16 Notification of Advances, Interest Rates, Prepayments and
Aggregate Revolving Loan Commitment Reductions....................42
2.17 Lending Installations..............................................42
</TABLE>
i
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<TABLE>
<S> <C>
2.18 Non-Receipt of Funds by the Agent..................................42
2.19 Termination Date...................................................42
2.20 Replacement of Certain Lenders.....................................42
2.21 Letter of Credit Facility..........................................43
2.22 Letter of Credit Participation.....................................44
2.23 Reimbursement Obligation...........................................44
2.24 Cash Collateral....................................................45
2.25 Letter of Credit Fees..............................................45
2.26 Indemnification; Exoneration.......................................45
ARTICLE III: CHANGE IN CIRCUMSTANCES..........................................47
3.1 Yield Protection....................................................47
3.2 Changes in Capital Adequacy Regulations.............................47
3.3 Availability of Types of Advances...................................48
3.4 Funding Indemnification.............................................48
3.5 Lender Statements; Survival of Indemnity............................48
ARTICLE IV: CONDITIONS PRECEDENT..............................................49
4.1 Conditions Precedent to Effectiveness of this Agreement.............49
4.2 Each Advance and Letter of Credit...................................51
ARTICLE V: REPRESENTATIONS AND WARRANTIES.....................................51
5.1 Organization; Corporate Powers......................................51
5.2 Authority...........................................................51
5.3 No Conflict; Governmental Consents..................................52
5.4 Financial Statements................................................53
5.5 No Material Adverse Change..........................................53
5.6 Taxes...............................................................53
(A) Tax Examinations..............................................53
(B) Payment of Taxes..............................................53
5.7 Litigation; Loss Contingencies and Violations.......................53
5.8 Subsidiaries........................................................54
5.9 ERISA...............................................................54
5.10 Accuracy of Information............................................55
5.11 Securities Activities..............................................55
5.12 Material Agreements................................................55
5.13 Compliance with Laws...............................................55
5.14 Assets and Properties..............................................56
5.15 Statutory Indebtedness Restrictions................................56
5.16 Post-Retirement Benefits...........................................56
5.17 Insurance..........................................................56
5.18 Contingent Obligations.............................................56
5.19 Restricted Junior Payments.........................................56
5.20 Labor Matters......................................................57
5.21 Environmental Matters..............................................57
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
5.22 The BHD Acquisition................................................57
ARTICLE VI: COVENANTS........................................................58
6.1 Reporting...........................................................58
(A) Financial Reporting...........................................58
(B) Notice of Default.............................................60
(C) Lawsuits......................................................60
(D) Insurance.....................................................61
(E) ERISA Notices.................................................61
(F) Labor Matters.................................................62
(G) Other Indebtedness............................................62
(H) Environmental Notices.........................................62
(I) Borrowing Base Certificate....................................62
(J) SEC Filings and Notices.......................................62
(K) Other Publicly Available Information..........................63
(L) Other Information.............................................63
6.2 Affirmative Covenants...............................................63
(A) Corporate Existence, Etc. ....................................63
(B) Corporate Powers; Conduct of Business.........................63
(C) Compliance with Laws, Etc. ...................................63
(D) Payment of Taxes and Claims; Tax Consolidation................63
(E) Insurance.....................................................64
(F) Inspection of Property; Books and Records; Discussions........64
(G) Insurance and Condemnation Proceeds...........................65
(H) ERISA Compliance..............................................66
(I) Maintenance of Property.......................................66
(J) Environmental Compliance......................................66
(K) Use of Proceeds...............................................66
(L) Interest Rate Agreements......................................66
(M) Collection Account Arrangements...............................66
(N) Separate Corporate Existence..................................67
6.3 Negative Covenants..................................................68
(A) Indebtedness..................................................69
(B) Sales of Assets...............................................71
(C) Liens.........................................................71
(D) Investments...................................................72
(E) Contingent Obligations........................................73
(F) Restricted Junior Payments....................................74
(G) Conduct of Business; Subsidiaries; Acquisitions...............76
(H) Transactions with Shareholders and Affiliates.................76
(I) Restriction on Fundamental Changes............................77
(J) Sales and Leasebacks..........................................77
(K) Margin Regulations............................................77
(L) ERISA.........................................................77
(M) Issuance of Capital Stock.....................................77
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
(N) Corporate Documents...........................................77
(O) Other Indebtedness............................................77
(P) Fiscal Year...................................................78
(Q) Subsidiary Covenants..........................................78
(R) Rate Hedging Obligations......................................78
(S) Subordinated Indebtedness.....................................78
(T) Purchase Agreements...........................................78
6.4 Financial Covenants.................................................79
(A) Defined Terms for Financial Covenants.........................79
(B) Interest Expense Coverage Ratio...............................80
(C) Fixed Charge Coverage Ratio...................................80
(D) Maximum Leverage Ratio........................................80
ARTICLE VII: DEFAULTS.........................................................81
7.1 Defaults............................................................81
ARTICLE VIII: ACCELERATION, DEFAULTING LENDERS; WAIVERS,
AMENDMENTS AND REMEDIES..................................................84
8.1 Termination of Commitments; Acceleration............................84
8.2 Defaulting Lender...................................................84
8.3 Amendments..........................................................86
8.4 Preservation of Rights..............................................86
ARTICLE IX: GENERAL PROVISIONS................................................87
9.1 Survival of Representations.........................................87
9.2 Governmental Regulation.............................................87
9.3 Performance of Obligations..........................................87
9.4 Headings............................................................88
9.5 Entire Agreement....................................................88
9.6 Several Obligations; Benefits of this Agreement.....................88
9.7 Expenses; Indemnification...........................................88
(A) Expenses......................................................88
(B) Indemnity.....................................................88
(C) Waiver of Certain Claims......................................90
(D) Survival of Agreements........................................90
9.8 Numbers of Documents................................................90
9.9 Accounting..........................................................90
9.10 Severability of Provisions.........................................90
9.11 Nonliability of Lenders............................................90
9.12 GOVERNING LAW......................................................90
9.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL............90
(A) EXCLUSIVE JURISDICTION........................................90
(B) OTHER JURISDICTIONS...........................................91
(C) SERVICE OF PROCESS............................................91
(D) WAIVER OF JURY TRIAL..........................................91
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
(E) WAIVER OF BOND................................................92
(F) ADVICE OF COUNSEL.............................................92
9.14 Reserved...........................................................92
9.15 No Strict Construction.............................................92
ARTICLE X: THE AGENT..........................................................92
10.1 Appointment........................................................92
10.2 Powers.............................................................93
10.3 General Immunity...................................................93
10.4 No Responsibility for Loans, Creditworthiness, Collateral,
Recitals, Etc.....................................................93
10.5 Action on Instructions of Lenders..................................93
10.6 Employment of Agents and Counsel...................................94
10.7 Reliance on Documents; Counsel.....................................94
10.8 Agent's Reimbursement and Indemnification..........................94
10.9 Rights as a Lender.................................................94
10.10 Lender Credit Decision............................................94
10.11 Successor Agent...................................................95
10.12 Collateral Documents..............................................95
ARTICLE XI: SETOFF; RATABLE PAYMENTS..........................................95
11.1 Setoff.............................................................95
11.2 Ratable Payments...................................................95
11.3 Application of Payments............................................96
11.4 Relations Among Lenders............................................97
ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS................97
12.1 Successors and Assigns.............................................97
12.2 Participations.....................................................98
(A) Permitted Participants; Effect................................98
(B) Voting Rights.................................................98
(C) Benefit of Setoff.............................................98
12.3 Assignments........................................................98
(A) Permitted Assignments.........................................98
(B) Effect; Effective Date........................................99
(C) The Register..................................................99
12.4 Confidentiality...................................................100
12.5 Dissemination of Information......................................100
ARTICLE XIII: NOTICES........................................................100
13.1 Giving Notice.....................................................100
13.2 Change of Address.................................................100
ARTICLE XIV: COUNTERPARTS....................................................100
</TABLE>
v
<PAGE>
EXHIBITS
EXHIBIT A -- Borrowing Base Certificate (Definitions)
EXHIBIT B -- Term Loan Amounts and Revolving Loan Commitments
(Definitions)
EXHIBIT C -- Form of Substituted and Amended Revolving Note
(Definitions)
EXHIBIT D -- Form of Substituted and Amended Term Note (Definitions)
EXHIBIT E -- Form of Assignment Agreement ((S)(S) 2.20, 12.3)
EXHIBIT F -- Form of Officer's Certificate ((S)(S) 4.2, 6.1(A)(iv))
EXHIBIT G -- Form of Compliance Certificate ((S)(S)4.2, 6.1(A)(iv))
EXHIBIT H -- [Reserved].
EXHIBIT I -- [Reserved].
EXHIBIT J -- List of Closing Documents
EXHIBIT K -- Holdings Subordination Agreement
vi
<PAGE>
SCHEDULES
SCHEDULE 1.1.1 -- Permitted Existing Contingent Obligations (Definitions)
SCHEDULE 1.1.2 -- Permitted Existing Indebtedness (Definitions)
SCHEDULE 1.1.3 -- Permitted Existing Investments (Definitions)
SCHEDULE 1.1.4 -- Permitted Existing Liens (Definitions)
SCHEDULE 1.1.5 -- Existing Letters of Credit (Definition)
SCHEDULE 5.3 -- Conflicts; Governmental Consents ((S) 5.3)
SCHEDULE 5.7 -- Litigation; Loss Contingencies ((S) 5.7)
SCHEDULE 5.8 -- Subsidiaries ((S) 5.8)
SCHEDULE 5.17 -- Insurance ((S)(S) 5.17, 6.2(E))
SCHEDULE 5.18 -- Contingent Obligations ((S)(S) 5.7, 5.18)
SCHEDULE 5.20 -- Labor Matters; Compensation Agreements ((S) 5.20)
SCHEDULE 5.21 -- Environmental Matters ((S) 5.21)
SCHEDULE 6.2(M) -- Deposit Accounts; Collection Account Agreements ((S)
6.2(M))
SCHEDULE 6.3(F)(ii) -- Schedule of Permissible Tax Payments ((S)6.3(F)(ii))
vii
<PAGE>
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This Third Amended and Restated Credit Agreement dated as of December 31,
1997 is entered into among South Central Pool Supply, Inc., a Delaware
corporation, the institutions from time to time a party hereto as Lenders,
whether by execution of this Agreement or an assignment and acceptance pursuant
to Section 12.3, and LaSalle National Bank, in its capacity as contractual
representative for itself and the other Lenders. The parties hereto agree as
follows:
WITNESSETH:
WHEREAS, the Borrower has requested and the Agent and the Lenders have
agreed to amend the Second Restated Credit Agreement (as defined below);
WHEREAS, the Borrower, the Lenders and the Agent have agreed to enter into
this Agreement in order to (i) amend and restate the Second Restated Credit
Agreement; (ii) re-evidence the Obligations, which shall be repayable in
accordance with the terms of this Agreement; and (iii) set forth the terms and
conditions under which the Lenders will, from time to time, make loans and
extend other financial accommodations to or for the benefit of the Borrower; and
WHEREAS, it is the intention of the parties to this Agreement that this
Agreement not constitute a novation and that, from and after the Effective Date,
the Second Restated Credit Agreement shall be amended and restated hereby and
all references herein to "hereunder," "hereof," or words of like import and all
references in any other Loan Document to the "Credit Agreement" or words of like
import shall mean and be a reference to the Second Restated Credit Agreement as
amended and restated hereby (and any section references to the Second Restated
Credit Agreement shall refer to the applicable equivalent provision set forth
herein although the section number thereof may have changed);
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or extensions of credit heretofore, now or hereafter
made to or for the benefit of the Borrower by the Lenders and the Agent, the
parties hereto agree as follows:
ARTICLE I: DEFINITIONS
- -----------------------
1.1 Certain Defined Terms. In addition to the terms defined in other
sections of this Agreement, the following terms used in this Agreement shall
have the following meanings, applicable both to the singular and the plural
forms of the terms defined:
As used in this Agreement:
"Accommodation Obligations" is defined in the definition "Contingent
Obligations" below.
1
<PAGE>
"Account Debtor" means and includes the account debtor or obligor with
respect to any of the Receivables and/or the prospective purchaser with respect
to any contract right, and/or any party who enters into or proposes to enter
into any contract or other arrangement with the Borrower or any of its
Subsidiaries.
"Acquisition" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
of its Subsidiaries (i) acquires any going business or all or substantially all
of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions at least a majority (in number of vote) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency), a majority (by percentage of voting power) of the membership,
ownership or other equity interests in a limited liability company or a majority
(by percentage of voting power) of the outstanding partnership interests of a
partnership.
"Advance" means a borrowing hereunder consisting of the aggregate amount of
the several Loans made by the Lenders to the Borrower of the same Type and, in
the case of Eurodollar Advances, for the same Interest Period.
"Affected Lender" is defined in Section 2.20 hereof.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person is the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act)
of twenty percent (20%) or more of any class of voting securities (or other
voting interests) of the controlled Person or possesses, directly or indirectly,
the power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, membership, ownership or
other equity interests, by contract or otherwise.
"Agent" means LaSalle in its capacity as contractual representative for
itself and the Lenders pursuant to Article X hereof and any successor Agent
appointed pursuant to Article X hereof.
"Aggregate Revolving Loan Commitment" means the aggregate of the Revolving
Loan Commitments of all the Lenders, as reduced from time to time pursuant to
the terms hereof. The Aggregate Revolving Loan Commitment is Sixty-Five Million
and 00/100 dollars ($65,000,000.00) subject to reduction as provided in this
Agreement.
"Agreement" means this Third Amended and Restated Credit Agreement, as it
may be further amended, restated or otherwise modified and in effect from time
to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect as of the Closing Date, applied in a manner consistent
with that used in preparing the historical financial statements referred to in
Section 5.4 hereof.
2
<PAGE>
"Alliance" means Alliance Packaging, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Borrower, and its successors and assigns,
including a debtor-in-possession on behalf of Alliance Packaging, Inc.
"Alliance Guaranty" means that certain Guaranty entered into between
Alliance and the Agent dated as of January 20, 1995, as amended by the Global
Amendment, and as the same may from time to time be further amended, modified,
supplemented or restated.
"Alliance Security Agreement" means that certain Amended and Restated
Security Agreement entered into between Alliance and the Agent dated as of May
30, 1996, as amended by an Amendment No. 1, dated as of September 26, 1996, and
the Global Amendment, and as the same may from time to time be further amended,
modified, supplemented or restated.
"Alternate Base Rate" means, for any day, a fluctuating rate of interest
per annum equal to the higher of (i) the Corporate Base Rate for such day and
(ii) the sum of (a) the Federal Funds Effective Rate for such day and (b) one-
half of one percent (1/2%) per annum.
"Applicable Commitment Fee" as at any date of determination, shall be the
rate per annum then applicable in the determination of the amount payable under
Section 2.15(C) with respect to the unused Aggregate Revolving Loan Commitment,
determined in accordance with the provisions of Section 2.8(a).
"Applicable Eurodollar Margin" as at any date of determination, shall be
the rate per annum then applicable to Eurodollar Loans determined in accordance
with the provisions of Section 2.8(a).
"Applicable Floating Rate Margin" as at any date of determination, shall be
the rate per annum then applicable to Floating Rate Loans determined in
accordance with the provisions of Section 2.8(a).
"Applicable Letter of Credit Fee" as at any date of determination, shall be
the rate per annum then applicable in the determination of the amount payable
under Section 2.25 with respect to Letters of Credit, determined in accordance
with the provisions of Section 2.8(a).
"Applicable Margins" is defined in Section 2.5(B)(i)(d).
"Asset Sale" means, with respect to any Person, (i) the sale, lease,
conveyance, disposition or other transfer by such Person of any of its assets
(including by way of a sale-leaseback transaction and including the sale or
other transfer of any of the capital stock of any Subsidiary of such Person) or
(ii) the issuance, sale, conveyance, disposition or other transfer by such
Person of any Capital Stock of or ownership, membership or other equity
interests in such Person resulting in Net Cash Proceeds to such Person in excess
of $1,000,000; provided, however, that notwithstanding the foregoing, the term
"Asset Sale" shall not include the sale, lease, conveyance, disposition or other
transfer of any assets in the ordinary course of business.
3
<PAGE>
"Authorized Officer" means any of the Chairman, President, Treasurer,
Controller and Secretary of the Borrower, acting singly.
"Benefit Plan" means a defined benefit plan as defined in Section 3(35) of
ERISA (other than a Multiemployer Plan) in respect of which Borrower or any
other member of the Controlled Group is, or within the immediately preceding six
(6) years was, an "employer" as defined in Section 3(5) of ERISA.
"BHD" means Bicknell Huston Distributors, Inc., a Massachusetts
corporation.
"BHD Acquisition" means the Acquisition by the Borrower of certain of the
assets and assumption of certain of the liabilities of BHD on the terms and
conditions set forth in the BHD Acquisition Agreement.
"BHD Acquisition Agreement" means that certain Asset Purchase Agreement,
dated as of November 13, 1997, by and among the Borrower, Holdings, BHD, Pacific
Industries, Inc., a Delaware corporation and Cookson America, Inc., a Delaware
corporation.
"BLN" means The B-L Network, Inc., a Delaware corporation, and its
successors and assigns.
"BLN Intercreditor Agreement" means the Intercreditor Agreement dated as of
September 26, 1996 among the Agent, the Lenders and BLN, and acknowledged and
agreed to by the Borrower.
"BLN Note" means that certain Inventory Note, dated as of September 26,
1996 issued by the Borrower in favor of BLN in the original aggregate principal
amount of $28,315,099.41.
"Borrower" means South Central Pool Supply, Inc., a Delaware corporation,
and its successors and assigns, including a debtor-in-possession on behalf of
Borrower.
"Borrowing Base" means, as of any date of calculation, an amount, as set
forth on the most current Borrowing Base Certificate delivered to the Agent,
equal to: (i) eighty percent (80%) of the Gross Amount of Eligible Receivables
of the Borrower; plus (ii) forty-five percent (45%) of the lesser of (A)
$1,000,000 multiplied by the number of service centers operated by the Borrower
and (B) the Gross Amount of Eligible Inventory of the Borrower; minus (iii) the
aggregate outstanding L/C Obligations less any Cash Equivalents on deposit as
cash collateral therefor; minus (iv) the then applicable Rentals Reserve. The
Agent shall give the Borrower commercially reasonable notice, taking into
account all facts and circumstances known by the Agent at such time, of any
change in the criteria to determine the eligibility of any Receivables or
Inventory of the Borrower or to the establishment by the Agent of any reserves
which, in any such case, might reasonably be expected to materially decrease the
amount of the Borrowing Base.
"Borrowing Base Certificate" means a certificate, in substantially the form
of Exhibit A attached hereto and made a part hereof, setting forth the Borrowing
Base and the component calculations thereof.
4
<PAGE>
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.9 hereof.
"Business Activity Report" means (A) a Notice of Business Activities Report
from the State of Minnesota, Department of Revenue, or (B) any similar report
required by any other State relating to the ability of the Borrower or its
Subsidiaries to enforce their accounts receivable claims against Account Debtors
located in any such state.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Loans bearing interest at the Eurodollar Rate, a day (other than a
Saturday or Sunday) on which banks are open for business in Chicago and New York
and on which dealings in United States dollars are carried on in the London
interbank market and (ii) for all other purposes a day (other than a Saturday or
Sunday) on which banks are open for business in Chicago, Illinois and New York,
New York.
"Capital Expenditures" is defined in Section 6.4(A) hereof.
"Capitalized Lease" of a Person means any lease of property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be capitalized
on a balance sheet of such Person prepared in accordance with Agreement
Accounting Principles.
"Capital Stock", with respect to any Person, means any capital stock of
such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls or claims
of any character with respect thereto.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; (ii) domestic and
Eurodollar certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, or its branches or agencies and having capital and surplus in an
aggregate amount not less than $500,000,000 (fully protected against currency
fluctuations for any such deposits with a term of more than ten (10) days);
(iii) shares of money market, mutual or similar funds having net assets in
excess of $500,000,000 and the investments of which are limited to investment
grade securities (i.e., securities rated at least Baa by Moody's Investors
Service, Inc. or at least BBB by Standard & Poor's Corporation) and (iv)
commercial paper of United States and foreign banks and bank holding companies
and their subsidiaries and United States and foreign finance, commercial
industrial or utility companies which, at the time of acquisition, are rated A-1
(or better) by Standard & Poor's Corporation or P-1 (or better) by Moody's
Investors Services, Inc.; provided, that the maturities of such Cash Equivalents
shall not exceed 365 days.
5
<PAGE>
"Cash Flow Period" means the period from January 1, 1998 through the end of
the Borrower's fiscal year ending December 31, 1998 and, thereafter, as separate
periods, each subsequent 12-month period ending on December 31 of each calendar
year.
"Change" is defined in Section 3.2 hereof.
"Change of Control" means an event or series of events by which:
(a) any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act), other than CHS, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act), directly or indirectly, of thirty percent (30%) or more of the
combined voting power of the then outstanding Capital Stock of the Borrower
entitled to vote generally in the election of the directors of the
Borrower; or
(b) with respect to either Borrower or Holdings, during any period of
12 consecutive calendar months, individuals:
(i) who were directors of such Person on the first day of such
period, or
(ii) whose election or nomination for election to the board of
directors of such Person was recommended or approved by at least
a majority of the directors then still in office who were
directors of such Person on the first day of such period, or
whose election or nomination for election was so approved,
shall cease to constitute a majority of the board of directors of such
Person.
"CHS" means Code, Hennessy & Simmons Limited Partnership, an Illinois
limited partnership.
"Closing Date" means December 31, 1997.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral" means all property and interests in property now owned or
hereafter acquired by Borrower or any of its Subsidiaries in or upon which a
security interest, lien or mortgage is granted to the Agent, for the benefit of
the Holders of Secured Obligations, or to the Agent, for the benefit of the
Lenders, whether under the Security Agreement, under any of the other Collateral
Documents or under any of the other Loan Documents.
"Collateral Documents" means all agreements, instruments and documents
executed in connection with the Original Credit Agreement, the Restated Credit
Agreement, the Second Restated Credit Agreement or this Agreement, including,
without limitation (a) the Security Agreement, (b) the Alliance Guaranty, (c)
the Alliance Security Agreement, (d) the Pledge Agreement, (e) all security
agreements relating to any intellectual property of the Borrower or Alliance,
(f) the Collection
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Account Agreements, (g) the Mortgages, and (h) all other security agreements,
mortgages, deeds of trusts, loan agreements, notes, guarantees, subordination
agreements, pledges, powers of attorney, consents, assignments, contracts, fee
letters, notices, leases, financing statements and all other written matter
whether heretofore, now, or hereafter executed by or on behalf of Borrower or
any of its Subsidiaries and delivered to the Agent or any of the Lenders,
together, in each case, with all agreements and documents referred to therein or
contemplated thereby.
"Collection Account" means each depository account maintained by Borrower,
which may be subject to a Collection Account Agreement, for the collection of
Borrower's Receivables and other proceeds of Collateral.
"Collection Account Agreement" means a written agreement among the
Borrower, the Agent, and, as applicable, certain of the banks at which the
Borrower maintains a Collection Account.
"Collection Account Blockage Date" means the date, following the occurrence
and during the continuance of a Default, on which the Agent or the Required
Lenders, in the Agent's or the Required Lenders' sole discretion, instruct(s)
any financial institution party to a Collection Account Agreement as described
in the applicable Collection Account Agreement to remit, during the continuance
of such Default, all amounts deposited in the Collection Account to the Agent or
as the Agent shall direct.
"Commission" means the Securities and Exchange Commission and any Person
succeeding to the functions thereof.
"Commitments" means the Revolving Credit Commitments.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit G delivered to the Agent and each Lender by the Borrower pursuant to the
provisions of this Agreement and covering, among other things, Borrower's
calculation of the Applicable Margins, applicable Commitment Fee, Applicable
Letter of Credit Fee, Borrower's compliance with the financial covenants
contained in Section 6.4 and certain other provisions of this Agreement.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos, polychlorinated biphenyls ("PCBs") and includes
but is not limited to these terms as defined in Environmental, Health or Safety
Requirements of Law.
"Contingent Obligation", as applied to any Person, means (i) any
Contractual Obligation, contingent or otherwise, of that Person with respect to
any Indebtedness of another or other obligation or liability of another,
including, without limitation, any such Indebtedness, obligation or liability of
another directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), co-made or discounted
or sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable, including Contractual Obligations
(contingent or otherwise) arising through any agreement to purchase, repurchase,
or otherwise acquire such Indebtedness, obligation or liability or any security
therefor, or to provide
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funds for the payment or discharge thereof (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), or to maintain
solvency, assets, level of income, or other financial condition, or to make
payment other than for value received (such obligations under this clause (i)
being sometimes referred to as "Accommodation Obligations") and (ii) any other
contingent obligation or liability of such Person, whether or not reflected in
financial statements of such Person as a liability.
"Contractual Obligation", as applied to any Person, means any provision of
any equity or debt securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument, in any case in writing, to which that
Person is a party or by which it or any of its properties is bound, or to which
it or any of its properties is subject.
"Controlled Group" means the group consisting of (i) any corporation which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower; (ii) a partnership or other trade
or business (whether or not incorporated) which is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower; and (iii) a member
of the same affiliated service group (within the meaning of Section 414(m) of
the Code) as the Borrower, any corporation described in clause (i) above or any
partnership or trade or business described in clause (ii) above.
"Conversion/Continuation Notice" is defined in Section 2.11(D) hereof.
"Corporate Base Rate" means the rate of interest publicly announced by
LaSalle from time to time as its "prime rate", changing when and as said prime
rate changes.
"Cure Loan" is defined in Section 8.2(iii) hereof.
"Customary Permitted Liens" means:
(i) Liens (other than Environmental Liens and Liens in favor of the
IRS or the PBGC) with respect to the payment of taxes, assessments or
governmental charges in all cases which are not yet due or which are being
contested in good faith by appropriate proceedings and with respect to
which adequate reserves or other appropriate provisions are being
maintained in accordance with Agreement Accounting Principles;
(ii) statutory Liens of landlords and Liens of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and other similar Liens
imposed by law created in the ordinary course of business for amounts not
yet due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with Agreement
Accounting Principles;
(iii) Liens (other than Environmental Liens and Liens in favor of the
IRS or the PBGC) incurred or deposits made in the ordinary course of
business in connection with
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worker's compensation, unemployment insurance or other types of social
security benefits or to secure the performance of bids, tenders, sales,
contracts (other than for the repayment of borrowed money), surety, appeal
and performance bonds; provided that (A) all such Liens do not in the
aggregate materially detract from the value of the Borrower's or such
Subsidiary's assets or property taken as a whole or materially impair the
use thereof in the operation of the businesses taken as a whole, and (B)
all Liens securing bonds to stay judgments or in connection with appeals
that do not secure at any time an aggregate amount exceeding $1,000,000;
(iv) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar charges or encumbrances on the use
of real property which do not interfere with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(v) Liens of attachment or judgment with respect to judgments, writs
or warrants of attachment, or similar process against the Borrower or any
of its Subsidiaries which do not constitute a Default under Section 7.1(h);
(vi) Liens arising from leases or subleases granted to others which
do not interfere in any material respect with the business of the Borrower
or any of its Subsidiaries; and
(vii) any interest or title of the lessor in the property subject to
any operating lease entered into by the Borrower or any of its Subsidiaries
in the ordinary course of business.
"Dated Receivables" is defined in the definition of Eligible Receivables
below.
"Decision Period" is defined in Section 6.2(G) hereof.
"Decision Reserve" is defined in Section 6.2(G) hereof.
"Default" means an event described in Article VII hereof.
"Designated Prepayment" is defined in Section 2.5(B)(i)(e).
"DOL" means the United States Department of Labor and any Person succeeding
to the functions thereof.
"EBITA" is defined in Section 6.4(A) hereof.
"Effective Date" means the date on which this Agreement has become
effective in accordance with the provisions of Article IV hereto but not later
than December 31, 1997.
"Eligible Inventory" means Inventory of the Borrower which is held for sale
or lease or furnished under any contract of service by the Borrower which is at
all times and shall continue to be acceptable to the Agent in all respects.
Standards of eligibility may be fixed and revised from time
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<PAGE>
to time by the Agent in the Agent's reasonable business judgment (which credit
judgment shall be exercised in a manner that is not arbitrary or capricious). In
general, without limiting the foregoing, the following inventory is not Eligible
Inventory:
(i) (to the extent not provided for by reserves described in the
definition of the Gross Amount of Eligible Inventory) Inventory which is
obsolete, not in good condition, not either currently usable or currently
saleable in the ordinary course of the Borrower's business or does not meet
all material standards imposed by any Governmental Authority having
regulatory authority over such item of Inventory, its use or its sale;
(ii) Inventory which the Agent determines, in the exercise of its
reasonable discretion (which discretion shall not be exercised in a manner
that is arbitrary or capricious), to be unacceptable due to age, type,
category and/or quantity;
(iii) Inventory consisting of packaging material, supplies, raw
materials and work in process;
(iv) Inventory which (a) is consigned to a third party for sale or
(b) is on consignment from a third party to the Borrower for sale;
(v) Inventory which has been held by the Borrower for more than two
(2) years;
(vi) Inventory which consists of goods in transit;
(vii) Inventory which is subject to a Lien in favor of any Person
other than the Agent (other than a statutory Lien in favor of a landlord),
including, without limitation, Inventory subject to the Lien in favor of
BLN, which shall be deemed at any time to have an aggregate value equal to
ninety percent (90%) of the outstanding principal balance of the BLN Note,
at such time;
(viii) Inventory with respect to which the Agent does not have a first
and valid fully perfected security interest;
(ix) Inventory of the Borrower which is not located either (i) on
the Borrower's owned premises in the United States listed on Schedule 2 to
the Security Agreement or (ii) (A) on the Borrower's leased premises in the
United States listed on Schedule 2 to the Security Agreement, (B) in
warehouses or with other bailees in the United States, in each case as
listed on Schedule 2-A to the Security Agreement or (C) in other leased
premises, warehouses or with other bailees in the United States not listed
on Schedule 2-A to the Security Agreement permitted to be established under
the Security Agreement or established in connection with a Permitted
Acquisition, in each case under the immediately preceding clauses (B) and
(C) in connection with which the Agent shall have received bailee and/or
warehousemen's access and lien waiver agreements, as applicable, in each
case in form and substance acceptable to the Agent;
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(x) Inventory which is evidenced by a Receivable; and
(xi) Inventory which is not in full conformity with the
representations and warranties made by the Borrower to the Agent with
respect thereto whether contained in this Agreement or the Security
Agreement.
Without limiting the foregoing, (i) Inventory of the Borrower which is acquired
pursuant to a Permitted Acquisition shall not be deemed Eligible Inventory
unless and until the Agent and the Required Lenders, after concluding any due
diligence they reasonably deem necessary, shall be satisfied as to the condition
thereof and that such Inventory would otherwise meet the standards of
eligibility set forth herein (including, without limitation, perfection and
priority of the Agent's security interests in such Inventory) but for the fact
that it was acquired by the Borrower outside of the ordinary course of business
and (ii) Inventory acquired pursuant to such Permitted Acquisition may be deemed
Eligible Inventory from and after such Permitted Acquisition if the foregoing
determinations have been made to the Agent's and the Required Lenders'
satisfaction.
"Eligible Receivables" means Receivables created by the Borrower in the
ordinary course of its respective business arising out of the sale of goods or
rendition of services by the Borrower, which Receivables are and at all times
shall continue to be acceptable to the Agent in all respects. Standards of
eligibility may be fixed and revised from time to time by the Agent in the
Agent's reasonable credit judgment (which credit judgment shall be exercised in
a manner that is not arbitrary or capricious). In general, without limiting the
foregoing, the following Receivables are not Eligible Receivables:
(i) Receivables which remain unpaid sixty (60) days after the original
due date (provided the Borrower continues to offer dating terms to its
account debtors consistent with past practices);
(ii) all Receivables owing by a single Account Debtor (including a
Receivable which remains unpaid fewer than sixty (60) days after the
original due date) if twenty-five percent (25%) of the balance owing by
such Account Debtor to the Borrower, calculated without taking into account
any credit balances of such Account Debtor, remains unpaid sixty (60) days
after the original due date or has otherwise become, or has been determined
by the Agent to be, ineligible;
(iii) Receivables from any single Account Debtor and its Affiliates
which otherwise constitute Eligible Receivables comprising more than
fifteen percent (15%) of all Eligible Receivables;
(iv) Receivables with respect to which the Account Debtor is a
director, officer, employee, Subsidiary or Affiliate of the Borrower;
(v) Receivables with respect to which the Account Debtor is (a) any
federal Governmental Authority, the United States of America, or, in each
case, any department, agency or instrumentality thereof, unless with
respect to any such Account, the Borrower has
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complied to the Agent's satisfaction with the provisions of the Federal
Assignment of Claims Act or other applicable statutes, including, without
limitation, executing and delivering to Agent all statements of assignment
and/or notification which are in form and substance acceptable to Agent and
which are deemed necessary by Agent to effectuate the assignment to the
Agent of such Receivables on behalf of the Lenders of such Accounts or (b)
any state or municipal Governmental Authority or any agency or
instrumentality thereof;
(vi) Receivables with respect to which the Account Debtor is any state
or municipal Governmental Authority or any agency or instrumentality
thereof;
(vii) Receivables not denominated in U.S. dollars or with respect to
which the Account Debtor is not a resident of the United States unless the
Account Debtor has supplied the Borrower with an irrevocable letter of
credit, issued by a financial institution satisfactory to the Agent,
sufficient to cover such Receivable in form and substance satisfactory to
the Agent;
(viii) Receivables with respect to which the Account Debtor has (a)
asserted a counterclaim, (b) a right of setoff or (c) a receivable owing
from the Borrower but only to the extent of such counterclaim, setoff or
receivable;
(ix) Receivables for which the prospect of payment or performance by
the Account Debtor is or will be impaired as determined by the Agent in the
exercise of its reasonable credit judgment (which credit judgment shall not
be exercised in a manner that is arbitrary or capricious);
(x) Receivables with respect to which the Agent does not have a first
and valid fully perfected and enforceable security interest;
(xi) Receivables with respect to which the Account Debtor is the
subject of bankruptcy or a similar insolvency proceeding or has made an
assignment for the benefit of creditors or whose assets have been conveyed
to a receiver, trustee or assignee for the benefit of creditors;
(xii) Receivables with respect to which the Account Debtor's
obligation to pay the Receivable is conditional upon the Account Debtor's
approval or is otherwise subject to any repurchase obligation or return
right, as with sales made on a bill-and-hold, guaranteed sale, sale-and-
return, sale on approval (except with respect to Receivables in connection
with which Account Debtors are entitled to return Inventory on the basis of
the quality of such Inventory) or consignment basis;
(xiii) Receivables with respect to which the Account Debtor is
located in Minnesota (or any other jurisdiction which adopts a statute or
other requirement with respect to which any Person that obtains business
from within such jurisdiction or is otherwise subject to such
jurisdiction's tax law requiring such Person to file a Business Activity
Report or make any other required filings in a timely manner in order to
enforce its claims in such jurisdiction's
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<PAGE>
courts or arising under such jurisdiction's laws); provided, however, such
Receivables shall nonetheless be eligible if the Borrower has filed a
Business Activity Report (or other applicable report) with the applicable
state office or is qualified to do business in such jurisdiction and, at
the time the Receivable was created, was qualified to do business in such
jurisdiction or had on file with the applicable state office a current
Business Activity Report (or other applicable report);
(xiv) Receivables with respect to which the Account Debtor's
obligation does not constitute its legal, valid and binding obligation,
enforceable against it in accordance with its terms;
(xv) Receivables with respect to which the Borrower has not yet
shipped the applicable goods or performed the applicable service or in
connection with which an invoice has not been issued;
(xvi) Receivables which the Agent, exercising reasonable discretion
(which discretion shall not be exercised in a manner that is arbitrary or
capricious), has determined to be unacceptable to it;
(xvii) any Receivable which is not in conformity with the
representations and warranties made by the Borrower to the Agent with
respect thereto, whether contained in this Agreement or the Security
Agreement;
(xviii) Receivables in connection with which the Borrower has not
complied with all material requirements contained in the charter and by-
laws or other organizational or governing documents of the Borrower and any
law, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon
the Borrower or any of its property or to which the Borrower or any of its
property is subject, including, without limitation, all laws, rules,
regulations and orders of any Governmental Authority or judicial authority
relating to truth in lending, billing practices, fair credit reporting,
equal credit opportunity, debt collection practices and consumer debtor
protection, applicable to such Receivable (or any related contracts) or
affecting the collectability of such Receivables;
(xix) Receivables in connection with which the Borrower or any other
party to such Receivable is in default in the performance or observance of
any of the terms thereof in any material respect; and
(xx) (y) for the period from January 1 through April 30 in each year,
Receivables for which the due date is greater than thirty (30) days after
the date of the applicable invoice ("Dated Receivables") to the extent such
Dated Receivables comprise greater than sixty-five percent (65%) of all
Receivables of the Borrower; and (z) for the period from May 1 through
December 31 in each year, Dated Receivables to the extent such Dated
Receivables comprise greater than forty percent (40%) of all Receivables of
the Borrower.
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Without limiting the foregoing, (i) Receivables of the Borrower which are
acquired pursuant to a Permitted Acquisition shall not be deemed Eligible
Receivables unless and until the Agent and the Required Lenders, after
concluding any due diligence they reasonably deem necessary, shall be satisfied
as to the quality and creditworthiness thereof and that such Receivables would
otherwise meet the standards of eligibility set forth herein (including, without
limitation, perfection and priority of the Agent's security interests in such
Receivables) but for the fact that they were acquired by the Borrower outside of
the ordinary course of business and (ii) Receivables acquired pursuant to such
Permitted Acquisition may be deemed Eligible Receivables from and after such
Permitted Acquisition if the foregoing determinations have been made to the
Agent's and the Required Lenders' satisfaction.
"Environmental, Health or Safety Requirements of Law" means all
Requirements of Law derived from or relating to federal, state and local laws or
regulations relating to or addressing pollution or protection of the
environment, or protection of worker health or safety, including but not limited
to the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. (S)(S) 9601 et seq., the Occupational Safety and Health Act of 1970, 29
U.S.C. (S)(S) 651 et seq., the Resource Conservation and Recovery Act of 1976,
42 U.S.C. (S)(S) 6901 et seq., and the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. (S)(S) 136 et seq., in each case including any
amendments thereto, any successor statutes, and any regulations promulgated
thereunder, and any state or local equivalent thereof.
"Environmental Lien" means a lien in favor of any Governmental Authority
for (a) any liability under Environmental, Health or Safety Requirements of Law,
or (b) damages arising from, or costs incurred by such Governmental Authority in
response to, a Release or threatened Release of a Contaminant into the
environment.
"Environmental Property Transfer Act" means any applicable requirement of
law that conditions, restricts, prohibits or requires any notification or
disclosure triggered by the closure of any property or the transfer, sale or
lease of any property or deed or title for any property for environmental
reasons, including, but not limited to, any so-called "Industrial Site Recovery
Act" or "Responsible Property Transfer Act."
"Equipment" means all of the Borrower's and each of its Subsidiaries'
respective present and future (i) equipment, including, without limitation,
machinery, manufacturing, distribution, selling, data processing and office
equipment, assembly systems, tools, molds, dies, fixtures, appliances,
furniture, furnishings, vehicles, vessels, aircraft, aircraft engines, and trade
fixtures, (ii) other tangible personal property (other than the Borrower's and
each such Subsidiary's respective Inventory), and (iii) any and all accessions,
parts and appurtenances attached to any of the foregoing or used in connection
therewith, and any substitutions therefor and replacements, products and
proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.
"Eurodollar Advance" means an Advance which bears interest at the
Eurodollar Rate.
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"Eurodollar Base Rate" means, with respect to a Eurodollar Loan for the
relevant Interest Period, the rate determined by the Agent to be the rate at
which deposits in U.S. dollars are offered by LaSalle to first-class banks in
the London interbank market at approximately 11 a.m. (London time) two Business
Days prior to the first day of such Interest Period, in the approximate amount
of LaSalle's relevant Eurodollar Loan and having a maturity approximately equal
to such Interest Period, as adjusted for Reserves.
"Eurodollar Loan" means a Loan, or portion thereof, which bears interest at
the Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Loan for the relevant
Interest Period, the Eurodollar Base Rate applicable to such Interest Period
plus the Applicable Eurodollar Margin. The Eurodollar Rate shall be rounded to
the next higher multiple of 1/16 of 1% if the rate is not such a multiple.
"Excess Cash Flow" means, for any Cash Flow Period, an amount equal to the
Borrower's and its Subsidiaries' consolidated (i) earnings before interest
expense, tax expense, depreciation and amortization for such period, plus (ii)
the net reduction, if any, in Working Capital during such period, minus (iii)
the net increase, if any, in Working Capital during such period, minus (iv)
income taxes, whether paid in cash or accrued, minus (v) Capital Expenditures,
whether paid in cash or accrued during such period, minus (vi) Interest Expense
for such period, minus (vii) scheduled amortization of the principal portion of
the Term Loan and scheduled amortization of the principal portion of all other
Indebtedness of the Borrower and its Subsidiaries during such period, minus
(viii) the aggregate amount (without duplication) of (y) cash dividends paid
during such period with respect to Borrower's Capital Stock and (z) Restricted
Junior Payments paid during such period pursuant to Section 6.3(F)(ii), minus
(ix) all prepayments of Loans made (other than ordinary course repayments of the
Revolving Loans). All such amounts shall be calculated assuming that the
Borrower has conducted its business in the ordinary course and in accordance
with past practices.
"Excluded Proceeds" is defined in Section 6.2(G)
"Existing Letters of Credit" means the letters of credit identified in
Schedule 1.1.5.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"Fees" is defined in Section 6.4(A) hereof.
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"Finance Subsidiary" means a wholly-owned Subsidiary of Holdings, the sole
purpose and activity of which is to hold the Subordinated Intercompany
Indebtedness subject to the Holdings Subordination Agreement.
"Floating Rate" means, for any day, a rate per annum equal to (i) the
Alternate Base Rate for such day plus (ii) the Applicable Floating Rate Margin,
changing when and as the Alternate Base Rate changes.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan, or portion thereof, which bears interest
at the Floating Rate.
"Global Amendment" means that certain Global Amendment No.1, dated as of
December 31, 1997, between the Borrower, Holdings, Alliance and the Agent,
amending certain provisions of the Collateral Documents.
"Governmental Acts" is defined in Section 2.26(A) hereof.
"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Gross Amount of Eligible Inventory" means Eligible Inventory valued at the
lower of cost determined on a first-in-first-out basis (determined in accordance
with Agreement Accounting Principles, consistently applied) or market value
less (i) the value of reserves which have been recorded by the Borrower with
respect to obsolete, slow-moving or excess Inventory and (ii) such other
reserves as the Agent elects to establish in accordance with its reasonable
credit judgment (which credit judgment shall be exercised in a manner that is
not arbitrary or capricious).
"Gross Amount of Eligible Receivables" means the face amount outstanding
under the Eligible Receivables, determined in accordance with Agreement
Accounting Principles, consistently applied less (i) all finance charges, late
fees and other fees that are unearned, (ii) the value of any accrual which has
been recorded by the Borrower with respect to downward price adjustments, and
(iii) such other reserves as the Agent elects to establish in accordance with
its reasonable credit judgment (which credit judgment shall be exercised in a
manner that is not arbitrary or capricious).
"Gross Negligence" means recklessness, the absence of the slightest care or
the complete disregard of consequences. Gross Negligence does not mean the
absence of ordinary care or diligence, or an inadvertent act or inadvertent
failure to act. If the term "gross negligence" is used with respect to the
Agent or any Lender or any indemnitee in any of the other Loan Documents, it
shall have the meaning set forth herein.
"Holders of Secured Obligations" means the holders of the Secured
Obligations from time to time and shall refer to (i) each Lender in respect of
its Loans, (ii) the Agent in respect of
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Reimbursement Obligations, (iii) the Agent and the Lenders in respect of all
other present and future obligations and liabilities of the Borrower, any of its
Subsidiaries or Holdings of every type and description arising under or in
connection with this Agreement or any other Loan Document, (iii) each Indemnitee
in respect of the obligations and liabilities of the Borrower to such Person
hereunder, (iv) each Lender (or affiliate thereof) in respect of all Rate
Hedging Obligations of the Borrower to such Lender (or such affiliate), and (v)
their respective successors, transferees and assigns.
"Holdings" means SCP Pool Corporation, a Delaware corporation (formerly
known as SCP Holding Corp.), and its successors and assigns, including a debtor-
in-possession on behalf of Holdings. From and after the date on which Holdings
changed its name from SCP Holding Corp. to SCP Pool Corporation all references
in this Agreement and each of the other Loan Documents to "Holdings" or "SCP
Holding Corp." shall be references to SCP Pool Corporation (formerly known as
SCP Holding Corp.).
"Holdings' Dividends" is defined in Section 6.3(F)(i).
"Holdings Guaranty" means that certain Guaranty entered into between
Holdings and The First National Bank of Chicago, as agent, dated as of May 30,
1996, as amended by the Global Amendment and as the same may from time to time
be amended, modified, supplemented or restated.
"Holdings Subordinated Debt" means (a) the Convertible Subordinated
Promissory Note of Holdings issued as of December 31, 1993 to the SCP Seller in
the original principal amount of $125,000; and (b) the Orcal Notes, $883,333.34
of which is outstanding as of September 30, 1997.
"Holdings Subordination Agreement" has the meaning given that term in
Section 6.3(A).
"Indebtedness" of any Person means, without duplication, (i) any
indebtedness of such Person, contingent or otherwise, in respect of borrowed
money including all principal, interest, fees and expenses with respect thereto
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), or evidenced by bonds, notes, acceptances,
debentures or other instruments or letters of credit (or reimbursement
obligations with respect thereto, including, in the case of the Borrower,
Reimbursement Obligations under the Letters of Credit) or representing the
balance deferred and unpaid of the purchase price of any property (including
pursuant to Capitalized Leases) or services, if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with Agreement Accounting Principles (except that
any such balance that constitutes a trade payable and/or an accrued liability
arising in the ordinary course of business shall not be considered
Indebtedness); and (ii) to the extent not otherwise included, (a) interest
accruing after the commencement of any bankruptcy, insolvency, receivership or
similar proceedings and other interest that would have accrued but for the
commencement of such proceedings, (b) any Capitalized Lease Obligations, (c) the
maximum fixed repurchase price of any Redeemable Stock, (d) obligations, whether
or not assumed, secured by Liens or payable out of the proceeds or production
from property now or hereafter owned or acquired by such Person, (e) Contingent
Obligations (exclusive of whether such items would appear upon such balance
sheet) and (f) Rate Hedging Obligations. For purposes of the preceding sentence,
the maximum fixed repurchase price of any Redeemable Stock
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which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Redeemable Stock as if such Redeemable Stock were
repurchased on any date on which Indebtedness shall be required to be determined
pursuant to this Agreement, provided that if such Redeemable Stock is not then
permitted to be repurchased, the repurchase price shall be the book value of
such Redeemable Stock. The amount of Indebtedness of any Person at any date
shall be without duplication (i) the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
such Contingent Obligations at such date and (ii) in the case of Indebtedness of
others secured by a Lien to which the property or assets owned or held by such
Person is subject, the lesser of the fair market value at such date of any asset
subject to a Lien securing the Indebtedness of others and the amount of the
Indebtedness secured.
"Indemnified Matters" is defined in Section 9.7(B) hereof.
"Indemnitees" is defined in Section 9.7(B) hereof.
"Interest Expense" is defined in Section 6.4(A) hereof.
"Interest Expense Coverage Ratio" is defined in Section 6.4(B) hereof.
"Interest Period" means, with respect to a Eurodollar Loan, a period of one
(1), two (2), three (3) or six (6) months commencing on a Business Day selected
by the Borrower pursuant to this Agreement; provided, however, notwithstanding
anything in this Agreement to the contrary, for the period from the Closing Date
to the earlier of (y) the date that is ninety (90) days after the Closing Date
and (z) the date upon which the Agent confirms that the loan syndication process
has been completed (the "Syndication Period"), "Interest Period" means with
respect to a Eurodollar Loan, a period of not more than one month. Other than
during the Syndication Period, such Interest Period shall end on (but exclude)
the day which corresponds numerically to such date one, two, three or six months
thereafter; provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.
"Interest Rate Agreements" is defined in Section 6.3(R) hereof.
"Inventory" shall mean any and all goods, including, without limitation,
goods in transit, wheresoever located, whether now owned or hereafter acquired
by the Borrower which are held for sale or lease, furnished under any contract
of service or held as raw materials, work in process or supplies, and all
materials used or consumed in the Borrower's business, and shall include such
property the sale or other disposition of which has given rise to Receivables
and which has been returned to or repossessed or stopped in transit by the
Borrower.
"Investment" means, with respect to any Person, (i) any purchase or other
acquisition by that Person of stock, partnership interest, membership, ownership
or other equity interests, notes,
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debentures or other securities, or of a beneficial interest in stock,
partnership interest, membership, ownership or other equity interests, notes,
debentures or other securities, issued by any other Person, (ii) any purchase by
that Person of all or substantially all of the assets of a business conducted by
another Person, and (iii) any loan, advance (other than deposits with financial
institutions available for withdrawal on demand, prepaid expenses, accounts
receivable, advances to employees and similar items made or incurred in the
ordinary course of business) or capital contribution by that Person to any other
Person, including all Indebtedness to such Person arising from a sale of
property by such Person other than in the ordinary course of its business.
"IRS" means the Internal Revenue Service and any Person succeeding to the
functions thereof.
"LaSalle" means LaSalle National Bank, in its individual capacity, and its
successors.
"L/C Draft" means a draft drawn on the Agent pursuant to a Letter of
Credit.
"L/C Interest" shall have the meaning ascribed to such term in Section
2.22.
"L/C Obligations" means, without duplication, an amount equal to the sum of
(i) the aggregate of the amount then available for drawing under each of the
Letters of Credit, (ii) the face amounts of all outstanding L/C Drafts
corresponding to the Letters of Credit, which L/C Drafts have been accepted by
the Agent, (iii) the aggregate face amount of all Letters of Credit requested by
the Borrower but not yet issued (unless the request for an unissued Letter of
Credit has been denied) and (iv) the aggregate outstanding amount of all
Reimbursement Obligations at such time.
"Lenders" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"Letter of Credit" means any letter of credit previously issued under the
Original Credit Agreement, the Restated Credit Agreement or the Second Restated
Credit Agreement or to be issued by the Agent pursuant to Section 2.21 hereof.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, the interest of a vendor or lessor
under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan(s)" means, with respect to a Lender, such Lender's portion of any
Advance made pursuant to Section 2.1 or Section 2.2, as applicable, and
collectively all Term Loans and Revolving Loans, whether made or continued as or
converted to Floating Rate Loans or Eurodollar Loans.
"Loan Account" is defined in Section 2.15(F) hereof.
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"Loan Documents" means this Agreement, the Notes, the Holdings Guaranty and
the other Collateral Documents and all other documents, instruments and
agreements executed in connection therewith or contemplated thereby, as the same
may be amended, restated or otherwise modified and in effect from time to time.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, condition (financial or otherwise), operations, performance or
properties of the Borrower, or the Borrower and its Subsidiaries, taken as a
whole, (b) the ability of the Borrower or any of its Subsidiaries to perform
their respective obligations under the Loan Documents in any material respect,
or (c) the ability of the Lenders or the Agent to enforce in any material
respect the Obligations or their rights with respect to the Collateral.
"Maximum Revolving Credit Amount" means, at any particular time, (i) the
lesser of (A) the Aggregate Revolving Loan Commitment at such time and (B) the
Borrowing Base at such time minus (ii) the amount of any Decision Reserve in
effect at such time.
"Mortgages" means the mortgages dated as of September 26, 1996, executed by
the Borrower in favor of the Agent for the benefit of itself and the Holders of
Secured Obligations, with respect to the owned real property owned by the
Borrower, as amended by a Deed of Trust Modification Agreement, dated as of
December 31, 1997, and as the same may from time to time be further amended,
modified, supplemented or restated.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is party to which more than one employer is
obligated to make contributions.
"Net Cash Proceeds" means, with respect to any Asset Sale of any Person,
(a) cash (freely convertible into U.S. dollars) received by such Person or any
Subsidiary of such Person from such Asset Sale (including cash received as
consideration for the assumption or incurrence of liabilities incurred in
connection with or in anticipation of such Asset Sale), after (i) provision for
all income or other taxes measured by or resulting from such Asset Sale, (ii)
payment of all brokerage commissions and other fees and expenses related to such
Asset Sale, (iii) all amounts used to repay Indebtedness secured by a Lien on
any asset disposed of in such Asset Sale or which is or may be required (by the
express terms of the instrument governing such Indebtedness) to be repaid in
connection with such Asset Sale (including payments made to obtain or avoid the
need for the consent of any holder of such Indebtedness), and (iv) deduction of
appropriate amounts to be provided by such Person or a Subsidiary of such Person
as a reserve, in accordance with Agreement Accounting Principles, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by such Person or a Subsidiary of such Person after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such Asset Sale; and (b) cash payments in respect of any Indebtedness, Capital
Stock, ownership or membership interest or other consideration received by such
Person or any Subsidiary of such Person from such Asset Sale upon receipt of
such cash payments by such Person or such Subsidiary.
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"Net Distribution" is defined in Section 6.3(F).
"Net Income" is defined in Section 6.4(A) hereof.
"Non Pro Rata Loan" is defined in Section 8.2 hereof.
"Notes" means the Revolving Notes and the Term Notes.
"Notice of Assignment" is defined in Section 12.3(B) hereof.
"Obligations" means all Loans, Reimbursement Obligations, obligations,
advances, debts, liabilities, covenants and duties owing by the Borrower to the
Agent, any Lender, any Affiliate of the Agent or any Lender, or any Indemnitee,
of any kind or nature, present or future, arising under this Agreement, the
Notes, the Collateral Documents, or any other Loan Document, whether or not
evidenced by any note, guaranty or other instrument, whether or not for the
payment of money, whether arising by reason of an extension of credit, loan,
guaranty, indemnification, or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The term
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements, paralegals' fees (in each case whether or not allowed),
and any other sum chargeable to the Borrower under this Agreement or any other
Loan Document.
"Orcal Notes" means the Subordinated Promissory Notes dated February 28,
1995 in the aggregate original principal amount of $2,650,000 issued by Holdings
to Ronald Hetzner.
"Original Closing Date" means December 31, 1993.
"Original Credit Agreement" means the Credit Agreement dated as of December
31, 1993 among the Borrower, the Lenders and The First National Bank of Chicago,
as Agent, as the same was amended prior to the effective date of the Restated
Credit Agreement.
"Other Taxes" is defined in Section 2.15(E)(ii) hereof.
"Participants" is defined in Section 12.2(A) hereof.
"Parent Entity" is defined in Section 6.2(M).
"Payment Date" means the last Business Day of each month.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Permitted Acquisition" is defined in Section 6.3(G) hereof.
"Permitted Existing Contingent Obligations" means those Contingent
Obligations of the Borrower and its Subsidiaries identified as such on Schedule
1.1.1 to this Agreement.
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"Permitted Existing Indebtedness" means the Indebtedness of the Borrower
and its Subsidiaries identified as such on Schedule 1.1.2 to this Agreement.
"Permitted Existing Investments" means those Investments identified as such
on Schedule 1.1.3 to this Agreement.
"Permitted Existing Liens" means the Liens on assets of the Borrower or any
of its Subsidiaries identified as such on Schedule 1.1.4 to this Agreement.
"Permitted Inventory and Equipment Sales" is defined in Section 6.3(B)(iv)
hereof.
"Permitted Purchase Money Indebtedness" means the Indebtedness permitted
pursuant to Section 6.3(A)(ii)(j).
"Permitted Subordinated Indebtedness" means Subordinated Indebtedness
permitted pursuant to Section 6.3(A)(ii)(c) and the Subordinated Intercompany
Indebtedness.
"Person" means any natural person, corporation, company, firm, joint
venture, partnership, association, enterprise, trust or other entity or
organization, or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" means an employee pension benefit plan defined in Section 3(3) of
ERISA in respect of which the Borrower or any member of the Controlled Group is,
or within the immediately preceding six (6) years was, an "employer" as defined
in Section 3(5) of ERISA.
"Pledge Agreement" means that certain Pledge Agreement, dated as of January
20, 1995, executed by the Borrower in favor of the Agent for the benefit of
itself and the Holders of Secured Obligations pursuant to which Borrower has
pledged all of the Capital Stock of Alliance as additional security for the
Secured Obligations, as amended by the Global Amendment, and as the same may
from time to time be further amended, modified, supplemented or restated.
"Pro Rata Share" means, with respect to any Lender, the percentage obtained
by dividing (A) the sum of such Lender's Term Loans and Revolving Loan
Commitment at such time (in each case, as adjusted from time to time in
accordance with the provisions of this Agreement) by (B) the sum of the
aggregate amount of all of the Term Loans and the Aggregate Revolving Loan
Commitment at such time; provided, however, if all of the Commitments are
terminated pursuant to the terms of this Agreement, then "Pro Rata Share" means
the percentage obtained by dividing (x) the sum of such Lender's Term Loans and
Revolving Loans by (y) the aggregate amount of all Term Loans and Revolving
Loans.
"Purchasers" is defined in Section 12.3(A) hereof.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor),
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under (i) any and all agreements, devices or arrangements designed to protect at
least one of the parties thereto from the fluctuations of interest rates,
exchange rates or forward rates applicable to such party's assets, liabilities
or exchange transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"Rate Option" means the Eurodollar Rate or the Floating Rate.
"Receivable(s)" means and includes all of the Borrower's presently existing
and hereafter arising or acquired accounts, accounts receivable, and all present
and future rights of the Borrower to payment for goods sold or leased or for
services rendered (except those evidenced by instruments or chattel paper),
whether or not they have been earned by performance, and all rights in any
merchandise or goods which any of the same may represent, and all rights, title,
security and guaranties with respect to each of the foregoing, including,
without limitation, any right of stoppage in transit.
"Redeemable Stock" means any Capital Stock which by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, in whole or in part, prior to the maturity of the Obligations
(including any extensions thereof contemplated by this Agreement), or is, by its
terms or upon the happening of any event, redeemable at the option of the holder
thereof, in whole or in part, prior to the maturity of the Obligations
(including any extensions thereof contemplated by this Agreement).
"Register" is defined in Section 12.3(C) hereof.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"Regulation G" means Regulation G of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by nonbank, nonbroker lenders for the purpose of purchasing
or carrying margin stock (as defined therein).
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by and to brokers and dealers of securities for the purpose
of purchasing or carrying margin stock (as defined therein).
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation
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of said Board of Governors relating to the extension of credit by banks for the
purpose of purchasing or carrying margin stock (as defined therein) applicable
to member banks of the Federal Reserve System.
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by foreign lenders for the purpose of purchasing or carrying
margin stock (as defined therein).
"Reimbursement Obligation" is defined in Section 2.23 hereof.
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including the unrestricted migration of Contaminants
through or in the air, soil, surface water or groundwater.
"Rentals" is defined in Section 6.4(A) hereof.
"Rentals Reserve" is the amount established by the Agent from time to time
approximating three (3) months rent for those leased locations of the Borrower
for which landlord agreements have not been obtained under the terms of the
applicable Security Agreement and where the landlord has a lien which may take
priority over the Lien in favor of the Agent, less $74,000, relating to leased
locations in New Jersey and Pennsylvania as of the Closing Date. The Rentals
Reserve as of the Closing Date shall be $500,000.
"Replacement Lender" is defined in Section 2.20 hereof.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standards of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Required Lenders" means Lenders whose Pro Rata Shares, in the aggregate,
are equal to or greater than sixty-six and two-thirds percent (66-2/3%);
provided, however, that, in the event any of the Lenders shall have failed to
fund its Pro Rata Share of any Revolving Loan requested by the Borrower which
such Lenders are obligated to fund under the terms of this Agreement and any
such failure has not been cured, then for so long as such failure continues,
"Required Lenders" means Lenders (excluding all Lenders whose failure to fund
their respective Pro Rata Shares of such Revolving Loans have not been so cured)
whose Pro Rata Shares represent at least sixty-six and two-thirds percent
(66-2/3%) of the aggregate Pro Rata Shares of such Lenders; provided, further,
however, that, in the event that the Commitments have been terminated pursuant
to the terms of this Agreement, "Required Lenders" means Lenders (without regard
to such Lenders' performance of their respective obligations hereunder) whose
aggregate ratable shares (stated as a percentage) of the
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aggregate outstanding principal balance of all Loans are equal to or greater
than sixty-six and two-thirds percent (66-2/3%).
"Requirements of Law" means, as to any Person, the charter and by-laws or
other organizational or governing documents of such Person, and any law, rule or
regulation, or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject including,
without limitation, the Securities Act, the Securities Exchange Act, Regulations
G, U and X, ERISA, the Fair Labor Standards Act, the Worker Adjustment and
Retraining Notification Act, the Americans with Disabilities Act of 1990, and
any certificate of occupancy, zoning ordinance, building, environmental or land
use requirement or Permit or environmental, labor, employment, occupational
safety or health law, rule or regulation, including Environmental, Health or
Safety Requirements of Law.
"Reserves" shall mean the maximum reserve requirement, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) with respect
to "Eurocurrency liabilities" or in respect of any other category of liabilities
which includes deposits by reference to which the interest rate on Eurodollar
Loans is determined or category of extensions of credit or other assets which
includes loans by a non-United States office of any Lender to United States
residents.
"Restated Credit Agreement" means the Amended and Restated Credit Agreement
dated as of May 30, 1996 among the Borrower, the Lenders and The First National
Bank of Chicago, as agent, as the same was amended prior to the effective date
of the Second Restated Credit Agreement.
"Restricted Junior Payment" means (i) any dividend or other distribution,
direct or indirect, on account of any shares of any class of Capital Stock of
the Borrower now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock or in any junior class of stock to the holders of
that class, (ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of Capital Stock of the Borrower or any of its Subsidiaries now or
hereafter outstanding, (iii) any payment or prepayment of principal of, premium,
if any, or interest, fees or other charges on or with respect to, and any
redemption, purchase, retirement, defeasance, sinking fund or similar payment
and any claim for rescission with respect to any Permitted Subordinated
Indebtedness, (iv) any payment made to redeem, purchase, repurchase or retire,
or to obtain the surrender of, any outstanding warrants, options or other rights
to acquire shares of any class of Capital Stock of the Borrower or any of its
Subsidiaries now or hereafter outstanding (v) any payment of a claim for the
rescission of the purchase or sale of, or for material damages arising from the
purchase or sale of any Permitted Subordinated Indebtedness or any shares of the
capital stock of Holdings, Borrower or any of Borrower's Subsidiaries or of a
claim for reimbursement, indemnification or contribution arising out of or
related to any such claim for damages or rescission and (vi) any payment of
management fees to Holdings, CHS or any of their Affiliates.
"Revolving Credit Availability" means, at any particular time, the amount
by which the Maximum Revolving Credit Amount at such time exceeds the Revolving
Credit Obligations.
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"Revolving Credit Obligations" means, at any particular time, the sum of
(i) the outstanding principal amount of the Revolving Loans at such time, plus
(ii) the L/C Obligations at such time.
"Revolving Loan" is defined in Section 2.2.
"Revolving Loan Commitment" means, for each Lender, the obligation of such
Lender to make Revolving Loans and to purchase participations in Letters of
Credit not exceeding the amount set forth on Exhibit B to this Agreement under
the heading "Revolving Loan Commitment" opposite its name thereon or as
identified in the Assignment and Acceptance by which it became a Lender, as such
amount may be modified from time to time pursuant to the terms of this Agreement
or to give effect to any applicable assignment under Section 12.3.
"Revolving Note" means a promissory note, in substantially the form of
Exhibit C hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Revolving Loan Commitment, including any amendment,
restatement modification, renewal or replacement of such Revolving Note.
"Risk Based Capital Guidelines" is defined in Section 3.2 hereof.
"SCP Seller" means South Central Pool Supply, Inc., a Louisiana
corporation.
"Second Restated Credit Agreement" means the Second Amended and Restated
Credit Agreement dated as of September 26, 1996 among the Borrower, the Lenders
and LaSalle, as successor agent to The First National Bank of Chicago, as
amended by an Amendment No. 1 dated as of December 17, 1997.
"Secured Obligations" means, collectively, (i) the Obligations and (ii) all
Rate Hedging Obligations owing to one or more of the Lenders or any Affiliate of
one or more of the Lenders.
"Security Agreement" means that certain Amended and Restated Security
Agreement dated as of May 30, 1996, executed by the Borrower in favor of the
Agent for the benefit of the Holders of Secured Obligations, as amended by an
Amendment No. 1 and an Amendment No. 2, dated as of September 26, 1996 and
December 31, 1997, respectively, and the Global Amendment, and as the same may
be further amended, restated or otherwise modified from time to time.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Specified Default" means a Default under any of : (a) Section 7.1(a); (b)
Section 7.1(b)(iii) to the extent such Default relates to a breach of Section
6.4; (c) Section 7.1(e); (d) Section 7.1(f); (e) Section 7.1(g); (f) Section
7.1(i); (g) Section 7.1(m); or (h) Section 7.1(n).
"Subordinated Indebtedness" means any Indebtedness of the Borrower or any
Subsidiary of Borrower the payment of which is subordinated to payment of the
Secured Obligations to the
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written satisfaction of the Required Lenders, including, without limitation, the
Subordinated Intercompany Indebtedness.
"Subordinated Intercompany Indebtedness" has the meaning given to that term
in Section 6.3(A).
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Syndication Period" shall have the meaning set forth in the definition of
"Interest Period" above.
"Taxes" is defined in Section 2.15(E)(i) hereof.
"Termination Date" means the earlier of (a) December 31, 2002 and (b) the
date of termination of the Commitments pursuant to Section 2.6 or Section 8.1.
"Termination Event" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Borrower or any member of the
Controlled Group from a Benefit Plan during a plan year in which the Borrower or
such Controlled Group member was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which results in the
termination of employment of twenty percent (20%) of Benefit Plan participants
who are employees of the Borrower or any member of the Controlled Group; (iii)
the imposition of an obligation on the Borrower or any member of the Controlled
Group under Section 4041 of ERISA to provide affected parties written notice of
intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Benefit Plan; (v) any event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Benefit Plan; or (vi) the partial or complete
withdrawal of the Borrower or any member of the Controlled Group from a
Multiemployer Plan.
"Term Loan" is defined in Section 2.1(a).
"Term Loan Termination Date" means June 30, 2002.
"Term Notes" means the promissory notes, in substantially the form of
Exhibit D hereto, duly executed by the Borrower and payable to the order of a
Lender in the amount of its Term Loans, including any amendment, restatement
modification, renewal or replacement of such promissory note.
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"Transaction Documents" means the Loan Documents, the documents evidencing
the Holdings Subordinated Debt, the documents evidencing the Subordinated
Intercompany Indebtedness, the Holdings Subordination Agreement and the
documents, instruments and agreements entered into in connection with the BHD
Acquisition, the BLN Note and any Permitted Acquisition.
"Transferee" is defined in Section 12.5 hereof.
"Type" means, with respect to any Loan, its nature as a Floating Rate Loan
or a Eurodollar Loan.
"Unmatured Default" means an event which, but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"Upstream Guarantee" is defined in Section 6.3(E).
"Working Capital" means, as at any date of determination, the excess, if
any, of (i) the Borrower's consolidated current assets, except cash and Cash
Equivalents, over (ii) the Borrower's consolidated current liabilities, except
current maturities of long-term debt and Revolving Credit Obligations as of such
date and all accrued interest as of such date.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms. Any accounting terms used in this
Agreement which are not specifically defined herein shall have the meanings
customarily given them in accordance with generally accepted accounting
principles in existence as of the Closing Date. Any references to Subsidiaries
of the Borrower set forth herein shall (i) with respect to representations and
warranties which deal with historical matters be deemed to include all former
Subsidiaries of any seller in connection with any Permitted Acquisition
previously consummated or consummated after the date of this Agreement; and (ii)
shall not be deemed a consent by the Lenders to the formation of any
Subsidiaries by the Borrower.
1.2 Subsidiary References. The existence throughout the Agreement of
references to the Borrower's Subsidiaries is for a matter of convenience only
and shall not in any way be construed as consent by the Agent or any Lender to
the establishment, maintenance or acquisition of any Subsidiary other than
Alliance.
1.3 Supplemental Disclosure. At any time at the request of the Agent and
at such additional times as the Borrower determines, the Borrower shall
supplement each schedule or representation herein or in the other Loan Documents
with respect to any matter hereafter arising which, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in such schedule or as an exception to such representation or which is
necessary to correct any information in such schedule or representation which
has been rendered inaccurate thereby. If any such supplement to such schedule or
representation discloses the existence or occurrence of events, facts or
circumstances which are restricted or prohibited by the terms of this Agreement
or any other Loan Documents, such supplement to such schedule or representation
shall not be deemed an amendment thereof unless expressly consented to in
writing by Agent and the Required Lenders, and
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<PAGE>
no such amendments, except as the same may be consented to in a writing which
expressly includes a waiver, shall be or be deemed a waiver by the Agent or any
Lender of any Default disclosed therein. Any items disclosed in any such
supplemental disclosures shall be included in the calculation of any baskets,
limits or similar restrictions contained in this Agreement or any other Loan
Document.
1.4 Amendment and Restatement of Second Restated Credit Agreement. The
Borrower, the Lenders and the Agent agree that, upon (i) the execution and
delivery by each of the parties hereto of this Agreement and (ii) satisfaction
of the conditions set forth in Sections 4.1 and 4.2, the terms and provisions of
the Second Restated Credit Agreement shall be and hereby are amended, superseded
and restated in their entirety by the terms and provisions of this Agreement.
This Agreement is not intended to and shall not constitute a novation. All Loans
made and Secured Obligations incurred under the Second Restated Credit
Agreement, under the Restated Credit Agreement or under the Original Credit
Agreement which are outstanding on the Effective Date shall continue as Loans
and Obligations under (and shall be governed by the terms of) this Agreement.
Without limiting the foregoing, (a) all Letters of Credit issued for the account
of the Borrower under the Second Restated Credit Agreement, under the Restated
Credit Agreement or under the Original Credit Agreement which remain outstanding
on the Effective Date shall continue as Letters of Credit under (and shall be
governed by the terms of) this Agreement and (b) all Secured Obligations
consisting of Rate Hedging Obligations incurred under Interest Rate Agreements
with any Lender or any Affiliate of any Lender which are outstanding on the
Effective Date shall continue as Secured Obligations under this Agreement and
the other Loan Documents.
ARTICLE II: THE CREDITS
2.1. Term Loans. (a) Amount of Term Loans. Prior to the Effective Date,
term loans were previously made to the Borrower under the Original Credit
Agreement and the Second Restated Credit Agreement in the aggregate principal
amount of Twenty-Five Million and no/100 dollars ($25,000,000), the principal
balance of which has been reduced to $21,000,000 as of the date of this
Agreement (such outstanding loans being hereinafter referred to as the "Term
Loans").
(b) Reserved.
(c) Reserved.
(d) Repayment of the Term Loans.
(i) The Term Loans shall be repayable in eighteen (18) consecutive
quarterly installments payable on the last day of each calendar quarter
commencing March 31, 1998 and continuing thereafter until June 30, 2002 and
a final installment on the Term Loan Termination Date, and the Term Loans
shall be permanently reduced by the amount of each installment on the date
payment thereof is required to be made hereunder. The installments shall be
in the aggregate amount set forth below:
29
<PAGE>
<TABLE>
<CAPTION>
Installment Date Installment Amount
---------------- ------------------
<S> <C>
March 31, 1998 $1,000,000
June 30, 1998 $1,000,000
September 30, 1998 $1,000,000
December 31, 1998 $1,000,000
March 31, 1999 $1,250,000
June 30, 1999 $1,250,000
September 30, 1999 $1,250,000
December 31, 1999 $1,250,000
March 31, 2000 $1,250,000
June 30, 2000 $1,250,000
September 30, 2000 $1,250,000
December 31, 2000 $1,250,000
March 31, 2001 $1,250,000
June 30, 2001 $1,250,000
September 30, 2001 $1,250,000
December 31, 2001 $1,250,000
March 31, 2002 $1,250,000
June 30, 2002 $ 750,000
</TABLE>
Notwithstanding the foregoing, the final installment on the Term Loan
Termination Date shall be in the amount of the then outstanding principal
balance of the Term Loans. No installment of any Term Loan shall be
reborrowed once repaid. In addition, the then outstanding principal balance
of all of the Term Loans shall be due and payable on the Termination Date.
(ii) In addition to the scheduled payments on the Term Loans, the
Borrower may make the voluntary prepayments described in Section 2.5(A) for
credit against the scheduled payments on the Term Loans pursuant to Section
2.5(A) and shall make the mandatory prepayments prescribed in Section
2.5(B), for credit against such scheduled payments on the Term Loans
pursuant to Section 2.5(B).
2.2 Revolving Loans. Upon the satisfaction of the conditions precedent set
forth in Sections 4.1 and 4.2 hereof, from and including the date of this
Agreement and prior to the Termination Date, each Lender severally agrees, on
the terms and conditions set forth in this Agreement, to make revolving loans to
the Borrower from time to time in dollars in an amount not to exceed such
Lender's Pro Rata Share of Revolving Credit Availability at such time (each
individually, a "Revolving Loan" and, collectively, the "Revolving Loans");
provided, however, at no time shall the Revolving Credit Obligations exceed the
Maximum Revolving Credit Amount. Subject to the terms of this Agreement, the
Borrower may borrow, repay and reborrow Revolving Loans at any time prior to the
Termination Date. The Revolving Loans made on the Effective Date shall initially
be Floating Rate Loans and thereafter may be continued as Floating Rate Loans or
converted into Eurodollar Loans in the manner provided in Section 2.11 and
subject to the other conditions and
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<PAGE>
limitations therein set forth and set forth in this Article II. On the
Termination Date, the Borrower shall repay in full the outstanding principal
balance of the Revolving Loans.
2.3 Ratable Loans. Each Advance under Section 2.2 shall consist of
Revolving Loans made by each Lender ratably in proportion to such Lender's
respective Pro Rata Share.
2.4 Rate Options for all Advances. The Advances may be Floating Rate
Advances or Eurodollar Advances, or a combination thereof, selected by the
Borrower in accordance with Section 2.11; provided, however, that
notwithstanding anything herein to the contrary, the Borrower may not select
Interest Periods for Eurodollar Advances made during the Syndication Period
which exceed one month and the Interest Periods with respect to all such
Eurodollar Advances made during the Syndication Period shall be required to
expire on the same date. The Borrower may select, in accordance with Section
2.11, Rate Options and Interest Periods applicable to portions of the Revolving
Loans and the Term Loans; provided that there shall be no more than six (6)
Interest Periods in effect with respect to all of the Loans at any time.
2.5 Optional Payments; Mandatory Prepayments.
(A) Optional Payments. Subject to payment of all amounts required pursuant
to Section 3.4, Borrower may from time to time repay or prepay, without further
penalty or premium all or any part of outstanding Floating Rate Advances and all
of any outstanding Eurodollar Rate Advance. Unless the aggregate outstanding
principal balance of the Term Loans is to be prepaid in full, voluntary
prepayments of the Term Loans shall be in an aggregate minimum amount of
$500,000 and integral multiples of $250,000 in excess of that amount. Each
voluntary prepayment of the Term Loan shall be applied pro rata and ratably to
the unpaid installments of the Term Loan.
(B) Mandatory Prepayments.
(i) Mandatory Prepayments of Term Loans.
(a) Upon the consummation of any Asset Sale by Holdings, the Borrower
or any Subsidiary of Borrower (other than the Permitted Inventory and
Equipment Sales and the sale of the Borrower's real property located in
Fresno County, California) the Net Cash Proceeds of which are greater than
$500,000, within (A) one hundred eighty (180) days in the case of an Asset
Sale described in clause(y) below, and (B) three (3) Business Days in the
case of an Asset Sale described in clause (z) below, after Holdings', the
Borrower's or any of its Subsidiaries' (i) receipt of any Net Cash Proceeds
from any such Asset Sale, or (ii) conversion to cash or Cash Equivalents of
non-cash proceeds (whether principal or interest and including securities,
release of escrow arrangements or lease payments) received from any Asset
Sale, the Borrower shall make or cause to be made a mandatory prepayment of
the Obligations in an amount equal to (y) one hundred percent (100%) of
such Net Cash Proceeds or such proceeds converted from non-cash to cash or
Cash Equivalents in the case of Asset Sales other than in connection with
the issuance of Capital Stock; provided, however, that such Net Cash
Proceeds which Holdings, the Borrower or such Subsidiary shall, within one
hundred eighty (180) days after the receipt thereof, use to acquire assets
of a like nature to those sold
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<PAGE>
in such Asset Sale in replacement thereof shall not be required to be
prepaid pursuant to the terms of this Section 2.5(B)(i)(a), provided,
further, however, that notwithstanding the foregoing, during the existence
of a Default under Section 7.1(a), if Holdings, the Borrower or any
Subsidiary shall consummate any Asset Sale in which the sale price exceeds
$50,000, then the Borrower shall, immediately upon receipt, make or cause
to be made a mandatory prepayment in an amount equal to 100% of such Net
Cash Proceeds and (z) seventy-five percent (75%) of such Net Cash Proceeds
or such proceeds converted from non-cash to cash or Cash Equivalents in the
case of Asset Sales consisting of the issuance of Capital Stock.
(b) Within two (2) Business Days after receipt by the Borrower or any
of its Subsidiaries of any proceeds of Indebtedness permitted by Section
6.3(A)(ii)(c), the Borrower shall make or cause to be made a mandatory
prepayment in an amount equal to one-hundred percent (100%) of such
proceeds of Indebtedness.
(c) Simultaneously with the delivery of the annual audited financial
statements required to be delivered pursuant to Section 6.1(a)(iii) for
each Cash Flow Period, the Borrower shall calculate Excess Cash Flow for
such Cash Flow Period and shall make a mandatory prepayment, payable no
later than ten (10) days after such calculation and financial statements
are delivered in an amount equal to fifty percent (50%) of such Excess Cash
Flow, provided that such mandatory prepayment shall not be required if the
Borrower's Leverage Ratio (as defined in Section 6.4(D)) as of the last day
of such Cash Flow Period is less than 4.00 to 1.00.
(d) Nothing in this Section 2.5(B)(i) shall be construed to constitute
the Lenders' consent to any transaction referred to in clause (a) or (b)
above which is not expressly permitted by the terms of this Agreement.
(e) Each mandatory prepayment required by clauses (a), (b) and (c) of
this Section 2.5(B)(i) shall be referred to herein as a "Designated
Prepayment". Designated Prepayments shall be allocated and applied to the
Obligations as follows:
(I) the amount of each Designated Prepayment required by (A)
clauses (a)(y), (b) and (c) of this Section 2.5(B)(i) shall be applied
to the unpaid installments of the Term Loans in the inverse order of
maturity, and (B) clause (a)(z) of this Section 2.5(B)(i) shall be
applied pro rata and ratably to the unpaid installments of the Term
Loans; and
(II) following the payment in full of the Term Loans, the amount
of each Designated Prepayment shall be applied to repay Revolving
Loans and following the payment in full of the Revolving Loans, the
amount of each Designated Prepayment shall be applied first to
interest on the Reimbursement Obligations, then to principal on the
Reimbursement Obligations, then to fees on account of Letters of
Credit and then, to the extent any L/C Obligations are contingent,
deposited with the Agent as cash collateral in respect of such L/C
Obligations.
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<PAGE>
(f) On the date any Designated Prepayment is received by the Agent,
such prepayment shall be applied (unless the Borrower shall have designated
an alternative application in writing which alternative application shall
be subject to payment of all amounts required pursuant to Section 3.4)
first to Floating Rate Loans and to any Eurodollar Loans maturing on such
date. The Agent shall hold the remaining portion of such Designated
Prepayment as cash collateral in an interest bearing deposit account and
shall apply funds from such account to subsequently maturing Eurodollar
Loans in order of maturity.
(ii) Mandatory Prepayments of Revolving Loans. In addition to
repayments under Section 2.5(B)(i)(e)(II), if the Revolving Credit Obligations
are greater than the Maximum Revolving Credit Amount, the Borrower shall
immediately make a mandatory prepayment of the Obligations in an amount equal to
such excess. In addition, if the Revolving Credit Availability is at any time
less than the amount of contingent L/C Obligations outstanding at any time, the
Borrower shall deposit cash collateral with the Agent in an amount equal to the
amount by which such L/C Obligations exceed such Revolving Credit Availability.
2.6 Reduction of Commitments. The Borrower may permanently reduce the
Aggregate Revolving Loan Commitment in whole, or in part ratably among the
Lenders, in an aggregate minimum amount of $500,000 and integral multiples of
$250,000 in excess of that amount, upon at least three Business Days' written
notice to the Agent, which notice shall specify the amount of any such
reduction; provided, however, that the amount of the Aggregate Revolving Loan
Commitment may not be reduced below the aggregate principal amount of the
outstanding Revolving Credit Obligations. All accrued commitment fees shall be
payable on the effective date of any termination of the obligations of the
Lenders to make Loans hereunder.
2.7 Method of Borrowing. Not later than 2:00 p.m. (Chicago time) on each
Borrowing Date, each Lender shall make available its Revolving Loan or Revolving
Loans, in funds immediately available in Chicago to the Agent at its address
specified pursuant to Article XIII hereof. The Agent will promptly make the
funds so received from the Lenders available to the Borrower at the Agent's
aforesaid address.
2.8 Determination of Applicable Margins, Applicable Letter of Credit Fee
and Applicable Commitment Fee.
(a) Definitions. As used in this Section 2.8 and in this Agreement,
the following terms shall have the following meanings:
"Applicable Margins", "Applicable Commitment Fee" and "Applicable
Letter of Credit Fee" shall mean the Applicable Floating Rate Margin
and/or Applicable Eurodollar Margin, with respect to Loans and the
Applicable Commitment Fee and/or Applicable Letter of Credit Fee, with
respect to fees payable as the case may be. The Applicable Margins
shall be determined, in accordance with the provisions of this Section
2.8, by reference to the following:
33
<PAGE>
<TABLE>
<CAPTION>
Applicable Applicable Applicable Applicable
Leverage Eurodollar Floating Rate Commitment Letter of
Ratio Margin Margin Fee Credit Fee
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than 2.00 to 1.00 0.75% 0.00% 0.25% 0.75%
-------------------------------------------------------------------------------------------------
Greater than or Equal to 2.01 to 1.00
and Less than or Equal to 2.50 to 1.00 1.00% 0.00% 0.30% 1.00%
-------------------------------------------------------------------------------------------------
Greater than or Equal to 2.51 to 1.00
and Less than or Equal to 3.00 to 1.00 1.25% 0.00% 0.35% 1.25%
-------------------------------------------------------------------------------------------------
Greater than or Equal to 3.01 to 1.00
and Less than or Equal to 3.50 to 1.00 1.50% 0.00% 0.40% 1.50%
-------------------------------------------------------------------------------------------------
Greater than or Equal to 3.51 to 1.00
and Less than or Equal to 4.01 to 1.00 1.75% 0.25% 0.45% 1.75%
-------------------------------------------------------------------------------------------------
Greater than 4.01 to 1.00 2.00% 0.50% 0.50% 2.00%
-------------------------------------------------------------------------------------------------
</TABLE>
"Leverage Ratio" shall have the meaning ascribed to that term in
Section 6.4(D).
(b) Determination of Applicable Margins, Applicable Letter of Credit Fee
and Applicable Commitment Fee.
(i) The Applicable Margin in respect of any loan, the Applicable Letter of
Credit Fee payable under Section 2.25 and the Applicable Commitment Fee payable
under Section 2.15(c) shall be determined by reference to the tables set forth
in paragraph (a) above, as applicable, on the basis of the Leverage Ratio
(calculated based upon (a) with respect to Revolving Loans, the average of the
outstanding amounts as of the last day of each quarter for the four quarters in
the period then ended and (b) with respect to the Term Loans and other
Indebtedness, the outstanding amount as of the end of the quarter then ended)
determined by reference to the most recent financial statements delivered
pursuant to Section 6.1(A)(ii) or 6.1(A)(iii).
(ii) Upon receipt of the financial statements delivered pursuant to Section
6.1(A)(ii) or Section 6.1(A)(iii), as applicable, the Applicable Margins for all
outstanding
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<PAGE>
Obligations, the Applicable Letter of Credit Fee and Applicable Commitment
Fee shall be adjusted, such adjustment being effective on the fifth (5th)
Business Day after receipt of such financial statements and the Compliance
Certificate to be delivered in connection therewith; provided, however, if
the Borrower shall not have timely delivered such financial statements in
accordance with Section 6.1(A)(ii) or Section 6.1(A)(iii), as applicable,
beginning with the date upon which such financial statements should have
been delivered and continuing until such financial statements are
delivered, it shall be assumed for purposes of determining the Applicable
Margins, the Applicable Commitment Fee and the Applicable Letter of Credit
Fee that the Leverage Ratio was greater than 4.01 to 1.0.
2.9 Method of Selecting Types and Interest Periods for Advances. The
Borrower shall select the Type of Advance and, in the case of each Eurodollar
Advance, the Interest Period applicable to each Advance from time to time. The
Borrower shall give the Agent irrevocable notice (a "Borrowing Notice") not
later than 11:00 a.m. (Chicago time) on the Borrowing Date of each Floating Rate
Advance and three Business Days before the Borrowing Date for each Eurodollar
Advance, specifying: (i) the Borrowing Date (which shall be a Business Day) of
such Advance; (ii) the aggregate amount of such Advance; (iii) the Type of
Advance selected; and (iv) in the case of each Eurodollar Advance, the Interest
Period applicable thereto. The Borrower shall select Interest Periods so that,
to the best of the Borrower's knowledge, it will not be necessary to prepay all
or any portion of any Eurodollar Advance prior to the last day of the applicable
Interest Period in order to make mandatory prepayments as required pursuant to
the terms hereof. Each Floating Rate Advance shall bear interest from and
including the later of (i) the date of the making of such Advance or (ii) the
Effective Date to (but not including) the date of repayment thereof at the
Floating Rate, changing when and as such Floating Rate changes. All Obligations
(other than Advances) shall bear interest from and including the date such
Obligation is payable under the terms of this Agreement or any other Loan
Document to (but not including) the date of payment thereof at the Floating
Rate, changing when and as such Floating Rate changes. Changes in the rate of
interest on that portion of any Advance maintained as a Floating Rate Loan or
other Obligations which bear interest by reference to the Floating Rate will
take effect simultaneously with each change in the Alternate Base Rate. Each
Eurodollar Advance shall bear interest from and including the later of (i) the
first day of the Interest Period applicable thereto or (ii) the Effective Date
to (but not including) the last day of such Interest Period at the interest rate
determined as applicable to such Eurodollar Advance, changing only with respect
to the Applicable Eurodollar Margin to take effect simultaneously with each
change in the Applicable Eurodollar Margin. Interest with respect to Advances
made prior to the Effective Date shall be calculated and paid in accordance with
the terms of the Second Restated Credit Agreement for periods prior to the
Effective Date.
2.10 Minimum Amount of Each Advance. Each Eurodollar Advance shall be in
the minimum amount of $1,000,000 (and in multiples of $500,000 if in excess
thereof), and each Floating Rate Advance shall be in the minimum amount of
$300,000 (and in multiples of $75,000 if in excess thereof), provided, however,
that any Floating Rate Advance may be in the amount of the unused Aggregate
Revolving Loan Commitment.
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<PAGE>
2.11 Method of Selecting Types and Interest Periods for Conversion and
Continuation of Advances.
(A) Right to Convert. The Borrower may elect from time to time, subject to
the provisions of Section 2.4 and Section 2.11, to convert all or any part of a
Loan of any Type into any other Type or Types of Loans; provided that any
conversion of any Eurodollar Advance shall be made on, and only on, the last day
of the Interest Period applicable thereto.
(B) Automatic Conversion and Continuation. Floating Rate Loans shall
continue as Floating Rate Loans unless and until such Floating Rate Loans are
converted into Eurodollar Loans. Eurodollar Loans shall continue as Eurodollar
Loans until the end of the then applicable Interest Period therefor, at which
time such Eurodollar Loans shall be automatically converted into Floating Rate
Loans unless the Borrower shall have given the Agent notice in accordance with
Section 2.11(D) requesting that, at the end of such Interest Period, such
Eurodollar Loans continue as a Eurodollar Loan.
(C) No Conversion Post-Default or Post-Unmatured Default. Notwithstanding
anything to the contrary contained in Section 2.11(A) or Section 2.11(B), no
Loan may be converted into or continued as a Eurodollar Loan (except with the
consent of the Required Lenders) when any Default or Unmatured Default has
occurred and is continuing.
(D) Conversion/Continuation Notice. The Borrower shall give the Agent
irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a
Floating Rate Loan into a Eurodollar Loan or continuation of a Eurodollar Loan
not later than 11:00 a.m. (Chicago time) three Business Days prior to the date
of the requested conversion or continuation, specifying: (1) the requested date
(which shall be a Business Day) of such conversion or continuation; (2) the
amount and Type of the Loan to be converted or continued; and (3) the amount of
Eurodollar Loan(s) into which such Loan is to be converted or continued and the
duration of the Interest Period applicable thereto.
2.12 Default Rate. After the occurrence and during the continuance of a
Specified Default, at the option of the Agent or at the direction of the
Required Lenders, the interest rate(s) applicable to the Obligations and the
letter of credit fee payable under Section 2.25 with respect to Letters of
Credit shall be increased by two percent (2.0%) above the Floating Rate,
Eurodollar Rate or Applicable Letter of Credit Fee, as applicable.
2.13 Method of Payment. All payments of principal, interest, and fees
hereunder shall be made, without setoff, deduction or counterclaim, in
immediately available funds to the Agent at the Agent's address specified
pursuant to Article XIII, or at any other Lending Installation of the Agent
specified in writing by the Agent to the Borrower, by 2:00 p.m. (Chicago time)
on the date when due and shall be made ratably among the Lenders (unless such
amount is not to be shared ratably in accordance with the terms hereof). Each
payment delivered to the Agent for the account of any Lender shall be delivered
promptly by the Agent to such Lender in the same type of funds which the Agent
received at its address specified pursuant to Article XIII or at any Lending
Installation specified in a notice received by the Agent from such Lender. The
Agent is
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<PAGE>
hereby authorized to charge the account of the Borrower maintained with LaSalle
for each payment of principal, interest, fees and other Obligations as it
becomes due hereunder.
2.14 Notes, Telephonic Notices. Each Lender is hereby authorized to record
the principal amount of each of its Loans and each repayment with respect to its
Loans on the schedule attached to its respective Note; provided, however, that
the failure to so record shall not affect the Borrower's obligations under any
such Note. The Borrower hereby authorizes the Lenders and the Agent to extend
Advances, effect selections of Types of Advances and to transfer funds based on
telephonic notices made by any person or persons the Agent or any Lender in good
faith believes to be acting on behalf of the Borrower. The Borrower agrees to
deliver promptly to the Agent a written confirmation signed by an Authorized
Officer, if such confirmation is requested by the Agent or any Lender, of each
telephonic notice. If the written confirmation differs in any material respect
from the action taken by the Agent and the Lenders, (i) the telephonic notice
shall govern absent manifest error and (ii) the Agent or the Lender, as
applicable, shall promptly notify the Authorizing Officer who provided such
confirmation of such difference.
2.15 Promise to Pay; Interest and Fees; Interest Payment Dates; Interest
and Fee Basis; Taxes; Loan and Control Accounts.
(A) Promise to Pay. The Borrower hereby unconditionally promises to pay
when due the principal amount of each Loan which is made to it and all other
Obligations incurred by it, and to pay all unpaid interest accrued thereon, in
accordance with the terms of this Agreement and Notes.
(B) Interest Payment Dates. Interest accrued on each Floating Rate Loan
shall be payable on each Payment Date, commencing with the first such date to
occur after the date hereof and at maturity (whether by acceleration or
otherwise). Interest accrued on each Eurodollar Loan shall be payable on the
last day of its applicable Interest Period, on any date on which the Eurodollar
Loan is prepaid, whether by acceleration or otherwise, and at maturity. Interest
accrued on each Eurodollar Loan having an Interest Period longer than three
months shall also be payable on the last day of each three-month interval during
such Interest Period. Interest accrued on the principal balance of all other
Obligations shall be payable in arrears (i) on the last day of each calendar
month, commencing on the first such day following the incurrence of such
Obligation, (ii) upon repayment thereof in full or in part, and (iii) if not
theretofore paid in full, at the time such other Obligation becomes due and
payable (whether by acceleration or otherwise).
(C) Commitment Fees; Closing Fees; Agent's and Arranger's Fees.
(i) The Borrower shall pay to the Agent, for the account of the
Lenders, in accordance with their Pro Rata Shares, a commitment fee
accruing at the rate of the Applicable Commitment Fee per annum from and
after the Closing Date until the Revolving Credit Termination Date on the
average daily outstanding amount by which (A) the maximum amount of the
Aggregate Revolving Loan Commitment exceeds (B) the Revolving Credit
Obligations minus the aggregate of such Borrower's Letter of Credit
Obligations relating to outstanding commercial Letters of Credit. All such
commitment
37
<PAGE>
fees payable under this clause (C) shall be payable quarterly in arrears on
the last calendar day of each March, June, September and December occurring
after the Closing Date and, in addition, on the Revolving Credit
Termination Date. Commitment fees for periods prior to the Closing Date
shall be calculated and paid in accordance with the terms of the Second
Restated Credit Agreement.
(ii) The Borrower shall pay to the Agent, for the sole account of the
Agent the fees set forth in the letter agreement among the Borrower and the
Agent dated December 31, 1997, payable at the times and in the amounts set
forth therein.
(iii) The Borrower shall pay to Hibernia National Bank ("Hibernia"),
for the sole account of Hibernia the fees set forth in the letter agreement
among the Borrower and Hibernia dated December 31, 1997, payable at the
times and in the amounts set forth therein.
(D) Interest and Fee Basis. Interest and fees shall be calculated for
actual days elapsed on the basis of a 360-day year. Interest shall be payable
for the day an Obligation is incurred but not for the day of any payment on the
amount paid if payment is received prior to 2:00 p.m. (Chicago time) at the
place of payment. If any payment of principal of or interest on a Loan or any
payment of any other Obligations shall become due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
(E) Taxes.
(i) Any and all payments by the Borrower hereunder shall be made free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges, or withholdings, and all liabilities
with respect thereto including those arising after the Original Closing
Date as a result of the adoption of or any change in any law, treaty, rule,
regulation, guideline or determination of a Governmental Authority or any
change in the interpretation or application thereof by a Governmental
Authority but excluding, in the case of each Lender and the Agent, such
taxes (including income taxes, franchise taxes and branch profit taxes) as
are imposed on or measured by such Lender's or Agent's, as the case may be,
income by the United States of America or any Governmental Authority of the
jurisdiction under the laws of which such Lender or Agent, as the case may
be, is organized or maintains a Lending Installation (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings, and liabilities
which the Agent or a Lender determines to be applicable to this Agreement,
the other Loan Documents, the Revolving Loan Commitments, the Loans or the
Letters of Credit being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder or under the other Loan Documents to any Lender
or the Agent, (i) the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions applicable
to additional sums payable under this Section 2.15(E)) such Lender or Agent
(as the case may be)
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receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, and
(iii) the Borrower shall pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law. If
a withholding tax of the United States of America or any other Governmental
Authority shall be or become applicable (y) after the Original Closing
Date, to such payments by the Borrower made to the Lending Installation or
any other office that a Lender may claim as its Lending Installation, or
(z) after such Lender's selection and designation of any other Lending
Installation, to such payments made to such other Lending Installation,
such Lender shall use reasonable efforts to make, fund and maintain its
Loans through another Lending Installation of such Lender in another
jurisdiction so as to reduce the Borrower's liability hereunder, if the
making, funding or maintenance of such Loans through such other Lending
Installation of such Lender does not, in the judgment of such Lender,
otherwise adversely affect such Loans, or obligations under the Revolving
Loan Commitments or such Lender.
(ii) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges,
or similar levies which arise from any payment made hereunder, from the
issuance of Letters of Credit hereunder, or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, the other
Loan Documents, the Revolving Loan Commitments, the Loans or the Letters of
Credit (hereinafter referred to as "Other Taxes").
(iii) The Borrower will indemnify each Lender and the Agent for the
full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any Governmental Authority on amounts
payable under this Section 2.15(E)) paid by such Lender or the Agent (as
the case may be) and any liability (including penalties, interest, and
expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within thirty (30) days after the date such
Lender or the Agent (as the case may be) makes written demand therefor. A
certificate as to any additional amount payable to any Lender or the Agent
under this Section 2.15(E) submitted to the Borrower and the Agent (if a
Lender is so submitting) by such Lender or the Agent shall show in
reasonable detail the amount payable and the calculations used to determine
such amount and shall, absent manifest error, be final, conclusive and
binding upon all parties hereto. With respect to such deduction or
withholding for or on account of any Taxes and to confirm that all such
Taxes have been paid to the appropriate Governmental Authorities, the
Borrower shall promptly (and in any event not later than thirty (30) days
after receipt) furnish to each Lender and the Agent such certificates,
receipts and other documents as may be required (in the judgment of such
Lender or the Agent) to establish any tax credit to which such Lender or
the Agent may be entitled.
(iv) Within thirty (30) days after the date of any payment of Taxes or
Other Taxes by the Borrower, the Borrower will furnish to the Agent the
original or a certified copy of a receipt evidencing payment thereof.
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(v) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.15(E) shall survive the payment in full of
principal and interest hereunder, the termination of the Letters of Credit
and the termination of this Agreement.
(vi) Without limiting the obligations of the Borrower under this
Section 2.15(E), each Lender that is not created or organized under the
laws of the United States of America or a political subdivision thereof
shall deliver to the Borrower and the Agent on or before the Closing Date,
or, if later, the date on which such Lender becomes a Lender pursuant to
Section 12.3 hereof, a true and accurate certificate executed in duplicate
by a duly authorized officer of such Lender, in a form satisfactory to the
Borrower and the Agent, to the effect that such Lender is capable under the
provisions of an applicable tax treaty concluded by the United States of
America (in which case the certificate shall be accompanied by two executed
copies of Form 1001 of the IRS) or under Section 1442 of the Code (in which
case the certificate shall be accompanied by two copies of Form 4224 of the
IRS) of receiving payments of interest hereunder without deduction or
withholding of United States federal income tax. Each such Lender further
agrees to deliver to the Borrower and the Agent from time to time a true
and accurate certificate executed in duplicate by a duly authorized officer
of such Lender substantially in a form satisfactory to the Borrower and the
Agent, before or promptly upon the occurrence of any event requiring a
change in the most recent certificate previously delivered by it to the
Borrower and the Agent pursuant to this Section 2.15(E)(vi). Further, each
Lender which delivers a certificate accompanied by Form 1001 of the IRS
covenants and agrees to deliver to the Borrower and the Agent within
fifteen (15) days prior to January 1, 1997, and every third (3rd)
anniversary of such date thereafter, on which this Agreement is still in
effect, another such certificate and two accurate and complete original
signed copies of Form 1001 (or any successor form or forms required under
the Code or the applicable regulations promulgated thereunder), and each
Lender that delivers a certificate accompanied by Form 4224 of the IRS
covenants and agrees to deliver to the Borrower and the Agent within
fifteen (15) days prior to the beginning of each subsequent taxable year of
such Lender during which this Agreement is still in effect, another such
certificate and two accurate and complete original signed copies of IRS
Form 4224 (or any successor form or forms required under the Code or the
applicable regulations promulgated thereunder). Each such certificate shall
certify as to one of the following:
(a) that such Lender is capable of receiving payments of interest
hereunder without deduction or withholding of United States of America
federal income tax;
(b) that such Lender is not capable of receiving payments of
interest hereunder without deduction or withholding of United States
of America federal income tax as specified therein but is capable of
recovering the full amount of any such deduction or withholding from a
source other than the Borrower and will not seek any such recovery
from the Borrower; or
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(c) that, as a result of the adoption of or any change in any
law, treaty, rule, regulation, guideline or determination of a
Governmental Authority or any change in the interpretation or
application thereof by a Governmental Authority after the date such
Lender became a party hereto, such Lender is not capable of receiving
payments of interest hereunder without deduction or withholding of
United States of America federal income tax as specified therein and
that it is not capable of recovering the full amount of the same from
a source other than the Borrower.
Each Lender shall promptly furnish to the Borrower and the Agent such
additional documents as may be reasonably required by the Borrower or the
Agent to establish any exemption from or reduction of any Taxes or Other
Taxes required to be deducted or withheld and which may be obtained without
undue expense to such Lender.
(F) Loan Account. Each Lender shall maintain in accordance with its usual
practice an account or accounts (a "Loan Account") evidencing the Obligations of
the Borrower to such Lender owing to such Lender from time to time, including
the amount of principal and interest payable and paid to such Lender from time
to time hereunder and under the Notes.
(G) Control Account. The Register maintained by the Agent pursuant to
Section 12.3 shall include a control account, and a subsidiary account for each
Lender, in which accounts (taken together) shall be recorded (i) the date and
amount of each Advance made hereunder, the type of Loan comprising such Advance
and any Interest Period applicable thereto, (ii) the effective date and amount
of each assignment and acceptance delivered to and accepted by it and the
parties thereto pursuant to Section 12.3, (iii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder or under the Notes, (iv) the amount of any sum received by the
Agent from the Borrower hereunder and each Lender's share thereof, and (v) all
other appropriate debits and credits as provided in this Agreement, including,
without limitation, all fees, charges, expenses and interest.
(H) Entries Binding. The entries made in the Register and each Loan
Account shall be conclusive and binding for all purposes, absent manifest error,
unless the Borrower objects to information contained in the Register and each
Loan Account within thirty (30) days of the Borrower's receipt of such
information.
2.16 Notification of Advances, Interest Rates, Prepayments and Aggregate
Revolving Loan Commitment Reductions. Promptly after receipt thereof, the Agent
will notify each Lender of the contents of each Aggregate Revolving Loan
Commitment reduction notice, Borrowing Notice, Continuation/Conversion Notice,
and repayment notice received by it hereunder. The Agent will notify each Lender
of the interest rate applicable to each Eurodollar Loan promptly upon
determination of such interest rate and will give each Lender prompt notice of
each change in the Alternate Base Rate.
2.17 Lending Installations. Each Lender may book its Loans at any Lending
Installation selected by such Lender and may change its Lending Installation
from time to time. All terms of
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this Agreement shall apply to any such Lending Installation and the Notes shall
be deemed held by each Lender for the benefit of such Lending Installation. Each
Lender may, by written or facsimile notice to the Agent and the Borrower,
designate a Lending Installation through which Loans will be made by it and for
whose account Loan payments are to be made.
2.18 Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender,
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or (ii) in the case of payment by the
Borrower, the interest rate applicable to the relevant Loan.
2.19 Termination Date. This Agreement shall be effective until the
Termination Date. Notwithstanding the termination of this Agreement on the
Termination Date, until all of the Obligations (other than contingent indemnity
obligations) shall have been fully and indefeasibly paid and satisfied, all
financing arrangements among the Borrower and the Lenders shall have been
terminated (other than under Interest Rate Agreements or other agreements with
respect to Rate Hedging Obligations) and all of the Letters of Credit shall have
expired, been canceled or terminated, all of the rights and remedies under this
Agreement and the other Loan Documents shall survive and the Agent shall be
entitled to retain its security interest in and to all existing and future
Collateral for the benefit of itself and the Holders of Secured Obligations.
2.20 Replacement of Certain Lenders. In the event a Lender ("Affected
Lender") shall have: (i) failed to fund its Pro Rata Share of any Advance
requested by the Borrower which such Lender is obligated to fund under the terms
of this Agreement and which failure has not been cured, (ii) requested
compensation from the Borrower under Sections 2.15(E), 3.1 or 3.2 to recover
Taxes, Other Taxes or other additional costs incurred by such Lender which are
not being incurred generally by the other Lenders, (iii) delivered a notice
pursuant to Section 3.3 claiming that such Lender is unable to extend Eurodollar
Loans to the Borrower for reasons not generally applicable to the other Lenders
or (iv) has invoked Section 9.2, then, in any such case, the Borrower or the
Agent may make written demand on such Affected Lender (with a copy to the Agent
in the case of a demand by the Borrower and a copy to the Borrower in the case
of a demand by the Agent) for the Affected Lender to assign, and such Affected
Lender shall use its best efforts to assign pursuant to one or more duly
executed assignment and acceptance agreements in substantially the form of
Exhibit E five (5) Business Days after the date of such demand, to one or more
financial institutions which complies with the provisions of Section 12.3(A)
(and, if selected by the Borrower is reasonably acceptable to the Agent) which
the Borrower or the Agent, as the case may be, shall have engaged for such
purpose ("Replacement
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Lender"), all of such Affected Lender's rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, its
Revolving Loan Commitment, all Loans owing to it, all of its participation
interests in existing Letters of Credit, and its obligation to participate in
additional Letters of Credit hereunder) in accordance with Section 12.3. The
Agent hereby agrees, upon the occurrence of such events with respect to an
Affected Lender and upon the written request of the Borrower, to use its
reasonable efforts to obtain the commitments from one or more financial
institutions to act as a Replacement Lender. The Agent is hereby authorized to
execute one or more of such assignment agreements as attorney-in-fact for any
Affected Lender failing to execute and deliver the same within five (5) Business
Days after the date of such demand. Further, with respect to such assignment the
Affected Lender shall have concurrently received, in cash, all amounts due and
owing to the Affected Lender hereunder or under any other Loan Document,
including, without limitation, the aggregate outstanding principal amount of the
Loans owed to such Lender, together with accrued interest thereon through the
date of such assignment, amounts payable under Sections 2.15(E), 3.1, and 3.2
with respect to such Affected Lender and compensation payable under Section
2.15(C) in the event of any replacement of any Affected Lender under clause (ii)
or clause (iii) of this Section 2.20; provided, upon such Affected Lender's
replacement, such Affected Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 2.15(E), 3.1, 3.2, 3.4, and
9.7, as well as to any fees accrued for its account hereunder and not yet paid,
and shall continue to be obligated under Section 10.8. Upon the replacement of
any Affected Lender pursuant to this Section 2.20, the provisions of Section 8.2
shall continue to apply with respect to Advances which are then outstanding with
respect to which the Affected Lender failed to fund its Pro Rata Share and which
failure has not been cured.
2.21 Letter of Credit Facility. Pursuant to the Original Credit Agreement,
the Restated Credit Agreement or the Second Restated Credit Agreement the Agent
or any Lender may have previously issued and, upon receipt of duly executed
applications therefor, and such other documents, instructions and agreements as
the Agent may require, and subject to the provisions of Article IV, the Agent
will hereafter issue letters of credit for the account of the Borrower, on terms
as are satisfactory to the Agent; provided, however, that no Letter of Credit
will be issued for the account of the Borrower by the Agent if on the date of
issuance, before or after taking such Letter of Credit into account, (i) the
Revolving Credit Obligations at such time would exceed the Maximum Revolving
Credit Amount at such time or (ii) the aggregate outstanding amount of the L/C
Obligations exceeds $7,500,000; and provided, further, that no Letter of Credit
shall be issued which has an expiration date later than the date which is five
(5) Business Days immediately preceding the Termination Date. On the Effective
Date, each of the Existing Letters of Credit shall be deemed to be a Letter of
Credit issued hereunder, and shall from and after such date be governed by the
provisions of this Agreement as fully as if the same had been issued pursuant
hereto on the Effective Date.
2.22 Letter of Credit Participation. Immediately upon the issuance of each
Letter of Credit by the Agent hereunder, or, in the case of the Existing Letters
of Credit issued by a Lender (such Lender, and the Agent, as issuing bank, being
hereinafter referred to as an "Issuing Bank") under the Original Credit
Agreement, the Restated Credit Agreement or the Second Restated Credit
Agreement, as applicable, on the Effective Date, each Lender shall be deemed to
have
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automatically, irrevocably and unconditionally purchased and received from the
applicable Issuing Bank an undivided interest and participation in and to such
Letter of Credit, the obligations of the Borrower in respect thereof, and the
liability of the applicable Issuing Bank thereunder (collectively, an "L/C
Interest") in an amount equal to the amount available for drawing under such
Letter of Credit multiplied by such Lender's Pro Rata Share. The applicable
Issuing Bank will notify the Agent and each Lender promptly upon presentation to
it of an L/C Draft or upon any other draw under a Letter of Credit. On or before
the Business Day on which such Issuing Bank makes payment of each such L/C Draft
or, in the case of any other draw on a Letter of Credit, on demand of such
Issuing Bank, each Lender shall make payment to the Agent, for the account of
such Issuing Bank, in immediately available funds in an amount equal to such
Lender's pro rata share of the amount of such payment or draw. The obligation of
each Lender to reimburse each Issuing Bank under this Section 2.22 shall be
unconditional, continuing, irrevocable and absolute. In the event that any
Lender fails to make payment of any amount due to any Issuing Bank under this
Section 2.22, the Agent shall be entitled to receive, retain and apply against
such obligation the principal and interest otherwise payable to such Lender
hereunder until the Agent or such Issuing Bank, as applicable, receives such
payment from such Lender or such obligation is otherwise fully satisfied;
provided, however, that nothing contained in this sentence shall relieve such
Lender of its obligation to reimburse the applicable Issuing Bank for such
amount in accordance with this Section 2.22.
2.23 Reimbursement Obligation. The Borrower agrees unconditionally,
irrevocably and absolutely to pay immediately to the Agent (which payment shall
be for the account of the Lenders to the extent that the Lenders have funded
their participation in the applicable Letter of Credit otherwise for the account
of the applicable Issuing Bank as the issuer of the Letter of Credit) the amount
of each advance which may be drawn under or pursuant to a Letter of Credit
issued for its account or an L/C Draft related thereto (such obligation of the
Borrower to reimburse the applicable Issuing Bank for an advance made under a
Letter of Credit or L/C Draft being hereinafter referred to as a "Reimbursement
Obligation" with respect to such Letter of Credit or L/C Draft). If the Borrower
at any time fails to repay a Reimbursement Obligation pursuant to this Section
2.23, the Borrower shall be deemed to have elected to borrow a Revolving Loan
from the Lenders, as of the date of the advance giving rise to the Reimbursement
Obligation equal in amount to the amount of the unpaid Reimbursement Obligation.
Such Revolving Loan shall be made as of the date of the payment giving rise to
such Reimbursement Obligation, automatically, without notice and without any
requirement to satisfy the conditions precedent otherwise applicable to an
Advance of Revolving Loans if Borrower shall have failed to make such payment to
the Agent prior to such time. Such Revolving Loans shall constitute a Floating
Rate Advance, the proceeds of which Advance shall be used to repay such
Reimbursement Obligation. If, for any reason, the Borrower fails to repay a
Reimbursement Obligation on the day such Reimbursement Obligation arises and,
for any reason, the Lenders are unable to make or have no obligation to make a
Revolving Loan, then such Reimbursement Obligation shall bear interest from and
after such day, until paid in full, at the interest rate applicable to a
Floating Rate Advance.
2.24 Cash Collateral. Notwithstanding anything to the contrary herein or
in any application for a Letter of Credit, after the occurrence and during the
continuance of a Specified
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Default, the Borrower shall, upon the Agent's demand, deliver to the Agent for
the benefit of the Lenders, cash, or other collateral of a type satisfactory to
the Required Lenders, having a value, as determined by such Lenders, equal to
the aggregate outstanding L/C Obligations. In addition, to the extent the
Maximum Revolving Credit Amount is at any time less than the amount of
contingent L/C Obligations outstanding at any time, the Borrower shall deposit
cash collateral with the Agent in an amount equal to the amount by which such
L/C Obligations exceed such Maximum Revolving Credit Amount. Any such collateral
shall be held by the Agent in a separate account appropriately designated as a
cash collateral account in relation to this Agreement and the Letters of Credit
and retained by the Agent for the benefit of the Lenders as collateral security
for the Borrower's obligations in respect of this Agreement and each of the
Letters of Credit and L/C Drafts. Such amounts shall be applied to reimburse the
applicable Issuing Bank for drawings or payments under or pursuant to Letters of
Credit or L/C Drafts, or if no such reimbursement is required, to payment of
such of the other Obligations as the Agent shall determine. If no Default shall
be continuing, amounts remaining in any cash collateral account established
pursuant to this Section 2.24 which are not to be applied to reimburse the
applicable Issuing Bank for amounts actually paid or to be paid by the
applicable Issuing Bank in respect of a Letter of Credit or L/C Draft, shall be
returned to the Borrower (after deduction of the Agent's expenses incurred in
connection with such cash collateral account).
2.25 Letter of Credit Fees. The Borrower agrees to pay (i) monthly, in
arrears, to the Agent for the ratable benefit of the Lenders, except as set
forth in Section 8.2, a letter of credit fee in the amount of the Applicable
Letter of Credit Fee rate per annum on the aggregate amount available for
drawing under all of the standby Letters of Credit and (ii) to the applicable
Issuing Bank for the benefit of the applicable Issuing Bank, as issuing bank,
all customary fees and other issuance, amendment, negotiation and presentment
expenses and related charges in connection with the issuance, amendment,
presentation of L/C Drafts, and the like customarily charged by the applicable
Issuing Bank with respect to standby and commercial Letters of Credit,
including, without limitation standard commissions with respect to commercial
Letters of Credit, payable at the time of invoice of such amounts.
2.26 Indemnification; Exoneration. (a) In addition to amounts payable as
elsewhere provided in this Agreement, the Borrower hereby agrees to protect,
indemnify, pay and save harmless the Agent, each Issuing Bank and each Lender
from and against any and all liabilities and costs which the Agent, each Issuing
Bank or any Lender may incur or be subject to as a consequence, direct or
indirect, of (i) the issuance of any Letter of Credit other than, in the case of
the issuer thereof, as a result of its Gross Negligence or willful misconduct,
as determined by the final judgment of a court of competent jurisdiction, or
(ii) the failure of the issuer of such Letter of Credit to honor a drawing under
such Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental Authority
(all such acts or omissions herein called "Governmental Acts").
(b) As among the Borrower, the Lenders, each Issuing Bank and the Agent,
the Borrower assumes all risks of the acts and omissions of, or misuse of such
Letter of Credit by, the beneficiary of any Letter of Credit. In furtherance and
not in limitation of the foregoing, subject to the provisions of the Letter of
Credit applications and Letter of Credit reimbursement
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agreements executed by the Borrower at the time of request for any Letter of
Credit, the issuer of the Letter of Credit, the Agent, each Issuing Bank and the
Lenders shall not be responsible (in the absence of Gross Negligence or willful
misconduct in connection therewith, as determined by the final judgment of a
court of competent jurisdiction): (i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of the Letters of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
(iii) for failure of the beneficiary of a Letter of Credit to comply duly with
conditions required in order to draw upon such Letter of Credit; (iv) for
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, or other similar form of
teletransmission or otherwise; (v) for errors in interpretation of technical
trade terms; (vi) for any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit or of
the proceeds thereof; (vii) for the misapplication by the beneficiary of a
Letter of Credit of the proceeds of any drawing under such Letter of Credit; and
(viii) for any consequences arising from causes beyond the control of the Agent,
the issuer of the Letter of Credit and the Lenders including, without
limitation, any Governmental Acts. None of the above shall affect, impair, or
prevent the vesting of any of the Letter of Credit issuers' rights or powers
under this Section 2.26.
(c) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Letter of
Credit issuer under or in connection with Letters of Credit issued on behalf of
the Borrower or any related certificates shall not, in the absence of Gross
Negligence or willful misconduct, as determined by the final judgment of a court
of competent jurisdiction, put the Letter of Credit issuer, the Agent, any
Issuing Bank or any Lender under any resulting liability to the Borrower or
relieve the Borrower of any of its obligations hereunder to any such Person.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.26 shall survive the payment in full of principal and interest
hereunder, the termination of the Letters of Credit and the termination of this
Agreement.
ARTICLE III: CHANGE IN CIRCUMSTANCES
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3.1 Yield Protection. If any law or any governmental or quasi-governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) adopted after the Original Closing Date and having general
applicability to all banks within the jurisdiction in which such Lender operates
(excluding, for the avoidance of doubt, the effect of and phasing in of capital
requirements or other regulations or guidelines passed prior to the Original
Closing Date), or any interpretation or application thereof by any Governmental
Authority charged with the interpretation or application thereof, or the
compliance of any Lender therewith,
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(i) subjects any Lender or any applicable Lending Installation to any
tax, duty, charge or withholding on or from payments due from the Borrower
(excluding federal taxation of the overall net income of any Lender or
applicable Lending Installation), or changes the basis of taxation of
payments to any Lender in respect of its Loans, its L/C Interests, the
Letters of Credit or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender or
any applicable Lending Installation (other than reserves and assessments
taken into account in determining the interest rate applicable to
Eurodollar Loans) with respect to its Loans, L/C Interests or the Letters
of Credit, or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation of making,
funding or maintaining the Loans, the L/C Interests or the Letters of
Credit or reduces any amount received by any Lender or any applicable
Lending Installation in connection with Loans or Letters of Credit, or
requires any Lender or any applicable Lending Installation to make any
payment calculated by reference to the amount of Loans or L/C Interests
held or interest received by it or by reference to the Letters of Credit,
by an amount deemed material by such Lender;
and the result of any of the foregoing is to increase the cost to that Lender of
making, renewing or maintaining its Loans, L/C Interests or Letters of Credit or
to reduce any amount received under this Agreement, then, within 15 days after
receipt by the Borrower of written demand by such Lender pursuant to Section
3.5, the Borrower shall pay such Lender that portion of such increased expense
incurred or reduction in an amount received which such Lender determines is
attributable to making, funding and maintaining its Loans, L/C Interests,
Letters of Credit and its Revolving Loan Commitment.
3.2 Changes in Capital Adequacy Regulations. If a Lender determines (i)
the amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such Lender
is increased as a result of a "Change" (as defined below), and (ii) such
increase in capital will result in an increase in the cost to such Lender of
maintaining its Loans, L/C Interests, the Letters of Credit or its obligation to
make Loans hereunder, then, within 15 days after receipt by the Borrower of
written demand by such Lender pursuant to Section 3.5, the Borrower shall pay
such Lender the amount necessary to compensate for any shortfall in the rate of
return on the portion of such increased capital which such Lender determines is
attributable to this Agreement, its Loans, its L/C Interests, the Letters of
Credit or its obligation to make Loans hereunder (after taking into account such
Lender's policies as to capital adequacy). "Change" means (i) any change after
the Original Closing Date in the "Risk-Based Capital Guidelines" (as defined
below) excluding, for the avoidance of doubt, the effect of any phasing in of
such Risk Based Capital Guidelines or any other capital requirements passed
prior to the Original Closing Date, or (ii) any adoption of or change in any
other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive
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(whether or not having the force of law) after the Original Closing Date and
having general applicability to all banks and financial institutions within the
jurisdiction in which such Lender operates which affects the amount of capital
required or expected to be maintained by any Lender or any Lending Installation
or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means
(i) the risk-based capital guidelines in effect in the United States on the
Original Closing Date, including transition rules, and (ii) the corresponding
capital regulations promulgated by regulatory authorities outside the United
States implementing the July 1988 report of the Basle Committee on Banking
Regulation and Supervisory Practices Entitled "International Convergence of
Capital Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the Original Closing Date.
3.3 Availability of Types of Advances. If (i) any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation or directive, whether or not having
the force of law, or (ii) the Required Lenders determine that (x) deposits of a
type and maturity appropriate to match fund Eurodollar Advances are not
available or (y) the interest rate applicable to a Type of Advance does not
accurately reflect the cost of making or maintaining such an Advance, then the
Agent shall suspend the availability of the affected Type of Advance and, in the
case of any occurrence set forth in clause (i) require any Advances of the
affected Type to be repaid.
3.4 Funding Indemnification. If any payment of a Eurodollar Advance occurs
on a date which is not the last day of the applicable Interest Period, whether
because of acceleration, prepayment, or otherwise, or a Eurodollar Advance is
not made on the date specified by the Borrower for any reason other than default
by the Lenders, the Borrower will indemnify each Lender for any loss or cost
incurred by it resulting therefrom, including, without limitation, any loss or
cost in liquidating or employing deposits acquired to fund or maintain the
Eurodollar Advance. In connection with any assignment by any Lender of any
portion of the Loans made pursuant to Section 12.3 and made during the
Syndication Period, the Borrower shall be deemed to have repaid all outstanding
Eurodollar Advances as of such date and reborrowed such amounts as Floating Rate
Advances and the indemnification provisions under this Section 3.4 shall apply.
3.5 Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of the Borrower to such
Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of
Advance under Section 3.3, so long as such designation is not disadvantageous to
such Lender. Each Lender requiring compensation pursuant to Section 2.15(E) or
to this Article III shall use its best efforts to notify the Borrower and the
Agent in writing of any Change, law, policy, rule, guideline or directive giving
rise to such demand for compensation not later than ninety (90) days following
the date upon which the responsible account officer of such Lender knows or
should have known of such Change, law, policy, rule, guideline or directive. Any
demand for compensation pursuant to this Article III shall be in writing and
shall state the amount due, if any, under Section 3.1, 3.2 or 3.4 and shall set
forth in reasonable detail the calculations upon which such Lender determined
such amount. Such written demand shall be rebuttably presumed correct for all
purposes. Notwithstanding anything in this Agreement to the contrary, the
Borrower shall not be obligated to pay any amount or amounts
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under Section 2.15(E) or this Article III to the extent such amount or amounts
result from a Change, law, policy, rule, guideline or directive which took
effect more than 120 days prior to the date of delivery of the notice described
above. Determination of amounts payable under such Sections in connection with a
Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar
Loan through the purchase of a deposit of the type and maturity corresponding to
the deposit used as a reference in determining the Eurodollar Rate applicable to
such Loan, whether in fact that is the case or not. The obligations of the
Borrower under Sections 3.1, 3.2 and 3.4 shall survive payment of the
Obligations and termination of this Agreement.
ARTICLE IV: CONDITIONS PRECEDENT
4.1 Conditions Precedent to Effectiveness of this Agreement. The
effectiveness of this Agreement and the obligation of each Lender to make any
Loan requested to be made by it from and after the Effective Date, and the
obligation of the Agent to issue and of each Lender to participate in any Letter
of Credit from and after the Effective Date, shall be subject to satisfaction of
the following conditions precedent:
(a) Documents. The delivery by the Borrower to the Agent of each of the
following, with sufficient copies for the Lenders:
(1) Copies of the Certificate of Incorporation of the Borrower,
together with all amendments, and a certificate of good standing, both
certified by the appropriate governmental officer in its jurisdiction
of incorporation;
(2) Copies, certified by the Secretary or Assistant Secretary of
the Borrower, of its By-Laws and of its Board of Directors'
resolutions (and resolutions of other bodies, if any are deemed
necessary by counsel for any Lender) authorizing the execution of the
Loan Documents;
(3) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Borrower, which shall identify by name and
title and bear the signature of the officers of the Borrower
authorized to sign the Loan Documents and to make borrowings
hereunder, upon which certificate the Lenders shall be entitled to
rely until informed of any change in writing by the Borrower;
(4) A certificate, signed by the chief financial officer of the
Borrower, stating that on Effective Date no Default or Unmatured
Default has occurred and is continuing;
(5) A written opinion of the Borrower's counsel, addressed to
the Lenders in form and substance acceptable to the Agent, the Lenders
and their respective counsel;
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(6) Substituted and amended Notes payable to the order of each of
the Lenders;
(7) The Global Amendment and Amendment No. 2 to the Security
Agreement;
(8) A certificate, executed by the president, any vice-president
or the chief financial officer of the Company, stating that on the
Effective Date (x) the BHD Acquisition shall have been consummated for
not more than $23,000,000 in total consideration (exclusive of
transaction fees and expenses) and (y) the Borrower shall have made
payment to The First National Bank of Chicago, as agent under the
Second Restated Credit Agreement, of the principal payment in the
amount of $750,000 due in respect of the Term Loans pursuant to the
terms of the Second Restated Credit Agreement; and
(9) Such other documents as the Agent or any Lender or its
counsel may have reasonably requested, including, without limitation,
all of the documents reflected on the List of Closing Documents
attached as Exhibit J to this Agreement (unless designated thereon to
be a document which was previously delivered or to be received after
the Effective Date).
(b) No Legal Impediments. No law, regulation, order, judgment or decree
of any Governmental Authority shall, and the Agent shall not have
received any notice that litigation is pending or threatened which
could (i) enjoin, prohibit or restrain this Agreement from becoming
effective, the making of the Loans and/or the issuance of Letters of
Credit on or after Effective Date or (ii) impose or result in the
imposition of a Material Adverse Effect.
(c) No Default. No Default or Unmatured Default shall have occurred and
be continuing or shall not have been waived in accordance with the
terms of the Second Restated Credit Agreement or would result from
this Agreement becoming effective and the parties' respective
performance hereunder.
(d) Representations and Warranties. All of the representations and
warranties contained in Article V and in any of the other Loan
Documents shall be true and correct in all material respects on and as
of the Effective Date.
(e) Legal Matters. All legal and regulatory matters shall be satisfactory
to the Agent and its counsel and to each Lender and their respective
counsel.
4.2 Each Advance and Letter of Credit. The Lenders shall not be required
to make any Advance, issue any Letter of Credit or purchase any participation
therein, unless on the applicable Borrowing Date, or in the case of a Letter of
Credit, the date on which the Letter of Credit is to be issued:
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(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V are
true and correct as of such Borrowing Date except for amendments to the
Schedules to this Agreement made pursuant to the provisions of Section 1.3
and reflecting transactions permitted by this Agreement.
Each Borrowing Notice with respect to each such Advance and the letter of
credit application with respect to a Letter of Credit shall constitute a
representation and warranty by the Borrower that the conditions contained in
Sections 4.2(i) and (ii) have been satisfied. Any Lender may require a duly
completed officer's certificate in substantially the form of Exhibit F hereto
and/or a duly completed compliance certificate in substantially the form of
Exhibit G hereto as a condition to making an Advance.
ARTICLE V: REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Lenders to enter into this Agreement
and to make the Loans and the other financial accommodations to the Borrower and
to issue the Letters of Credit described herein, the Borrower hereby represents
and warrants as follows to each Lender and the Agent as of the date hereof and
thereafter on each date as required by Section 4.2:
5.1 Organization; Corporate Powers. The Borrower and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii) is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction in which failure to be so qualified and in good
standing will have a Material Adverse Effect, (iii) has filed and maintained
effective (unless exempt from the requirements for filing) a current Business
Activity Report with the appropriate Governmental Authority in the States in
which it is required to do so and (iv) has all requisite corporate power and
authority to own, operate and encumber its property and to conduct its business
as presently conducted and as proposed to be conducted.
5.2 Authority.
(A) The Borrower and each of its Subsidiaries have or had, as applicable,
the requisite corporate power and authority (i) to execute, deliver and perform
each of the Transaction Documents to which it is a party and (ii) to file the
Transaction Documents which must be filed by it with any Governmental Authority.
(B) The execution, delivery, performance and filing, as the case may be, of
each of the Transaction Documents to which the Borrower or any of its
Subsidiaries is party, and the consummation of the transactions contemplated
thereby, have been duly approved by the respective boards of directors and, if
necessary, the shareholders of the Borrower and its Subsidiaries, and such
approvals have not been rescinded. No other corporate action or
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proceedings on the part of the Borrower or its Subsidiaries are necessary to
consummate such transactions.
(C) Each of the Transaction Documents to which the Borrower or any of its
Subsidiaries is a party has been duly executed, delivered or filed, as the case
may be, by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms (except as enforceability
may be limited by bankruptcy, insolvency, or similar laws affecting the
enforcement of creditor's rights generally), is in full force and effect and no
material term or condition thereof has been amended, modified or waived from the
terms and conditions contained in the Transaction Documents delivered to the
Agent pursuant to the Original Credit Agreement, the Restated Credit Agreement,
the Second Restated Credit Agreement or this Agreement without the prior written
consent of the Required Lenders, and the Borrower and its Subsidiaries have,
and, to the best of the Borrower's and its Subsidiaries' knowledge, all other
parties thereto have, performed and complied with all the terms, provisions,
agreements and conditions set forth therein and required to be performed or
complied with by such parties on or before the Effective Date, and no unmatured
default, default or breach of any covenant by any such party exists thereunder
which could reasonably be expected to have a Material Adverse Effect.
5.3 No Conflict; Governmental Consents. The execution, delivery and
performance of each of the Loan Documents and other Transaction Documents to
which the Borrower or any of its Subsidiaries is a party do not and will not (i)
conflict with the certificate or articles of incorporation or by-laws of the
Borrower or any such Subsidiary, (ii) constitute a tortious interference with
any Contractual Obligation of any Person or conflict with, result in a breach of
or constitute (with or without notice or lapse of time or both) a default under
any Requirement of Law (including, without limitation, any Environmental
Property Transfer Act) or Contractual Obligation of the Borrower or any such
Subsidiary, or require termination of any Contractual Obligation, except such
interference, breach, default or termination which individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect,
(iii) with respect to the Loan Documents and, to the best of the Borrower's and
its Subsidiaries' knowledge with respect to the other Transaction Documents,
result in or require the creation or imposition of any Lien whatsoever upon any
of the property or assets of the Borrower or any such Subsidiary, other than
Liens permitted by the Loan Documents, or (iv) require any approval of the
Borrower's or any such Subsidiary's shareholders except such as have been
obtained. Except as set forth on Schedule 5.3 to this Agreement, the execution,
delivery and performance of each of the Transaction Documents to which the
Borrower or any of its Subsidiaries is a party do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by any Governmental Authority, including under any Environmental
Property Transfer Act, except filings, consents or notices which have been made,
obtained or given, or which, if not made, obtained or given, individually or in
the aggregate would not reasonably be expected to have a Material Adverse
Effect.
5.4 Financial Statements. The September 30, 1997 financial statements of
Holdings, the Borrower and its Subsidiaries, copies of which were delivered to
the Agent and the Lenders pursuant to the Second Credit Agreement, present the
financial condition of Holdings, the Borrower and such Subsidiaries as of such
date. The pro forma financial statements of Holdings,
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the Borrower and its Subsidiaries dated as of the Closing Date, copies of which
have been delivered to the Agent and the Lenders prior to the Closing Date,
present on a pro forma basis the financial condition of Holdings, the Borrower
and its Subsidiaries as of such date after giving effect to the BHD Acquisition.
The assumptions expressed in such pro forma financial statements were prepared
in good faith and are reasonable based on the information available to the
Borrower as of the Closing Date.
5.5 No Material Adverse Change. Since September 30, 1997, there has
occurred no change in the business, properties, condition (financial or
otherwise) or results of operations of the Borrower or the Borrower and its
Subsidiaries taken as a whole or any other event which has had or is reasonably
likely to have a Material Adverse Effect.
5.6 Taxes.
(A) Tax Examinations. All deficiencies which have been asserted against
the Borrower or any of the Borrower's Subsidiaries as a result of any federal,
state, local or foreign tax examination for each taxable year in respect of
which an examination has been conducted have been fully paid or finally settled
or are being contested in good faith, and as of the Closing Date, no issue has
been raised by any taxing authority in any such examination which, by
application of similar principles, reasonably can be expected to result in
assertion by such taxing authority of a material deficiency for any other year
not so examined which has not been reserved for in the Borrower's consolidated
financial statements to the extent, if any, required by Agreement Accounting
Principles. Except as permitted pursuant to Section 6.2(D), neither the
Borrower nor any of the Borrower's Subsidiaries anticipates any material tax
liability with respect to the years which have not been closed pursuant to
applicable law.
(B) Payment of Taxes. All tax returns and reports of each of Holdings,
the Borrower and the Borrower's Subsidiaries required to be filed have been
timely filed, and all taxes, assessments, fees and other governmental charges
thereupon and upon their respective property, assets, income and franchises
which are shown in such returns or reports to be due and payable have been paid
except those items which are being contested in good faith and have been
reserved for in accordance with Agreement Accounting Principles. The Borrower
has no knowledge of any proposed tax assessment against Holdings, the Borrower
or any of the Borrower's Subsidiaries that will have or is reasonably likely to
have a Material Adverse Effect.
5.7 Litigation; Loss Contingencies and Violations. Except as set forth
in Schedules 5.7 and 5.18 to this Agreement, there is no action, suit,
proceeding, investigation known to the Borrower or arbitration before or by any
Governmental Authority or private arbitrator pending or, to the knowledge of the
Borrower or any of its Subsidiaries, threatened against the Borrower or any of
its Subsidiaries or any property of any of them (i) challenging the validity or
the enforceability of any material provision of the Transaction Documents or
(ii) which will have or is reasonably likely to have a Material Adverse Effect.
There is no material loss contingency within the meaning of Agreement Accounting
Principles which has not been reflected in the consolidating financial
statements of the Borrower prepared and delivered to Section 6.1(A)(i) for the
fiscal period during which such material loss contingency was incurred. Neither
the Borrower
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nor any of its Subsidiaries is (A) in violation of any applicable Requirements
of Law which violation will have or is reasonably likely to have a Material
Adverse Effect, or (B) subject to or in default with respect to any final
judgment, writ, injunction, restraining order or order of any nature, decree,
rule or regulation of any court or Governmental Authority which will have or is
reasonably likely to have a Material Adverse Effect.
5.8 Subsidiaries. Schedule 5.8 to this Agreement (i) contains a
description of the corporate structure of Holdings, the Borrower, its
Subsidiaries and any other Person in which Holdings, the Borrower or any of its
Subsidiaries holds an equity interest; and (ii) accurately sets forth (A) the
correct legal name, the jurisdiction of incorporation and the jurisdictions in
which each of the Borrower and the direct and indirect Subsidiaries of the
Borrower is qualified to transact business as a foreign corporation, (B) the
authorized, issued and outstanding shares of each class of Capital Stock of the
Borrower and each of its Subsidiaries and the owners of such shares, and (C) a
summary of the direct and indirect partnership, joint venture, or other equity
interests, if any, of Holdings, the Borrower and each Subsidiary of the Borrower
in any Person that is not a corporation. None of the issued and outstanding
Capital Stock of the Borrower or any of its Subsidiaries is subject to any
vesting, redemption, or repurchase agreement, and there are no warrants or
options outstanding with respect to such Capital Stock. The outstanding Capital
Stock of the Borrower and each of its Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and is not margin stock (as defined in
Regulation U). The Borrower has no Subsidiaries other than Alliance, all of the
Capital Stock of which is owned by the Borrower. Except as described in
Schedule 5.8, Alliance has no assets or Indebtedness and does not conduct any
active business. Holdings has no Subsidiaries other than the Borrower and, upon
its creation in accordance with Section 6.3(G), the Finance Subsidiary.
5.9 ERISA. Neither the Borrower nor any of its Subsidiaries is now
maintaining or contributing to or has ever maintained or contributed to any
Benefit Plan. Neither the Borrower nor any of its Subsidiaries is now
contributing to or has ever contributed to or been obligated to contribute to
any Multiemployer Plan. Neither the Borrower nor any of its Subsidiaries
maintains or contributes to any employee welfare benefit plan within the meaning
of Section 3(1) of ERISA which provides benefits to employees after termination
of employment other than as required by Section 601 of ERISA. Each Plan which
is intended to be qualified under Section 401(a) of the Code as currently in
effect is so qualified, and each trust related to any such Plan is exempt from
federal income tax under Section 501(a) of the Code as currently in effect. The
Borrower and all its Subsidiaries are in compliance in all material respects
with the responsibilities, obligations and duties imposed on them by ERISA and
the Code with respect to all Plans. Neither the Borrower nor any other member
of the Controlled Group nor, to the knowledge of the Borrower or any member of
the Controlled Group, any fiduciary of any Plan has engaged in a nonexempt
prohibited transaction described in Sections 406 of ERISA or 4975 of the Code
which could reasonably be expected to subject the Borrower to liability
individually or in the aggregate in excess of $1,000,000. Neither the Borrower
nor any member of the Controlled Group has taken or failed to take any action
which would constitute or result in a Termination Event, which action or
inaction could reasonably be expected to subject the Borrower to liability
individually or in the aggregate in excess of $1,000,000. Neither the Borrower
nor any Subsidiary is subject to any liability under Sections 4063, 4064, 4069,
4204 or 4212(c) of ERISA and no other member of the
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Controlled Group is subject to any liability under Sections 4063, 4064, 4069,
4204 or 4212(c) of ERISA which could reasonably be expected to subject the
Borrower to liability individually or in the aggregate in excess of $1,000,000.
Neither the Borrower nor any of its Subsidiaries has, by reason of the
transactions contemplated hereby, any obligation to make any payment to any
employee pursuant to any Plan or existing contract or arrangement.
5.10 Accuracy of Information. The information, exhibits and reports
furnished by the Borrower and any of its Subsidiaries to the Agent or to any
Lender in connection with the negotiation of, or compliance with, the Loan
Documents, the representations and warranties of the Borrower and its
Subsidiaries contained in the Loan Documents, and all certificates and documents
delivered to the Agent and the Lenders pursuant to the terms thereof do not
contain as of the date furnished any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which they were made, not
misleading. The assumptions and projections expressed in the documents so
furnished were reasonable based on the best information available at the time so
furnished; provided that the Borrower makes no representation or warranty that
such assumptions will prove in the future to be accurate or that the Borrower
will achieve the financial results reflected in such projections.
5.11 Securities Activities. Neither the Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (as defined in Regulation U).
5.12 Material Agreements. Neither the Borrower nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction which will have or is reasonably likely to have a Material
Adverse Effect. Neither the Borrower nor any of its Subsidiaries has received
notice or has actual knowledge that (i) it is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Contractual Obligation applicable to it, or (ii) any condition
exists which, with the giving of notice or the lapse of time or both, would
constitute a default with respect to any such Contractual Obligation, in each
case, except where such default or defaults, if any, will not have or are not
reasonably likely to have a Material Adverse Effect.
5.13 Compliance with Laws. The Borrower and its Subsidiaries are in
compliance with all Requirements of Law applicable to them and their respective
businesses, in each case where the failure to so comply individually or in the
aggregate will have or is reasonably likely to have a Material Adverse Effect.
5.14 Assets and Properties. The Borrower and each of its Subsidiaries
has good and marketable title to all of its assets and properties (tangible and
intangible, real or personal) owned by it or a valid leasehold interest in all
of its leased assets (except insofar as marketability may be limited by any laws
or regulations of any Governmental Authority affecting such assets), and all
such assets and property are free and clear of all Liens, except Liens securing
the Secured Obligations and Liens permitted under Section 6.3(C). Substantially
all of the assets and properties owned by, leased to or used by the Borrower
and/or each such Subsidiary of the
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Borrower are in adequate operating condition and repair, ordinary wear and tear
excepted. Except for Liens granted to the Agent for the benefit of the Agent and
the Holders of Secured Obligations, neither this Agreement nor any other
Transaction Document, nor any transaction contemplated under any such agreement,
will affect any right, title or interest of the Borrower or such Subsidiary in
and to any of such assets in a manner that would have or is reasonably likely to
have a Material Adverse Effect.
5.15 Statutory Indebtedness Restrictions. Neither the Borrower, nor any
of its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or the
Investment Company Act of 1940, or any other federal or state statute or
regulation which limits its ability to incur indebtedness or its ability to
consummate the transactions contemplated hereby.
5.16 Post-Retirement Benefits. As of the Closing Date the Borrower and
its Subsidiaries have no expected cost of post-retirement medical and insurance
benefits payable by the Borrower and its Subsidiaries to its employees and
former employees, as estimated by the Borrower in accordance with Financial
Accounting Standards Board Statement No. 106.
5.17 Insurance. Schedule 5.17 to this Agreement accurately sets forth as
of the Closing Date all insurance policies and programs currently in effect with
respect to the respective properties and assets and business of the Borrower and
its Subsidiaries, specifying for each such policy and program, (i) the amount
thereof, (ii) the risks insured against thereby, (iii) the name of the insurer
and each insured party thereunder, (iv) the policy or other identification
number thereof, (v) the expiration date thereof, (vi) the annual premium with
respect thereto and (vii) describes any reserves, relating to any self-insurance
program that is in effect. Such insurance policies and programs reflect
coverage that is reasonably consistent with prudent industry practice.
5.18 Contingent Obligations. Except as set forth on Schedule 5.18 to
this Agreement, neither the Borrower nor any of its Subsidiaries has any
Contingent Obligation, contingent liability, long-term lease or commitment, not
reflected in its audited financial statements delivered to the Agent on or prior
to the Closing Date or otherwise disclosed to the Agent and the Lenders in the
other Schedules to this Agreement, which will have or is reasonably likely to
have a Material Adverse Effect.
5.19 Restricted Junior Payments. Neither the Borrower nor any of its
Subsidiaries has directly or indirectly declared, ordered, paid or made or set
apart any sum or properties for any Restricted Junior Payment or agreed to do
so, except as permitted pursuant to Section 6.3(F) of this Agreement.
5.20 Labor Matters.
(A) Except as listed on Schedule 5.20 to this Agreement, on the Closing
Date there are no collective bargaining agreements, other labor agreements or
Multiemployer Plans covering any of the employees of the Borrower or any of its
Subsidiaries. As of the Closing Date, no attempt
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to organize the employees of the Borrower, and no labor disputes, strikes or
walkouts affecting the operations of the Borrower or any of its Subsidiaries, is
pending, or, to the Borrower's knowledge, threatened, planned or contemplated.
(B) Set forth in Schedule 5.20 to this Agreement is a list, as of the
Closing Date, of all material consulting agreements, executive compensation
plans, deferred compensation agreements, employee pension plans or retirement
plans, employee profit sharing plans, employee stock purchase and stock option
plans, severance plans, group life insurance, hospitalization insurance or other
plans or arrangements of Holdings, the Borrower and its Subsidiaries providing
for benefits for employees of Holdings, the Borrower and its Subsidiaries.
5.21 Environmental Matters. Except as disclosed on Schedule 5.21 to this
Agreement or except as would not reasonably be likely to subject the Borrower to
liability individually or in the aggregate in excess of $1,000,000, the
operations of the Borrower and its Subsidiaries comply in all material respects
with Environmental, Health or Safety Requirements of Law and neither the
Borrower, any of its Subsidiaries nor any of their respective present property
or operations, or, to the best of, the Borrower's or any of its Subsidiaries'
knowledge, any of their respective past property or operations, are subject to
or the subject of, any investigation known to the Borrower or any of its
Subsidiaries, judicial or administrative proceeding, order, judgment, decree,
settlement or other agreement respecting (a) any material violation of
Environmental, Health or Safety Requirements of Law, (b) any remedial action or
(c) any claims or liabilities arising from the Release or threatened Release of
a Contaminant into the environment. Except as disclosed on Schedule 5.21 to
this Agreement or except as would not reasonably be likely to subject the
Borrower to liability individually or in the aggregate in excess of $1,000,000,
there is not now, nor to the best of the Borrower's or any of its Subsidiaries'
knowledge has there ever been on or in the property of the Borrower or any of
its Subsidiaries any landfill, waste pile, underground storage tanks,
aboveground storage tanks, surface impoundment or hazardous waste storage
facility of any kind, any polychlorinated biphenyls (PCBs) used in hydraulic
oils, electric transformers or other equipment, or any asbestos containing
material. Neither the Borrower nor any of its Subsidiaries has any material
Contingent Obligation in connection with any Release or threatened Release of a
Contaminant into the environment which could reasonably be likely to subject the
Borrower to liability individually or in the aggregate in excess of $1,000,000.
5.22 The BHD Acquisition. As of the Closing Date, the BHD Acquisition
has been consummated pursuant to the BHD Acquisition Agreement, no material
breach, default or waiver of any term or condition of the BHD Acquisition
Agreement by the Borrower or Holdings or, to the best of the Borrower's
knowledge, the other parties thereto has occurred, and the Borrower has obtained
good and marketable title to the "Purchased Assets" (as defined in the BHD
Acquisition Agreement) free and clear of any Liens other than Liens permitted
under this Agreement.
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ARTICLE VI: COVENANTS
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The Borrower covenants and agrees that so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations
(other than contingent indemnity obligations), unless the Required Lenders shall
otherwise give prior written consent:
6.1 Reporting. The Borrower shall:
(A) Financial Reporting. Furnish to the Lenders:
(i) Monthly Reports. As soon as practicable, and in any event within
twenty-five (25) days after the end of each calendar month, the
consolidated balance sheet of Holdings and its consolidated Subsidiaries as
at the end of such period and the related consolidated statements of
income, stockholders' equity and cash flow of Holdings and its
consolidated Subsidiaries for such calendar month, certified by the chief
financial officer of the Borrower on behalf of the Borrower as fairly
presenting the consolidated financial position of Holdings and its
consolidated Subsidiaries as at the dates indicated and the results of
their operations and cash flow for the calendar months indicated in
accordance with Agreement Accounting Principles, subject to absence of
footnote disclosures and to normal year end adjustments.
(ii) Quarterly Reports. (a) As soon as practicable, and in any event
within forty-five (45) days after the end of each fiscal quarter in each
fiscal year, the consolidated balance sheet of Holdings and its
consolidated Subsidiaries as at the end of such period and the related
consolidated statements of income, stockholders' equity and cash flow of
Holdings and its consolidated Subsidiaries for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the end of
such fiscal quarter, and a forecasted consolidated balance sheet and a
consolidated statement of earnings and cash flow of Holdings and its
consolidated Subsidiaries for and as of the end of the next succeeding
fiscal quarter and a comparison of the statement of earnings and cash flow
to the budget, certified by the chief financial officer of the Borrower on
behalf of the Borrower as fairly presenting the consolidated financial
position of Holdings and its consolidated Subsidiaries as at the dates
indicated and the results of their operations and cash flow for the periods
indicated in accordance with Agreement Accounting Principles, subject to
absence of footnote disclosures and to normal year end adjustments.
(b) As soon as practicable, and in any event within forty-five (45)
days after the end of the last fiscal quarter in each fiscal year, the
preliminary annual unaudited consolidated balance sheets of Holdings and
its consolidated Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income, stockholders' equity and cash
flow of Holdings and its consolidated Subsidiaries for such fiscal year,
setting forth in each case in comparative form the corresponding actual and
forecasted figures for the previous fiscal year, subject to revisions based
on the annual reports delivered pursuant to clause (iii) below, along with
consolidating schedules in form and substance sufficient to calculate the
financial covenants set forth in Section 6.4.
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(iii) Annual Reports. As soon as practicable, and in any event
within ninety (90) days after the end of each fiscal year, (a) the
consolidated balance sheets of Holdings and its consolidated Subsidiaries
as at the end of such fiscal year and the related consolidated statements
of income, stockholders' equity and cash flow of Holdings and its
consolidated Subsidiaries for such fiscal year, and in comparative form the
corresponding figures for the previous fiscal year along with consolidating
schedules in form and substance sufficient to calculate the financial
covenants set forth in Article 6.4, (b) a schedule from the Borrower
setting forth for each item in clause (a) hereof, the corresponding figures
from the consolidated financial budget for the current fiscal year
delivered pursuant to Section 6.1(A)(v), and (c) an audit report on the
items listed in clause (a) hereof of independent certified public
accountants of recognized national standing, which audit report shall be
unqualified and shall state that such financial statements fairly present
the consolidated financial position of Holdings and its consolidated
Subsidiaries as at the dates indicated and the results of their operations
and cash flow for the periods indicated in conformity with Agreement
Accounting Principles and that the examination by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards. The deliveries made
pursuant to this clause (iii) shall be accompanied by (y) any management
letter prepared by the above-referenced accountants and (z) a certificate
of such accountants that, in the course of their examination necessary for
their certification of the foregoing, they have obtained no knowledge of
any Default or Unmatured Default, or if, in the opinion of such
accountants, any Default or Unmatured Default shall exist, stating the
nature and status thereof.
(iv) Officer's Certificate. Together with each delivery of any
financial statement (a) pursuant to clauses (i), (ii) and (iii) of this
Section 6.1(A), an Officer's Certificate of the Borrower, substantially in
the form of Exhibit F attached hereto and made a part hereof, stating that
no Default or Unmatured Default exists, or if any Default or Unmatured
Default exists, stating the nature and status thereof and (b) pursuant to
clauses (ii) and (iii) of this Section 6.1(A), a Compliance Certificate,
substantially in the form of Exhibit G attached hereto and made a part
hereof, signed by the Borrower's chief financial officer or treasurer,
setting forth calculations for the period then ended for Section 2.5(B), if
applicable, which demonstrate compliance, when applicable, with the
provisions of Sections 6.3(F) and 6.4 and which details the current status
of lease payments required with respect to each of the Borrower's leased
premises where no landlord waiver agreement has been obtained pursuant to
the terms of the applicable Security Agreement.
(v) Budgets; Business Plans; Financial Projections. As soon as
practicable and in any event not later than the forty-fifth (45th) day
after the beginning of each fiscal year, a copy of the plan and forecast
(including a projected balance sheet, income statement and funds flow
statement) of Holdings, the Borrower and its Subsidiaries for such fiscal
year prepared in such detail as shall be reasonably satisfactory to the
Agent. As soon as practicable, any revisions of such plan and forecast
which represent a material amendment thereof.
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(vi) Consolidating Financial Statements. Together with each delivery
of any financial statement pursuant to clause (i), (ii) or (iii) of this
Section 6.1(A), the Borrower shall deliver the corresponding consolidating
financial statements of the Borrower and each of its Subsidiaries (other
than Alliance) certified or audited, as applicable, if requested by the
Agent or the Required Lenders.
(B) Notice of Default. Promptly upon any of the chief executive officer,
chief operating officer, chief financial officer, treasurer or controller of the
Borrower obtaining knowledge (i) of any condition or event which constitutes a
Default or Unmatured Default, or becoming aware that any Lender or Agent has
given any written notice with respect to a claimed Default or Unmatured Default
under this Agreement, or (ii) that any Person has given any written notice to
the Borrower or any Subsidiary of the Borrower or taken any other action with
respect to a claimed default or event or condition of the type referred to in
Section 7.1(e), deliver to the Agent and the Lenders an Officer's Certificate
specifying (A) the nature and period of existence of any such claimed default,
Default, Unmatured Default, condition or event, (B) the notice given or action
taken by such Person in connection therewith, and (C) what action the Borrower
has taken, is taking and proposes to take with respect thereto.
(C) Lawsuits. (i) Promptly upon the Borrower obtaining knowledge of the
institution of, or written threat of, any action, suit, proceeding, governmental
investigation or arbitration against or affecting the Borrower or any of its
Subsidiaries or any property of the Borrower or any of its Subsidiaries not
previously disclosed pursuant to Section 5.7, which action, suit, proceeding,
governmental investigation or arbitration exposes, or in the case of multiple
actions, suits, proceedings, governmental investigations or arbitrations arising
out of the same general allegations or circumstances which expose, in the
Borrower's reasonable judgment, the Borrower or any of its Subsidiaries to
liability in an amount aggregating $1,000,000 or more (exclusive of claims
covered by insurance policies of the Borrower or any of its Subsidiaries unless
the insurers of such claims have disclaimed coverage or reserved the right to
disclaim coverage on such claims and exclusive of claims covered by the
indemnity of a financially responsible indemnitor in favor of Borrower or any of
its Subsidiaries (unless the indemnitor has disclaimed or reserved the right to
disclaim coverage thereof)), give written notice thereof to the Agent and the
Lenders and provide such other information as may be reasonably available to
enable each Lender and the Agent and its counsel to evaluate such matters; and
(ii) in addition to the requirements set forth in clause (i) of this Section
6.1(C), upon request of the Agent or the Required Lenders, promptly give written
notice of the status of any action, suit, proceeding, governmental investigation
or arbitration covered by a report delivered pursuant to clause (i) above and
provide such other information as may be reasonably available to it that would
not violate any attorney-client privilege by disclosure to the Lenders to enable
each Lender and the Agent and its counsel to evaluate such matters.
(D) Insurance. As soon as practicable and in any event within ninety
(90) days after the end of each fiscal year commencing with the fiscal year
ending December 31, 1997, deliver to the Agent and the Lenders (i) a report in
form and substance reasonably satisfactory to the Agent and the Lenders
outlining all material insurance coverage maintained as of the date of such
report by
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the Borrower and its Subsidiaries and the duration of such coverage and (ii) an
insurance broker's statement that all premiums with respect to such coverage
have been paid when due.
(E) ERISA Notices. Deliver or cause to be delivered to the Agent and the
Lenders, at the Borrower's expense, the following information and notices as
soon as reasonably possible, and in any event:
(i) (a) within ten (10) Business Days after the Borrower knows or has
reason to know that a Termination Event has occurred, a written statement
of the chief financial officer of the Borrower describing such Termination
Event and the action, if any, which the Borrower has taken, is taking or
proposes to take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto and (b) within ten
(10) Business Days after any member of the Controlled Group knows or has
reason to know that a Termination Event has occurred which could reasonably
be expected to subject the Borrower to liability individually or in the
aggregate in excess of $1,000,000, a written statement of the chief
financial officer of the Borrower describing such Termination Event and the
action, if any, which the member of the Controlled Group has taken, is
taking or proposes to take with respect thereto, and when known, any action
taken or threatened by the IRS, DOL or PBGC with respect thereto;
(ii) within ten (10) Business Days after the Borrower or any of its
Subsidiaries knows or has reason to know that an assessment of a prohibited
transaction excise tax under Section 4975 of the Code has occurred, a
statement of the chief financial officer of the Borrower describing such
transaction and the action which the Borrower or any of its Subsidiaries
has taken, is taking or proposes to take with respect thereto;
(iii) within ten (10) Business Days after the establishment of any
Benefit Plan or the commencement of, or obligation to commence,
contributions to any Benefit Plan or Multiemployer Plan to which the
Borrower or any of its Subsidiaries was not previously contributing,
notification of such establishment, commencement or obligation to commence
and the amount of such contributions;
(iv) within ten (10) Business Days after the Borrower or any of its
Subsidiaries receives notice of any unfavorable determination letter from
the IRS regarding the qualification of a Plan under Section 401(a) of the
Code, copies of each such letter; and
(v) within ten (10) Business Days after the establishment of any
foreign employee benefit plan or the commencement of, or obligation to
commence, contributions to any foreign employee benefit plan to which the
Borrower or any Subsidiary was not previously contributing, notification of
such establishment, commencement or obligation to commence and the amount
of such contributions.
For purposes of this Section 6.1(E), the Borrower and any member of the
Controlled Group shall be deemed to know all facts known by the Administrator of
any Plan of which the Borrower or any member of the Controlled Group is the plan
sponsor.
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(F) Labor Matters. Notify the Agent and the Lenders in writing, promptly
upon the Borrower's learning thereof, of (i) any material labor dispute to which
the Borrower or any of its Subsidiaries may become a party, including, without
limitation, any strikes, lockouts or other disputes relating to such Persons'
plants and other facilities and (ii) any Worker Adjustment and Retraining
Notification Act liability incurred with respect to the closing of any plant or
other facility of the Borrower or any of its Subsidiaries.
(G) Other Indebtedness. Deliver to the Agent (i) a copy of each regular
report, notice or communication regarding potential or actual defaults
(including any accompanying officers' certificate) delivered by or on behalf of
the Borrower to the holders of funded Indebtedness pursuant to the terms of the
agreements governing such Indebtedness, such delivery to be made at the same
time and by the same means as such notice or other communication is delivered to
such holders, and (ii) a copy of each notice or other communication received by
the Borrower from the holders of funded Indebtedness pursuant to the terms of
such Indebtedness, such delivery to be made promptly after such notice or other
communication is received by the Borrower.
(H) Environmental Notices. As soon as possible and in any event within
ten (10) days after receipt by the Borrower, a copy of (i) any notice or claim
to the effect that the Borrower or any of its Subsidiaries is or may be liable
to any Person as a result of the Release by the Borrower, any of its
Subsidiaries, or any other Person of any Contaminant into the environment, and
(ii) any notice alleging any violation of any Environmental, Health or Safety
Requirements of Law by the Borrower or any of its Subsidiaries if, in either
case, such notice or claim relates to an event which could reasonably be
expected to subject the Borrower to liability individually or in the aggregate
in excess of $1,000,000.
(I) Borrowing Base Certificate. As soon as practicable, and in any event
within twenty (20) days after the close of each calendar month (and more often
if requested by the Agent or the Required Lenders), the Borrower shall provide
the Agent and the Lenders with a Borrowing Base Certificate, together with such
supporting documents as the Agent deems desirable, all certified as being true
and correct by the chief financial officer or treasurer of the Borrower. The
Borrower may update the Borrowing Base Certificate and supporting documents more
frequently than monthly and the most recently delivered Borrowing Base
Certificate shall be the applicable Borrowing Base Certificate for purposes of
determining the Borrowing Base at any time.
(J) SEC Filings and Notices. Promptly upon the filing thereof or receipt
thereof, deliver copies to the Agent of all registration statements and annual,
quarterly, monthly or other reports (including 8-Ks) which Holdings, the
Borrower or any of its Subsidiaries files with the Securities and Exchange
Commission (other than routine reports which are required to be filed concerning
the management of employee benefit plans, including, without limitation, stock
purchases or the exercise of stock options made under any such employee benefit
plan) and all notifications received from the Securities and Exchange Commission
by Holdings, the Borrower or their Subsidiaries pursuant to the Securities
Exchange Act and the rules promulgated thereunder.
(K) Other Publicly Available Information. Promptly upon the furnishing
thereof or the making available thereof, copies of all financial statements,
reports and notices, if any, sent or
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made available generally by Holdings or the Borrower to its securities holders
or filed with the Securities and Exchange Commission by Holdings or the
Borrower, all press releases made available generally by Holdings or the
Borrower or any of their Subsidiaries to the public concerning material
developments in the business of Holdings, the Borrower or any such Subsidiary.
(L) Other Information. Promptly upon receiving a request therefor from
the Agent, prepare and deliver to the Agent and the Lenders such other
information with respect to Holdings, the Borrower, any of its Subsidiaries, or
the Collateral, including, without limitation, schedules identifying and
describing the Collateral and any dispositions thereof or any Asset Sale (and
the use of the Net Cash Proceeds thereof), as from time to time may be
reasonably requested by the Agent.
6.2 Affirmative Covenants.
(A) Corporate Existence, Etc. The Borrower shall, and shall cause each
of its Subsidiaries (other than Alliance) to, at all times maintain its
corporate existence and preserve and keep, or cause to be preserved and kept, in
full force and effect its rights and franchises material to its businesses.
(B) Corporate Powers; Conduct of Business. The Borrower shall, and shall
cause each of its Subsidiaries (other than Alliance) to, qualify and remain
qualified to do business in each jurisdiction in which the nature of its
business requires it to be so qualified and where the failure to be so qualified
will have or is reasonably likely to have a Material Adverse Effect. The
Borrower will, and will cause each Subsidiary (other than Alliance) to, carry on
and conduct its business in substantially the same manner and in substantially
the same fields of enterprise as it is presently conducted.
(C) Compliance with Laws, Etc. The Borrower shall, and shall cause its
Subsidiaries to, (a) comply with all Requirements of Law and all restrictive
covenants affecting such Person or the business, properties, assets or
operations of such Person, and (b) obtain as needed all Permits necessary for
its operations and maintain such Permits in good standing, unless failure to
comply or obtain could not reasonably be anticipated to have a Material Adverse
Effect.
(D) Payment of Taxes and Claims; Tax Consolidation. The Borrower shall
pay, and cause each of its Subsidiaries to pay, (i) all taxes, assessments and
other governmental charges imposed upon it or on any of its properties or assets
or in respect of any of its franchises, business, income or property before any
penalty or interest accrues thereon, and (ii) all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or may become a Lien (other
than a Lien permitted by Section 6.3(C) upon any of the Borrower's or such
Subsidiary's property or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided, however, that no such taxes,
assessments and governmental charges referred to in clause (i) above or claims
referred to in clause (ii) above (and interest, penalties or fines relating
thereto) need be paid if being contested in good faith by appropriate
proceedings diligently instituted and
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conducted and if a reserve or other appropriate provision, if any, as shall be
required in conformity with Agreement Accounting Principles shall have been made
therefor. The Borrower will not, nor will it permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with any
Person other than Holdings and the Finance Subsidiary.
(E) Insurance. The Borrower shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force
and effect the insurance policies and programs listed on Schedule 5.17 to this
Agreement or substantially similar policies and programs or other policies and
programs as reflect coverage that is reasonably consistent with prudent industry
practice. The Borrower shall deliver to the Agent endorsements (y) to all "All
Risk" physical damage insurance policies on all of the Borrower's and its
Subsidiaries' tangible real and personal property and assets and business
interruption insurance policies naming the Agent loss payee, in form and
substance acceptable to the Agent showing loss payable to the Agent (Form 438
BFU or its equivalent) and extra expense and business interruption endorsements
and such endorsement, or an independent instrument furnished to the Agent, shall
provide that the insurance companies will give the Agent at least thirty (30)
days' prior written notice before any such policy or policies of insurance shall
be altered or canceled (other than for nonpayment of premiums, which shall
require ten (10) days' prior written notice) and that no act or default of the
Borrower or any of its Subsidiaries or any other Person shall affect the right
of the Agent to recover under such policy or policies of insurance in case of
loss or damage and (z) to all general liability and other liability policies of
the Borrower and its Subsidiaries naming the Agent an additional insured. In
the event the Borrower or any of its Subsidiaries, at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required herein or to pay any premium in whole or in part relating thereto, then
the Agent, without waiving or releasing any Obligations or resulting Default
hereunder, may at any time or times thereafter (but shall be under no obligation
to do so) obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto which the Agent deems advisable.
All sums so disbursed by the Agent shall constitute part of the Obligations,
payable as provided in this Agreement.
(F) Inspection of Property; Books and Records; Discussions. The Borrower
shall permit, and cause each of its Subsidiaries to permit, any authorized
representative(s) designated by either the Agent or any Lender to visit and
inspect any of the properties of the Borrower or any of its Subsidiaries, to
examine, audit, check and make copies of their respective financial and
accounting records, books, journals, orders, receipts and any correspondence and
other data relating to their respective businesses or the transactions
contemplated hereby (including, without limitation, in connection with
environmental compliance, hazard or liability), and to discuss their affairs,
finances and accounts with their officers and independent certified public
accountants, all upon reasonable notice and at such reasonable times during
normal business hours, as often as may be reasonably requested; provided,
however, that the Agent and the Lenders shall conduct no more than one
inspection during any twelve-month period if such inspection is conducted at a
time when no Default or Unmatured Default shall have occurred and is continuing.
The Borrower shall keep and maintain, and cause its Subsidiaries to keep and
maintain, in all material respects, proper books of record and account in which
entries in conformity with Agreement Accounting Principles shall be made of all
dealings and transactions in relation to their respective businesses and
activities, including, without limitation, transactions and other dealings with
respect to the
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Collateral. If a Default has occurred and is continuing, the Borrower, upon the
Agent's request, shall turn over any such records to the Agent or its
representatives.
(G) Insurance and Condemnation Proceeds. The Borrower hereby directs
(and, if applicable, shall cause its Subsidiaries to direct) all insurers under
policies of property damage, boiler and machinery and business interruption
insurance and payors of any condemnation claim or award relating to the property
to pay all proceeds payable under such policies or with respect to such claim or
award for any loss with respect to the Collateral directly to the Agent, for the
benefit of the Agent and the Holders of the Secured Obligations; provided,
however, in the event that such proceeds or award are less than $2,000,000 in
the aggregate or $1,000,000 for any particular service center or other location
("Excluded Proceeds"), unless a Default shall have occurred and be continuing,
the Agent shall remit such Excluded Proceeds to the Borrower which the Borrower
hereby covenants and agrees it shall use to restore, rebuild or replace the
property subject to any such insurance payment or condemnation award as soon as
practicable after receipt thereof. Each such policy shall contain a long-form
loss-payable endorsement naming the Agent as loss payee, which endorsement shall
be in form and substance acceptable to the Agent. The Agent shall, upon receipt
of such proceeds (other than Excluded Proceeds) and at the Borrower's direction,
either apply the same to the principal amount of the Loans outstanding at the
time of such receipt and create a corresponding reserve against Revolving Credit
Availability in an amount equal to such application (the "Decision Reserve") or
hold them as cash collateral for the Secured Obligations. For up to 150 days
from the date of any loss (the "Decision Period"), the Borrower may notify the
Agent that it intends to restore, rebuild or replace the property subject to any
insurance payment or condemnation award and shall, as soon as practicable
thereafter, provide the Agent detailed information, including a construction
schedule and cost estimates. Should a Default occur at any time during the
Decision Period, should the Borrower notify the Agent that it has decided not to
rebuild or replace such property during the Decision Period, or should the
Borrower fail to notify the Agent of the Borrower's decision during the Decision
Period, then the amounts held as cash collateral pursuant to this Section 6.2(G)
or as the Decision Reserve shall upon the Required Lenders' direction be applied
as a mandatory prepayment of the Term Loans pursuant to Section 2.5(B).
Proceeds held as cash collateral pursuant to this Section 6.2(G) or constituting
the Decision Reserve shall be disbursed as payments for restoration, rebuilding
or replacement of such property become due; provided, however, should a Default
occur after the Borrower has notified the Agent that it intends to rebuild or
replace the property, the Decision Reserve or amounts held as cash collateral
may, or shall, upon the Required Lenders' direction, be applied as a mandatory
prepayment of the Term Loans pursuant to Section 2.5(B). In the event the
Decision Reserve is to be applied as a mandatory prepayment to the Term Loans,
the Borrower shall be deemed to have requested Revolving Loans in an amount
equal to the Decision Reserve, and such Loans shall be made regardless of any
failure of the Borrower to meet the conditions precedent set forth in Article
IV. Upon completion of the restoration, rebuilding or replacement of such
property, the unused proceeds shall constitute Net Cash Proceeds of an Asset
Sale and shall be applied as a mandatory prepayment of the Term Loans pursuant
to Section 2.5(B).
(H) ERISA Compliance. The Borrower shall, and shall cause each of its
Subsidiaries to, establish, maintain and operate all Plans to comply in all
material respects with the provisions of
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ERISA, the Code, all other applicable laws, and the regulations and
interpretations thereunder and the respective requirements of the governing
documents for such Plans.
(I) Maintenance of Property. The Borrower shall cause all property used
or useful in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Borrower from
discontinuing the operation or maintenance of any of such property if such
discontinuance is, in the judgment of the Borrower, desirable in the conduct of
its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Agent or the Lenders.
(J) Environmental Compliance. The Borrower and its Subsidiaries shall
comply with all Environmental, Health or Safety Requirements of Law, except
where noncompliance will not have or is not reasonably likely to have a Material
Adverse Effect.
(K) Use of Proceeds. The Borrower will use the proceeds of the Revolving
Loans to provide funds (i) to fund the BHD Acquisition, (ii) for the working
capital needs of the Borrower and other general corporate purposes and (iii) to
repay outstanding Loans. The Borrower will not, nor will it permit any
Subsidiary to, use any of the proceeds of the Loans to purchase or carry any
"margin stock" (as defined in Regulation U) or to make any Acquisition (other
than the BHD Acquisition or any Permitted Acquisition).
(L) Interest Rate Agreements. The Borrower has previously entered into,
shall at all times hereafter maintain and shall enter into such additional
Interest Rate Agreements on terms and with counterparties determined by the
Borrower and reasonably acceptable to the Agent by which the Borrower is
protected against increases in interest rates from and after the date of such
contracts as to a notional amount which is not at any time less than twenty-five
percent (25%) of the outstanding principal amount of the Term Loans. In the
event a Lender elects to enter into any Interest Rate Agreement with the
Borrower, the obligations of the Borrower with respect to such Interest Rate
Agreement shall be Secured Obligations secured by the Collateral.
(M) Collection Account Arrangements.
(i) All collections of the Borrower's Receivables included in the
Collateral and other proceeds of its Collateral shall be deposited in a
Collection Account of the Borrower which may be subject to a Collection
Account Agreement or pursuant to another similar arrangement for the
collection of such amounts established by the Borrower and Agent and shall
be transferred by the Borrower (1) at such frequency (but not less
frequently than each Business Day) as agreed to between the Agent and the
Borrower to a concentration account maintained by the Borrower with the
Agent or otherwise subject to a Collection Account Agreement, for any such
account not subject to a Collection Account Agreement or (2) in accordance
with the terms of the applicable Collection
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Account Agreement. Schedule 6.2(M) sets forth all of the deposit accounts
currently maintained by the Borrower. All collections from Account Debtors
in respect of payments on the Receivables of the Borrower shall be deemed
to have been received by the Borrower as the Agent's trustee and, upon the
Borrower's receipt thereof, the Borrower shall transfer all such amounts in
their original form (together with all necessary endorsements) for deposit
in accordance with the provisions of this Section 6.2(M).
(ii) Following the Collection Account Blockage Date and during the
continuance of a Default giving rise thereto, all payments received by the
Agent, all collections of Receivables included in the Collateral received
by the Agent, and all proceeds of other Collateral received by the Agent,
whether through payment or otherwise, will be the sole property of the
Agent for the benefit of the Holders of Secured Obligations and will be
deemed received by the Agent for application to the Obligations pursuant to
the terms of this Agreement.
(iii) The Borrower agrees to pay to Agent any and all fees, costs and
expenses which Agent incurs in connection with establishing and maintaining
the Collection Accounts, concentration accounts and depositing for
collection by Agent any check or item of payment received and/or delivered,
and the Borrower agrees to reimburse Agent for any amounts paid to any bank
party to a Collection Account Agreement arising out of Agent's
indemnification of such bank against damages incurred by the bank in the
operation of a Collection Account or other payments required to be made
under the Collection Account Agreement, all of which shall constitute
additional Obligations hereunder and shall be secured by the Collateral.
(N) Separate Corporate Existence. The Borrower shall take all reasonable
steps (including, without limitation, all steps which the Agent may from time to
time reasonably request) to maintain its and its Subsidiaries' identity as
separate legal entities from Holdings and to make it apparent to third parties
that each of the Borrower and such Subsidiaries are each an entity with assets
and liabilities distinct from those of Holdings and any of Holdings' Affiliates
(other than the Borrower and its Subsidiaries) (each of Holdings and such other
Persons are referred to in this Section 6.2(N), as the "Parent Entity").
Without limiting the generality of the foregoing, the Borrower shall:
(i) require that all full-time employees of the Borrower and each of
its Subsidiaries identify themselves as such and not as employees of any
Parent Entity;
(ii) compensate all employees, consultants, investment bankers,
accountants, lawyers and agents directly, from the Borrower's or such
Subsidiary's applicable bank accounts, for services provided to the
Borrower or such Subsidiary by such employees, consultants, investment
bankers and agents and, if any employee, consultant, investment banker or
agent of the Borrower or any of its Subsidiaries is also an employee,
consultant, investment banker or agent of any Parent Entity, allocate the
compensation of such employee, consultant, investment banker or agent among
the Borrower or its Subsidiaries, on the one hand as applicable, and the
applicable Parent Entity or Parent Entities, on the
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other hand as applicable, on the basis of actual use of the services so
rendered to the extent practicable and, to the extent such allocation is
not practical, on a basis reasonably related to actual use of such
services;
(iii) allocate all overhead expenses (including, without limitation,
telephone and other utility charges and lease and office expenses) for
items shared among the Borrower or its Subsidiaries, on the one hand as
applicable, and the applicable Parent Entity or Parent Entities, on the
other hand as applicable, on the basis of actual use to the extent
practicable and, to the extent such allocation is not practicable, on a
basis reasonably related to actual use;
(iv) cause the Borrower and each of its Subsidiaries to be named as
an insured on the insurance policy covering its property, or enter into an
agreement with the holder of such policy whereby in the event of a loss in
connection with such property, proceeds are paid to the Borrower or
applicable Subsidiary;
(v) maintain the Borrower's and its Subsidiaries' books and records
complete and separate from those of each Parent Entity;
(vi) ensure that any of the Borrower's or any Parent Entity's
consolidated financial statements or other public information for the
Borrower and its Affiliates or any Parent Entity and its Affiliates on a
consolidated basis contain appropriate disclosures concerning the
Borrowers' separate existence;
(vii) not maintain bank accounts or other depository accounts to
which any Parent Entity is an account party, into which any Parent Entity
makes deposits or from which any Parent Entity has the power to make
withdrawals;
(viii) not permit any Parent Entity to pay any of the Borrower's
operating expenses (except when paid and charged pursuant to an allocation
based upon actual use, to the extent practicable and, to the extent such
allocation is not practicable, on a basis reasonably related to actual
use); and
(ix) not pay dividends or make distributions, loans or other advances
to any Parent Entity except to the extent duly authorized by its board of
directors and in accordance with applicable corporation law and otherwise
as permitted by this Agreement.
6.3 Negative Covenants.
(A) Indebtedness. Neither Holdings, the Borrower nor any of its
Subsidiaries shall directly or indirectly create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to any Indebtedness,
except:
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(i) with respect to Holdings:
(a) the Holdings Subordinated Debt;
(b) Indebtedness in respect of taxes;
(c) Indebtedness incurred for ordinary administrative expenses,
franchise taxes, accounting expenses and legal expenses of
Holdings which Indebtedness shall not exceed an aggregate of
$500,000 in any fiscal year and Indebtedness incurred for
reasonable and customary expenses in connection with the public
offerings of Holdings' stock;
(d) Indebtedness incurred under the BLN Note;
(e) Indebtedness constituting Contingent Obligations supporting
the Borrower's Indebtedness and other liabilities, in each case,
permitted under Section 6.3(A)(ii).
(f) other Indebtedness in an aggregate outstanding principal
amount which does not at any time exceed $5,000,000;
(ii) with respect to the Borrower and its Subsidiaries:
(a) the Obligations;
(b) Permitted Existing Indebtedness, and any extension, renewal,
refunding or refinancing thereof, provided that any such extension,
renewal, refunding or refinancing is in an aggregate principal amount
not greater than the principal amount of and interest, fees and
expenses accrued on, such Permitted Existing Indebtedness outstanding
at the time thereof and is on terms (including, without limitation,
maturity, amortization, interest rate, premiums, fees, covenants,
events of default, and remedies) not materially less favorable to the
Borrower or materially adverse to the Lenders than the terms of such
Permitted Existing Indebtedness;
(c) Subordinated Indebtedness the terms (including, without
limitation, maturity, amortization, interest rate, premiums, fees,
covenants, events of default, and remedies) of which are acceptable to
the Required Lenders when issued, but not any increase in the
principal amount thereof and not any refinancing, modification,
refunding or extension of maturity thereof, in whole or in part,
unless such refinancing, modification, refunding or extension is not
materially less favorable to the Borrower, including, without
limitation, with respect to amount, maturity, amortization, interest
rate, premiums, fees, covenants, subordination terms, events of
default and remedies;
(d) Indebtedness in respect of taxes, assessments, governmental
charges and claims for labor, materials or supplies, to the extent
that payment thereof is not required pursuant to Section 6.2(D);
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(e) Indebtedness constituting Contingent Obligations permitted
by Section 6.3(E);
(f) Indebtedness arising from intercompany loans from any
Subsidiary to the Borrower or any other such Subsidiary;
(g) Indebtedness in respect of profit sharing plans to the
extent permitted under Section 6.3(D)(ii);
(h) Indebtedness in respect of Interest Rate Agreements
permitted under Section 6.3(R);
(i) Indebtedness with respect to warranties and indemnities made
under any agreements for Asset Sales permitted under Section 6.3(B);
(j) secured purchase money Indebtedness (including Capitalized
Leases) incurred by the Borrower after the Closing Date to finance the
acquisition of fixed assets, if (1) at the time of such incurrence, no
Default or Unmatured Default has occurred and is continuing or would
result from such incurrence, (2) such Indebtedness has a scheduled
maturity and is not due on demand, (3) such Indebtedness does not
exceed $1,000,000 in the aggregate outstanding at any time, and (4)
any Lien securing such Indebtedness is permitted under Section 6.3(C);
(k) Indebtedness with respect to surety, appeal and performance
bonds obtained by the Borrower or any Subsidiary in the ordinary
course of business;
(l) unsecured Indebtedness and other liabilities incurred in the
ordinary course of business and consistent with past practice, but not
incurred through the borrowing of money or the obtaining of credit
(other than customary trade terms);
(m) unsecured subordinated Indebtedness to Holdings or to the
Finance Subsidiary (the "Subordinated Intercompany Indebtedness") in
the original principal amount of $48,587,000 as evidenced by the
Substituted and Amended Revolving Promissory Note dated December 31,
1997, in the maximum principal amount of $100,000,000, but not any
increase in the principal amount thereof (other than as a result of
the simultaneous loan by Holdings (or the Finance Subsidiary, as
applicable) to the Borrower in an amount not to exceed the amount of
interest paid by the Borrower to Holdings (or the Finance Subsidiary,
as applicable) on the date of such loan, which loan shall be on the
same terms as the original Subordinated Intercompany Indebtedness in
respect of which such interest was paid, provided the aggregate
outstanding amount of principal shall not at any time exceed
$90,000,000) and not any refinancing, modification, refunding or
extension of maturity thereof, in whole or in part, unless such
refinancing, modification, refunding or extension is not materially
less favorable to the Borrower, including, without limitation, with
respect to amount, maturity, amortization, interest rate, premiums,
fees, covenants, subordination terms, events of default and remedies,
and which Subordinated
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Intercompany Indebtedness shall be subject to a subordination
agreement (the "Holdings Subordination Agreement") in substantially
the form attached hereto as Exhibit K; and
(n) Indebtedness incurred pursuant to the BLN Note.
(B) Sales of Assets. Neither the Borrower nor any of its Subsidiaries
shall sell, assign, transfer, lease, convey or otherwise dispose of any
property, whether now owned or hereafter acquired, or any income or profits
therefrom, or enter into any agreement to do so, except:
(i) sales of Inventory in the ordinary course of business;
(ii) the disposition of obsolete Equipment in the ordinary
course of business;
(iii) sales, assignments, transfers, leases, conveyances or other
dispositions of other assets if such transaction (a) is for all cash
consideration with respect to any Collateral which is sold, (b) is for
not less than fair market value and (c) when combined with all such
other sales, assignments, transfers, conveyances or other dispositions
in the immediately preceding twelve-month period, represents the
disposition of not greater than ten percent (10%) of the Borrower's
consolidated (y) assets or (z) revenues; if, after giving effect to
any such sale or other disposition, property (other than the
Borrower's real property located in Fresno County, California) having
an aggregate fair market value in excess of $4,000,000 will have been
sold by the Borrower or any of its Subsidiaries pursuant to this
Section 6.2(B)(iii) since the Closing Date, the Borrower shall, prior
to such sale, provide the Agent with reasonable projections or other
evidence reasonably satisfactory to the Agent that such sale will not
or is not reasonably likely to have a Material Adverse Effect;
(iv) the disposition of Inventory and Equipment (other than
pursuant to clauses (i), (ii) and/or (iii) above) with an aggregate
book value for all such sales which have occurred since the Closing
Date not exceeding $500,000 (the "Permitted Inventory and Equipment
Sales"); and
(v) the dissolution of Alliance.
(C) Liens. Neither the Borrower nor any of its Subsidiaries shall
directly or indirectly create, incur, assume or permit to exist any Lien on or
with respect to any of their respective property or assets except:
(i) Liens created by the Loan Documents;
(ii) Permitted Existing Liens;
(iii) Customary Permitted Liens;
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(iv) purchase money Liens (including the interest of a lessor
under a Capitalized Lease and Liens to which any property is subject
at the time of the Borrower's acquisition thereof) securing
Indebtedness permitted under Section 6.3(A); provided that such Liens
shall not apply to any property of the Borrower or its Subsidiaries
other than that purchased or subject to such Capitalized Lease;
(v) Liens created under the Intercompany Security Agreement;
and
(vi) Liens created to secure the Indebtedness evidenced by the
BLN Note.
In addition, neither the Borrower nor any Subsidiary of the Borrower shall
become a party to any agreement, note, indenture or other instrument, or take
any other action, which would prohibit the creation of a Lien on any of its
properties or other assets in favor of the Agent for the benefit of itself and
the Holders of Secured Obligations, as additional collateral for the
Obligations; provided that any agreement, note, indenture or other instrument in
connection with secured purchase money indebtedness (including Leases) may
prohibit the creation of a Lien in favor of the Agent for the benefit of itself
and the Holders of the Secured Obligations on the items of property obtained
with the proceeds of such purchase money indebtedness.
(D) Investments. Except to the extent permitted pursuant to paragraph
(G) below, neither the Borrower nor any of its Subsidiaries shall directly or
indirectly make or own any Investment except:
(i) Investments in Cash Equivalents;
(ii) Permitted Existing Investments in an amount not greater
than the amount thereof on the Closing Date;
(iii) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(iv) Investments consisting of loans to employees of the
Borrower in an aggregate outstanding principal amount at any time not
to exceed $200,000 minus the aggregate outstanding amount of Permitted
Existing Investments;
(v) Investments consisting of Collection Accounts maintained by
the Borrower and its Subsidiaries in compliance with the provisions of
Section 6.2(M); and
(vi) Investments with any other Persons which do not exceed
$500,000 in the aggregate at any time.
(E) Contingent Obligations. Neither the Borrower nor any of its
Subsidiaries shall directly or indirectly create or become or be liable with
respect to any Contingent Obligation, except:
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(i) recourse obligations resulting from endorsement of
negotiable instruments for collection in the ordinary course of
business;
(ii) Permitted Existing Contingent Obligations and any
extensions, renewals or replacements thereof, provided that any such
extension, renewal or replacement is not greater than the Indebtedness
under, and shall be on terms no less favorable to the Borrower or such
Subsidiary than the terms of, the Permitted Existing Contingent
Obligation being extended, renewed or replaced;
(iii) obligations, warranties, and indemnities, not relating to
Indebtedness of any Person, which have been or are undertaken or made
in the ordinary course of business and not for the benefit of or in
favor of an Affiliate of the Borrower or such Subsidiary;
(iv) Contingent Obligations arising under the Transaction
Documents or incurred in connection with any Acquisition permitted
under terms of the Original Credit Agreement, the Restated Credit
Agreement or the Second Restated Credit Agreement;
(v) additional Contingent Obligations which do not exceed
$100,000 in the aggregate at any time;
(vi) Contingent Obligations with respect to surety, appeal and
performance bonds obtained by the Borrower or any Subsidiary in the
ordinary course of business; and
(vii) Contingent Obligations consisting of the guarantee of
Indebtedness of Holdings ("Upstream Guarantee") provided:
(A) the Indebtedness guaranteed is for a sum certain;
(B) such Upstream Guarantee shall be with respect to
Indebtedness the principal amount of which does not exceed the
amount which the Borrower would be permitted to pay at the time
such Upstream Guarantee is entered into as a dividend under
Section 6.3(F)(i) below; and
(C) the aggregate amount of Indebtedness guaranteed is
deducted from any calculations of dividends and interest
distributions permitted under Section 6.3(F)(i) for so long as
such Upstream Guarantee is outstanding.
(F) Restricted Junior Payments. Neither the Borrower nor any of its
Subsidiaries shall declare or make any Restricted Junior Payment, except:
(i) the Borrower may make (a) mandatory payments of interest
due on the Subordinated Intercompany Indebtedness ("Subordinated
Interest Payments") and (b) other distributions (the "Holdings'
Dividends") to Holdings or to the Finance Subsidiary, as applicable,
in any fiscal year, from funds legally available for such purpose,
provided the aggregate amount of (1) Subordinated Interest Payments,
plus (2) Holdings' Dividends
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minus the aggregate amount of additional Subordinated Intercompany
Indebtedness loaned by Holdings or by the Finance Subsidiary, as
applicable, to the Borrower on the date of any such distribution does not
exceed in the aggregate; (A) 50% of the net earnings (or loss) after taxes
of Borrower and its consolidated Subsidiaries on a consolidated basis for
the period from January 1, 1996 to the end of the most recently completed
fiscal year for which the audited financial statements have been delivered
pursuant to Section 6.1(A)(i) taken as a single accounting period
determined in conformity with Agreement Accounting Principles minus (B) the
aggregate amount of Contingent Obligations which are the subject of an
Upstream Guarantee;
(ii) the Borrower may make distributions to Holdings in any fiscal
year, from funds legally available for such purpose, in an amount not to
exceed the amount calculated pursuant to Schedule 6.3(F)(ii) minus any
amounts paid directly by the Borrower to any Governmental Authority with
respect to the consolidated group's tax liability;
(iii) (a) mandatory payments of interest, principal or premium, if
any, due on the Subordinated Indebtedness as permitted under Section
6.3(A)(ii)(c), unless such payments are prohibited by the terms of such
Indebtedness or the subordination agreements related thereto and (b)
distributions to Holdings from funds legally available for such purpose, in
an amount equal to mandatory payments of principal and interest, if any,
due on the Orcal Notes unless such payments are prohibited by the terms of
such Indebtedness or the subordination provisions related thereto provided
such distributions shall not be permitted to be made prior to the date upon
which Holdings must make such payments to the holder(s) of the Orcal Notes
and for which adequate provisions must be made for insuring that such
payments on the Orcal Notes are made by Holdings through a disbursement
direction agreement for direct funding or some similar alternative
arrangement acceptable to the Agent; and
(iv) cash dividends or distributions on the Capital Stock of the
Borrower to fund actual out-of-pocket ordinary administrative expenses,
franchise taxes, accounting expenses and legal expenses of Holdings which
dividends shall not exceed $500,000 in any fiscal year;
provided, however, that:
(1) the Restricted Junior Payments described in clauses (i) through
(iii) above shall not be permitted if either a Default or an Unmatured
Default shall have occurred and be continuing at the date of declaration or
payment thereof or would result therefrom;
(2) the amount of Restricted Junior Payments permitted to be made
pursuant to clause (i) above shall be determined after the Agent's and the
Lenders' receipt of the audited financial statements to be delivered
pursuant to Section 6.1(a)(iii) (and the related Officer's Certificate
pursuant to Section 6.1(A)(iv)) for the immediately preceding fiscal year
and no earnings or income for any period shall be included in such
calculation until receipt of the above-reference audited financial
statements for such period;
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(3) the Restricted Junior Payments described in clause (iii)(b) above
shall not be permitted to be made until after the Agent's and the Lenders'
receipt of: (1) the audited financial statements to be delivered pursuant
to Section 6.1(a)(iii) (and the related Officer's Certificate pursuant to
Section 6.1(A)(iv)) for the immediately preceding fiscal year; (2) the
unaudited quarterly financial statements to be delivered pursuant to
Section 6.1(a)(ii) (and the related Officer's Certificate pursuant to
Section 6.1(A)(iv)) for the immediately preceding fiscal quarter and (3)
the unaudited monthly financial statements to be delivered pursuant to
Section 6.1(A)(i) (and the related Officer's Certificate pursuant to
Section 6.1(A)(iv)) for the immediately preceding fiscal month (other than
in connection with the annual principal payment to be made under such
clause (iii)(b)), all of which financial statements shall reflect that no
Default or Unmatured Default shall exist prior to or after taking into
account the effect of any such payment; and
(4) In addition to the requirements set forth in clause (i) above,
Restricted Junior Payments described in clause (i) above shall not be
permitted to be made unless (A) the aggregate amount of such Restricted
Junior Payments described in clause (i) consisting of Holdings' Dividends
and Subordinated Interest Payments is not greater than the aggregate amount
of additional Subordinated Intercompany Indebtedness loaned by Holdings to
the Borrower on the date of such distributions; or (B) if the aggregate
amount of such Restricted Junior Payments described in clause (i)
consisting of Holdings' Dividends and Subordinated Interest Payments
exceeds the aggregate amount of additional Subordinated Intercompany
Indebtedness loaned by Holdings to the Borrower on the date of such
distributions (such excess being herein, the "Net Distribution"):
(I) in addition to the audited financial statements required
pursuant to clause (2) above, the Agent and the Lenders shall have
received the unaudited quarterly financial statements to be delivered
pursuant to Section 6.1(A)(ii) (and the related Officer's Certificate
pursuant to Section 6.1(A)(iv)) for the fiscal quarter ending
immediately preceding the proposed date of such Net Distribution; and
(II) the Borrower shall have demonstrated to the satisfaction of
the Agent and the Lenders that if the proposed Net Distribution had
been paid as of the end of the immediately preceding fiscal quarter,
the Fixed Charge Coverage Ratio as of the end of such quarter would
not be less than 1.25 to 1.00.
(G) Conduct of Business; Subsidiaries; Acquisitions. Neither the
Borrower nor any of its Subsidiaries shall engage in any business other than the
businesses engaged in by the Borrower or its Subsidiaries on the date hereof and
any business or activities which are substantially similar, related or
incidental thereto. Holdings shall not engage, either directly or indirectly
(except through the Borrower) in any operating business enterprise and shall
solely own the Capital Stock of the Borrower and the Finance Subsidiary,
provided that Holdings may enter into and incur obligations under the BHD
Acquisition Agreement. Holdings shall not create, capitalize or acquire any
Subsidiary (other than the Borrower or the Finance Subsidiary) after the date
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hereof. Neither the Borrower nor Alliance shall create, capitalize or acquire
any Subsidiary after the date hereof. The Borrower shall not enter into any
transaction or series of transactions in which it acquires all or any
significant portion of the assets of another Person, except such a purchase by
the Borrower that meets the following requirements (each such purchase
constituting a "Permitted Acquisition"):
(1) no Default or Unmatured Default shall have occurred and be
continuing or would result from such transaction or transactions or the
incurrence of any Indebtedness in connection therewith;
(2) prior to each such purchase, the Borrower shall deliver to the
Agent and the Lenders a certificate from one of the Borrower's financial
officers demonstrating to the satisfaction of the Agent and the Required
Lenders that after giving effect to such transaction or transactions and
the incurrence of any Indebtedness permitted by Section 6.3(A) in
connection therewith on a pro forma basis as if such acquisition and such
incurrence of Indebtedness had occurred on the first day of the twelve-
month period ending on the last day of the Borrower's most recently
completed fiscal quarter, the Borrower would have been in compliance with
all provisions of Section 6.4 at all times during such twelve-month period;
and
(3) the purchase is consummated pursuant to a negotiated acquisition
agreement on a non-hostile basis and involves the purchase of a business
line similar, related or incidental to that of the Borrower and its
Subsidiaries as of the Closing Date.
(H) Transactions with Shareholders and Affiliates. Neither the Borrower
nor any of its Subsidiaries shall directly or indirectly (i) pay any management
fees or other similar fees or compensation to Holdings, CHS, any other holder or
holders of the Borrower's equity securities or any of their Affiliates, other
than wages, salaries and bonuses of employees who are also stockholders of the
Borrower in the ordinary course and consistent with past practices or (ii)
except the guaranty of CHS of the Orcal Note, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with Holdings, CHS,
any other holder or holders of any of the Borrower's equity securities or any of
their Affiliates (which is not a Subsidiary of the Borrower), on terms that are
less favorable to the Borrower or any of its Subsidiaries, as applicable, than
those that might be obtained in an arm's length transaction at the time from
Persons who are not such a holder or Affiliate.
(I) Restriction on Fundamental Changes. Neither the Borrower nor any of
its Subsidiaries shall enter into any merger or consolidation, or liquidate,
wind-up or dissolve (or suffer any liquidation or dissolution), or convey,
lease, sell, transfer or otherwise dispose of, in one transaction or series of
transactions, all or substantially all of the Borrower's or any such
Subsidiary's business or property, whether now or hereafter acquired, except
transactions permitted under Sections 6.3(B) or 6.3(G).
(J) Sales and Leasebacks. Neither the Borrower nor any of its
Subsidiaries shall become liable, directly, by assumption or by Contingent
Obligation, with respect to any lease, whether an
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Operating Lease or a Capitalized Lease, of any property (whether real or
personal or mixed) (i) which it or one of its Subsidiaries sold or transferred
or is to sell or transfer to any other Person, or (ii) which it or one of its
Subsidiaries intends to use for substantially the same purposes as any other
property which has been or is to be sold or transferred by it or one of its
Subsidiaries to any other Person in connection with such lease, unless in either
case the sale involved is not prohibited under Section 6.3(B) and the lease
involved is not prohibited under Section 6.3(A).
(K) Margin Regulations. Neither the Borrower nor any of its Subsidiaries,
shall use all or any portion of the proceeds of any credit extended under this
Agreement to purchase or carry Margin Stock.
(L) ERISA. The Borrower shall not engage, or permit any of its
Subsidiaries to engage, in any prohibited transaction described in Sections 406
of ERISA or 4975 of the Code for which a statutory or class exemption is not
available or a private exemption has not been previously obtained from the DOL.
(M) Issuance of Capital Stock. Neither the Borrower nor any of its
Subsidiaries shall issue any Capital Stock.
(N) Corporate Documents. Neither the Borrower nor any of its Subsidiaries
shall amend, modify or otherwise change any of the terms or provisions in any of
their respective corporate documents (other than the by-laws and, in the case of
by-laws, any of the material terms or provisions thereof) as in effect on the
date hereof in any manner adverse to the interests of the Lenders without the
prior written consent of the Required Lenders (which consent shall not be
unreasonably withheld).
(O) Other Indebtedness. (i) Except as permitted in Section 6.3(S), the
Borrower shall not amend, supplement or otherwise modify the terms of any
Indebtedness (other than the Obligations) permitted under Section 6.3(A) in any
way that would be materially less advantageous to the Borrower or materially
adverse to the Lenders, including, without limitation, with respect to amount,
maturity, amortization, interest rate, premiums, fees, covenants, events of
default and remedies. Except for payments made in the ordinary course with
respect to the Borrower's trade indebtedness and except as permitted in
Section 6.3(F)(iii), neither the Borrower nor any of its Subsidiaries shall
purchase, redeem or prepay any principal of, premium, if any, interest or other
amount payable in respect of any Indebtedness (other than the Obligations)
permitted under Section 6.3(A).
(ii) Holdings shall not amend, supplement or otherwise modify the
Holdings Subordinated Debt (as in effect as of the date of issuance thereof) in
any way that would be materially less advantageous to Holdings or materially
adverse to the Lenders, including, without limitation, with respect to amount,
maturity, amortization, interest rate, premiums, fees, covenants, events of
default, remedies, dividends and subordination provisions.
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(P) Fiscal Year. Neither the Borrower nor any of its consolidated
Subsidiaries shall change its fiscal year for accounting or tax purposes from a
period consisting of the 12-month period ending on December 31 of each calendar
year.
(Q) Subsidiary Covenants. The Borrower will not, and will not permit any
Subsidiary to, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Subsidiary to pay dividends or make any other distribution on its stock, or make
any other Restricted Junior Payment, pay any Indebtedness or other Obligation
owed to the Borrower or any other Subsidiary, make loans or advances or other
Investments in the Borrower or any other Subsidiary, or sell, transfer or
otherwise convey any of its property to the Borrower or any other Subsidiary.
(R) Rate Hedging Obligations. The Borrower shall not and shall not
permit any of its Subsidiaries to enter into any interest rate, commodity or
foreign currency exchange, swap, collar, cap, leveraged derivative or similar
agreements other than interest rate, foreign currency or commodity exchange,
swap, collar, cap or similar agreements entered into by the Borrower pursuant to
Section 6.2(L) hereof or pursuant to which the Borrower has hedged its actual
interest rate, foreign currency or commodity exposure (such hedging agreements
are sometimes referred to herein as "Interest Rate Agreements").
(S) Subordinated Indebtedness. The Borrower shall not amend, supplement
or modify the terms of any Permitted Subordinated Indebtedness, or make any
payment required as a result of an amendment or change thereto other than
amendments, supplements or modifications which (i) decrease the rate of interest
payable on the Permitted Subordinated Indebtedness, (ii) provide for the payment
in kind in lieu of cash of any portion of the interest on the Permitted
Subordinated Indebtedness, (iii) provide for the extension of the maturity date
with respect to any principal or interest payment to be made under instruments
evidencing Permitted Subordinated Indebtedness, (iv) provide more flexibility to
the Borrower in connection with any financial covenants or (v) waive any
defaults existing in connection with the Permitted Subordinated Indebtedness,
and which in any event do not adversely affect in any respect the interests of
the Agent or the Holders of the Secured Obligations.
(T) Purchase Agreements. The Borrower shall not amend, supplement or
modify the terms of the BHD Acquisition Agreement or the BLN Note in any way
that would be materially less advantageous to the Borrower or materially adverse
to the Lenders.
6.4 Financial Covenants. The Borrower shall comply, and shall cause
Holdings and its consolidated Subsidiaries to comply, with the following:
(A) Defined Terms for Financial Covenants. The following terms used in
this Agreement shall have the following meanings (such meanings to be
applicable, except to the extent otherwise indicated in a definition of a
particular term, both to the singular and the plural forms of the terms
defined):
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"Capital Expenditures" means, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities and including
Capitalized Leases and Permitted Purchase Money Indebtedness) by Holdings and
its consolidated Subsidiaries during that period that, in conformity with
Agreement Accounting Principles, are required to be included in or reflected by
the property, plant, equipment or similar fixed asset accounts reflected in the
consolidated balance sheet of Holdings and its consolidated Subsidiaries other
than with respect to the acquisition of fixed assets in connection with any
Acquisitions, including, without limitation, the BHD Acquisition.
"EBITA" means, for any period, on a consolidated basis for Holdings and its
consolidated Subsidiaries, the sum, without duplication, of the amounts for such
period of (i) Net Income, plus (ii) charges against income for foreign, federal,
state and local taxes, plus (iii) Interest Expense, plus (iv) Non-Cash Interest
Expense plus (v) Fees, plus (vi) amortization expense, including, without
limitation, amortization of goodwill and other intangible assets, plus (vii)
other non-cash charges classified as long-term deferrals in accordance with
Agreement Accounting Principles, minus (viii) interest income, minus (ix)
extraordinary gains (and any unusual gains arising in or outside of the ordinary
course of business not included in extraordinary gains determined in accordance
with Agreement Accounting Principles which have been included in the
determination of Net Income).
"Fees" means fees (including agency and unused commitment fees) and
discounts with respect to (i) Letters of Credit and (ii) Indebtedness evidenced
by this Agreement.
"Interest Expense" means, for any period, total consolidated interest
expense of Holdings and its consolidated Subsidiaries, whether paid or accrued
(including the interest component of Capitalized Leases), but excluding Non-Cash
Interest Expense and Fees, all as determined in conformity with Agreement
Accounting Principles. For purposes of determining compliance with the
requirements of clause (4) of Section 6.3(F) with respect to any proposed Net
Distribution, the amount of such Net Distribution shall be treated as Interest
Expense.
"Net Income" means, for any period, the net earnings (or loss) after taxes
of Holdings and its consolidated Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with
Agreement Accounting Principles.
"Non-Cash Interest Expense" means, for any period, that portion of the
consolidated interest expense of Holdings and its consolidated Subsidiaries
which is not payable in cash, including, without limitation (i) amortization of
discount and (ii) accrued interest on the Holdings Subordinated Notes, all as
determined in accordance with Agreement Accounting principles.
"Rentals" of a Person means the aggregate fixed amounts payable by such
Person under any lease of real or personal property having an original term
(including any required renewals or any renewals at the option of the lessor or
lessee) of one year or more but does not include any amounts payable under
Capitalized Leases of such Person.
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(B) Interest Expense Coverage Ratio. Maintain a ratio (the "Interest
Expense Coverage Ratio") of (i) EBITA to (ii) Interest Expense for the
applicable period of at least 2.00 to 1.00 for the fiscal quarter ended March
31, 1998 and for each fiscal quarter thereafter until the Termination Date. In
each case the Interest Coverage Ratio shall be determined as of the last day of
each fiscal quarter for the four-quarter period ending on such day.
(C) Fixed Charge Coverage Ratio. Maintain a ratio of: (i) the sum,
without duplication, of the amounts of (a) EBITA, plus (b) depreciation expense,
plus (c) Rentals, minus (d) Capital Expenditures to (ii) the sum, without
duplication, of the amounts of (a) Interest Expense, plus (b) Fees, plus (c)
Rentals, plus (d) the aggregate of the Restricted Junior Payments consisting of
tax related payments paid pursuant to Section 6.3(F)(ii) and any amounts paid
directly by the Borrower to any Governmental Authority with respect to the
consolidated group's tax liability, plus (e) scheduled amortization of the
principal portion of the Term Loans and scheduled amortization of the principal
portion of all other Indebtedness (other than Indebtedness incurred pursuant to
the BLN Note) of Holdings and its Subsidiaries during such period, plus (f) all
payments in the nature of dividends, distributions, return of capital or other
similar payments made by Holdings to holders of its equity securities (the
intent hereof being to capture all payments which if made by the Borrower would
be classified as Restricted Junior Payments), plus (g) Net Distributions of at
least 1.15 to 1.00 for the fiscal quarter ending March 31, 1998 and for each
fiscal quarter thereafter until the Termination Date. In each case the Fixed
Charge Coverage Ratio shall be determined as of the last day of each fiscal
quarter for the four-quarter period ending on such day.
(D) Maximum Leverage Ratio. Maintain a ratio ("Leverage Ratio") of (i)
the sum, without duplication, of (y) Indebtedness of Holdings and its
consolidated subsidiaries for borrowed money (excluding from such calculation
Indebtedness of Holdings in connection with the Holdings Subordinated Notes)
plus (z) the maximum fixed repurchase price of any Redeemable Stock of Holdings
to the extent that payment thereof may be funded as a permissible Restricted
Junior Payment under the terms of Section 6.3(F) to (ii) the sum, without
duplication, of (a) EBITA plus (b) depreciation expenses minus (c) Capital
Expenditures, of not greater than the respective ratio set forth below for the
fiscal quarter ending March 31, 1998 and for each fiscal quarter thereafter
until the Termination Date:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Maximum Ratio
--------------------- -------------
<S> <C>
March 31, 1998 4.00 to 1.00
June 30, 1998 4.00 to 1.00
September 30, 1998 4.00 to 1.00
December 31, 1998 4.00 to 1.00
March 31, 1999 3.75 to 1.00
June 30, 1999 3.75 to 1.00
September 30, 1999 3.75 to 1.00
December 31, 1999 3.75 to 1.00
March 31, 2000 and thereafter 3.50 to 1.00
</TABLE>
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The Leverage Ratio shall be calculated, in each case, determined as of the last
day of each fiscal quarter based upon (A) (i) with respect to Revolving Loans,
the average of the outstanding amounts as of the last day of each quarter for
the four quarters in the period then ended and (ii) with respect to the Term
Loans and other Indebtedness, the outstanding amount as of the end of the
quarter then ended; and (B) for EBITA and depreciation, the total for the four-
quarter period ending on such day and (C) for Capital Expenditures the amount
spent during such four-quarter period.
ARTICLE VII: DEFAULTS
- ----------------------
7.1 Defaults. Each of the following occurrences shall constitute a
Default under this Agreement:
(a) Failure to Make Payments When Due. The Borrower shall (i) fail to pay
when due any of the Obligations consisting of principal with respect to the
Loans or (ii) shall fail to pay within three (3) Business Days of the date when
due any of the other Obligations under this Agreement or the other Loan
Documents.
(b) Breach of Certain Covenants. The Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on the Borrower under:
(i) Sections 6.1(C), 6.1(D), 6.1(E), 6.1(F), 6.1(G), 6.1(H), 6.1(I),
6.2(B) or 6.2(F) and such failure shall continue unremedied for fifteen
(15) days;
(ii) Section 6.1(A) or 6.1(B) and such failure shall continue
unremedied for five (5) Business Days; or
(iii) Section 6.3 or 6.4(B), 6.4(C), 6.4(D), 6.4(E) or 6.4(F).
(c) Breach of Representation or Warranty. Any representation or warranty
made or deemed made by the Borrower to the Agent, any Lender or any Issuing Bank
herein or by Holdings, the Borrower or any of its Subsidiaries in any of the
other Loan Documents or in any statement or certificate at any time given by any
such Person pursuant to any of the Loan Documents shall be false or misleading
in any material respect on the date as of which made (or deemed made).
(d) Other Defaults. The Borrower shall default in the performance of or
compliance with any term contained in this Agreement (other than as covered by
paragraphs (a), (b) or (c) of this Section 7.1), or Holdings, the Borrower or
any of its Subsidiaries shall default in the performance of or compliance with
any term contained in any of the other Loan Documents, and such default shall
continue for thirty (30) days after the occurrence thereof.
(e) Default as to Other Indebtedness; Operating Leases. The Borrower or
any of its Subsidiaries shall fail to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) with
respect to any Indebtedness (other than the
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Obligations), the outstanding principal amount of which Indebtedness is in
excess of $1,000,000; or any breach, default or event of default shall occur, or
any other condition shall exist under any instrument, agreement or indenture
pertaining to any such Indebtedness, if the effect thereof is to cause an
acceleration, mandatory redemption, a requirement that the Borrower offer to
purchase such Indebtedness or other required repurchase of such Indebtedness, or
permit the holder(s) of such Indebtedness to accelerate the maturity of any such
Indebtedness or require a redemption or other repurchase of such Indebtedness;
or any such Indebtedness shall be otherwise declared to be due and payable (by
acceleration or otherwise) or required to be prepaid, redeemed or otherwise
repurchased by the Borrower or any of its Subsidiaries (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc.
(i) An involuntary case shall be commenced against Holdings, the
Borrower or any of the Borrower's Subsidiaries and the petition shall not
be dismissed, stayed, bonded or discharged within sixty (60) days after
commencement of the case; or a court having jurisdiction in the premises
shall enter a decree or order for relief in respect of Holdings, the
Borrower or any of the Borrower's Subsidiaries in an involuntary case,
under any applicable bankruptcy, insolvency or other similar law now or
hereinafter in effect; or any other similar relief shall be granted under
any applicable federal, state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Holdings, the
Borrower or any of the Borrower's Subsidiaries or over all or a substantial
part of the property of Holdings, the Borrower or any of the Borrower's
Subsidiaries shall be entered; or an interim receiver, trustee or other
custodian of Holdings, the Borrower or any of the Borrower's Subsidiaries
or of all or a substantial part of the property of Holdings, the Borrower
or any of the Borrower's Subsidiaries shall be appointed or a warrant of
attachment, execution or similar process against any substantial part of
the property of Holdings, the Borrower or any of the Borrower's
Subsidiaries shall be issued and any such event shall not be stayed,
dismissed, bonded or discharged within sixty (60) days after entry,
appointment or issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc. Holdings, the
Borrower or any of the Borrower's Subsidiaries shall (i) commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (ii) consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any such law, (iii) consent to the appointment of or taking
possession by a receiver, trustee or other custodian for all or a substantial
part of its property, (iv) make any assignment for the benefit of creditors or
(v) take any corporate action to authorize any of the foregoing.
(h) Judgments and Attachments. Any money judgment(s) (other than a money
judgment covered by insurance as to which the insurance company has not
disclaimed or reserved the right to disclaim coverage), writ or warrant of
attachment, or similar process against the Borrower or
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any of its Subsidiaries or any of their respective assets involving in any
single case or in the aggregate an amount in excess of $1,000,000 is (are)
entered and shall remain undischarged, unvacated, unbonded or unstayed for a
period of sixty (60) days or in any event later than fifteen (15) days prior to
the date of any proposed sale thereunder.
(i) Dissolution. Any order, judgment or decree shall be entered against
the Borrower decreeing its involuntary dissolution or split up and such order
shall remain undischarged and unstayed for a period in excess of sixty (60)
days; or the Borrower shall otherwise dissolve or cease to exist except as
specifically permitted by this Agreement.
(j) Loan Documents; Failure of Security. At any time, for any reason, (i)
any Loan Document as a whole that materially affects the ability of the Agent,
or any of the Lenders to enforce the Obligations or enforce their rights against
the Collateral ceases to be in full force and effect or Holdings, the Borrower
or any of the Borrower's Subsidiaries party thereto seeks to repudiate its
obligations thereunder and the Liens intended to be created thereby are, or
Holdings, the Borrower or any such Subsidiary seeks to render such Liens,
invalid and unperfected, or (ii) Liens on Collateral with a fair market value in
excess of $1,000,000 in favor of the Agent contemplated by the Loan Documents
shall, at any time, for any reason, be invalidated or otherwise cease to be in
full force and effect, or such Liens shall not have the priority contemplated by
this Agreement or the Loan Documents.
(k) Termination Event. Any Termination Event occurs which the Required
Lenders believe is reasonably likely to subject the Borrower to liability in
excess of $1,000,000.
(l) Waiver Application. The plan administrator of any Benefit Plan
applies under Section 412(d) of the Code for a waiver of the minimum funding
standards of Section 412(a) of the Code and the Agent believes that the
substantial business hardship upon which the application for the waiver is based
is reasonably likely to subject the Borrower to liability in excess of
$1,000,000.
(m) Change of Control. A Change of Control shall occur.
(n) Interest Rate Agreements. Nonpayment by the Borrower of any
obligation under the any Interest Rate Agreements entered into with any Lender
or the breach by the Borrower of any term, provision or condition contained in
any such Interest Rate Agreements.
(o) Environmental Matters. The Borrower or any of its Subsidiaries shall
be the subject of any proceeding or investigation pertaining to (i) the Release
by the Borrower or any of its Subsidiaries of any Contaminant into the
environment, (ii) the liability of the Borrower or any of its Subsidiaries
arising from the Release by any other Person of any Contaminant into the
environment, or (iii) any violation of any Environmental, Health or Safety
Requirements of Law by the Borrower or any of its Subsidiaries, where such
Release, liability or violation individually or when aggregated with all other
such Releases, liabilities and violations has or is reasonably likely to have a
Material Adverse Effect.
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(p) Guarantor Revocation. Any guarantor of the Obligations shall terminate
or revoke any of its obligations under the applicable guarantee agreement or
breach any of the terms of such guarantee agreement.
(q) Failure of Subordination. The subordination provisions of the documents
and instruments evidencing any Permitted Subordinated Indebtedness shall, at any
time, be invalidated or otherwise cease to be in full force and effect.
A Default shall be deemed "continuing" until cured or until waived in
writing in accordance with Section 8.3.
ARTICLE VIII: ACCELERATION, DEFAULTING LENDERS; WAIVERS, AMENDMENTS AND
REMEDIES
8.1 Termination of Commitments; Acceleration. If any Default described in
Section 7.1(f) or 7.1(g) occurs with respect to the Borrower, the obligations of
the Lenders to make Loans hereunder and the obligation of the Agent to issue
Letters of Credit hereunder shall automatically terminate and the Obligations
shall immediately become due and payable without any election or action on the
part of the Agent or any Lender. If any other Default occurs, the Required
Lenders may terminate or suspend the obligations of the Lenders to make Loans
hereunder and the obligation of the Agent to issue Letters of Credit hereunder,
or declare the Obligations to be due and payable, or both, whereupon the
Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrower hereby
expressly waives.
8.2 Defaulting Lender. In the event that any Lender fails to fund its Pro
Rata Share of any Advance requested or deemed requested by the Borrower which
such Lender is obligated to fund under the terms of this Agreement (the funded
portion of such Advance being hereinafter referred to as a "Non Pro Rata Loan"),
until the earlier of such Lender's cure of such failure and the termination of
the Revolving Loan Commitments, the proceeds of all amounts thereafter repaid to
the Agent by the Borrower and otherwise required to be applied to such Lender's
share of all other Obligations pursuant to the terms of this Agreement shall be
advanced to the Borrower by the Agent on behalf of such Lender to cure, in full
or in part, such failure by such Lender, but shall nevertheless be deemed to
have been paid to such Lender in satisfaction of such other Obligations.
Notwithstanding anything in this Agreement to the contrary:
(i) the foregoing provisions of this Section 8.2 shall apply only with
respect to the proceeds of payments of Obligations and shall not affect the
conversion or continuation of Loans pursuant to Section 2.11;
(ii) any such Lender shall be deemed to have cured its failure to fund
its Pro Rata Share of any Advance at such time as an amount equal to such
Lender's original Pro Rata Share of the requested principal portion of such
Advance is fully funded to the Borrower, whether made by such Lender itself
or by operation of the terms of this Section 8.2, and
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whether or not the Non Pro Rata Loan with respect thereto has been repaid,
converted or continued;
(iii) amounts advanced to the Borrower to cure, in full or in part,
any such Lender's failure to fund its Pro Rata Share of any Advance ("Cure
Loans") shall bear interest at the rate applicable to Floating Rate Loans
in effect from time to time, and for all other purposes of this Agreement
shall be treated as if they were Floating Rate Loans;
(iv) regardless of whether or not a Default has occurred or is
continuing, and notwithstanding the instructions of the Borrower as to its
desired application, all repayments of principal which, in accordance with
the other terms of this Agreement, would be applied to the outstanding
Floating Rate Loans shall be applied first, ratably to all Floating Rate
Loans constituting Non Pro Rata Loans, second, ratably to Floating Rate
Loans other than those constituting Non Pro Rata Loans or Cure Loans and,
third, ratably to Floating Rate Loans constituting Cure Loans;
(v) for so long as and until the earlier of any such Lender's cure of
the failure to fund its Pro Rata Share of any Advance and the termination
of the Revolving Loan Commitments, the term "Required Lenders" for purposes
of this Agreement shall mean Lenders (excluding all Lenders whose failure
to fund their respective Pro Rata Shares of such Advance have not been so
cured) whose Pro Rata Shares represent equal to or greater than sixty-six
and two thirds percent (66-2/3%) of the aggregate Pro Rata Shares of such
Lenders; and
(vi) for so long as and until any such Lender's failure to fund its
Pro Rata Share of any Advance is cured in accordance with Section 8.2(ii),
(A) such Lender shall not be entitled to any commitment fees with respect
to its Revolving Loan Commitment and (B) such Lender shall not be entitled
to any letter of credit fees, which commitment fees and letter of credit
fees shall accrue in favor of the Lenders which have funded their
respective Pro Rata Share of such requested Advance, shall be allocated
among such performing Lenders ratably based upon their relative Revolving
Loan Commitments, and shall be calculated based upon the average amount by
which the aggregate Revolving Loan Commitments of such performing Lenders
exceeds the sum of (I) the outstanding principal amount of the Loans owing
to such performing Lenders, plus (II) the outstanding Reimbursement
Obligations owing to such performing Lenders, plus (III) the aggregate
participation interests of such performing Lenders arising pursuant to
Section 2.21 with respect to undrawn and outstanding Letters of Credit.
8.3 Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of each Lender affected thereby:
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(i) Postpone or extend the Revolving Credit Termination Date, the Term
Loan Termination Date or any other date fixed for any payment of principal
of, or interest on, the Loans, the Reimbursement Obligations or any fees or
other amounts payable to such Lender (except with respect to any
modifications of the provisions relating to prepayments of Loans and other
Obligations).
(ii) Reduce the principal amount of any Loans or L/C Obligations, or
reduce the rate or extend the time of payment of interest or fees thereon.
(iii) Reduce the percentage specified in the definition of Required
Lenders or any other percentage of Lenders specified to be the applicable
percentage in this Agreement to act on specified matters.
(iv) Increase the amount of the Revolving Loan Commitment of any
Lender hereunder (except with respect to an increase in the amount, or
other modification to the terms or components, of the Borrowing Base).
(v) Permit the Borrower to assign its rights under this Agreement.
(vi) Amend this Section 8.3.
(vii) Release all or substantially all of the Collateral.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive payment
of the fee required under Section 12.3(B) without obtaining the consent of any
of the Lenders.
8.4 Preservation of Rights. No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan or the issuance of a Letter of Credit notwithstanding the
existence of a Default or the inability of the Borrower to satisfy the
conditions precedent to such Loan or issuance of such Letter of Credit shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.3, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agent and the Lenders until the Obligations have been paid in
full.
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ARTICLE IX: GENERAL PROVISIONS
9.1 Survival of Representations. All representations and warranties of the
Borrower contained in this Agreement shall survive delivery of the Notes and the
making of the Loans herein contemplated.
9.2 Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower and the Agent shall not be obligated to issue any Letter of Credit for
the account of the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.
9.3 Performance of Obligations. The Borrower agrees that the Agent may, but
shall have no obligation to (i) at any time, pay or discharge taxes, liens,
security interests or other encumbrances levied or placed on or threatened
against any Collateral and (ii) after the occurrence and during the continuance
of a Default make any other payment or perform any act required of the Borrower
under any Loan Document or take any other action which the Agent in its
discretion deems necessary or desirable to protect or preserve the Collateral,
including, without limitation, any action to (y) effect any repairs or obtain
any insurance called for by the terms of any of the Loan Documents and to pay
all or any part of the premiums therefor and the costs thereof and (z) pay any
rents payable by the Borrower which are more than 30 days past due, or as to
which the landlord has given notice of termination, under any lease. The Agent
shall use its best efforts to give the Borrower notice of any action taken under
this Section 9.3 prior to the taking of such action or promptly thereafter
provided the failure to give such notice shall not affect the Borrower's
obligations in respect thereof. The Borrower agrees to pay the Agent, upon
demand, the principal amount of all funds advanced by the Agent under this
Section 9.3, together with interest thereon at the rate from time to time
applicable to Floating Rate Loans from the date of such advance until the
outstanding principal balance thereof is paid in full. If the Borrower fails to
make payment in respect of any such advance under this Section 9.3 within one
(1) Business Day after the date the Borrower receives written demand therefor
from the Agent, the Agent shall promptly notify each Lender and each Lender
agrees that it shall thereupon make available to the Agent, in dollars in
immediately available funds, the amount equal to such Lender's Pro Rata Share of
such advance. If such funds are not made available to the Agent by such Lender
within one (1) Business Day after the Agent's demand therefor, the Agent will be
entitled to recover any such amount from such Lender together with interest
thereon at the Effective Federal Funds Rate for each day during the period
commencing on the date of such demand and ending on the date such amount is
received. The failure of any Lender to make available to the Agent its Pro Rata
Share of any such unreimbursed advance under this Section 9.3 shall neither
relieve any other Lender of its obligation hereunder to make available to the
Agent such other Lender's Pro Rata Share of such advance on the date such
payment is to be made nor increase the obligation of any other Lender to make
such payment to the Agent. All outstanding principal of, and interest on,
advances made under this Section 9.3 shall constitute Obligations secured by the
Collateral until paid in full by the Borrower.
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9.4 Headings. Section headings in the Loan Documents are for convenience of
reference only, and shall not govern the interpretation of any of the provisions
of the Loan Documents.
9.5 Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof.
9.6 Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns.
9.7 Expenses; Indemnification.
(A) Expenses. The Borrower shall reimburse the Agent for any reasonable
costs, internal charges and out-of-pocket expenses (including attorneys' and
paralegals' fees and time charges of attorneys and paralegals for the Agent,
which attorneys and paralegals may be employees of the Agent) paid or incurred
by the Agent in connection with the preparation, negotiation, execution,
delivery, syndication, review, amendment, modification, and administration of
the Loan Documents. The Borrower also agrees to reimburse the Agent and the
Lenders for any costs, internal charges and out-of-pocket expenses (including
attorneys' and paralegals' fees and time charges of attorneys and paralegals for
the Agent and the Lenders, which attorneys and paralegals may be employees of
the Agent or the Lenders) paid or incurred by the Agent or any Lender in
connection with the collection of the Obligations and enforcement of the Loan
Documents. In addition to expenses set forth above, the Borrower agrees to
reimburse the Agent, promptly after the Agent's request therefor, for each
audit, collateral analysis or other business analysis performed by or for the
benefit of the Lenders in connection with this Agreement or the other Loan
Documents in an amount equal to the Agent's then customary charges for each
person employed to perform such audit or analysis, plus all costs and expenses
(including without limitation, travel expenses) incurred by the Agent in the
performance of such audit or analysis. Agent shall provide the Borrower with a
detailed statement of all reimbursements requested under this Section.
(B) Indemnity. The Borrower further agrees to defend, protect, indemnify,
and hold harmless the Agent and each and all of the Lenders and each of their
respective Affiliates, and each of such Agent's, Lender's, or Affiliate's
respective officers, directors, employees, attorneys and agents (including,
without limitation, those retained in connection with the satisfaction or
attempted satisfaction of any of the conditions set forth in Article IV)
(collectively, the "Indemnitees") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses of any kind or nature whatsoever (including, without limitation,
the fees and disbursements of counsel for such Indemnitees in connection with
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any investigative, administrative or judicial proceeding, whether or not such
Indemnitees shall be designated a party thereto), imposed on, incurred by, or
asserted against such Indemnitees in any manner relating to or arising out of:
(i) this Agreement, the other Loan Documents or any of the Transaction
Documents, or any act, event or transaction related or attendant thereto,
the making of the Loans, and the issuance of and participation in Letters
of Credit hereunder, the management of such Loans or Letters of Credit, the
use or intended use of the proceeds of the Loans or Letters of Credit
hereunder, or any of the other transactions contemplated by the Transaction
Documents; or
(ii) any liabilities, obligations, responsibilities, losses, damages,
personal injury, death, punitive damages, economic damages, consequential
damages, treble damages, intentional, willful or wanton injury, damage or
threat to the environment, natural resources or public health or welfare,
costs and expenses (including, without limitation, attorney, expert and
consulting fees and costs of investigation, feasibility or remedial action
studies), fines, penalties and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or future
relating to violation of any Environmental, Health or Safety Requirements
of Law arising from or in connection with the past, present or future
operations of Holdings, the Borrower, its Subsidiaries or any of their
respective predecessors in interest, or, the past, present or future
environmental, health or safety condition of any respective property of the
Borrower or its Subsidiaries, the presence of asbestos-containing materials
at any respective property of the Borrower or its Subsidiaries or the
Release or threatened Release of any Contaminant into the environment
(collectively, the "Indemnified Matters");
provided, however, the Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Matters caused solely by or resulting
solely from (y) a dispute among the Lenders or a dispute between any Lender and
the Agent, or (z) the willful misconduct or Gross Negligence of such Indemnitee
or breach of contract by such Indemnitee with respect to the Loan Documents, in
each case, as determined by the final non-appealed judgment of a court of
competent jurisdiction. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in the preceding sentence may be unenforceable because
it is violative of any law or public policy, the Borrower shall contribute the
maximum portion which it is permitted to pay and satisfy under applicable law,
to the payment and satisfaction of all Indemnified Matters incurred by the
Indemnitees. In addition, no settlement shall be entered into by Holdings, the
Borrower or any if its Subsidiaries with respect to any claim, litigation,
arbitration or other proceeding relating to or arising out of the transaction
evidenced by this Agreement, the other Loan Documents or in connection with any
Permitted Acquisition (whether or not the Agent or any Lender or any Indemnitee
is a party thereto) unless such settlement releases all Indemnitees from any and
all liability with respect thereto.
(C) Waiver of Certain Claims. The Borrower further agrees to assert no
claim against any of the Indemnitees on any theory of liability for
consequential, special, indirect, exemplary or punitive damages.
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(D) Survival of Agreements. The obligations and agreements of the Borrower
under this Section 9.7 shall survive the termination of this Agreement.
9.8 Numbers of Documents. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to each of the Lenders.
9.9 Accounting. Except as provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with Agreement Accounting Principles.
9.10 Severability of Provisions. Any provision in any Loan Document that is
held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as
to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
9.11 Nonliability of Lenders. The relationship between the Borrower and the
Lenders and the Agent shall be solely that of borrower and lender. Neither the
Agent nor any Lender shall have any fiduciary responsibilities to the Borrower.
Neither the Agent nor any Lender undertakes any responsibility to the Borrower
to review or inform the Borrower of any matter in connection with any phase of
the Borrower's business or operations.
9.12 GOVERNING LAW. THE AGENT HEREBY ACCEPTS THIS AGREEMENT, ON BEHALF OF
ITSELF AND THE LENDERS, AT CHICAGO, ILLINOIS BY ACKNOWLEDGING AND AGREEING TO IT
THERE. ANY DISPUTE BETWEEN THE BORROWER AND THE AGENT, ANY LENDER, OR ANY OTHER
HOLDER OF SECURED OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL
LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF
ILLINOIS.
9.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH OF
THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS WHETHER
ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY
BY STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, BUT THE PARTIES HERETO
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS
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MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. EACH OF
THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE
DISPUTE.
(B) OTHER JURISDICTIONS. THE BORROWER AGREES THAT THE AGENT, ANY LENDER OR
ANY HOLDER OF SECURED OBLIGATIONS SHALL HAVE THE RIGHT TO PROCEED AGAINST THE
BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1)
OBTAIN PERSONAL JURISDICTION OVER THE BORROWER OR (2) REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. THE BORROWER AGREES THAT IT WILL
NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON
TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. THE BORROWER
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH
PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION.
(C) SERVICE OF PROCESS. THE BORROWER WAIVES PERSONAL SERVICE OF ANY PROCESS
UPON IT AND, AS ADDITIONAL SECURITY FOR THE OBLIGATIONS, IRREVOCABLY APPOINTS
THE PRENTICE HALL CORPORATION SYSTEM, INC., THE BORROWER'S REGISTERED AGENT,
WHOSE ADDRESS IS 33 NORTH LASALLE STREET, SUITE 1925, CHICAGO, ILLINOIS 60602,
AS THE BORROWER'S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS ISSUED
BY ANY COURT. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
IN ANY JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT
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WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. THE BORROWER WAIVES THE POSTING OF ANY BOND OTHERWISE
REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS OR
PROCEEDING TO REALIZE ON THE COLLATERAL (INCLUDING, WITHOUT LIMITATION, THE REAL
PROPERTY COLLATERAL) OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO ENFORCE BY
SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT
INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER PARTY
HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE PROVISIONS OF
THIS SECTION 9.13, WITH ITS COUNSEL.
9.14 Reserved.
9.15 No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement and each of the other Loan
Documents. In the event an ambiguity or question of intent or interpretation
arises, this Agreement and the other Loan Documents shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement or the other Loan Documents.
9.16 Dissolution of Alliance. In the event that the Borrower dissolves
Alliance, all reference in the Loan Documents to Alliance, and each of the
Alliance Guaranty and the Alliance Security Agreement, shall be of no further
force and effect, and no Default or Unmatured Default shall result therefrom.
ARTICLE X: THE AGENT
10.1 Appointment. LaSalle National Bank is appointed by the Lenders as the
Agent hereunder and under each other Loan Document, and each of the Lenders
irrevocably authorizes the Agent to act as the contractual representative of
such Lender with the rights and duties expressly set forth herein and in the
other Loan Documents. The Agent agrees to act as such contractual representative
upon the express conditions contained in this Article X. Notwithstanding the use
of the defined term "Agent," it is expressly understood and agreed that the
Agent shall not have any fiduciary responsibilities to any Lender by reason of
this Agreement and that the Agent is merely acting as the representative of the
Lenders with only those duties as are expressly set forth in this Agreement and
the other Loan Documents. In its capacity as the Lenders' contractual
representative, the Agent (i) does not assume any fiduciary duties to any of the
Lenders, (ii) is a "representative" of the Lenders within the meaning of Section
9-105 of the Uniform Commercial Code and (iii) is acting as an independent
contractor, the rights and duties of
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which are limited to those expressly set forth in this Agreement and the other
Loan Documents. Each of the Lenders agrees to assert no claim against the Agent
on any agency theory or any other theory of liability for breach of fiduciary
duty, all of which claims each Lender waives.
10.2 Powers. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties or fiduciary duties to the Lenders, or any
obligation to the Lenders to take any action hereunder or under any of the other
Loan Documents except any action specifically provided by the Loan Documents
required to be taken by the Agent.
10.3 General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is found in a final judgment by a court of
competent jurisdiction to have arisen solely from (i) the Gross Negligence or
willful misconduct of such Person or (ii) breach of contract by such Person with
respect to the Loan Documents.
10.4 No Responsibility for Loans, Creditworthiness, Collateral, Recitals,
Etc. Neither the Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into, or verify
(i) any statement, warranty or representation made in connection with any Loan
Document or any borrowing hereunder; (ii) the performance or observance of any
of the covenants or agreements of any obligor under any Loan Document; (iii) the
satisfaction of any condition specified in Article IV, except receipt of items
required to be delivered solely to the Agent; (iv) the existence or possible
existence of a Default or Unmatured Default or (v) the validity, effectiveness
or genuineness of any Loan Document or any other instrument or writing furnished
in connection therewith. The Agent shall not be responsible to any Lender for
any recitals, statements, representations or warranties herein or in any of the
other Loan Documents, for the perfection or priority of any of the Liens on any
of the Collateral, or for the execution, effectiveness, genuineness, validity,
legality, enforceability, collectibility, or sufficiency of this Agreement or
any of the other Loan Documents or the transactions contemplated thereby, or for
the financial condition of any guarantor of any or all of the Obligations,
Holdings, the Borrower or any of their respective Subsidiaries.
10.5 Action on Instructions of Lenders. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders and on all holders of
Notes. The Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.
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10.6 Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorney-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
10.7 Reliance on Documents; Counsel. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
10.8 Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Revolving Loan Commitment (i) for any amounts not reimbursed by the Borrower for
which the Agent is entitled to reimbursement by the Borrower under the Loan
Documents, (ii) for any other expenses incurred by the Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery, administration
and enforcement of the Loan Documents including as a result of a dispute among
the Lenders or between any Lender and the Agent and (iii) for any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to or arising
out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement of any of
the terms thereof or of any such other documents, including as a result of a
dispute among the Lenders or between any Lender and the Agent, provided that no
Lender shall be liable for any of the foregoing to the extent any of the
foregoing is found in a final non-appealable judgment by a court of competent
jurisdiction to have arisen solely from the Gross Negligence or willful
misconduct of the Agent.
10.9 Rights as a Lender. With respect to its Revolving Loan Commitment,
Loans made by it and the Notes issued to it, the Agent shall have the same
rights and powers hereunder and under any other Loan Document as any Lender and
may exercise the same as through it were not the Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. The Agent may accept deposits from, lend money to,
enter into Interest Rate Agreements and generally engage in any kind of trust,
debt, equity or other transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Borrower or any of its
Subsidiaries in which the Borrower or such Subsidiary is not restricted hereby
from engaging with any other Person.
10.10 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by Holdings and the Borrower and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and
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without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and the
other Loan Documents.
10.11 Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, and the Agent may be removed at
any time with or without cause by written notice received by the Agent from the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint, on behalf of the Borrower and the Lenders, a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders and shall have accepted such appointment within thirty days
after the retiring Agent's giving notice of resignation, then the retiring Agent
may appoint, on behalf of the Borrower and the Lenders, a successor Agent.
Notwithstanding anything herein to the contrary, so long as no Default has
occurred and is continuing, each such successor Agent shall be subject to
approval by the Borrower, which approval shall not be unreasonably withheld.
Such successor Agent shall be a commercial bank having capital and retained
earnings of at least $50,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder and under the other Loan Documents. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
X shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent hereunder and under
the other Loan Documents.
10.12 Collateral Documents. Each Lender hereby authorizes the Agent to
enter into each of the Collateral Documents to which it is a party and to take
all action contemplated by such documents. Each Lender agrees that no Lender
shall have the right individually to seek to realize upon the security granted
by any Collateral Document, it being understood and agreed that such rights and
remedies may be exercised solely by the Agent for the benefit of the Holders of
Secured Obligations upon the terms of the Collateral Documents.
ARTICLE XI: SETOFF; RATABLE PAYMENTS
11.1 Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if any Default occurs and is continuing, any
indebtedness from any Lender to the Borrower (including all account balances,
whether provisional or final and whether or not collected or available) may be
offset and applied toward the payment of the Obligations owing to such Lender,
whether or not the Obligations, or any part hereof, shall then be due.
11.2 Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Loans (other than payments received pursuant to
Sections 3.1, 3.2 or 3.4) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligation or such amounts which may be
subject to setoff, such Lender agrees,
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promptly upon demand, to take such action necessary such that all Lenders share
in the benefits of such collateral ratably in proportion to the obligations
owing to them. In case any such payment is disturbed by legal process, or
otherwise, appropriate further adjustments shall be made.
11.3 Application of Payments. Subject to the provisions of Section 8.2, the
Agent shall, unless otherwise specified at the direction of the Required Lenders
which direction shall be consistent with the last sentence of this Section 11.3,
apply all payments and prepayments in respect of any Obligations and all
proceeds of Collateral in the following order:
(A) first, to pay interest on and then principal of any portion of
the Loans which the Agent may have advanced on behalf of any Lender for
which the Agent has not then been reimbursed by such Lender or the
Borrower;
(B) second, to pay interest on and then principal of any advance made
under Section 9.3 for which the Agent has not then been paid by the
Borrower or reimbursed by the Lenders;
(C) third, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Agent;
(D) fourth, to pay Obligations in respect of any fees, expenses,
reimbursements or indemnities then due to the Lenders and the issuer(s) of
Letters of Credit;
(E) fifth, to pay interest due in respect of Loans and L/C
Obligations;
(F) sixth, to the ratable payment or prepayment of principal
outstanding on Loans, Reimbursement Obligations and Rate Hedging
Obligations in such order as the Agent may determine in its sole
discretion;
(G) seventh, to provide required cash collateral if any pursuant to
Section 2.24; and
(H) eighth, to the ratable payment of all other Obligations.
Unless otherwise designated (which designation shall only be applicable prior to
the occurrence of a Default) by the Borrower, all principal payments in respect
of Loans shall be applied first, to the outstanding Revolving Loans and, second,
to the outstanding Term Loans, in each case, first, to repay outstanding
Floating Rate Loans, and then to repay outstanding Eurodollar Loans with those
Eurodollar Loans which have earlier expiring Interest Periods being repaid prior
to those which have later expiring Interest Periods. The order of priority set
forth in this Section 11.3 and the related provisions of this Agreement are set
forth solely to determine the rights and priorities of the Agent, the Lenders,
the issuer(s) of Letters of Credit and other Holders of Secured Obligations as
among themselves. The order of priority set forth in clauses (D) through (H) of
this Section 11.3 may at any time and from time to time be changed by the
Required Lenders without necessity of notice to or consent of or approval by the
Borrower, or any other Person.
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The order of priority set forth in clauses (A) through (C) of this Section 11.3
may be changed only with the prior written consent of the Agent.
11.4 Relations Among Lenders.
(a) Except with respect to the exercise of set-off rights of any
Lender in accordance with Section 11.1, the proceeds of which are applied in
accordance with this Agreement, and except as set forth in the following
sentence, each Lender agrees that it will not take any action, nor institute any
actions or proceedings, against the Borrower or any other obligor hereunder or
with respect to any Collateral or Loan Document, without the prior written
consent of the Required Lenders or, as may be provided in this Agreement or the
other Loan Documents, at the direction of the Agent.
(b) The Lenders are not partners or co-venturers, and no Lender shall
be liable for the acts or omissions of, or (except as otherwise set forth herein
in case of the Agent) authorized to act for, any other Lender. Notwithstanding
the foregoing, and subject to Section 11.2, any Lender shall have the right to
enforce on an unsecured basis the payment of the principal of and interest on
any Loan made by it after the date such principal or interest has become due and
payable pursuant to the terms of this Agreement.
ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1 Successors and Assigns. The terms and provisions of the Loan Documents
shall be binding upon and inure to the benefit of the Borrower and the Lenders
and their respective successors and assigns, except that (i) the Borrower shall
not have the right to assign its rights or obligations under the Loan Documents
and (ii) any assignment by any Lender must be made in compliance with Section
12.3 hereof. Notwithstanding clause (ii) of this Section, any Lender may at any
time, without the consent of the Borrower or the Agent, assign all or any
portion of its rights under this Agreement and its Notes to a Federal Reserve
Bank; provided, however, that no such assignment shall release the transferor
Lender from its obligations hereunder. The Agent may treat the payee of any Note
as the owner thereof for all purposes hereof unless and until such payee
complies with Section 12.3 hereof in the case of an assignment thereof or, in
the case of any other transfer, a written notice of the transfer is filed with
the Agent. Any assignee or transferee of a Note agrees by acceptance thereof to
be bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
12.2 Participations.
(A) Permitted Participants; Effect. Any Lender may, in the ordinary course
of its business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("Participants") participating interests in any
Loan owing to such Lender, any Note held by such Lender, any Revolving Loan
Commitment of such Lender, any L/C Interest of such Lender or any
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other interest of such Lender under the Loan Documents on a pro-rata or non pro-
rata basis; provided that the amount of such participation shall not be for less
than $5,000,000 (provided such amount may be reduced after the occurrence of a
Default without the consent of the Borrower by the Agent and the Required
Lenders). In the event of any such sale by a Lender of participating interests
to a Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Lender shall remain
the holder of any such Note for all purposes under the Loan Documents, all
amounts payable by the Borrower under this Agreement shall be determined as if
such Lender had not sold such participating interests, and the Borrower and the
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under the Loan Documents except that,
for purposes of Article III hereof, the Participants shall be entitled to the
same rights as if they were Lenders.
(B) Voting Rights. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Loan or Commitment in which such Participant has an
interest which forgives principal, interest or fees or reduces the interest rate
or fees payable pursuant to the terms of this Agreement with respect to any such
Loan or Revolving Loan Commitment, postpones any date fixed for any regularly-
scheduled payment of principal of, or interest or fees on, any such Loan or
Revolving Loan Commitment, or releases all or substantially all of the
Collateral, if any, securing any such Loan.
(C) Benefit of Setoff. The Borrower agrees that each Participant shall be
deemed to have the right of setoff provided in Section 11.1 hereof in respect to
its participating interest in amounts owing under the Loan Documents to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under the Loan Documents, provided that each Lender shall retain the
right of setoff provided in Section 11.1 hereof with respect to the amount of
participating interests sold to each Participant except to the extent such
Participant exercises its right of set off. The Lenders agree to share with each
Participant, and each Participant, by exercising the right of setoff provided in
Section 11.1 hereof, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with Section 11.2 as if each Participant were a Lender.
12.3 Assignments.
(A) Permitted Assignments. Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("Purchasers") all or a portion of its rights and
obligations under this Agreement (including, without limitation, its Revolving
Loan Commitment, all Loans owing to it, all of its participation interests in
existing Letters of Credit, and its obligation to participate in additional
Letters of Credit hereunder) in accordance with the provisions of this Section
12.3. Each assignment shall be of a constant, and not a varying, ratable
percentage of all of the assigning Lender's rights and obligations under this
Agreement. Such assignment shall be substantially in the form of Exhibit E
hereto and shall not be permitted hereunder unless such assignment is either for
all of such Lender's rights and obligations under the Loan Documents or involves
loans and commitments in
98
<PAGE>
an aggregate amount of at least $5,000,000 (provided such amount shall not apply
to an assignment to a Lender and may be reduced after the occurrence of a
Default without the consent of the Borrower by the Agent and the Required
Lenders). The consent of the Agent and the Borrower shall be required prior to
an assignment becoming effective with respect to a Purchaser which is not a
Lender or an Affiliate thereof. Such consent shall be substantially in the form
attached as Appendix I to Exhibit E hereto and shall not be unreasonably
withheld, and, in the case of the Borrower, which consent shall not be required
after the occurrence and during the continuance of a Default.
(B) Effect; Effective Date. Upon (i) delivery to the Agent of a notice of
assignment, substantially in the form attached as Appendix II to Exhibit E
hereto (a "Notice of Assignment"), together with any consents required by
Section 12.3.(A) hereof, and (ii) payment of a $3,500 fee to the Agent for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. The Notice of Assignment
shall contain a representation by the Purchaser to the effect that none of the
consideration used to make the purchase of the Revolving Loan Commitment, Loans
and L/C Obligations under the applicable assignment agreement are "plan assets"
as defined under ERISA and that the rights and interests of the Purchaser in and
under the Loan Documents will not be "plan assets" under ERISA. On and after the
effective date of such assignment, such Purchaser, if not already a Lender,
shall for all purposes be a Lender party to this Agreement and any other Loan
Documents executed by the Lenders and shall have all the rights and obligations
of a Lender under the Loan Documents, to the same extent as if it were an
original party hereto, and no further consent or action by the Borrower, the
Lenders or the Agent shall be required to release the transferor Lender with
respect to the percentage of the Aggregate Revolving Loan Commitment, Loans and
Letter of Credit participations assigned to such Purchaser. Upon the
consummation of any assignment to a Purchaser pursuant to this Section 12.3(B),
the transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that replacement Notes are issued to such transferor Lender and
new Notes or, as appropriate, replacement Notes, are issued to such Purchaser,
in each case in principal amounts reflecting their Revolving Loan Commitment and
their Term Loans, as adjusted pursuant to such assignment.
(C) The Register. The Agent shall maintain at its address referred to in
Section 13.1 a copy of each assignment delivered to and accepted by it pursuant
to this Section 12.3 and a register (the "Register") for the recordation of the
names and addresses of the Lenders and the Revolving Loan Commitment of and
principal amount of the Loans owing to, each Lender from time to time and
whether such Lender is an original Lender or the assignee of another Lender
pursuant to an assignment under this Section 12.3. The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrower and each of its Subsidiaries, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
12.4 Confidentiality. Subject to Section 12.5, the Agent and the Lenders
shall hold all nonpublic information obtained pursuant to the requirements of
this Agreement and identified as
99
<PAGE>
such by the Borrower in accordance with such Person's customary procedures for
handling confidential information of this nature and in accordance with safe and
sound banking practices and in any event may make disclosure reasonably required
by a prospective "Transferee" (as defined in Section 12.5) in connection with
the contemplated participation or assignment or as required or requested by any
Governmental Authority or representative thereof or pursuant to legal process
and shall require any such Transferee to agree (and require any of its
Transferees to agree) to comply with this Section 12.4. In no event shall the
Agent or any Lender be obligated or required to return any materials furnished
by the Borrower; provided, however, each prospective Transferee shall be
required to agree that if it does not become a participant or assignee it shall
return all materials furnished to it by or on behalf of the Borrower in
connection with this Agreement.
12.5 Dissemination of Information. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the Holdings, the Borrower and its Subsidiaries and the Collateral;
provided that, prior to any such disclosure, such prospective Transferee shall
agree to preserve in accordance with Section 12.4 the confidentiality of any
confidential information described therein.
ARTICLE XIII: NOTICES
13.1 Giving Notice. Except as otherwise permitted by Section 2.14 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Documents shall be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as may
be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the case of telexes); or, if by
courier, one (1) business day after deposit with a reputable overnight carrier
service with all charges paid or provided for.
13.2 Change of Address. The Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
ARTICLE XIV: COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower, the Agent and the Lenders
and each party as notified the Agent by telex or telephone, that it has taken
such action.
100
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.
SOUTH CENTRAL POOL SUPPLY, INC.
By: /s/ CRAIG K. HUBBARD
-----------------------------------------
Title: Chief Financial Officer, Treasurer and
Secretary
Address:
109 Northpark Boulevard
Covington, LA 70433-5070
Attention: Craig Hubbard
Facsimile: 504/892-1657
Confirmation: 504/892-5521
LASALLE NATIONAL BANK,
Individually and as Agent
By: /s/ JAMES C. TUCKER
---------------------------------------
Title: Senior Vice President
------------------------------
Address:
135 South LaSalle Street
Suite 307
Chicago, Illinois 60603
Attention: James C. Tucker
Telephone No.: 312-904-4970
Facsimile No.: 312-904-4605
SIGNATURE PAGE TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE>
HIBERNIA NATIONAL BANK, as a Lender
By: /s/ STEVE C. HEMPERLEY
----------------------------------------
Title: Vice President
---------------------------------
Address:
313 Carondelet Street
6th Floor
New Orleans, LA 70130
Attention: Steve C. Hemperley
Telephone No.: 504-533-2895
Facsimile No.: 504-533-2060
THE FIRST NATIONAL BANK OF CHICAGO, as
a Lender
By:
------------------------------------
Title:
------------------------------------
Address:
One First National Plaza
Suite 0173
Chicago, IL 60670
Attn: Cory Olson
Telephone No.: 312-732-1706
Facsimile No.: 312-732-2991
SIGNATURE PAGE TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE>
HIBERNIA NATIONAL BANK, as a Lender
By:
----------------------------------------
Title:
---------------------------------
Address:
313 Carondelet Street
6th Floor
New Orleans, LA 70130
Attention: Steve C. Hemperley
Telephone No.: 504-533-2895
Facsimile No.: 504-533-2060
THE FIRST NATIONAL BANK OF CHICAGO, as
a Lender
By: /s/ CORY OLSON
----------------------------------------
Title: Authorized Agent
------------------------------------
Address:
One First National Plaza
Suite 0173
Chicago, IL 60670
Attn: Cory Olson
Telephone No.: 312-732-1706
Facsimile No.: 312-732-2991
SIGNATURE PAGE TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
<PAGE>
EXHIBIT A
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 31, 1997
Form of Borrowing Base Certificate
----------------------------------
Attached
<PAGE>
BORROWING BASE CERTIFICATE
FOR
SOUTH CENTRAL POOL SUPPLY, INC. ("SCP")
TO: LaSalle National Bank, as Agent
135 South LaSalle Street
Chicago, IL 60603-3499
I. GROSS AMOUNT OF ELIGIBLE RECEIVABLES (SCP ONLY)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Face Amount of All Receivables $
---------
2. Less: Receivables aged over 60 days from due date ($ )
---------
3. Less: Cross-aged Receivables ($ )
---------
4. Less: Receivables in excess of 15% of all Eligible
Receivables Owing from any Single Account
Debtor and its Affiliates ($ )
---------
5. Less: Affiliate Receivables ($ )
---------
6. Less: Non-Complying Federal Governmental
Receivables ($ )
---------
7. Less: State and Municipal Receivables ($ )
---------
8. Less: Foreign Receivables ($ )
---------
9. Less: Receivables subject to offset or counterclaim ($ )
---------
10. Less: Dated Receivables in excess of (a) 65% of
total Receivables if calculation is during
January 1 through April 30 and (b) 40% of
total Receivables if calculation is made during
May 1 through December 31 ($ )
---------
11. Less: Other Ineligibles Receivables ($ )
---------
12. Less: Unearned finance charges, late fees and
other fees ($ )
---------
13. Less: Accruals from price adjustment ($ )
---------
14. Less: Other Reserves ($ )
---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
15. Total of Ineligible Receivables and Reserves
(Sum of Lines 2 through 14) $
---------
16. Total Gross Amount of Eligible Receivables
(Line 1 minus Line 15) $
---------
x .80
--------
17. Availability from Eligible Receivables
(80% of Line 16) = $
---------
II. GROSS AMOUNT OF ELIGIBLE INVENTORY (SCP ONLY)
18. Total Amount of Inventory (Lower of FIFO or
Market) $
---------
19. Less: Inventory subject to the Lien in favor of
BLN (deemed to be equal to 90% of the outstanding
balance of the BLN Note ($ )
---------
20. Less: Obsolete and not currently saleable
Inventory ($ )
---------
21. Less: Packaging material, supplies, raw
materials, and work in process ($ )
---------
22. Less: Consigned Inventory ($ )
---------
23. Less: Inventory held for more than two
(2) years ($ )
---------
24. Less: Goods in transit ($ )
---------
25. Less: Other Ineligibles ($ )
---------
26. Less: Obsolescence Reserve ($ )
---------
27. Less: Other Reserves ($ )
---------
28. Total of Ineligible Inventory Reserves (sum of
Lines 19 through 27) $
---------
29. Gross Amount of Eligible Inventory (Line 18
minus Line 28) $
---------
x $.45
---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
30. Availability from Eligible
Inventory By Reference to
Gross Amount of Eligible
Inventory (45% of Line 29) $
=========
31. $1,000,000 multiplied by the number of
service centers run by the Borrower $
---------
x $ .45
---------
32. Availability from Eligible Inventory By
Reference to Inventory Sublimit (45% of
Line 31) $
=========
33. Rentals Reserve (for Leased Locations
Not Subject to Landlord's Agreements; Initially ($ )
---------
34. Inventory Availability (Lesser of Lines 30
and 32, minus Line 33) ($ )
---------
III. OTHER ITEMS
35. Less: Letter of Credit Obligations ($ )
---------
36. Aggregate Borrowing Base (sum of
Lines 17 and 34 minus Line 35) ($ )
---------
IV. CALCULATION OF MAXIMUM AVAILABLE AMOUNT
37. Aggregate Revolving Loan Commitments $
---------
38. Less: Letter of Credit Obligations ($ )
---------
39. Less: Outstanding Revolving Loans ($ )
---------
40. Amount available by reference to commitment
level (Line 37 minus the sum of Lines 38 and 39) $
=========
41. Borrowing Base (Line 36) $
---------
42. Less: Outstanding Revolving Loans ($ )
---------
43. Amount available by reference to Borrowing Base $
=========
44. Maximum Available Amount (Lesser of Line 40
and Line 43) $
---------
</TABLE>
<PAGE>
Pursuant to, and in accordance with, the terms and provisions of that
certain Third Amended and Restated Credit Agreement, dated as of December 31,
1997, among South Central Pool Supply, Inc. ("Borrower"), the financial
institutions from time to time parties thereto (the "Lenders"), LaSalle National
Bank, as contractual representative on behalf of itself and the other Lenders
(the "Agent") as amended, restated, supplemented or otherwise modified from time
to time (the "Credit Agreement"), Borrower is executing and delivering to Agent
this Borrowing Base Certificate accompanied by supporting data (collectively
referred to as "Certificate"). Borrower warrants and represents to the Agent
and the Lenders that this Certificate is true, correct, and based on information
contained in Borrower's and its Subsidiaries' own records. Borrower, by the
execution of this Certificate, hereby ratifies, confirms and affirms all of the
terms, conditions and provisions of the Credit Agreement, and further certifies
on the date of this Certificate, that the Borrower is in compliance with said
Credit Agreement.
DATE: SOUTH CENTRAL POOL SUPPLY, INC.
---------------------
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
EXHIBIT B
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 31, 1997
TERM LOAN AMOUNTS AND
COMMITMENTS
-----------
<TABLE>
<CAPTION>
=========================================================================================
Lender Total Term Loan Amounts as of Effective Date
- -----------------------------------------------------------------------------------------
<S> <C>
LaSalle National Bank $10,011,627.91
- -----------------------------------------------------------------------------------------
Hibernia National Bank $ 7,325,581.39
- -----------------------------------------------------------------------------------------
The First National Bank of Chicago $ 3,662,790.70
- -----------------------------------------------------------------------------------------
Total $ 21,000,000
=========================================================================================
</TABLE>
<TABLE>
<CAPTION>
=========================================================================================
Lender Total Commitment Post Effective Date
- -----------------------------------------------------------------------------------------
<S> <C>
LaSalle National Bank $30,988,372.10
- -----------------------------------------------------------------------------------------
Hibernia National Bank $22,674,418.60
- -----------------------------------------------------------------------------------------
The First National Bank of Chicago $11,337,209.30
- -----------------------------------------------------------------------------------------
Total $ 65,000,000
=========================================================================================
</TABLE>
<PAGE>
EXHIBIT C
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 31, 1997
FORM OF
SUBSTITUTED AND AMENDED REVOLVING LOAN NOTE
-------------------------------------------
U.S. $_____________ Chicago, Illinois
DATED: December 31, 1997
FOR VALUE RECEIVED, the undersigned, SOUTH CENTRAL POOL SUPPLY, INC., a
Delaware corporation (the "Borrower"), HEREBY UNCONDITIONALLY PROMISES TO PAY to
the order of [LaSalle National Bank] (the "Lender") the principal sum of
[__________] MILLION AND NO/100 DOLLARS ($__,000,000.00), or, if less, the
aggregate unpaid amount of all "Revolving Loans" (as defined in the Credit
Agreement referred to below) made by the Lender to the Borrower pursuant to the
"Credit Agreement" (as defined below) on the "Termination Date" (as defined in
the Credit Agreement), or on such earlier date as may be required by the terms
of the Credit Agreement. Capitalized terms used herein and not otherwise defined
herein are as defined in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
each Revolving Loan from the date of such Revolving Loan until such principal
amount is paid in full at a rate or rates per annum determined in accordance
with the terms of the Credit Agreement. Interest hereunder is due and payable at
such times and on such dates as set forth in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to the Agent (as defined below), to such domestic account as
the Agent may designate, in same day funds. At the time of each Revolving Loan,
and upon each payment or prepayment of principal of each Revolving Loan, the
Lender shall make a notation either on the schedule attached hereto and made a
part hereof, or in such Lender's own books and records, in each case specifying
the amount of such Revolving Loan, the respective Interest Period thereof, in
the case of Eurodollar Loans, or the amount of principal paid or prepaid with
respect to such Revolving Loan, as the case may be; provided, that the failure
of the Lender to make any such recordation or notation shall not affect the
Obligations of the Borrower hereunder or under the Credit Agreement.
This Substituted and Amended Revolving Loan Note is one of the
"Revolving Notes" referred to in, and is entitled to the benefits of, the Third
Amended and Restated Credit Agreement dated as of December 31, 1997 (as so
amended and restated, and further amended, restated, supplemented or modified
from time to time, the "Credit Agreement") among the Borrower (formerly known as
SCP Acquisition Corp.), the financial institutions from time to time parties
thereto (such financial institutions being herein referred to collectively as
the "Lenders") and LaSalle National Bank, as one of the Lenders and as
contractual representative of the Lenders (the "Agent") for the Lenders. The
Credit Agreement, among other things, (i) provides for the making of Revolving
Loans by the Lender to the Borrower from time to time in an aggregate amount not
to exceed at any time
<PAGE>
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Revolving Loan being evidenced by this
Substituted and Amended Revolving Loan Note and (ii) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments of the principal hereof prior to the maturity hereof
upon the terms and conditions therein specified.
The unpaid balance of the indebtedness hitherto evidenced by (x) one
or more of those certain "Substituted and Amended Revolving Loan Notes" (as
defined in and issued pursuant to the Restated Credit Agreement) dated May 30,
1996 and (y) one or more of those certain "Substituted and Amended Revolving
Loan Notes" (as defined in and issued pursuant to the Second Restated Credit
Agreement) dated September 26, 1996 (collectively, the "Former Notes") made by
the Borrower and delivered to the Lenders, remains outstanding as of the date
hereof and shall continue to be secured pursuant to the terms of the Collateral
Documents. The principal balance of this Substituted and Amended Revolving Loan
Note includes the indebtedness hitherto evidenced by the Former Notes and to the
extent such indebtedness is included in the principal balance of this
Substituted and Amended Revolving Loan Note, this Substituted and Amended
Revolving Loan Note (i) merely reevidences the indebtedness hitherto evidenced
by the Former Notes, (ii) is given in substitution for, and not as payment of
the Former Notes, and (iii) is in no way intended to constitute a novation of
the Former Notes.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by the Borrower.
Whenever in this Substituted and Amended Revolving Loan Note reference
is made to the Agent, the Lender or the Borrower, such reference shall be deemed
to include, as applicable, a reference to their respective successors and
assigns. The provisions of this Substituted and Amended Revolving Loan Note
shall be binding upon and shall inure to the benefit of said successors and
assigns. The Borrower's successors and assigns shall include, without
limitation, a receiver, trustee or debtor in possession of or for the Borrower.
This Substituted and Amended Revolving Loan Note shall be interpreted,
and the rights and liabilities of the parties hereto determined, in accordance
with the internal laws (as distinguished from the conflicts of law provisions)
of the State of Illinois.
SOUTH CENTRAL POOL SUPPLY, INC.
By:
-------------------------------------
Its:
------------------------------------
-2-
<PAGE>
SCHEDULE OF REVOLVING LOANS AND PAYMENTS OR PREPAYMENTS
-------------------------------------------------------
Amount of
Principal Unpaid
Amount of Type of Interest Paid or Principal Notation
Date Loan Loan Period/Rate Prepaid Balance Made By
- ---- --------- -------- ----------- --------- --------- --------
-3-
<PAGE>
EXHIBIT D
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 31, 1997
FORM OF
SUBSTITUTED AND AMENDED TERM LOAN NOTE
--------------------------------------
U.S.$ ___________________________________ Chicago, Illinois
DATED: December 31, 1997
FOR VALUE RECEIVED, the undersigned, SOUTH CENTRAL POOL SUPPLY, INC., a
Delaware corporation ("Borrower"), hereby unconditionally promises to pay to the
order of [LaSalle National Bank] (the "Lender"), the principal sum of
[______________________________________________] AND ____/100 DOLLARS ($
[___________________]), such amount representing the outstanding aggregate
principal amount of the "Term Loan" (as defined in the Credit Agreement referred
to below) made by the Lender to the Borrower pursuant to the "Credit Agreement"
(as defined below). Capitalized terms used herein and not otherwise defined
herein are as defined in the Credit Agreement.
Unless otherwise required to be paid sooner pursuant to the provisions
of the Credit Agreement, the principal indebtedness evidenced hereby shall be
payable in the amounts and at the times specified in Section 2.1(d) of the
Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of
the Lender's Term Loan from the date of such Term Loan until such principal
amount is paid in full at a rate or rates per annum determined in accordance
with the terms of the Credit Agreement. Interest hereunder is due and payable at
such times and on such dates as set forth in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to the Agent (as defined below), to such domestic account as
the Agent may designate, in same day funds. At the time of each payment or
prepayment of principal of the Lender's Term Loan, the Lender shall make a
notation either on the schedule attached hereto and made a part hereof, or in
such Lender's own books and records, in each case specifying the amount of
principal paid or prepaid with respect to such Term Loan; provided, that the
failure of the Lender to make any such recordation or notation shall not affect
the Obligations of the Borrower hereunder or under the Credit Agreement.
This Substituted and Amended Term Loan Note is one of the "Term Notes"
referred to in, and is entitled to the benefits of, the Third Amended and
Restated Credit Agreement dated as of December 31, 1997 (as so amended and
restated, and as further amended,
<PAGE>
restated, supplemented or modified from time to time, the "Credit Agreement")
among the Borrower (formerly known as SCP Acquisition Corp.), the financial
institutions from time to time parties thereto (such financial institutions
being herein referred to collectively as the "Lenders") and LaSalle National
Bank, as one of the Lenders and as contractual representative for the Lenders
(the "Agent"). The Credit Agreement, among other things, (i) provides for the
making of the Lender's Term Loan, the indebtedness of the Borrower resulting
therefrom being evidenced by this Substituted and Amended Term Loan Note and
(ii) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events and also for prepayments of the principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.
The unpaid balance of the indebtedness hitherto evidenced by those
certain Substituted and Amended Term Loan Notes, dated June 7, 1996 in the
original principal amount of $3,193,305.19, and September 26, 1996 in the
original principal amount of $7,812,500.00 (the "Original Notes"), made by the
Borrower and delivered to the Lenders, remains outstanding as of the date hereof
and shall continue to be secured pursuant to the terms of the Collateral
Documents. The principal balance of this Substituted and Amended Term Loan Note
includes the indebtedness hitherto evidenced by the Original Notes and to the
extent such indebtedness is included in the principal balance of this
Substituted and Amended Term Loan Note, this Substituted and Amended Term Loan
Note (i) merely reevidences the indebtedness hitherto evidenced by the Original
Notes, (ii) is given in substitution for, and not as payment of the Original
Notes, and (iii) is in no way intended to constitute a novation of the Original
Notes.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by the Borrower.
Whenever in this Substituted and Amended Term Loan Note reference is
made to the Agent, the Lender or the Borrower, such reference shall be deemed to
include, as applicable, a reference to their respective successors and assigns.
The provisions of this Substituted and Amended Term Loan Note shall be binding
upon and shall inure to the benefit of said successors and assigns. The
Borrower's successors and assigns shall include, without limitation, a receiver,
trustee or debtor in possession of or for the Borrower.
This Substituted and Amended Term Loan Note shall be interpreted, and
the rights and liabilities of the parties hereto determined, in accordance with
the internal laws (as distinguished from the conflicts of law provisions) of the
State of Illinois.
SOUTH CENTRAL POOL SUPPLY, INC.
By:
--------------------------------
Its:
-------------------------------
<PAGE>
SCHEDULE OF TERM LOAN AND PAYMENTS OR PREPAYMENTS
-------------------------------------------------
Amount of
Principal Unpaid
Amount of Type of Interest Paid or Principal Notation
Date Term Loan Loan Period/Rate Prepaid Balance Made By
- ---- --------- ------- ----------- --------- --------- -------
<PAGE>
EXHIBIT E
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 31, 1997
FORM OF ASSIGNMENT AGREEMENT
----------------------------
This Assignment Agreement (this "Assignment Agreement") between
__________________________ (the "Assignor") and __________________ (the
"Assignee") is dated as of _________________, 19__. The parties hereto agree as
follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Third Amended and
Restated Credit Agreement dated as of December 31, 1997 (which, as it may
heretofore have been and may hereafter be amended, modified, restated, renewed
or extended from time to time is herein called the "Credit Agreement") described
in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 3 of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if
the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period agreed to by the Agent) after a
Notice of Assignment substantially in the form of Appendix II attached hereto
has been delivered to the Agent. Such Notice of Assignment must include any
consents, including, without limitation the consent of the Agent in the form of
Appendix I attached hereto, required to be delivered to the Agent by Section
12.3(A) of the Credit Agreement. In no event will the Effective Date occur if
the payments required to be made by the Assignee to the Assignor on the
Effective Date under Sections 4 and 5 hereof are not made on the proposed
Effective Date. The Assignor will notify the Assignee of the proposed Effective
Date no later than the Business Day prior to the proposed Effective Date. As of
the Effective Date, (i) the Assignee shall have the rights and obligations of a
Lender under the Loan Documents with respect to the rights and obligations
assigned to the Assignee hereunder and (ii) the Assignor shall relinquish its
rights and be released from its corresponding obligations under the Loan
Documents with respect to the rights and obligations assigned to the Assignee
hereunder.
<PAGE>
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Agent all payments of principal, interest
and fees with respect to the interest assigned hereby. The Assignee shall
advance funds directly to the Agent with respect to all Loans and reimbursement
payments made on or after the Effective Date with respect to the interest
assigned hereby. [In consideration for the sale and assignment of Loans
hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date, an
amount equal to the principal amount of the portion of all Floating Rate Loans
assigned to the Assignee hereunder and (ii) with respect to each Fixed Rate Loan
made by the Assignor and assigned to the Assignee hereunder which is outstanding
on the Effective Date, (a) on the last day of the Interest Period therefor or
(b) on such earlier date agreed to by the Assignor and the Assignee or (c) on
the date on which any such Fixed Rate Loan either becomes due (by acceleration
or otherwise) or is prepaid (the date as described in the foregoing clauses (a),
(b) or (c) being hereinafter referred to as the "Payment Date"), the Assignee
shall pay the Assignor an amount equal to the principal amount of the portion of
such Fixed Rate Loan assigned to the Assignee which is outstanding on the
Payment Date. If the Assignor and the Assignee agree that the Payment Date for
such Fixed Rate Loan shall be the Effective Date, they shall agree to the
interest rate applicable to the portion of such Loan assigned hereunder for the
period from the Effective Date to the end of the existing Interest Period
applicable to such Fixed Rate Loan (the "Agreed Interest Rate") and any interest
received by the Assignee in excess of the Agreed Interest Rate shall be remitted
to the Assignor. In the event interest for the period from the Effective Date to
but not including the Payment Date is not paid by the Borrower with respect to
any Fixed Rate Loan sold by the Assignor to the Assignee hereunder, the Assignee
shall pay to the Assignor interest for such period on the portion of such Fixed
Rate Loan sold by the Assignor to the Assignee hereunder at the applicable rate
provided by the Credit Agreement. In the event a prepayment of any Fixed Rate
Loan which is existing on the Payment Date and assigned by the Assignor to the
Assignee hereunder occurs after the Payment Date but before the end of the
Interest Period applicable to such Fixed Rate Loan, the Assignee shall remit to
the Assignor the excess of the prepayment penalty paid with respect to the
portion of such Fixed Rate Loan assigned to the Assignee hereunder over the
amount which would have been paid if such prepayment penalty was calculated
based on the Agreed Interest Rate. The Assignee will also promptly remit to the
Assignor (i) any principal payments received from the Agent with respect to
Fixed Rate Loans prior to the Payment Date and (ii) any amounts of interest on
Loans and fees received from the Agent which relate to the portion of the Loans
assigned to the Assignee hereunder for periods prior to the Effective Date, in
the case of Floating Rate Loans, or the Payment Date, in the case of Fixed Rate
Loans, and not previously paid by the Assignee to the Assignor.]/1/ In the event
that either party hereto receives any payment to which the other party hereto is
entitled under this Assignment Agreement, then the party receiving such amount
shall promptly remit it to the other party hereto.
- ---------------------
/1/ Each Assignor may insert its standard payment provisions in lieu of the
payment term included in this Exhibit.
-2-
<PAGE>
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor
a fee on each day on which a payment of interest or commitment fees is made
under the Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or commitment fees for the period
prior to the Effective Date or, in the case of Fixed Rate Loans, the Payment
Date, which the Assignee is obligated to deliver to the Assignor pursuant to
Section 4 hereof). The amount of such fee shall be the difference between (i)
the interest or fee, as applicable, paid with respect to the amounts assigned to
the Assignee hereunder and (ii) the interest or fee, as applicable, which would
have been paid with respect to the amounts assigned to the Assignee hereunder if
each interest rate was ___ of 1% less than the interest rate paid by the
Borrower or if the commitment fee was ___ of 1% less than the commitment fee
paid by the Borrower, as applicable. In addition, the Assignee agrees to pay __%
of the processing fee required to be paid to the Agent under Section 12.3(B) of
the Credit Agreement in connection with this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor,
the Agent nor any other Lender nor any of their respective officers, directors,
employees, agents or attorneys shall be responsible for (i) the due execution,
legality, validity, enforceability, genuineness, sufficiency or collectability
of any Loan Document, including without limitation, documents granting the Agent
and the other Lenders a security interest in assets of the Borrower or any
guarantor, (ii) any representation, warranty or statement made in or in
connection with any of the Loan Documents, (iii) the financial condition or
creditworthiness of the Borrower or any guarantor, (iv) the performance of or
compliance with any of the terms or provisions of any of the Loan Documents, (v)
inspecting any of the Property, books or records of the Borrower, (vi) the
validity, enforceability, perfection, priority, condition, value or sufficiency
of any collateral securing or purporting to secure the Loans or (vii) any
mistake, error of judgment, or action taken or omitted to be taken in connection
with the Loans or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Lender and based on such documents and information at it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents, (iii) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto, (iv) agrees that it will
-3-
<PAGE>
perform in accordance with their terms all of the obligations which by the terms
of the Loan Documents are required to be performed by it as a Lender, (v) agrees
that its payment instructions and notice instructions are as set forth in the
attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are "plan assets" as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be "plan assets" under ERISA,
[and (vii) attaches the forms prescribed by the Internal Revenue Service of the
United States certifying that the Assignee is entitled to receive payments under
the Loan Documents without deduction or withholding of any United States federal
income taxes]./2/
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any manner from the Assignee's non-performance
of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to Section 12.3 of the Credit Agreement to assign the
rights which are assigned to the Assignee hereunder to any entity or person,
provided that (i) any such subsequent assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under Sections 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
Aggregate Revolving Loan Commitment/3/ occurs between the date of this
Assignment Agreement and the Effective Date, the percentage interest specified
in Item 3 of Schedule 1 shall remain the same, but the dollar amount purchased
shall be recalculated based on the reduced Aggregate Revolving Loan Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice
of Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
- ---------------------
/2/ To be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
/3/ If there are any other applicable commitments at the time, insert here and
in other appropriate location at the end of this sentence.
-4-
<PAGE>
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
14. NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Assignment Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Assignment
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of this Assignment Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:
-------------------------
Title:
----------------------
[NAME OF ASSIGNEE]
By:
-------------------------
Title:
----------------------
-6-
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
Third Amended and Restated Credit Agreement dated as of December 31, 1997
by and among SOUTH CENTRAL POOL SUPPLY, INC., a Delaware corporation (the
"Borrower"), the financial institutions from time to time parties thereto
(such financial institutions being herein referred to as collectively as
the "Lenders") and LASALLE NATIONAL BANK, as one of the Lenders and as
contractual representative for itself and the other Lenders (the "Agent").
/1/
2. Date of Assignment Agreement: , 19
----------------- -- --
3. Amounts (As of Date of Item 2 above):
Revolving
Loans Term Loans
a. Total of Commitments
(Loans)/2/ under
Credit Agreement $ $
-------- --------
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement/3/ --------% --------%
c. Amount of Assigned Share
in each Facility purchased
under the Assignment
Agreement $ $
-------- --------
- ---------------------
/1/ Insert any other Amendments.
/2/ If a Commitment has been terminated, insert outstanding Loans in place
of Commitment.
/3/ Percentage taken to 10 decimal places.
<PAGE>
4. Assignee's Aggregate
(Loans and Commitments)/4/
Amount Purchased
Hereunder: $
--------
5. Proposed Effective Date:
-------------------
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
------------------------ ------------------------
Title: Title:
--------------------- ---------------------
- --------------------
/4/ If a Commitment has been terminated, insert outstanding Loans in place of
Commitment.
-2-
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
<PAGE>
APPENDIX I
CONSENT TO ASSIGNMENT
---------------------
To: LaSalle National Bank, as Agent
135 South LaSalle Street
Chicago, IL 60603
[South Central Pool Supply, Inc.
109 Northpark Blvd.
Covington, LA 70433-5072]/5/
From: [Name of Assignor]
[Name of Assignee]
, 199
------------------- -
1. We refer to that certain Third Amended and Restated Credit Agreement
dated as of December 31, 1997 (which, as it may have been and may hereafter be
amended, restated, modified, renewed or extended from time to time, is herein
called the "Credit Agreement") among South Central Pool Supply, Inc., (the
"Borrower"), certain financial institutions party thereto (each a "Lender"),
including ________________________ ("Assignor"), and LaSalle National Bank, as
contractual representative for the Lenders. Capitalized terms used herein and
not otherwise defined herein shall have the meanings given to them in the Credit
Agreement.
2. Pursuant to Section 12.3 of the Agreement, Assignor desires to assign
to ______________________________ ("Assignee"), and the Assignee desires to
assume from the Assignor, an undivided interest in the Revolving Loan Commitment
of the Assignor such that after giving effect to the assignment and assumption
hereinafter provided, the Revolving Loan Commitment (and its corresponding
participation in and obligation to participate in Letters of Credit) of the
Assignee shall equal $_______________, and the Term Loan of the Assignor such
that after giving effect to the assignment and assumption hereinafter provided,
the Term Loan of the Assignee shall equal $______________, and the Pro Rata
Share of the Assignee shall equal ____% (the "Proposed Transaction").
- ----------------------
/5/ If applicable.
<PAGE>
3. Pursuant to the terms of Section 12.3, the consent of the Agent [and
the Borrower] is required for the Proposed Transaction. The Assignor and
Assignee request that the Agent [and the Borrower] execute this consent in the
space indicated below.
ASSIGNOR ASSIGNEE
- ------------------------- -------------------------
By: By:
---------------------- ----------------------
Title: Title:
------------------- -------------------
Acknowledged and Consented to
as of this ____ day of
_____________________, 199_
LASALLE NATIONAL BANK, AS AGENT
By:
----------------------
Its:
---------------------
[SOUTH CENTRAL POOL SUPPLY, INC.
By:
----------------------
Its:
--------------------- ]
-2-
<PAGE>
APPENDIX II
to Assignment Agreement
NOTICE
OF ASSIGNMENT
-------------
_________, 19__
To: LaSalle National Bank, As Agent
135 South LaSalle Street
Chicago, IL 60603
Attention: James Tucker
[South Central Pool Supply, Inc.
109 Northpark Blvd.
Covington, LA 70433-5072]/6/
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that certain Third Amended and Restated Credit
Agreement (the "Credit Agreement") described in Item 1 of Schedule 1 attached
hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and
delivered to the Agent [and the Borrower] pursuant to Section 12.3(B) of the
Credit Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of ___________, 19__ (the "Assignment"), pursuant to which,
among other things, the Assignor has sold, assigned, delegated and transferred
to the Assignee, and the Assignee has purchased, accepted and assumed from the
Assignor the percentage interest specified in Item 3 of Schedule 1 of all
outstanding, rights and obligations under the Credit Agreement relating to the
facilities listed in Item 3 of Schedule 1. The Effective Date of the Assignment
shall be the later of the date specified in Item 5 of Schedule 1 or two Business
Days (or such shorter period as agreed to by the Agent) after this Notice of
Assignment and any consents and fees required by Sections 12.3(B) of the Credit
Agreement have been delivered to the Agent, provided that the Effective
- -------------------
/6/ If applicable
<PAGE>
Date shall not occur if any condition precedent agreed to by the Assignor and
the Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to the Agent [and
the Borrower] notice of the assignment and delegation referred to herein. The
Assignor will confer with the Agent before the date specified in Item 5 of
Schedule 1 to determine if the Assignment Agreement will become effective on
such date pursuant to Section 3 hereof, and will confer with the Agent to
determine the Effective Date pursuant to Section 3 hereof if it occurs
thereafter. The Assignor shall notify the Agent if the Assignment Agreement does
not become effective on any proposed Effective Date as a result of the failure
to satisfy the conditions precedent agreed to by the Assignor and the Assignee.
At the request of the Agent, the Assignor will give the Agent written
confirmation of the satisfaction of the conditions precedent.
5. The Assignor and/or the Assignee shall pay to the Agent on or
before the Effective Date the processing fee of $3,500 required by Section
12.3(B) of the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor
and the Assignee request and direct that the Agent prepare and cause the
Borrower to execute and deliver new Notes or, as appropriate, replacements
notes, to the Assignor and the Assignee. The Assignor and, if applicable, the
Assignee each agree to deliver to the Agent the original Notes received by it
from the Borrower upon its receipt of new Notes in the appropriate amount.
7. The Assignee advises the Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the
funds, monies, assets or other consideration being used to make the purchase
pursuant to the Assignment are "plan assets" as defined under ERISA and that its
rights, benefits, and interests in and under the Loan Documents will not be
"plan assets" under ERISA.
9. The Assignee authorizes the Agent to act as its contractual
representative under the Loan Documents in accordance with the terms thereof.
The Assignee acknowledges that the Agent has no duty to supply information with
respect to the Borrower or the Loan Documents to the Assignee until the Assignee
becomes a party to the Credit Agreement./1/
NAME OF ASSIGNOR NAME OF ASSIGNEE
By:__________________ By:__________________
____________________
/1/ May be eliminated if assignee is a party to the credit agreement prior to
the effective date.
-2-
<PAGE>
Title: ____________________ Title: _______________________
-3-
<PAGE>
EXHIBIT F
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 31, 1997
Form of Officer's Certificate
-----------------------------
OFFICER'S CERTIFICATE
I, the undersigned, hereby certify that I am the _______________ of
South Central Pool Supply, Inc., a corporation duly organized and existing under
the laws of the State of Delaware (the "Corporation"). Capitalized terms used
herein and not otherwise defined herein are as defined in that certain Third
Amended and Restated Credit Agreement dated as of December 31, 1997, among the
Corporation, the financial institutions from time to time parties thereto (the
"Lenders") and LaSalle National Bank, as contractual representative for the
Lenders (as further amended, restated, supplemented or modified from time to
time, the "Credit Agreement").
I further certify that, pursuant to Section 4.2 and Section 6.1(A)(iv)
of the Credit Agreement, as of the date hereof no Default or Unmatured Default
exists [other than the following (describe the nature of the Default or
Unmatured Default and the status thereof)].
IN WITNESS WHEREOF, I hereby subscribe my name and affix the seal of
the Corporation on the _____ day of December, 1997.
[Insert Name of Officer]
_____________________________
<PAGE>
EXHIBIT G
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 31, 1997
FORM OF COMPLIANCE CERTIFICATE
------------------------------
Pursuant to Section 6.1(A)(iv) of the Third Amended and Restated Credit
Agreement (as the same may from time to time be further amended, supplemented,
modified or restated, the "Credit Agreement"), dated as of December 31, 1997, by
and among South Central Pool Supply, Inc. (the "Borrower"), the financial
institutions which may from time to time become parties thereto (the "Lenders"),
LaSalle National Bank, as contractual representative for itself and the other
Lenders (the "Agent"), the Borrower, through its _________________________
______________________________, hereby delivers to the Agent, together with the
financial statements being delivered to the Agent pursuant to Section 6.1(A) of
the Credit Agreement, this Compliance Certificate (the "Certificate") for the
accounting period from ____________, 19__ to ___________, 19__. Capitalized
terms used herein shall have the meanings set forth in the Credit Agreement.
Subsection references herein relate to subsections of the Credit Agreement.
I. MANDATORY PREPAYMENTS (Section 2.5(B))
--------------
A. Section 2.5(B)(i)(a)
--------------------
(1) State whether upon the consummation of any Asset Sale by Holdings,
the Borrower or any Subsidiary of Borrower (other than Permitted
Inventory and Equipment Sales) any Net Cash Proceeds in excess of
$500,000 have arisen. Yes/No
(2) If the answer to question (1) is yes, state the date of and the
nature of the transaction giving rise to the Net Cash Proceeds,
the aggregate principal amount of such Net Cash Proceeds, whether
the Net Cash Proceeds are to be reinvested, and the amount, if
required, of any mandatory prepayment on Schedule A.
B. Section 2.5(B)(i)(b)
--------------------
(1) State whether any proceeds of issuance of Indebtedness permitted
under Section 6.3(A)(ii)(c) have been received
Yes/No
<PAGE>
(2) If the answer to question (1) is yes, state the date of the
issuance of the Indebtedness, the original principal amount and
the amount of any mandatory prepayment on Schedule A.
<TABLE>
<CAPTION>
<S> <C>
C. Section 2.5(B)(i)(c)
--------------------
(1) The Borrower's calculation of Excess Cash Flow for the
Cash Flow Period ended __________________ is as follows:
Earnings before interest expense, tax expense depreciation
and amortization $_________
+ Net reduction in Working Capital +_________
- Net increase in Working Capital -_________
- Income taxes -_________
- Capital Expenditures -_________
- Interest Expense -_________
- Scheduled amortization of principal portion of
Term Loan and all other Indebtedness -_________
- Aggregate amount of (y) cash dividends paid with
respect to Capital Stock (z) Restricted Junior Payments
paid pursuant to Section 6.3(F)(ii) -_________
- Prepayments of Loans (other than ordinary course
repayments of the Revolving Loans) -_________
+/-Reductions or Increases in long-term assets +/-_______
Excess Cash Flow =_________
x .50
_________
Excess Cash Flow Payment Amount (50% of
Excess Cash Flow; or $0 if Leverage Ratio as of
the last day of the Cash Flow Period is less than
3.50 to 1.00) =_________
</TABLE>
-2-
<PAGE>
II. RESTRICTED JUNIOR PAYMENTS (Section 6.3(F))*
--------------
<TABLE>
<CAPTION>
<S> <C>
(1) 50% of the net earnings (loss) after taxes for the
Borrower and its consolidated Subsidiaries for period
from 1/1/97 to end of most recently completed fiscal year $________
(2) Aggregate amount of upstream guarantees $________
(3) Maximum amount available for Holdings' Dividends
and Subordinated Interest Payments (Line 1 minus Line 2) $________
(4) Aggregate amount of Holdings' Dividends previously paid $________
(5) Aggregate amount of Subordinated Interest Payments $________
(6) Amount of proposed additional Subordinated Intercompany
Indebtedness from Holdings to the Borrower $________
(7) Net amount remaining available for Holdings' Dividends and
Subordinated Interest Payments (Line 3 minus Line 4 and minus
Line 5 and plus Line 6) $________
(8) Amount of proposed Holdings' Dividends $________
(9) Amount of proposed Subordinated Interest Payments $________
(10) Proposed Net Distribution Amount (Line 7 minus Line 8 and
minus Line 9) $________
(11) If Line 10 is a positive number, attach as an exhibit your
calculation of the Fixed Charge Coverage Ratio as of the end
of most recently completed fiscal quarter treating such Net
Distribution as having been paid during that quarter. Is such
Fixed Charge Coverage Ratio greater than or equal to 1.25 to
1.00 Yes/No
</TABLE>
* To be included only with annual audited financial statements.
-3-
<PAGE>
III. FINANCIAL COVENANTS
<TABLE>
<CAPTION>
<S> <C>
A. MINIMUM INTEREST EXPENSE COVERAGE RATIO (Section 6.4(B))
The ratio of EBITA to Interest Expense for the period from
______ to______ ____ to 1.0
B. MINIMUM FIXED CHARGE COVERAGE RATIO (Section 6.4(C))
The ratio of (1) the sum, without duplication, of the
amounts of EBITA + depreciation expense + Rentals - Capital
Expenditures to (2) the sum, without duplication, of the
amounts of Interest Expense + Fees + Rentals + permitted
tax-related Restricted Junior Payments under Section
6.3(F)(ii) and any amounts paid directly by the Borrower to
any Governmental Authority with respect to the
consolidated group's tax liability + scheduled amortization
on Term Loans and other Indebtedness + dividends/
distributions/return of capital by Holdings to its equity
security holders + Net Distributions for the period
from ______ to ______ ____ to 1.0
C. MAXIMUM LEVERAGE RATIO (Section 6.4(D))
The ratio of (1) the sum, without duplication, of the amount
of Indebtedness of Holdings and its consolidated
subsidiaries (excluding Holdings Subordinated Notes) +
maximum fixed repurchase price of Holdings' Redeemable
Stock permitted as Restricted Junior Payment under Section
6.3(F) to (2) the sum, without duplication, of the amount of
E+ depreciation expense - Capital Expenditures for
the period from ______ to ______ ____ to 1.0
IV. RENTAL PAYMENTS (Definition of Eligible Inventory)
Attached to this Compliance Certificate as Exhibit A is a
detailed report of the status of rental payments by the
Borrower. State whether the Borrower is current in the payment
of all of its required lease payments as of the date of this
certificate. If not, please provide detailed information on
which locations are past due and the amount of such past-due
rent. Yes/No
</TABLE>
-4-
<PAGE>
The Borrower hereby certifies, through its _________________, that the
information set forth above is accurate as of __________________, 19___, to the
best of such officers' knowledge, after diligent inquiry, and that the financial
statements delivered herewith present fairly the financial position of the
Borrower and its Subsidiaries at the dates indicated and the results of their
operations and changes in their financial position for the periods indicated in
conformity with Agreement Accounting Principles, consistently applied.
Dated: ____________________, 19__/20__
SOUTH CENTRAL POOL SUPPLY, INC.
By: _____________________________
Title: ____________________________
-5-
<PAGE>
EXHIBIT H
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 31, 1997
[Reserved]
<PAGE>
EXHIBIT I
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 31, 1997
[Reserved]
<PAGE>
EXHIBIT J
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 31, 1997
(See Attached)
<PAGE>
CLOSING CHECKLIST
FOR
THIRD AMENDED AND RESTATED CREDIT AGREEMENT/1/
SOUTH CENTRAL POOL SUPPLY, INC.
DECEMBER 31, 1997
1. Assignment Agreements, each dated as of December 31, 1997, between (a) The
First National Bank of Chicago and LaSalle National Bank and (b) The First
National Bank of Chicago and Hibernia National Bank.
2. Agency Assumption Agreement, dated as of December 31, 1997, by and among
The First National Bank of Chicago, as agent under the Second Restated
Credit Agreement, and LaSalle National Bank, as successor agent,
acknowledged and agreed to by the Borrower and the Lenders party thereto.
3. Third Amended and Restated Credit Agreement ("Credit Agreement") among
South Central Pool Supply, Inc., a Delaware corporation ("Borrower"), the
institutions from time to time party hereto (collectively, the "Lenders")
and LaSalle National Bank in its separate capacity as contractual
representative for itself and the other Lenders (in such capacity, the
"Agent").
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C> <C>
Exhibit A - Borrowing Base Certificate
Exhibit B - Term Loan Amounts and Revolving Loan Commitments
Exhibit C - Form of Substituted and Amended Revolving Note
Exhibit D - Form of Substituted and Amended Term Note
Exhibit E - Form of Assignment Agreement
Exhibit F - Form of Officer's Certificate
Exhibit G - Form of Compliance Certificate
Exhibit H - [Reserved]
Exhibit I - [Reserved]
Exhibit J - List of Closing Documents
Exhibit K - Holdings Subordination Agreement
</TABLE>
- -------------
/1/ Documents marked with an asterisk to be provided by K&E/The Borrower
-1-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES
---------
<S> <C> <C>
Schedule 1.1.1 -- Permitted Existing Contingent Obligations*
Schedule 1.1.2 -- Permitted Existing Indebtedness*
Schedule 1.1.3 -- Permitted Existing Investments*
Schedule 1.1.4 -- Permitted Existing Liens*
Schedule 1.1.5 -- Permitted Existing Letters of Credit*
Schedule 5.3 -- Conflicts; Governmental Consents*
Schedule 5.7 -- Litigation; Loss Contingencies*
Schedule 5.8 -- Subsidiaries*
Schedule 5.17 -- Insurance*
Schedule 5.18 -- Contingent Obligations*
Schedule 5.20 -- Labor Matters; Compensation Agreements*
Schedule 5.21 -- Environmental Matters*
Schedule 6.2(M) -- Deposit Accounts, Collection Account Agreements*
Schedule 6.3(F)(ii) -- Schedule of Permissible Tax Payments
</TABLE>
4. Substituted and Amended Revolving Loan Notes executed by the Borrower in
favor of the Lenders.
5. Substituted and Amended Term Loan Notes executed by the Borrower in favor
of the Lenders.
6. Amendment No. 2 to the Amended and Restated Security Agreement of the
Borrower.
<TABLE>
<S> <C>
Schedule 1 Pledged Debt*
Schedule 2 Locations of Collateral*
Schedule 2-A Third Party Locations*
Schedule 2-B Financing Statement Filing Locations*
Schedule 3 Trade Names*
</TABLE>
7. Global Amendment No. 1, executed by each of the Borrower, Holdings, and
Alliance in favor of the Agent and the Lenders.
8. Deed of Trust Modification Agreements, in recordable form, with respect to
Real Property owned by the Borrower (the "Real Property"), together with
endorsements to title policies acknowledging LaSalle National Bank, as
Agent.
9. Pre-Filing UCC Lien Search Reports of Filings with respect to the BHD
Acquisition against the names and in the offices listed on Schedule I
hereto.*
-2-
<PAGE>
10. Pre-Filing Tax Lien and Judgment Search Reports of filings with respect to
the BHD Acquisition against the names and in the offices listed on
Schedule II hereto.*
11. UCC Financing Statement(s) for each of the jurisdictions and against each
of the names listed on Schedule III hereto.
12. Purchase Documents*
a. Asset Purchase Agreement for the BHD Purchase ("BHD Acquisition
Agreement").*
b. Assignment executed by the Borrower in favor of the Agent with respect
to the representations, warranties and covenants contained in the BHD
Acquisition Agreement.
c. Releases of or amendments to recorded security interests against the
assets purchased from BHD in form and substance satisfactory to the
Agent and the Lenders.*
d. Copies of all other Documents, Instruments and Agreements executed in
connection with the BHD Acquisition Agreement.*
13. Opinion of counsel to the Borrower and Holdings: Kirkland & Ellis.*
14. Evidence of Property Insurance (reflecting all collateral locations) with
respect to the Borrower together with loss payable endorsements (mortgagee
form) in favor of the Agent.*
15. Evidence of Liability Insurance together with evidence of the naming of the
Agent as an additional insured.*
16. Reaffirmation executed by Alliance Packaging, Inc., a Delaware corporation,
in favor of the Agent for its benefit and the benefit of Holders of Secured
Obligations reaffirming (i) that certain Guaranty dated as of January 20,
1995; (ii) that certain Patent Security Agreement dated as of January 20,
1995; and (iii) such other agreements and instruments delivered to the
Agent and the Holders of Secured Obligations or to the Borrower and
assigned to the Agent pursuant to the Credit Agreement, the Original Credit
Agreement, the Restated Credit Agreement and the Second Restated Credit
Agreement.
17. Reaffirmation of (i) that certain Guaranty dated as of May 30, 1996
executed by SCP Pool Corporation ("Holdings") in favor of the Agent for its
benefit and the benefit of Holders of Secured Obligations, (ii) the
Holdings Subordination Agreement; and (iii) such other agreements and
instruments delivered to the Agent and the Holders of Secured Obligations
or to the Borrower and assigned to the Agent pursuant to the Credit
Agreement, the Original Credit Agreement, the Restated Credit Agreement and
the Second Restated Credit Agreement.
-3-
<PAGE>
18. Financial Condition Certificate with appropriate supporting information
(including pro formas and fair value balance sheet) attached.*
19. Certificate of the Secretary of the Borrower certifying (i) resolutions of
the Board of Directors of the Borrower approving and authorizing the
execution, delivery and performance of each document to which it is a
party, (ii) that there have been no changes in the Certificate of
Incorporation of the Borrower since the date of the most recent
certification thereof by the Secretary of State of Delaware delivered to
the Agent, (iii) the names and true signatures of the incumbent officers of
the Borrower authorized to sign the documents to which it is a party, and
(iv) the By-laws (attached thereto) of the Borrower as in effect on the
date of such certification.*
20. Certificate of Incorporation of the Borrower certified by the Secretary of
State of Delaware.*
21. Good Standing Certificate for the Borrower from the office of the
Secretaries of State of Delaware, Louisiana, Alabama, Arkansas, Arizona,
California, Colorado, Florida, Georgia, Illinois, Indiana, Kansas,
Mississippi, Missouri, Nebraska, Nevada, New Mexico, North Carolina, Ohio,
Oklahoma, Oregon, Tennessee, Texas, Virginia, Washington, and each new
jurisdiction following the BHD Acquisition.*
22. Disbursement direction letter executed by the Borrower and addressed to
each of the Agent and The First National Bank of Chicago and the other
Lenders in respect of the proceeds of Holding's IPO held in a cash
collateral account at The First National Bank of Chicago.*
23. Current Borrowing Base Certificate dated as of November 1997.*
24. Officer's Certificate, executed by the President, any Vice-President or the
Chief Financial Officer of the Company, stating that on the Effective Date
(x) no Default shall have occurred and be continuing, (y) the BHD
Acquisition shall have been consummated for not more than $23,000,000 in
total consideration (exclusive of transaction fees and expenses) and (z)
the Borrower shall have made payment to The First National Bank of Chicago,
as Agent under the Second Restated Credit Agreement, of the principal
payment in the amount of $750,000 due in respect of the Term Loans pursuant
to the terms of the Second Restated Credit Agreement.*
25. Agent Fee Letter./2/
26. Summary of Environmental Due Diligence in connection with the BHD
Acquisition.*
- ---------------
/2/ To be included in the set of closing documents of the Borrower and the
Agent only.
-4-
<PAGE>
POST-CLOSING DOCUMENTS
27. Landlord Waiver agreements executed by the lessors with respect to the
Leases assigned by BHD to the Borrower in connection with the BHD Purchase
Agreement.*
28. Post-Filing UCC Search Reports of Filings against South Central Pool
Supply, Inc., as Debtor, in the offices set forth in Items 12 and 13 above.
29. Landlord Waiver agreements executed by certain of the lessors with respect
to certain of the Leases assigned by BHD to the Borrower in connection with
the BHD Acquisition Agreement.*
a. _________________________
b. _________________________
30. Notice Letters to each of the Borrower's existing lessors who have executed
Landlord Waivers notifying such lessors that LaSalle National Bank is the
successor Agent to The First National Bank of Chicago.*
31. Post-Closing UCC Searches in each of the jurisdictions and against each of
the names listed on Schedule III hereto.
-5-
<PAGE>
SCHEDULE I
TO
CLOSING CHECKLIST FOR
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
PRE-FILING UCC SEARCHES
1. Debtor: Bicknell Huston Distributors, Inc.
Jurisdictions: PA-Butler County Prothonotary
Department of State ("DOS"), PA
PA-Butler County
DOS, NY
Onondaga County, NY
Suffolk County, NY
Genesee County, NY
Albany County, NY
Secretary of State ("SOS"), MA
MA-Hopkinton Town Clerk
MA, North Essex County Registry
MA-South Middlesex County Registry
MA-North Andover Town Clerk
SOS, NJ
Burlington County, NJ
Somerset County, NJ
SOS, CT
CT-Windsor Town Clerk
SOS, ME
Cumberland County, ME
2. Debtor: Bicknell Distributors, Inc.
Jurisdictions: DOS, NY
Onondaga County, NY
Suffolk County, NY
Genesee County, NY
Albany County, NY
-6-
<PAGE>
SOS, CT
CT-Windsor Town Clerk
SOS, ME
Cumberland County, ME
SOS, MA
MA, North Essex County Registry
MA-South Middlesex County Registry
MA-North Andover Town Clerk
MA-Hopkinton Town Clerk
SOS, NJ
Burlington County, NJ
Somerset County, NJ
DOS, PA
PA-Butler County Prothonotary
PA-Butler County Recorder
3. Debtor: Huston Distributors Inc
Jurisdiction: SOS, NJ
Burlington County, NJ
Somerset County, NJ
DOS, NY
Onondaga County, NY
Suffolk County, NY
Genesee County, NY
Albany County, NY
DOS, PA
PA-Butler County
Butler County Recorder
SOS, CT
CT-Windsor Town Clerk
SOS, ME
Cumberland County, ME
-7-
<PAGE>
SOS, MA
MA, North Essex County Registry
MA-South Middlesex County Registry
MA-North Andover Town Clerk
MA-Hopkinton Town Clerk
4. Debtor: Huston Supply Company
Jurisdictions: SOS, NJ
Burlington County, NJ
Somerset County, NJ
5. Debtor: Aqua Fab Industries, Inc.
Jurisdiction: SOS, CT
Westport Town Clerk, CT
SOS, MA
Hampden County Registry, MA
Westfield City Clerk, MA
SOS, NH
Rockingham County Registry, NH
Stratham Town Clerk, NH
DOS, PA
Butler County Prothonotary, PA
Butler County Recorder, PA
6. Debtor: Aqua World
Jurisdiction: DOS, NY
Albany County, NY
-8-
<PAGE>
SCHEDULE II TO
CLOSING CHECKLIST FOR
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
PRE-FILING TAX LIEN AND JUDGMENT SEARCHES
1. Debtor: Bicknell Huston Distributors, Inc.
Jurisdictions: PA-Butler County Prothonotary
DOS, NY
Onondaga County, NY
Suffolk County, NY
Genesee County, NY
Albany County, NY
SOS, MA
MA, North Essex County Registry
MA-South Middlesex County Registry
NJ-Superior Court/Trenton
Burlington County, NJ
Somerset County, NJ
SOS, CT
CT-Hartford-New Britian Judicial District
SOS, ME
Cumberland County, ME
US District Court, MA
2. Debtor: Bicknell Distributors, Inc.
Jurisdictions: DOS, NY
Onondaga County, NY
Suffolk County, NY
Genesee County, NY
Albany County, NY
SOS, CT
Hartford New Britian Judicial District, CT
-9-
<PAGE>
SOS, ME
Cumberland County, ME
SOS, MA
U.S. District Court, MA
MA, North Essex County Registry
MA-South Middlesex County Registry
Burlington County, NJ
Somerset County, NJ
PA-Butler County Prothonotary
3. Debtor: Huston Distributors, Inc
Jurisdiction: SOS, NJ
Somerset County, NJ
Superior Court/Trenton, NJ
Burlington County, NJ
DOS, NY
Onondaga County, NY
Genesee County, NY
Albany County, NY
Suffolk County, NJ
DOS, PA
PA-Butler County
Cumberland County, ME
4. Debtor: Huston Supply Company
Jurisdictions: Superior Court/Trenton-NJ
Burlington County, NJ
Somerset County, NJ
-10-
<PAGE>
5. Debtor: Aqua Fab Industries, Inc.
Jurisdiction: SOS, CT
Fairfield Judicial District, CT
SOS, MA
Hampden County Registry, MA
US District Court, MA
SOS, NH
Rockingham County Registry, NH
DOS, PA
Butler County Prothonotary, PA
6. Debtor: Aqua World
Jurisdiction: DOS, NY
Albany County, NY
-11-
<PAGE>
SCHEDULE III TO
CLOSING CHECKLIST FOR
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
UCC FINANCING STATEMENTS
I. UCC-3 Assignments to LaSalle National Bank
South Central Pool Supply, Inc.
Secretary of State of Alabama,
Secretary of State of Arizona,
Clerk of Maricopa County, Arizona
Secretary of State of Arkansas,
Clerk of Circuit Court and Ex-Officio Recorder of Pulaski County, Arkansas
Secretary of State of California,
Clerk of Fresno County, California
Secretary of State of Florida,
Clerk of Superior Court of DeKalb County, Georgia
Clerk of Superior Court of Gwinnett County, Georgia
Secretary of State of Illinois,
Secretary of State of Indiana,
Secretary of State of Kansas,
Clerk of Court of Jefferson Parish, Louisiana
Secretary of State of Mississippi,
Chancery Court Clerk of Hinds (District 1) County, Mississippi
Secretary of State of Missouri,
City Register of St. Louis, Missouri
Recorder of Deeds of St. Louis County, Missouri
Secretary of State of New Mexico,
-12-
<PAGE>
Secretary of State of Nevada,
Secretary of State of North Carolina,
Register of Deeds of Mecklenburg County, North Carolina
Register of Deeds of Wake County, North Carolina
Secretary of State of Ohio
Recorder of Hamilton County, Ohio
Clerk of Oklahoma County, Oklahoma
Secretary of State of Oregon,
Secretary of State of Tennessee
Secretary of State of Texas
State Corporation Commission of Virginia
Clerk of Court of Fairfax County, Virginia
Clerk of Hanover County, Virginia
Department of Licensing, Washington
II. UCC-1 Financing Statements
Bicknell Huston Distributors, Inc. (d/b/a filings)
SOS, Connecticut
SOS, Maine
SOS, Massachusetts
Town Clerk of Framingham, Massachusetts
Town Clerk of Hopkinton, Massachusetts
Town Clerk of North Andover, Massachusetts
SOS, New Jersey
Department of State, New York
Albany County, New York
Genessee County, New York
Onondaga County, New York
Suffolk County, New York
Secretary of Commonwealth, Pennsylvania
Butler County, Pennsylvania
-13-
<PAGE>
South Central Pool Supply, Inc.
SOS, Connecticut
SOS, Maine
SOS, Massachusetts
Town Clerk of Framingham, Massachusetts
Town Clerk of Hopkinton, Massachusetts
Town Clerk of North Andover, Massachusetts
SOS, New Jersey
Department of State, New York
Albany County, New York
Genessee County, New York
Onondaga County, New York
Suffolk County, New York
Department of State, Pennsylvania
Butler County, Pennsylvania
Alliance Packaging, Inc. (new collateral locations)
Jefferson Parish, Louisiana
South Central Pool Supply, Inc. (new collateral locations)
Fulton County, Georgia
Caddo Parish, Louisiana
Department of Assessments and Taxation, Maryland
SOS, Minnesota
SOS, Missouri
Greene County, Missouri
SOS, Nebraska
SOS, Ohio
Franklin County, Ohio
State Corporation Commission, Virginia
Fairfax County, Virginia
-14-
<PAGE>
EXHIBIT K
SUBORDINATION AGREEMENT
-----------------------
This Subordination Agreement (as the same may from time to time be amended,
modified or restated, the "Agreement") entered into by and between SCP POOL
CORPORATION, a Delaware corporation (together with its successors,
"Noteholder"), and THE FIRST NATIONAL BANK OF CHICAGO, as agent (the "Agent" for
itself and the other "Senior Lenders" (as defined below).
W I T N E S S E T H:
WHEREAS, the Noteholder is financially interested in the "Borrower" (as
defined below"), in that Borrower is now indebted to the Noteholder, pursuant to
those certain Substituted and Amended Revolving Promissory Note dated as of May
30, 1996, in the total amount of fifty million and no/100 Dollars
($50,000,000.00) (which Substituted and Amended Revolving Promissory Note,
together with any instrument which may hereinafter be substituted therefor,
including, without limitation, any instrument evidencing any further loans made
by the Noteholder to the Borrower whether in connection with such Substituted
and Amended Revolving Promissory Note or any other agreement between Borrower
and the Noteholder are hereinafter referred to as the "Notes");
WHEREAS, the Borrower has entered into that certain Amended and Restated
Credit Agreement dated as of May 30, 1996 (as the same may from time to time be
amended, modified, supplemented or restated, in whole or in part and without
limitation as to amount, terms, conditions or covenants, the "Credit Agreement")
with the Agent on behalf of itself and the other financial institutions from
time to time party thereto;
WHEREAS, Borrower is presently indebted to the Senior Lenders as a result
of the advance of monies and other extensions of credit by the Senior Lenders to
Borrower pursuant to the Credit Agreement;
WHEREAS, Borrower is a wholly-owned subsidiary of the Noteholder;
WHEREAS, the Noteholder acknowledges that the loan or advance of monies or
other extensions of any financial accommodation or credit to Borrower by the
Senior Lenders is of value to the Noteholder;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged by the Noteholder, and in order to induce the Senior Lenders
to enter into the Credit Agreement and, at their option, now or from time to
time hereafter, to make loans or extend credit or any other financial
accommodation to or for the benefit of Borrower; or to grant such renewals,
increases or extensions thereof as the Senior Lenders may deem advisable; and to
better secure the Senior Lenders in respect of the foregoing, the Noteholder
hereby agrees with the Agent and the Senior Lenders as hereinafter set forth.
1. Certain Defined Terms. In addition to terms defined above and elsewhere
in this Agreement, the following terms used in this Agreement shall have the
following meanings, applicable both to the singular and the plural forms of the
terms defined:
<PAGE>
As used in this Agreement:
"Borrower" shall mean South Central Pool Supply, Inc., a Delaware
corporation or any successor or assign of South Central Pool Supply, Inc.,
including, without limitation, a receiver, trustee or debtor-in-possession.
"Senior Debt" shall mean (a) the outstanding principal balance of all
loans made under and pursuant to the Credit Agreement or any agreement providing
for the refunding or refinancing of the "Obligations" (as defined in the Credit
Agreement) ("Refinancing Agreement"), (b) all other obligations, liabilities,
and indebtedness, including, without limitation reimbursement obligations under
letters of credit issued pursuant to the Credit Agreement or Refinancing
Agreement, obligations with respect to acceptances issued pursuant to the Credit
Agreement or a Refinancing Agreement and obligations under interest rate or
foreign currency hedging, swap, cap, collar or similar agreements of either
Borrower to the Agent or any Senior Lender, whether now existing or hereafter
arising (and whether such indebtedness arises or accrues before or after the
commencement of any bankruptcy, insolvency or receivership proceedings),
including, without limitation, interest and fees accruing pre-petition or
post-petition at the rate or rates prescribed in the Credit Agreement or
Refinancing Agreement and costs, expenses, and attorneys' and paralegals' fees,
whenever incurred (and whether or not such claims, interest, costs, expenses or
fees are allowed or allowable in any such proceeding); and (c) amounts disbursed
or advanced (including, without limitation in connection with the provision of
any financing or other financial accommodations pursuant to Section 364 of the
Bankruptcy Code) by the Agent or the Senior Lenders or any one of them which the
Agent or any Senior Lender, in its good faith discretion, deems necessary or
desirable to preserve or protect any "Collateral" (as defined in the Credit
Agreement) or to enhance the likelihood or maximize the amount of repayment of
the Senior Debt, including, but not limited to, all protective advances, costs,
expenses, and attorneys' and paralegals' fees, whensoever made, advanced or
incurred by the Agent or any Senior Lender in connection with the Senior Debt or
the collateral therefor ("Preservation Debt"). Senior Debt shall include,
without limitation, all "Secured Obligations" (as defined in the Credit
Agreement) and all indebtedness, obligations and liabilities under and pursuant
to any agreement providing for the refunding or refinancing of the Secured
Obligations under the Credit Agreement. Senior Debt shall be considered to be
outstanding whenever any Senior Lender has an outstanding commitment therefor.
"Senior Lenders" shall mean each of the financial institutions from
time to time party to the Credit Agreement and each other holder of the Senior
Debt.
"Subordinated Debt" shall mean all (a) all principal of, and premium,
if any, and-interest on, the Notes and (b) all other indebtedness, fees,
expenses, obligations and liabilities of the Borrower (or any other person,
firm, partnership or corporation for the benefit of Borrower) to the Noteholder,
whether now existing or hereafter incurred or created, including, without
limitation, any loan made by the Noteholder to the Borrower in connection with
the reloaning of interest paid by the Borrower to the Noteholder hereunder, in
each case, whether such amounts are due or not due, direct or indirect, absolute
or contingent.
2. Standy; Subordination; Subrogation. The payment and performance of the
Subordinated Debt is hereby subordinated to the Senior Debt and, except as set
forth in Section 3 below, the Noteholder will not accelerate, ask, demand, sue
for, take or receive from Borrower, by setoff or in any other manner, the whole
or any part of the Subordinated Debt, including, without
-2-
<PAGE>
limitation, the taking of any negotiable instruments evidencing such amounts,
nor any security for any of the Subordinated Debt, unless and until all of the
Senior Debt shall have been fully and indefeasibly paid and satisfied in cash
and all financing arrangements among Borrower, the Agent and the Senior Lenders
have been terminated. The Noteholder also hereby agrees that, regardless of
whether the Senior Debt is secured or unsecured, the Senior Lenders shall be
subrogated for the Noteholder with respect to the Noteholder's claims against
Borrower and the Noteholder's rights, liens and security interests, if any, in
any of the Borrower's assets or any other assets securing the Senior Debt and
the proceeds thereof until all of the Senior Debt has been fully and
indefeasibly paid and satisfied in cash and all financing arrangements among
Borrower, the Agent and the Senior Lenders have been terminated.
3. Permitted Payments. Notwithstanding the provisions of Section 2 of this
Agreement, so long as no "Default" or "Unmatured Default" (each as defined in
the Credit Agreement) has occurred and is continuing, and provided that (i)
there shall not then exist any breach of this Agreement by the Noteholder which
has not been waived, in writing, by the Agent, and (ii) the payment described
below, if made, would not give rise to the occurrence of a Default or the Senior
Lenders' making an advance to Borrower in excess of amounts otherwise then
available to Borrower under the terms of the Credit Agreement, Borrower may pay
to the Noteholder, and the Noteholder may accept from Borrower, regularly
scheduled payments of interest, when due, on an unaccelerated basis, pursuant to
the Notes ("Permitted Payments"), it being understood and agreed by the
Noteholder that no Note may be modified or amended without the prior written
consent of the Agent on behalf of the Senior Lenders. It is further expressly
understood and agreed by the Noteholder that: (i) payments or prepayments
(whether optional or mandatory, by setoff or otherwise) of principal with
respect to the Subordinated Debt; (ii) any whole or partial prepayments (whether
optional or mandatory, by setoff or otherwise) of interest; and (iii) any
payments (whether optional or mandatory, by setoff or otherwise) of interest any
rate greater than ten percent (10%) per annum shall not be Permitted Payments.
Without in any way limiting the foregoing, it is expressly understood and agreed
by the Noteholder that in connection with any such interest payment, the
Borrower must be in compliance with the terms of the Credit Agreement, which
requirements include, among others, the following:
(i) the Borrower may make mandatory payment of interest on the Notes
only if (a) mandatory payments of interest due on the Notes ("Subordinated
Interest Payments") and (b) other distributions (the "Holdings' Dividends")
to Holdings in any fiscal year are made from funds legally available for
such purpose, in an aggregate amount for such (1) Subordinated Interest
Payments, plus (2) Holdings' Dividends minus the aggregate amount of
additional "Subordinated Intercompany Indebtedness" (as defined in the
Credit Agreement) loaned by Holdings to the Borrower on the date of any
such distribution not to exceed in the aggregate; (A) 50% of the net
earnings (or loss) after taxes of Borrower and its consolidated
Subsidiaries on a consolidated basis for the period from January 1, 1996 to
the end of the most recently completed fiscal year for which the audited
financial statements have been delivered pursuant to Section 6.1(A)(i) of
the Credit Agreement taken as a single accounting period determined in
conformity with Agreement Accounting Principles minus (B) the aggregate
amount of "Contingent Obligations" which are the subject of an "Upstream
Guarantee" (each as defined in the Credit Agreement) and any such interest
payments in excess of such amount shall not be a Permitted Payment; and
-3-
<PAGE>
(ii) the amount of payments permitted pursuant to clause (i) above
shall be determined after the Agent's and Senior Lenders' receipt of the audited
financial statements to be delivered pursuant to Section 6.1(a)(iii) of the
Credit Agreement (and the related Officer's Certificate pursuant to Section
6.1(A)(iv) of the Credit Agreement) for the immediately preceding fiscal year
and no earnings or income for any period shall be included in such calculation
until receipt of the above-reference audited financial statements for such
period:
(iii) in addition to the requirements set forth above, such
Subordinated Interest Payments shall not be Permitted Payments unless (A) the
aggregate amount of such Subordinated Interest Payments and Holdings' Dividends
is not greater than the aggregate amount of additional Subordinated Intercompany
Indebtedness loaned by Holdings to the Borrower on the date of such
distributions (all of which additional loans shall be Subordinated Debt governed
by the terms hereof); or (B) if the aggregate amount of such Subordinated
Interest Payments and Holdings' Dividends exceeds the aggregate amount of
additional Subordinated Intercompany Indebtedness loaned by Holdings to the
Borrower on the date of such distributions (such excess being herein, the "Net
Distribution"):
(I) in addition to the audited financial statements required
pursuant to clause (ii) above, the Agent and the Lenders shall have
received the unaudited quarterly financial statements to be delivered
pursuant to Section 6.1(A)(ii) of the Credit Agreement (and the
related Officer's Certificate pursuant to Section 6.1(A)(iv) of the
Credit Agreement) for the fiscal quarter ending immediately preceding
the proposed date of such; and
(II) the Borrower shall have demonstrated to the satisfaction of
the Agent and the Lenders that if the proposed Net Distribution had
been paid as of the end of the immediately preceding fiscal quarter,
the Fixed Charge Coverage Ratio (as defined in the Credit Agreement)
as of the end of such quarter would not be less than 1.25 to 1.00.
4. Enforcement Rights. Prior to the indefeasible payment in full of the
Senior Debt and the termination of all financing arrangements among Borrower and
the Senior Lenders, the Noteholder shall not have any right to enforce any claim
with respect to the Subordinated Debt, including, without limitation, any
Permitted Payment, or otherwise to take any action against Borrower or
Borrower's property without the Senior Lenders' prior written consent.
5. Liens; Permitted Transfers; Permitted Change of Control. The Noteholder
represents as of the date hereof that it has not been granted or obtained any
liens or security interests in any assets of the Borrower or any other assets
securing the Senior Debt. The Noteholder agrees that, without the prior written
consent of the Agent and each of the Senior Lenders, the Noteholder shall not
take any liens on or security interests in any assets of the Borrower or any
other assets securing the Senior Debt. In the event that the Borrower proposes
to sell, assign, transfer, lease, convey or otherwise dispose of any of its
property (a "Transfer") and such Transfer is either permitted pursuant to the
Credit Agreement or pursuant to a separate consent executed by the Senior
Lenders, then such Transfer shall be deemed to be permitted and consented to by
the Noteholder and shall not constitute a violation or breach of any terms
contained in the Notes. The Noteholder acknowledges and agrees that, to the
extent of the terms and provisions of this Agreement are inconsistent with the
Note or any
-4-
<PAGE>
other agreement related thereto, the Notes and such other agreements shall be
deemed to be subject to this Agreement. Notwithstanding any provision contained
in the Notes, if any, accelerating the Subordinated Debt or requiring a
mandatory prepayment or put of all or any part of the Subordinated Debt in
connection with a public offering of the stock of the Borrower, any change of
ownership of the capital stock of the Borrower, a change of the composition of
the Borrower's board of directors, consolidation or merger of the Borrower, sale
of all or substantially all of the assets of the Borrower or any other similar
event involving a change of control (a "Change of Control Event"), no such
Change of Control Event shall result in any such acceleration of the
Subordinated Debt, mandatory prepayment with respect to the Subordinated Debt or
put of any portion of the Subordinated Debt, all of which are hereby waived by
the Noteholder, unless and until all of the Senior Debt shall have been fully
and indefeasibly paid and satisfied in cash and all financing arrangements among
Borrower, the Agent and the Senior Lenders have been terminated.
6. Subordinated Debt Owed Only to the Noteholder. The Noteholder warrants
and represents that (a) the Noteholder has not previously assigned any interest
in the Subordinated Debt or any security interest in connection therewith, if
any; (b) no other party owns an interest in the Subordinated Debt or security
therefor other than the Noteholder (whether as joint holders of the Subordinated
Debt, participants or otherwise); and that the entire Subordinated Debt is
owning only to the Noteholder. The Noteholder covenants that the entire
Subordinated Debt shall continue to be owing only to the Noteholder and all
security therefor, if any, shall continue to be held solely for the benefit of
the Noteholder.
7. Senior Lender Priority. In the event of any distribution, division, or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the assets of Borrower or any of its
Subsidiaries or the proceeds thereof to the creditors of the Borrower or its
Subsidiaries or readjustment of the obligations and Subordinated Debt of
Borrower, whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding involving the readjustment of all or any part of the Senior Debt or
the Subordinated Debt, or the application of the assets of Borrower or any of
its Subsidiaries to the payment or liquidation thereof, or upon the dissolution
or other winding up of Borrower's or any of its Subsidiary's business, or upon
the sale of all or substantially all of Borrower's or any of its Subsidiaries'
assets, then, and in any such event, (i) the Agent and the Senior Lenders shall
be entitled to receive indefeasible payment in full in cash of any and all of
the Senior Debt prior to the payment of all or any part of the Subordinated
Debt, and (ii) any payment or distribution of any kind or character, whether in
cash, securities or other property, which shall be payable or deliverable upon
or with respect to any or all of the Subordinated Debt shall be paid or
delivered directly to Agent for application on any of the Senior Debt, due or
not due, until the Senior Debt shall have first been fully and indefeasibly paid
and satisfied in cash.
8. Grant of Authority to Agent. In the event of the occurrence of any event
descried in Section 7 above, and in order to enable the Agent and the Senior
Lenders to enforce their rights hereunder in any of the aforesaid actions or
proceedings, Agent is hereby irrevocably authorized and empowered, in the
Agent's discretion, to file, make and present for and on behalf of the
Noteholder such proofs of claims against Borrower on account of the Subordinated
Debt or other motions or pleadings as the Agent may deem expedient or proper and
to vote such proofs of claims in any such proceeding and to receive and collect
any and all dividends or other payments or disbursements made thereon in
whatever form the same may be paid or issued and to apply the same on account of
any portion of the Senior Debt. In voting such proofs of claim in any
proceeding, the Agent may act in a
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manner consistent with the sole interest of the Senior Lenders and the Agent
shall have no duty to take any action to optimize or maximize the Noteholder's
recovery with respect to its claim. The Noteholder irrevocably authorizes and
empowers the Agent to demand, sue for, collect and receive each of the aforesaid
payments and distributions described in Section 7 above and give acquittance
therefor and to file claims and take such other actions, in the Agent's own name
or in the name of the Noteholder or otherwise, as the Agent may deem necessary
or advisable for the enforcement of this Agreement. To the extent that payments
or distributions are made in property other than cash, the Noteholder authorizes
the Agent to sell such property to such buyers and on such terms as the Agent,
in the Agent's sole discretion, shall determine. The Noteholder will execute and
deliver to the Agent such powers of attorney, assignments and other instruments
or documents, including notes and stock certificates (together with such
assignments or endorsements as the Agent shall deem necessary), as may be
requested by the Agent in order to enable the Agent and to enforce any and all
claims of the Agent and the Senior Lenders upon or with respect to any or all of
the Subordinated Debt and to collect and receive any and all payments and
distributions which may be payable or deliverable at any time upon or with
respect to the Subordinated Debt, all for the Agent's and the Senior Lenders'
own benefit. Following the indefeasible payment in full in cash of the Senior
Debt, the Agent will remit to the Noteholder, to the extent of the Noteholder's
interest therein, all dividends or other payments or distributions paid to and
held by the Agent in excess of the Senior Debt. Each of the powers and
authorizations granted to the Agent in this Section 8, being coupled with an
interest, is irrevocable.
9. Payment Received by the Noteholder. Except for Permitted Payments
received by the Noteholder prior to the occurrence of a Default or Unmatured
Default as provided in Section 3 above, should any payment or distribution or
security or instrument or proceeds thereof be received by the Noteholder upon or
with respect to the Subordinated Debt or any other obligations of Borrower to
the Noteholder prior to the indefeasible payment in full in cash of all of the
Senior Debt and termination of all financing arrangements among Borrower, the
Agent and the Senior Lenders, the Noteholder shall receive and hold the same in
a segregated account in trust, as trustee and fiduciary, for the benefit of the
Agent and the Senior Lenders, and shall forthwith deliver the same to the Agent,
in precisely the form received (except for the endorsement or assignment of the
Noteholder where necessary), for application on any of Senior Debt, due or not
due, and, until so delivered, the same shall be held in trust by the Noteholder
as the property of the Agent and the Senior Lenders. In the event of the failure
of the Noteholder to make any such endorsement or assignment to the Agent, the
Agent, or any of its officers or employees, is hereby irrevocably authorized to
make the same (which authorization, being coupled with any interest is
irrevocable).
10. Instrument Legend. Any instrument evidencing any of the Subordinated
Debt (including, without limitation, the Notes), or any portion thereof, will,
on the date hereof, be inscribed with a legend conspicuously indicating that
payment thereof is subordinated to the claims of the Senior Lenders pursuant to
the terms of this Agreement, and (i) copy thereof will be delivered to the Agent
on the date hereof, and (ii) the original of any such instrument will be
immediately delivered to the Agent upon request therefor by any Senior Lender
after the occurrence of any Default of Unmatured Default under the Credit
Agreement. Any instrument evidencing any of the Subordinated Debt, or any
portion thereof, which is hereafter executed by Borrower, will, on the date
thereof, be inscribed with the aforesaid legend and a copy thereof will be
delivered to the Agent on the date of its execution or within five (5) business
days thereafter and the original thereof will be delivered as and when described
hereinabove.
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11. Reimbursements for Expenses and Borrowings from Borrower; Assignment of
Claims. Except as permitted in Section 3 hereof, the Noteholder agrees that
until the Senior Debt has been indefeasibly paid in full in cash and satisfied
and all financing arrangements among Borrower, the Agent and the Senior Lender
have been terminated, the Noteholder will not, directly or indirectly, accept or
receive the benefit of any remuneration or reimbursement for expenses on account
of the Subordinated Debt from or on behalf of Borrower and will not assign or
transfer to others any claim the Noteholder have or may have against Borrower.
If notwithstanding such agreement, the Noteholder is permitted under applicable
law to make such an assignment, such assignment shall be made expressly subject
to this Agreement.
12. Continuing Nature of Subordination. This Agreement shall be effective
and may not be terminated or otherwise revoked by the Noteholder until the
Senior Debt shall have been indefeasibly paid in full in cash and satisfied and
all financing arrangements among Borrower, the Agent and the Senior Lenders have
been terminated. The Noteholder hereby waives to the fullest extent permitted by
applicable law any right it may have to terminate or revoke this Agreement or
any of the provisions of this Agreement. In the event the Noteholder shall have
any right under applicable law otherwise to terminate or revoke this Agreement
which right cannot be waived, such termination or revocation shall not be
effective until written notice of such termination or revocation, signed by the
Noteholder, is actually received by the Agent's officer responsible for such
matters. In the absence of the circumstances described in the immediately
preceding sentence, this is a continuing agreement of subordination and the
Agent and the Senior Lenders may continue, at any time and without notice to the
Noteholder, to extend credit or other financial accommodations and loan monies
to or for the benefit of Borrower on the faith hereof. Any termination or
revocation described hereinabove shall not affect this Agreement in relation to
(a) any of the Senior Debt which arose or was committed to prior to receipt
thereof, (b) any of the Senior Debt created after receipt thereof, if such
Senior Debt was incurred either through readvances by the Senior Lenders
pursuant to the Senior Lenders' financing arrangements with Borrower, including,
without limitation, advances or readvances, in an aggregate outstanding amount
not to exceed the sum of the "Aggregate Revolving Credit Commitments" and
"Aggregate Term Loan Commitments" (each as defined in the Credit Agreement as in
effect on the date of receipt of any such notice), or (c) any of the Senior Debt
created after receipt thereof if such Senior Debt is Preservation Debt. If, in
reliance on this Agreement, any Senior Lender makes loans or other advances to
or for the benefit of Borrower or takes other action under the Credit Agreement
after such aforesaid termination or revocation by the Noteholder but prior to
the receipt by the Agent of said written notice as set forth above, the rights
of the Senior Lenders shall be the same as if such termination or revocation had
not occurred.
12. Additional Agreements between the Agent, the Senior Lenders and
Borrower. The Agent or any Senior Lender, at any time and from time to time,
either before or after any such aforesaid notice of termination or revocation,
may enter into such agreement or agreements with Borrower as the Agent or any
Senior Lender may deem proper, extending the time of payment of or renewing or
otherwise altering the terms, including, without limitation increasing the
principal amount thereof, of all or any portion of the Senior Debt or affecting
the security underlying any or all of the Senior Debt, and may exchange, sell,
release, surrender or otherwise deal with any such security, without in any way
thereby impairing or affecting this Agreement.
14. Noteholder's Waivers. All of the Senior Debt shall be deemed to have
been made or incurred in reliance upon this Agreement. The Noteholder expressly
waives all notice of the acceptance by the Agent or any Senior Lender of the
subordination and other provisions of this
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Agreement and all other notices not specifically required pursuant to the terms
of this Agreement whatsoever, and the Noteholder expressly waives reliance by
the Agent and the Senior Lenders upon the subordination and other agreements as
herein provided. In the event that the Noteholder has or at any time acquires
any lien upon or security interest in the assets securing the Senior Debt, or
any part thereof, the Noteholder hereby waives any right that it may have
whether such right arises under Sections 9-504 or 9-505 of the Uniform
Commercial Code or other applicable law, to receive notice of the Agent's or
Senior Lenders' intended disposition of such assets (or a portion thereof) or of
the Senior Lenders' proposed retention of such assets in satisfaction of the
Senior Debt (or a portion thereof). The Noteholder further agrees that in the
event Borrower consents or fails to object to a proposed retention of such
assets (or a portion thereof) by the Agent or the Senior Lenders in satisfaction
of the Senior Debt (or a portion thereof), the Noteholder hereby consents to
such proposed retention regardless of whether the Noteholder is provided with
notice of such proposed retention. The Noteholder agrees that the Noteholder
will not interfere with or in any manner oppose a disposition of any assets
securing the Senior Debt by the Agent or any Senior Lender. The Noteholder
agrees that neither the Agent nor any Senior Lender has made any warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Credit Agreement, or the collectibility of
the Senior Debt, that the Agent and the Senior Lenders shall be entitled to
manage and supervise their loans to Borrower in accordance with the applicable
law and their usual practices, modified from time to time as deemed appropriate
under the circumstances, without regard to the existence of any rights that the
Noteholder may now or hereafter have in or to any of the assets of Borrower, and
that Agent and the Senior Lenders shall have no liability to the Noteholder for,
and waives any claim which the Noteholder may now or hereafter have against, the
Agent or any Senior Lender arising out of any and all actions which the Agent or
any Senior Lender, in good faith, takes or omits to take (including, without
limitation, actions with respect to the creation, perfection or continuation of
liens or security interests in the Collateral and other security for the Senior
Debt, actions with respect to the occurrence of a Default, actions with respect
to the foreclosure upon, sale, release, or depreciation of, or failure to
realize upon, any of the Collateral and actions with respect to the collection
of any claim for all or any part of the Senior Debt from any account debtor,
guarantor or any other party) with respect to the Credit Agreement or any other
agreement related thereto or to the collection of the Senior Debt or the
valuation, use, protection or release of the Collateral and/or other security
for the Senior Debt.
15. Invalidated Payments. To the extent that the Senior Lenders receive
payments on, or proceeds of collateral for, the Senior Debt which are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
avoided and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law, or equitable cause,
then, to the extent of such payment or proceeds received, the Senior Debt,
or part thereof, intended to be satisfied shall be revived and continue in full
force and effect as if such payments or proceeds had not been received by the
Senior Lenders.
16. Bankruptcy Issues. The Noteholder agrees that the Senior Lenders, or
any one of them may consent to the use of cash collateral or provide financing
(under Section 363 or Section 364 of the Bankruptcy Code or otherwise) to the
Borrower on such terms and conditions and in such amounts as the Senior Lenders,
in their sole discretion, may decide and that, in connection with such cash
collateral usage or such financing, the Borrower (or a trustee appointed for the
estate of Borrower) may grant to the Agent or the Senior Lenders liens and
security interests upon all assets of the Borrower, which liens and security
interests (i) shall secure payment of all Senior Debt (whether such Senior Debt
arose prior to the filing of the petition for relief or arise thereafter); and
(ii) shall be
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superior in priority to the liens and security interests, if any, held by the
Noteholder on the assets of Borrower. All allocations of payments between the
Senior Lenders and the Noteholder shall, subject to any court order, continue to
be made after the filing of a petition under the Bankruptcy Code on the same
basis that the payments were to be allocated prior to the date of such filing.
The Noteholder agrees that it will not object to or oppose a sale or other
disposition of any assets securing the Senior Debt (or any portion thereof) free
and clear of security interests, liens or other claims of the Noteholder, if
any, under Section 363 of the Bankruptcy Code or any other provision of the
Bankruptcy Code if the Senior Lenders have consented to such sale or disposition
of such assets. In the event that the Noteholder has or at any time acquires any
security for the Subordinated Debt, the Noteholder agrees not to assert any
right it may have to "adequate protection" of its interest in such security in
any bankruptcy proceeding and agrees that it will not seek to have the automatic
stay lifted with respect to such security, without the prior written consent of
the Senior Lenders. The Noteholder waives any claim it may now or hereafter have
arising out of the Senior Lender's election, in any proceeding instituted under
Chapter 11 of the Bankruptcy Code, of the application of Section 1111(b)(2) of
the Bankruptcy Code, and/or any borrowing or grant of a security interest under
Section 364 of the Bankruptcy Code by Borrower, as debtor in possession. The
Noteholder agrees not to initiate or prosecute or encourage any other person to
initiate or prosecute any claim, action or other proceeding (i) challenging the
enforceability of any Senior Lender's claim, (ii) challenging the enforceability
of any liens or security interests in assets securing the Senior Debt or (iii)
asserting any claims which the Borrower may hold with respect to the Lender. The
Noteholder agrees that it will not seek participation or participate on any
creditors' committee without the Senior Lenders' prior written consent. In the
event that the Senior Lenders consent to such participation, at the request of
any Senior Lender, the Noteholder will resign from its position on such
committee. To the extent that any Senior Lender receives payments on, or
proceeds of collateral for, the Senior Debt which are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law, or equitable cause, then, to the extent of such
payment proceeds received, the Senior Debt, or part thereof, intended to be
satisfied shall be revived and continue in full force and effect as if such
payments or proceeds had not been received by the Senior Lender.
17. Agent's and Senior Lenders' Waivers. No right of the Agent or the
Senior Lenders or any of them to enforce the subordination or other terms as
provided in this Agreement shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Borrower or by any act
or failure to act by any Senior Lender or the Agent, or by any noncompliance by
the Borrower with the terms, provisions and covenants of this Agreement,
regardless of any knowledge thereof which the Senior Lenders, or any of them, or
the Agent may have or be otherwise charged with. No waiver shall be deemed to be
made by the Agent or any Senior Lender of any of the Agent's or the Senior
Lender's rights hereunder, unless the same shall be in writing signed on behalf
of the Agent or the Senior Lenders, as applicable, and each waiver, if any,
shall be a waiver only with respect to the specific instance involved and shall
in no way impair the rights of the Agent or any Senior Lender or the obligations
of the Noteholder to the Agent and the Senior Lenders in any other respect at
any other time. The failure of the Agent or any Senior Lender to enforce at any
time any provision of this Agreement shall not be construed to be a waiver of
such provisions, nor in any way to affect the validity of this Agreement or any
part hereof or the right of the Agent or the Senior Lenders thereafter to
enforce each and every such provision. No waiver by the Agent and the Senior
Lenders of any breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.
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18. Information Concerning Financial Condition of Borrower; Actions of the
Agent and the Senior Lenders. The Noteholder hereby assumes responsibility for
keeping informed of the financial condition of Borrower, any and all endorsers
and any and all guarantors of the Senior Debt and of all other circumstances
bearing upon the risk of nonpayment of the Senior Debt and/or Subordinated Debt
that diligent inquiry would reveal, and the Noteholder hereby agrees that
neither the Agent nor any Senior Lender shall have any duty to advise the
Noteholder of information known to the Agent or any Senior Lender regarding such
condition or any such circumstances. In the event the Agent or any Senior
Lender, in its sole discretion, undertakes, at any time or from time to time, to
provide any such information to the Noteholder, neither the Agent nor any Senior
Lender shall be under any obligation (i) to provide any such information to the
Noteholder on any subsequent occasion, or (ii) to undertake any investigation
not a part of Agent's or Senior Lender's regular business routine and shall be
under no obligation to disclose any information which, pursuant to accepted or
reasonable commercial finance practices, the Agent or the Senior Lender wishes
to maintain confidential. The Noteholder hereby agrees that all payments
received by any Senior Lender may be applied, reversed, and reapplied, in whole
or in part, to any portion of the Senior Debt, as the Senior Lenders, in their
sole discretion, deem appropriate and assent to any extension or postponement of
the time of payment of the Senior Debt or to any other indulgence with respect
thereto, to any substitution, exchange or release of collateral which may at any
time secure the Senior Debt and to the addition or release of any other party or
person primarily or secondarily liable therefor.
Without in any way limiting the generality of the foregoing paragraph, the
Senior Lenders, the Agent, and any of them, may, at any time and from time to
time, without the consent of, or notice to, the Noteholder, without incurring
any liabilities to the Noteholder and without impairing or releasing the
subordination and other benefits provided in this Agreement (even if any right
of subrogation or other right or remedy of the Noteholder is affected, impaired
or extinguished thereby) do any one or more of the following:
(i) change the manner, place or terms of payments or change or extent
the time of payment of, or renew, exchange, amend, increase or alter, the
terms of any of the Senior Debt or any Lien in any of the Collateral or
guaranty thereof or any liability of the Borrower or any guarantor, or any
liability incurred directly or indirectly in respect thereof (including,
without limitation, any extension of the Senior Debt, without any
restriction as to the tenor or terms of any such extension), or otherwise
amend, renew, exchange, extend, modify, supplement in any manner the
Senior Debt, the Credit Agreement or any of the other Loan Documents.
(ii) sell, exchange, release, surrender, realize upon, enforce or
otherwise deal with in any manner and in any order any part of the
Collateral or other property securing the Senior Debt or any liability of
the Borrower or any guarantor to such holder, or any liability incurred
directly or indirectly in respect thereof;
(iii) settle or compromise any Senior Debt or any other liability of
the Borrower or any guarantor or any security therefor or any liability
incurred directly or indirectly in respect thereof and apply any sums by
whomsoever paid and however realized to any liability (including, without
limitation, the Senior Debt) in any manner or order; and
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(iv) exercise or delay in or refrain from exercising any right or
remedy against the Borrower or any security or any guarantor or any other
Person, elect any remedy and otherwise deal freely with the Borrower and
the Collateral and any security and any guarantor or any liability of the
Borrower or any guarantor to such holder or any liability incurred directly
or indirectly in respect thereof.
The Senior Lenders and the Agent shall have no duty to the Noteholder with
respect to the preservation or maintenance of the Collateral or the manner in
which Agent or the Senior Lenders enforce their rights in such Collateral or to
preserve or maintain the rights of any Person in the Collateral, and the
Noteholder hereby waives all claims which the Noteholder may not or hereafter
have against the Agent and/or the Senior Lenders or any one of them which relate
to such preservation, maintenance or enforcement. In the event the Noteholder at
any time obtains or is granted a lien on any of the Collateral, the Noteholder
agrees not to assert and hereby waives, to the fullest extent permitted by law;
any right to demand, request, plead or otherwise assert or otherwise claim the
benefit of, any marshalling, appraisement, valuation or other similar right that
may otherwise be available under applicable law or any other similar rights a
junior secured credit may have under applicable law.
19. GOVERNING LAW. THE AGENT ACCEPTS THIS AGREEMENT, ON BEHALF OF ITSELF
AND THE SENIOR LENDERS, AT CHICAGO, ILLINOIS BY ACKNOWLEDGING AND AGREEING TO IT
THERE. ANY DISPUTE BETWEEN THE NOTEHOLDER AND THE AGENT OR ANY SENIOR LENDER
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
DOCUMENTS, INSTRUMENTS OR AGREEMENTS EXECUTED IN CONNECTION HEREWITH AND WHETHER
ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE
WITH THE LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE
OF ILLINOIS.
20. CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) THE NOTEHOLDER CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN COOK COUNTY, ILLINOIS, AND WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE
BY REGISTERED MAIL DIRECTED TO THE NOTEHOLDER AT THE ADDRESS STATED BELOW AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED AS AFORESAID. THE NOTEHOLDER WAIVES ANY OBJECTION BASED
UPON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER. NOTHING IN THIS SECTION 20 SHALL AFFECT THE RIGHT OF THE AGENT OR ANY
SENIOR LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF THE AGENT OR ANY SENIOR LENDER TO BRING ANY ACTION OR
PROCEEDING AGAINST THE NOTEHOLDER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
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(B) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE. WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(C) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER PARTY
HERETO THAT IT HAS DISCUSSED THIS SUBORDINATION AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF SECTIONS 19, 20, 21 AND 22, WITH COUNSEL OF ITS CHOICE AND IS
FULLY AWARE OF THE LEGAL CONSEQUENCES AND EFFECTS OF AND HAS KNOWINGLY AGREED TO
THE PROVISIONS HEREOF.
21. ARM'S LENGTH AGREEMENT. EACH OF THE PARTIES TO THIS SUBORDINATION
AGREEMENT AGREES AND ACKNOWLEDGES THAT THIS SUBORDINATION AGREEMENT HAS BEEN
NEGOTIATED IN GOOD FAITH, AT ARM'S LENGTH, AND NOT BY ANY MEANS FORBIDDEN BY
LAW.
22. INJUNCTIVE RELIEF. THE NOTEHOLDER ACKNOWLEDGES AND AGREES THAT ITS
COVENANTS AND OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER DOCUMENTS,
INSTRUMENTS AND AGREEMENTS EXECUTED IN CONNECTION HEREWITH ARE INTEGRAL TO THE
AGENT'S AND SENIOR LENDERS' REALIZATION OF THEIR RIGHTS AGAINST, AND THE VALUE
OF ITS INTEREST IN, THE ASSETS OF THE BORROWERS AND THEIR AFFILIATES, THAT A
BREACH OF ANY OF THE COVENANTS AND OBLIGATIONS OF THE NOTEHOLDER HEREUNDER OR
UNDER THE OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS EXECUTED IN CONNECTION
HEREWITH SHALL ENTITLE THE AGENT AND THE SENIOR LENDERS TO INJUNCTIVE RELIEF
AND SPECIFIC PERFORMANCE WITHOUT THE NECESSITY OF PROVING IRREPARABLE INJURY TO
THE AGENT AND THE SENIOR LENDERS OR THAT THE AGENT AND THE SENIOR LENDERS DO NOT
HAVE AN ADEQUATE REMEDY AT LAW IN RESPECT OF SUCH BREACH (EACH OF WHICH ELEMENTS
THE NOTEHOLDER ADMITS EXIST) AND, AS A CONSEQUENCE, THE NOTEHOLDER AGREES THAT
EACH AND EVERY COVENANT AND OBLIGATION APPLICABLE TO IT AND CONTAINED IN THIS
AGREEMENT OR THE OTHER DOCUMENTS INSTRUMENTS AND AGREEMENTS EXECUTED IN
CONNECTION HEREWITH SHALL BE SPECIFICALLY ENFORCEABLE AGAINST IT. THE
NOTEHOLDER HEREBY WAIVES AND AGREES NOT TO ASSERT ANY DEFENSES AGAINST AN ACTION
FOR SPECIFIC PERFORMANCE OF ITS RESPECTIVE COVENANTS AND OBLIGATIONS HEREUNDER
AND/OR UNDER THE OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS EXECUTED IN
CONNECTION HEREWITH.
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23. Notices. Except as otherwise expressly provided below, any notice
required or desired to be served, given or delivered hereunder shall be in
writing, and shall be deemed to have been validly served, given or delivered (i)
three (3) days after deposit in the United States Mails, with proper postage
prepaid or provided for, (ii) when sent after receipt of confirmation or
answerback if sent by telecopy, telex or other similar facsimile transmission,
(iii) one (1) business day after deposited with a reputable overnight courier
with all charges prepaid or (iv) when delivered, if hand-delivered by messenger,
all of which shall be properly addressed to the party to be notified and sent to
the address or number indicated as follows:
(i) If to the Agent or any Senior Lender at:
The First National Bank of Chicago, as Agent
One First National Plaza
Chicago, Illinois 60670
Attention: J. Garland Smith
Facsimile: 312/732-1117
with copies to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Sara E. Bartlett, Esq.
Facsimile: 312/853-7036
(ii) If to the Noteholder at:
SCP Pool Corporation
128 Northpark Blvd.
Covington, Louisiana 70433-5070
Attn: Maurice Van Dyke
Telecopy: 504-892-1657
Confirmation: 504-892-5521
with copies to:
Code Hennessy & Simmons
10 South Wacker Drive
Suite 3175
Chicago, Illinois 60606
Attn: Peter M. Gotsch
Telecopy: 312-876-1840
Confirmation: 312-876-9589
or to such other address as any party designates to the other parties in the
manner herein prescribed.
-13-
<PAGE>
24. Counterparts; Facsimile Effectiveness. This Agreement may be executed
in one or more counterparts, each of which shall be considered an original
counterpart, and shall become a binding agreement when then Agent, each of the
Senior Lenders, the Noteholder and the Borrower have each executed one
counterpart. Each of the parties hereto agrees that a signature transmitted to
the Agent or its counsel by facsimile transmission shall be effective to bind
the party so transmitting its signature.
25. Complete Agreement; Merger. This Agreement, including the schedules and
exhibits hereto, contain the entire understanding of the parties hereto with
regard to the subject matter contained herein. This Agreement supersedes all
prior or contemporaneous negotiations, promises, covenants, agreements and
representations of every nature whatsoever with respect to the matters referred
to in this Agreement, all of which have become merged and finally integrated
into this Agreement. Each of the parties understands that in the event of any
subsequent litigation, controversy or dispute concerning any of the terms,
conditions or provisions of this Agreement, no party shall be entitled to offer
or introduce into evidence any oral promises or oral agreements between the
parties relating to the subject matter of this Agreement not included or
referred to herein and not reflected by a writing included or referred to
herein.
26. No Third Party Beneficiaries. This Subordination Agreement is solely
for the benefit of the Agent and the Senior Lenders and their respective
successors and assigns and the Noteholder and its successors and is not intended
to confer upon the Borrowers or any other third party any rights or benefits.
27. Severability. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
28. Section Titles. The section titles contained in this Agreement are and
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreement between the parties hereto.
29. Authority. The signatory to this Agreement on behalf of the Noteholder
hereby certifies that it has all necessary authority to grant the subordination
evidenced hereby and execute this Agreement on behalf of the Noteholder.
30. No Strict Construction. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
31. Full Agreement. This Agreement constitutes the complete agreement
between the parties with respect to the subject matter hereof. Any document,
instrument or agreement executed by the parties hereto with respect to the
financing which is the subject of this Agreement predating this Agreement shall
be merged with and into and superseded by this Agreement.
-14-
<PAGE>
IN WITNESS WHEREOF, this Subordination Agreement has been signed as of
this day of May, 1996.
SCP POOL CORPORATION
By
--------------------------
Its
----------------------
Acknowledged and accepted in
Chicago, Illinois as of this
day of May, 1996
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By
-----------------------------------
Its:
---------------------------------
Without in any way establishing any rights with
respect to the terms thereof on behalf of any of the undersigned,
each of the undersigned acknowledges receipt of a copy
of the foregoing Subordination Agreement
as of this 30th day of May, 1996 and agrees to take
no action or refrain from taking action inconsistent with
the terms thereof.
SOUTH CENTRAL POOL SUPPLY, INC.
By
-----------------------------------
Its:
---------------------------------
ALLIANCE PACKAGING, INC.
By
-----------------------------------
Its:
---------------------------------
Signature Page to SCP Pool Corporation Subordination Agreement re Intercompany
Loan to South Central Pool Supply, Inc.
<PAGE>
Schedule 1.1.1
Permitted Existing Contingent Obligations
None.
<PAGE>
Schedule 1.1.2
Permitted Existing Indebtedness
None.
<PAGE>
Schedule 1.1.3
Permitted Existing Investments
Employee Loans
- --------------
Loan dated July 31, 1995 to J. Hess in the outstanding amount of $305
Loan dated August 31, 1996 to B. Burns in the outstanding amount of $25
Loan dated February 30, 1997 to R. Bennet in the outstanding amount of $200
Loan dated May 30, 1997 to Michael Blake in the outstanding amount of
$4517.75
Loan dated March 31, 1997 to Tim McDonald in the outstanding amount of
$7500
Loan dated August 31, 1997 to Winona Burrough in the outstanding amount of
$655
Loan dated August 31, 1997 to Cheryl May in the outstanding amount of $1433
Loan dated August 31, 1997 to Richard Witt in the outstanding amount of
$4500
Loan dated October 31, 1997 to Connie Boe-Cook in the outstanding amount of
$6000
Loan dated October 31, 1997 to D. Hanson in the outstanding amount of $450
Loan dated October 31, 1997 to Craig Hubbard in the outstanding amount of
$66.31
Loan dated November 30, 1997 to Daniel Cobian in the outstanding amount of
$13,000
Loan dated November 30, 1997 to Brenda Errico in the outstanding amount of
$488
Loan dated November 30, 1997 to Cheryl Hensarling in the outstanding amount
of $250
Loan dated November 30, 1997 to Jeff St. Romain in the outstanding amount
of $200
Outstanding Notes Receivable
- ----------------------------
Note receivable in the outstanding principal amount of $10,319.29 payable
by David's Pool Co.
Note receivable in the outstanding principal amount of $36,435.52 payable
by California Pools
Note receivable in the outstanding principal amount of $1210.15 payable by
Pratt Pools
Note receivable in the outstanding principal amount of $22,227.04 payable
by Pool Pro
Note receivable in the outstanding principal amount of $66,689.67 payable
by Paradise Pools
Note receivable in the outstanding principal and interest amount of
$12,340.47 payable by William F. Belser
Note receivable in the outstanding principal amount of approximately
$100,000 as of December 31,1997, payable by JJSC, Inc. (as assigned by
Bicknell Huston Distributors, Inc.)
<PAGE>
Schedule 1.1.4
Permitted Existing Liens
None.
<PAGE>
Schedule 1.1.5
Permitted Existing Letters of Credit
Borrower applied to the First National Bank of Chicago in December, 1997 for a
$1,000,000 standby letter of credit in favor of Asahi Chemical Industry Co.,
Ltd.
<PAGE>
Schedule 5.3
Conflicts; Governmental Consents
None.
<PAGE>
Schedule 5.7
Litigation; Loss Contingencies and Violations
1. Personal injury claim against South Central Pool Supply, Inc. arising out
of automobile collision involving one of its truck drivers, filed April 22,
1996 in the 116th Judicial District in Dallas County, Texas, Case No. 96-
03953-F. No amounts were pleaded in connection with this claim and no
settlement negotiations have occurred. This claim is covered by Borrower's
insurance.
2. The Houston, Texas Dunvale location has been informed by the local fire
department that the storage of hazardous materials is in excess of the
exempt amounts specified in Tables 80.306A and 80.314(a) of the 1991
Uniform Fire Code. The department has not issued a specific remedy.
Possible remedies include leasing an adjacent 4000 square foot building for
storage of these products, building of a chemical storage room, reduction
of an amount of products stored, or obtaining a waiver from the fire
department.
3. The Memphis, Tennessee location has been visited by the local fire
department and likely will require changes in chemical storage due to fire
requirements.
4. Claim filed by Spec Pack against Alliance Packaging, Inc., a subsidiary of
Borrower, arising out of a fire at a facility leased by Alliance Packaging,
Inc., located at 4647 Leston Avenue in Dallas, Texas on September 6, 1995.
Spec Pack has alleged $5,000,000 in damages resulting from lost profits and
the interruption of its business. This claim was settled by Borrower's
insurer.
5. Claim filed by Kenny Coyle against South Central Pool Supply, Inc. in the
District Court of Pittsburg County, State of Oklahoma. Claimant suffered
injuries while using a slide claimant alleges was sold and distributed by
South Central Pool. Claimant has plead damages in excess of $10,000.
Borrower's insurer's are defending this claim.
6. Complaint filed in September 1996 by the State of South Carolina under
CERCLA (the Superfund law) for recovery of costs incurred at the Aqua-Tech
Superfund Site in South Carolina. In February 1997, Borrower agreed to
settle the case for a payment of $12,000. Borrower has paid the settlement
amount and has been dismissed from the case.
7. During 1996 and early 1997, Borrower and the City of Las Vegas engaged in
discussions concerning the applicability of certain Fire and Building Code
provisions to Borrower's leased Las Vegas facility. On June 24, 1997,
Borrower and the City reached a settlement which was entered as a permanent
injunction in a case captioned City of Las Vegas v. South Central Pool
Supply. The injunction limits the storage quantities of certain pool supply
materials pending building upgrades necessary to comply with the Code
provisions in question. Borrower expects that the upgrades will cost
approximately $150,000 and is seeking reimbursement from the facility's
owner. The City also issued misdemeanor citations to the facility's
<PAGE>
manager. The citations were dismissed without prejudice on November 18,
1997. Because of the Code compliance questions, the City has delayed action
on Borrower's application for a business license for the facility. Borrower
expects to receive the business license after completing the facility
upgrades.
8. Criminal complaint received from the Los Angeles Police Department dated
December 22, 1997, alleging the transportation of hazardous materials
without the necessary shipping papers in June 1997. Borrower is required to
appear in Municipal Court in Van Nuys, California on January 13, 1998 to
respond to the complaint.
9. Personal injury claim by Roberto Franz, Jr. against South Central Pool
Supply, Inc. arising out of an alleged injury to the right elbow or right
hand at a warehouse, August 16, 1996. The Borrower's long-term disability
carrier has discontinued payments to Mr. Franz. Borrower's insurers are
defending the claim.
10. Personal injury claim by Jose Sanchez against South Central Pool Supply,
Inc., June 1997. Mr. Sanchez claims a back injury occurred while lifting
chlorine tablets at one of Borrower's facilities. Borrower's insurers are
defending the claim.
11. Wrongful dismissal claim by James M. Lacey against South Central Pool
Supply, Inc., July 1997. This claim is scheduled for mediation.
12. Taylor Gallagher et al vs. West End Tennis and Raquet Club, Inc. Suit for
personal injuries to 7-year old who tangled fingers in pool thermometer
rope and injured hand. Filed in Los Angeles Superior Court, Case No.
YC029861. There is an associated counterclaim against South Central Pool
Supply by Rainbow Lifeguard Products, Inc. Borrower's insurers are
defending the action.
13. Personal injury claim with respect to a multiple-automobile collision which
occurred on June 21, 1996 in Covington, LA. One of the three vehicles
involved was leased by Borrower and driven by A. David Cook, Vice President
of Borrower. The Borrower received notice of service of process in
November, 1997 for an action titled J.T Soileau, et al vs. Employers
Insurance of Wausau et al, filed in the 22nd J.D.C. of the Parish of St.
Tammany. Borrower's insurers are defending the action.
<PAGE>
Schedule 5.8
Subsidiaries
(i) SCP Pool Corporation owns 100% of the issued and outstanding capital stock
of South Central Pool Supply, Inc. and SCP Finance Co. South Central Pool
Supply, Inc. owns 100% of the issued and outstanding stock of Alliance
Packaging, Inc.
(ii) (A) South Central Pool Supply is a Delaware corporation and is qualified to
do business in the following states:
Alabama Nebraska
Arizona Nevada
Arkansas New Mexico
California North Carolina
Florida Ohio
Georgia Oklahoma
Illinois Oregon
Indiana Tennessee
Kansas Texas
Louisiana Virginia
Mississippi Washington
Missouri
Borrower is in the process of submitting applications to qualify to do business
in the jurisdictions of Colorado, New York, Massachusetts, Connecticut, Maine,
New Jersey and Pennsylvania.
SCP Pool Corporation
--------------------
SCP Pool Corporation is a Delaware corporation and is qualified to do
business in Louisiana.
Alliance Packaging, Inc.
------------------------
Alliance Packaging, Inc. is a Delaware corporation and is qualified to do
business in Texas. Assets: Alliance is the owner of certain intellectual
property assets used by Borrower, including the following registered
trademarks: Algi Kleer/(R)/, Blue Chlor/(R)/, Clear-Out/(R)/, Clor
King/(R)/ and design, Clor Save/(R)/, wave design, E-Z Clor/(R)/, E-Z Clor
Pac/(R)/, E-Z Clor Testrips/(R)/, E-Z Care/(R)/, Integra/(R)/, Pure-n-
Simple/(R)/, Re-Fresh/(R)/, Regal/(R)/, Super 90/(R)/, Supra/(R)/, The New
Wave of Convenience/(R)/, Thrifty Mint/(R)/ and Zap-Out/(R)/.
(B) Capital Stock: class authorized issued/outstanding
----- ---------- ------------------
Borrower Common Stock 1,000 1,000
SCP Finance Co. Common Stock 1,000 1,000
Alliance Packaging, Inc. Common Stock 1,000 1,000
(C) None.
<PAGE>
Schedule 5.17
Insurance
See Attached.
(vii) Borrower has a reserve of $677,555.16 relating to its group medical self-
insurance program.
<PAGE>
SOUTH CENTRAL POOL SUPPLY, INC.
CODE HENNESSY & SIMMONS, INC.
================================================================================
SCHEDULE OF INSURANCE
---------------------
(02/26/97 TO 02/26/98)
All Lines, except
(03/01/97 to 03/01/98
Property, DIC and Boiler & Machinery
(03/19/97 to 03/01/98) Flood
(10/15/97 to 10/15/00) Directors & Officers
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Business Auto Wausau Business Ins. Co. $1,000,000 Combined Single Limit
(TX) 0728-02-065373 $1,000,000 Uninsured/Underinsured Motorist $0 Liability
ACV Physical Damage $1,000 Comp. Tractors
Employers Ins. of Wausau Trailer Interchange $1,000 Coll. Tractors
(AOS) 0728-00-065373 Drive Other Car $500 Comp. All Other Vehicles
$30/30 Day Max Rental Reimbursement $500 Coll. All Other Vehicles
Wausau Underwriters $50 Towing & Labor (private passenger
Insurance Co. only)
(VA) 0728-03-065373
General Liability Chubb Custom Ins. Co. $1,000,000 Each Occurrence $5,000 Per Occurrence
7947-73-84 $1,000,000 Personal & Advertising Injury $1,000 Employee Benefits Liability
$2,000,000 Products/Compl. Operations Agg.-
Per Location
$2,000,000 General Agg.-Per Location
$100,000 Fire Legal
$50,000 Medical Expense (any one person)
$1,000,000 Employee Benefits Liability
</TABLE>
Page 1
<PAGE>
SOUTH CENTRAL POOL SUPPLY, INC.
CODE HENNESSY & SIMMONS, INC.
================================================================================
SCHEDULE OF INSURANCE
(02/26/97 to 02/26/98)
All Lines, except
(03/01/97 to 03/01/98)
Property, DIC and Boiler & Machinery
(03/19/97 to 03/19/98) Flood
(10/15/97 to 10/15/00) Directors & Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
DIC (Flood) Royal Indemnity Co. $5,000,000 Per Occurrence $10,000 Per Occurrence except
$500,000 Per Location for Building for
Peril of Flood
500,000 Per Location for Personal
Property for Peril of Flood
14 Day Waiting Period for B.L. for
Peril of Flood
Property National Surety Corp. $87,427,283 Blanket Real & Personal Property $10,000 Property Damage
MXX80668766 $17,903,000 Blanket Loss of Income $1,000 Cargo
$50,000,000 Earthquake - Except CA $50,000 Flood
$50,000,000 Flood - Except Zone A and some $50,000 Earthquake, except Memphis,
locations in Zone B and D TN & Auburn, WA which is
$10,000,000 Sublimit EQ for St. Louis, MO 10% of total insured values
and Arkansas locations 5% Florida Wind - Dade, Broward,
$500,000 Sublimit EQ for Memphis, TN Palm Beach counties
and Auburn, WA locations 2% TIV or $100,000 min. in all
other counties - Wind
Page 2
</TABLE>
<PAGE>
SOUTH CENTRAL POOL SUPPLY, INC.
CODE HENNESSY & SIMMONS, INC.
<TABLE>
<CAPTION>
==================================================================================================================================
SCHEDULE OF INSURANCE
(02/26/97 to 02/26/98)
All Lines, except
(03/01/97 to 03/01/98)
Property, DIC and Boiler & Machinery
(03/19/97 to 03/01/98) Flood
(10/15/97 to 10/15/00) Directors & Officers
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Primary Difference in Northfield Ins. Co. $2,500,000 Per Occurrence 5% Of values at time/place of loss
Conditions $100,000 Minimum -- EQ.
$10,000 All Other Perils
Excess Difference in RLI Insurance Co. $2,500,000 Excess $2.5mm Primary, per Underlying limits and
Conditions IMF026313 occurrence and in the aggregate deductibles
Boiler & Machinery American Mfg. Mutual $50,000,000 Per Accident $5,000 Property Damage
Insurance Co. $250,000 Expediting Expense $10,000 Production Machinery
3XN029101-01 $250,000 Water Damage 1 x 100% = Time Element
$250,000 Ammonia Contamination
$250,000 Hazardous Substance
$1,000,000 Utility Interruption
Ocean Cargo Hartford Fire Ins. Co. $1,000,000 Per Vessel $1,000
84CTPPI8542 $1,000,000 Per Aircraft
$100,000 Shipments -- On Deck
$1,000,000 War Risk
$5,000 Per Package
Page 3
</TABLE>
<PAGE>
SOUTH CENTRAL POOL SUPPLY, INC.
CODE HENNESSY & SIMMONS, INC.
================================================================================
SCHEDULE OF INSURANCE
---------------------
(02/26/97 TO 02/6/98)
All Lines, except
(03/01/97 to 03/01/98)
Property, DIC and Boiler & Machinery
(03/19/97 to 03/01/98) Flood
(10/15/97 to 10/15/00) Directors & Officers
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Crime Federal Insurance Co. $1,000,000 Employee Theft $ 5,000
8145-38-63 $1,000,000 Premises
$1,000,000 Transit
$1,000,000 Depositor's Forgery
$1,000,000 Computer Theft &
Funds Transfer
Fiduciary Liability Federal Insurance Co. $1,000,000 $ 0
8145-38-62
Workers' Wausau Underwriters Statutory Workers' Compensation
Compensation Insurance Co. $500,000 Each Accident
0718-00-065373 $500,000 Each Employee
$500,000 Policy Limit
Umbrella Chubb Custom Ins. Co. $25,000,000 Per Occurrence, in excess
7931-99-77 of underlying limits/SIR $10,000 SIR
$25,000,000 Aggregate
Umbrella Punitive Chubb-Atlantic Indemnity $25,000,000 Per Occurrence $10,000 SIR
Damages 3310-02-10 $25,000,000 Aggregate
Excess Umbrella TIG Insurance Co. $25,000,000 Per Occurrence, in excess Underlying limits &
of underlying limits/SIR SIR where applicable
XLX9262679 $25,000,000 Aggregate
</TABLE>
Page 4
<PAGE>
<TABLE>
<CAPTION>
SOUTH CENTRAL POOL SUPPLY, INC.
CODE HENNESSY & SIMMONS, INC.
====================================================================================================================================
SCHEDULE OF INSURANCE
---------------------
(02/26/97 TO 02/26/98)
All Lines, except
(03/01/97 to 03/01/98)
Property, DIC and Boiler & Machinery
(03/19/97 to 03/01/98) Flood
(10/15/97 to 10/15/00) Directors & Officers
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Foreign Liability CIGNA Ins. Co. of Illinois $1,000,000 General Liability $1,000 Employee Benefits Liability
CXC 042913 $1,000,000 Auto Liability
$1,000,000 Employee Benefits Liability
Directors & Officers CNA $3,000,000 Each Loss $0/$0/$200,000
132032399 $3,000,000 Each Policy Year
</TABLE>
Page 5
<PAGE>
Schedule 5.18
Contingent Obligations
None.
<PAGE>
Schedule 5.20
Labor Matters
1. Sales Incentive Plans for Perry Velargo, Lynel Vidrine, Larry Mott, Michael
Moore, Joseph Manak, James M. Phillips, Jerry Harben, Steven Dils, Steven
Blaylock, Cathy Doxsey, Louis Smith, Kendall Rekstad, Chad Lovett, Kenton
Feydt, Rick Thompson, Emmett Childress, James Aird, Christopher Widdon,
Michael Mitchell, John Haycock, John Hopkins, John Olden, Tracy Thompson,
Kenneth Tingley, Michael Muoio, Shannon Allman, Lionel Buchanan, Michael
Moss, Todd Rich, Sheila Macon, Rickhard Pollak, Ron Shults, Paul
Terminello, David Midkiff, and Jason Gordo.
2. Division Managers Bonus Plan for Chris Monaghan, Archie Canaday, Kenneth
St. Romian, Garry Stockbridge, Nofie Alfonso, John Kubacki, David Migel,
Robert Walker, Barry Fincher, Michael O'Neil, Joseph Mitchell, William
Hewes, Dennis Whittaker, Frank Harris, Mark Dilfield, Daniel Cobian, Robert
Jones, Rick Witt, William Belser, Claude Drewery, Richard Myers, Gary
Baker, Chris Duetsch, Keith Cowell, Vance Trowbridge, Alan Henseler, Joseph
Crowton, Thomas McCarthy, Ross Champion, Michael Konkler, David Soderquist,
Michael Huber, Frank Carmona, David Oxley, James Guskiewicz, Brett
MacNally, David Falk, Boyd Linker, Gregory Minton, William Eaterlin, Cheryl
Malone, Ronnie Seal, Ross Bray, Tim Holmes, Donld Blake, George Ponder,
Doug Horton, Steve Kruger, Kirk Johnston, Dale O'Dell, David Hanson, Dean
Davis, Craig Ponder, David Westlin, Dan Porter, Donald Weeks, Donald
Keller, Gary Martin, Tim McDonald, Don White, Kera Holm, Robert Rankin,
Eddie Lefever, Ronald Newman, Peter McLaughlin, Chris Rankin, Tylan Pearce,
Timothy Bowers, Daniel Cervantez, Val Estrada, Joseph Gravano, Robert
Pontecorvo, Thomas Burba, Terry Jacobsen, David Eslinger, John Gwatkin,
Heno Quiroz, Steve Craggs, and Leonard Maffei.
3. Assistant Managers Bonus Plans for Fred Cusack, Pat Hudak, James Hall, Jeff
Swanson, Alex Vasquez, Richard Brown and Wesley Goodman.
4. SCP Purhasing Bonus Plan for Edouard Blanc
5. Executive Bonus Plans for Frank W. St. Romain and Wilson B. Sexton
6. Non-Standardized Adoption Agreement Regional Prototype Cash or Deferred
Profit Sharing Plan Trust sponsored by Fringe Benefit Administrators Ltd.
Plan No. 006.
7. Allmerica Group Life Insurance Company Plan.
8. Allmerica Group Dental Plan.
9. Group Long Term Disability Insurance Plan.
<PAGE>
10. South Central Pool Supply, Inc. Cafeteria Plan.
11. Group Medical Insurance Plan.
12. Employee Stock Option Plan
13. Non-Employee Director Stock Option Plan
14. Noncompete Agreements between South Central Pool Supply, Inc. and each of
Wilson B. Sexton and Frank J. St. Romain..
15. Oral Employment Agreements with each of Wilson B. Sexton and Frank J. St.
Romain.
16. Management Agreement with Ronald Hetzner.
17. Noncompete Agreement with Ronald Hetzner.
<PAGE>
Schedule 5.21
Environmental Matters
1. Certain facilities operated by Borrower may not comply with all parts of
the Occupational Safety and Health Administration ("OSHA") Hazard
Communication Standard set forth at 29 CFR (S) 1910.1200.
2. The facilities operated by Borrower store certain pool chemicals. At some
facilities, such chemicals may be stored in amounts equal to or greater
than their "threshold levels" as defined by the Emergency Planning and
Community Right-to- Know Act ("EPCRA"), 42 U.S.C. (S) 11001, et seq. Where
such chemicals are stored in amounts equal to or greater than their
threshold levels, and are not entitled to the "household purposes"
exemption set forth in Section 311(e) of EPCRA, Borrower may not be in
compliance with the reporting requirements of EPCRA.
3. Certain pool chemicals distributed by Borrower are algicides regulated
under the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA") and
similar state pesticide laws. Borrower may not have registered each such
algicide in each state in which it distributes the algicides, as required
by FIFRA and/or state pesticide laws.
4. Borrower's South Houston, Texas facility was cited by the Texas Department
of Agriculture on February 24, 1993 for distributing "Regal Shock Treatment
and Super Chlorinator for Swimming Pools," a pool chemical that was
allegedly unregistered in the State of Texas. As a result, 343 cases of the
product were placed under a stop sale order, pending registration by the
Department. Borrower submitted an application for registration and the stop
sale order was lifted on February 25, 1993. No fines were levied as a
result of the incident.
5. U.S. Department of Transportation ("DOT") Hazardous Materials Regulations
set forth at 49 CFR (S) 172.506 require that each person offering more than
1000 pounds of a hazardous material for transportation by highway shall
provide to the motor carrier the required placards for that material. Some
facilities operated by Borrower may not comply with this requirement.
6. At certain facilities operated by Borrower, small quantities of pool
chemicals have been released. Such releases have been generally addressed
by diluting or neutralizing the chemicals, then disposing of them. Such
releases may not have been in compliance with Environmental, Health or
Safety Requirements of Law.
7. An out-of-service underground storage tank was present at Borrower's
facility located at 1916 E. McDowell Road, Phoenix, Arizona. The tank was
never used by Borrower. The B-L Network, Inc., the former operator of the
facility, removed the tank in 1997.
<PAGE>
8. Presumed asbestos-containing materials ("PACMs") are present at some of
Borrower's facilities. The PACMs may not be marked, and employee asbestos
training may not been conducted, as required by OSHA asbestos regulations
set forth at 29 CFR (S) 1910.1001.
9. A four-foot by four-foot area of stressed vegetation that appears to have
resulted from a parked vehicle with an oil leak is present at Borrower's
facility located at 2900 Dawn Road in Jacksonville, Florida.
10. In September 1996, Borrower was sued by the State of South Carolina under
CERCLA (the Superfund law) for recovery of costs incurred at the Aqua-Tech
Superfund Site in South Carolina. In February 1997, Borrower agreed to
settle the case for a payment of $12,000. Borrower has paid the settlement
amount and has been dismissed from the case.
11. A facility leased by Alliance Packaging, Inc., a subsidiary of Borrower,
located at 4647 Leston Avenue in Dallas, Texas, caught fire and burned on
September 6, 1995. Neither Borrower nor Alliance has received any
government agency notices of violation in connection with the fire. A
cleanup was completed at the facility after the fire. Borrower's insurer
settled one claim related to the fire, a lawsuit from a neighboring
business.
12. Alliance Packaging, Inc. has received "stop sale orders" from certain
states as a result of the lack of state registrations for certain pesticide
products it has produced. In each case, the required fees and/or penalties
have been paid and such stop sale orders have been lifted.
13. During 1996 and early 1997, Borrower and the City of Las Vegas engaged in
discussions concerning the applicability of certain Fire and Building Code
provisions to Borrower's leased Las Vegas facility. On June 24, 1997,
Borrower and the City reached a settlement which was entered as a permanent
injunction in a case captioned City of Las Vegas v. South Central Pool
Supply. The injunction limits the storage quantities of certain pool supply
materials pending building upgrades necessary to comply with the Code
provisions in question. Borrower expects that the upgrades will cost
approximately $150,000 and is seeking reimbursement from the facility's
owner. The City also issued misdemeanor citations to the facility's
manager. The citations were dismissed without prejudice on November 18,
1997. Because of the Code compliance questions, the City has delayed action
on Borrower's application for a business license for the facility. Borrower
expects to receive the business license after completing the facility
upgrades.
14. Borrower understands that two underground storage tanks were removed from
its leased Delanco, N.J. site in 1993, and that a closure permit was issued
by the N.J. Department of Environmental Protection ("NJDEP") for the
removal.
15. Borrower understands that NJDEP is investigating contamination at
Borrower's leased facility in Bound Brook, N.J. The contamination
apparently resulted from the operations of Hospitables, Inc. a former
operator of the facility, and NJDEP considers Hospitables, Inc. the
responsible party with respect to the contamination.
<PAGE>
16. Borrower's leased North Andover, Mass. facility appears on several
environmental agency databases as a result of the operations of Eastern
Tank, a former operator of the facility.
17. Borrower received a criminal complaint from the Los Angeles Police
Department dated December 22, 1997, alleging the transportation of
hazardous material without the necessary shipping papers in June 1997.
Borrower is required to appear in Municipal Court in Van Nuys, California
on January 13, 1998 to respond to the complaint. Borrower does not expect
monetary penalties associated this complaint to exceed $25,000, and any
non-monetary penalties will not materially impact Borrower's ability to
conduct its business.
18. In May, 1997, one of Borrower's trucks was rear-ended by another truck at a
railroad crossing in Chicago, Illinois. Certain hazardous materials
(hypochlorite solution, hydrochloric acid, certain algicides) were released
as a result of the collision, and a hazardous materials cleanup team
responded. The Borrower expects the insurer for the other driver to pay for
the costs of cleanup. The Borrower does not expect costs of cleanup to
exceed $25,000.
19. In August, 1997, an employee of Borrower allegedly caused a release of
hazardous materials at a customer site in Visalia, CA during an unloading
operation. Approximately 135 gallons of hypochlorite solution and
approximately 65 gallons of hydrochloric acid may have been released, and a
hazardous materials team performed a cleanup operation. The Borrower is
engaged in discussions with its insurance carrier with respect to the costs
associated with this incident. No fines have been received to date by the
Borrower as a result of this incident. Borrower does not expect costs of
cleanup to exceed $15,000. Any non-monetary penalties will not materially
impact Borrower's ability to conduct its business.
20. The Company is engaged in discussions with the local fire departments in
Houston and Seattle regarding the storage of pool chemicals by the
Borrower. To resolve the problem in Houston, Borrower may be required to
move to, or store certain chemicals at, an alternative site. To resolve the
problem in Seattle, Borrower may have to make improvements to its facility,
the cost of which is not expected to exceed $100,000.
<PAGE>
SCHEDULE 6.3(F)(ii)
Computation of Permissible Tax Payments
For purposes of this Section 6.3(F)(ii) in respect of taxes, the following
provisions shall be applicable:
As used herein the term "Affiliated Group" means the affiliated group as
defined in Section 1504 of the Internal Revenue Code of 1986, as amended (the
"Code").
1. Determination of Federal Income Tax Liability.
For each fiscal year or part thereof (each, a "Determination Period")
with respect to which Holdings files a consolidated federal or state income
tax return and the Borrower is a member of the Affiliated Group of which
Holdings is the common parent corporation (the "Holdings Group") Holdings
shall determine (i) the federal income tax liability of the hypothetical
Affiliated Group of which the Borrower would be the common parent
corporation (the "Borrower Group") and (ii) the state liabilities of each
member of the Borrower Group on a separate company or combined basis, as
appropriate for such Determination Period, on a stand-alone basis taking
only the income of the members of the Borrower Group into account, such
determination to (i) include any benefit resulting from ordinary losses,
capital losses and tax credits of the members of the Borrower Group from
the current year or the carryforward of ordinary losses, capital losses and
tax credits of the Borrower group from preceding years which would be
utilizable under the Code or relevant state law and (ii) take into account
the deductibility of state income tax for federal income tax purposes. The
aggregate federal and state income tax liability for all members of the
Borrower Group determined in accordance with this paragraph 1 with respect
to any Determination Period is referred to as the "Borrower Group Tax
Liability".
2. Payment of the Borrower's Tax Liability to Holdings.
The Borrower shall be permitted to pay to Holdings, subject to the
provisions of Section 6.3(F) the lesser of (i) the Borrower Group Tax
Liability for the relevant Determination Period (or reasonable estimates
thereof) and (ii) the sum of (x) the amount determined by multiplying (A)
the federal income tax liability of the Holdings Affiliated Group for such
Determination Period, by (B) a fraction, the numerator of which is the
federal income tax liability of the Borrower Group for such Determination
Period and the denominator of which is the aggregate federal income tax
liabilities of each member of the Holdings Affiliated Group having positive
liability (determined in the manner described in paragraph 1 hereof) for
such Determination Period, (y) with respect to each state in which members
of the Borrower Group file a combined state income tax return with members
of the Holdings Group which are not also members of the Borrower Group, the
amount determined by multiplying (C) the relevant combined state tax
liability of the Holdings Group for such Determination Period by (D) a
fraction, the numerator of which is the combined hypothetical state income
tax liability of the members of the Borrower Group
i
<PAGE>
(computed in a manner substantially similar to that set forth in paragraph
1 for such Determination Period) and the denominator of which is the
combined state income tax liability of all members of the Holdings Group
having positive liability for such Determination Period and (z) with
respect to each state in which members of the Borrower Group do not file
such a combined return, the aggregate separate state income tax liabilities
of all of the members of the Borrower Group for such Determination Period.
Such payments shall be made at such times as shall be requested by
Holdings, but not more frequently than quarterly. Except as provided in
paragraph 3 below, the Borrower shall not have any obligation to Holdings
or to any other member of the Affiliated Group to pay any further amounts
on account of the Holdings Group's tax liability, any such further amounts
being the sole responsibility of Holdings and the other members of the
Holdings Group. If as a result of estimated payments or otherwise, the
Borrower pays to Holdings for any fiscal year an amount in excess of the
amount determined under paragraph 1, the Borrower shall cause Holdings to
refund to the Borrower the amount of such excess no later than the date
upon which Holdings files the applicable consolidated federal income tax
return for the Holdings Group. If such amount is not so refunded it shall
be deducted from amounts which could otherwise be paid to Holdings pursuant
to Section 6.3(F) (whether in the nature of management fees (or other fees
of a similar nature) or tax payments).
3. Adjustments to the Borrower's Federal Income Tax Liability.
In the event that there is an increase or decrease in the amount
determined under paragraph 2 for any fiscal year (whether by amended
return, examination by the Internal Revenue Service, carryback or net
operating loss or unused credits, or otherwise), the Borrower shall or
shall cause Holdings, as the case may be, to promptly make a payment to the
other in the amount of such increase or decrease.
ii
<PAGE>
EXHIBIT 10.33
AMENDMENT TO
ASSET PURCHASE AGREEMENT
This Amendment to Asset Purchase Agreement is made and entered into as of
this 31st day of December, 1997 by and among SCP Pool Corporation, a Delaware
corporation ("SCP"), South Central Pool Supply, Inc., a Delaware corporation
("Buyer"), Bicknell Huston Distributors, Inc., a Massachusetts corporation
("Seller"), Pacific Industries, Inc., a Delaware corporation ("Pacific"), and
Cookson America, Inc., a Delaware corporation ("Cookson").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, the parties referred to above are parties to the Asset Purchase
Agreement dated November 13, 1997, pursuant to which the Buyer is purchasing
substantially all of the business and assets of Seller, and the parties now
desire to amend the Asset Purchase Agreement;
WHEREAS, the terms used herein shall have the meaning set forth in the
Asset Purchase Agreement.
NOW, THEREFORE, the parties agree that the Asset Purchase Agreement is
amended and/or supplemented as follows:
1. Section 1.1(d)(iii) is hereby amended by adding the phrase "and
Section 8.17" after the phrase "Section 8.5" in the second line and the fourth
line of Section 1.1(d)(iii).
2. Section 1.1(d)(v) is hereby amended by deleting the phrase "or
alleged violation" in the second line of Section 1.1(d)(v) and insert in the
fourth line after the word "Person" and before the closed parenthesis the phrase
"or the cost of defending against or disputing any such violation or alleged
violation."
3. Section 1.1(d) is amended by adding an additional paragraph at the
end of Section 1.1(d) as follows:
"Notwithstanding anything in this Section 1.1(d) to the contrary,
any liability arising from the sale of any of the Inventory by the
Buyer after the Closing shall not be deemed an "Excluded Liability"
and shall be deemed to relate to the business and operations of the
Buyer after the Closing, except to the extent any of the Inventory has
been made defective due to the acts of Seller."
<PAGE>
4. Section 1.4(a) of the Agreement is hereby amended by deleting the last
sentence in Section 1.4(a) and inserting in its place the following: "The
effective time of the Closing shall be 12:01 a.m. on January 1, 1998."
5. Section 4.1(a) is hereby amended by deleting the second sentence of
Section 4.1(a) and replacing it with the following:
"Seller has full corporate power necessary to own and operate its
properties and business and to conduct its business as presently
conducted."
6. Section 4.16 is hereby amended by adding the following at the end of
Section 4.16:
"(c) Seller has all necessary power and authority and all
licenses, permits and authorizations necessary to own and operate its
properties and business and to conduct its business as presently
conducted."
7. Section 6.1(c) is hereby amended by replacing the date "December 30,
1997" in each place where it is used in Section 6.1(c) with the date "December
31, 1997".
8. Section 7.2(b)(i) is hereby amended by adding after the word "above" in
the second line of Section 7.2(b)(i) the following:
"or, to the extent Section 1.1(d) may be deemed a covenant or
agreement of any of the Cookson Entities, under Section 7.A(a)(ii)
above".
9. Section 7.2(b)(iii) is hereby amended by adding after the word "above"
in the second line of Section 7.2(b)(iii) the following phrase:
"or, to the extent Section 1.1(d) may be deemed a covenant or
agreement of any of the Cookson Entities, in subsection (a)(ii)
above".
10. Section 8.14(b) and Section 8.14(c) are hereby amended by replacing the
phrase "Section 8.11" in each of those provisions with the phrase "Section
8.14."
11. Section 8.20 is hereby amended by adding after the phrase "Leased Real
Property" in the second line of Section 8.20 the phrase "(other than the old
Syracuse Lease expiring August 31, 1998)" and adding the phrase "or in a form
2
<PAGE>
otherwise agreed upon by the Buyer and Seller" after the word "hereto" in the
second line of Section 8.20.
12. That the definition of "Environmental and Safety Requirements" located
in Section 10.1 is hereby amended by adding at the end of such definition the
phrase "on or prior to the Closing Date".
13. That Schedules 4.7, 4.8(a) and 4.13 attached to the Asset Purchase
Agreement are hereby replaced by the respective Schedules attached hereto as
Schedule 4.7, Schedule 4.8(a) and Schedule 4.13.
14. That the Pacific Supply Agreement attached to the Asset Purchase
Agreement as Exhibit C is hereby deleted and replaced with the Pacific Supply
Agreement attached hereto as Exhibit C.
15. Except as expressly provided herein, the Asset Purchase Agreement shall
remain in full force and effect in accordance with its terms.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Asset Purchase Agreement as of the date first written above.
SCP POOL CORPORATION
By: /S/WILSON B. SEXTON
-------------------------
Name: Wilson B. Sexton
Title: Chairman
SOUTH CENTRAL POOL SUPPLY, INC.
BY: /S/WILSON B. SEXTON
-------------------------
Name: Wilson B. Sexton
Title: Chairman
BICKNELL HUSTON DISTRIBUTORS, INC.
BY: /S/THOMAS G. GIBBS
-------------------------
Name: Thomas G. Gibbs
Title: Treasurer
PACIFIC INDUSTRIES, INC.
BY: /S/THOMAS G. GIBBS
-------------------------
Name: Thomas G. Gibbs
Title: Vice President
COOKSON AMERICA, INC.
BY: /S/MARK J. PECHAK
-------------------------
Name: Mark J. Pechak
Title: Vice President
<PAGE>
SCHEDULE 4.7
------------
ABSENCE OF CERTAIN DEVELOPMENTS
- -------------------------------
(1) A major customer of Seller (Clear Blue) currently has certain tax problems
that is likely to result in it filing for bankruptcy and terminating its
operations and any further purchases of product.
(2) It is anticipated that the note receivable of Central Pools & Supplies,
Inc. referenced on Schedule 4.12 will be discharged prior to the Closing
Date upon receipt of final payment.
(3) The Seller is in the process of moving its current Syracuse branch to 900
E. Hiawatha Boulevard, Syracuse, New York on or about December 1, 1997. The
Seller has entered into a real estate lease with respect to the new
location as set forth on Schedule 4.8(a). Seller will be completing
leasehold improvements in the amount of approximately $156,000. The current
Syracuse lease will expire on August 31, 1998.
(4) Seller has terminated its software contract with its software supplier due
to its acquisition of the software.
(5) The Massachusetts Attorney General's Office has completed an audit of
Seller in 1997 which will require Seller to reclassify approximately 27
employees from exempt to non-exempt status as of January 1, 1998 - See
Schedule 4.17.
(6) Seller anticipates subleasing the Framingham storage facility, which is not
currently being used by Seller.
(7) The Business of Seller may be affected by, and the Cookson Entities shall
have no responsibility for, changes in the economic condition or climate of
the industry in which the Seller is engaged or the economy in general and,
in particular, the Business is subject to adverse changes in its operations
and operating results due to the seasonal nature of the Business.
(8) Seller entered into a Second Amendment on November 10, 1997 to the Lease
Agreement dated January 1, 1991, amended August 13, 1993, between Elmwood
Realty Associates and Seller relating to the leased premises located at 12
Parkwood Drive, Hopkinton, Massachusetts.
8
<PAGE>
SCHEDULE 4.8(a)
LEASES AND SUBLEASES
(1) NORTH ANDOVER, MASSACHUSETTS--2250 Turnpike Street, Building C. Lease
Agreement dated September 30, 1996 between Nomed Realty Trust and Bicknell
Huston Distributors, Inc.; written consent of landlord required to assign.
(2) SYRACUSE, NEW YORK (New)--900 Hiawatha Boulevard, Hiawatha Center. Lease
Agreement dated July 2, 1997 between Dale Weaver and Bicknell Huston
Distributors, Inc.; written consent of landlord required to assign.
(3) SYRACUSE, NEW YORK (Existing/Old)--1901 Lemoyne Avenue, Salina, New York.
(a) Lease Agreement dated March 21, 1988 between Dubnoff-Koldin Realty and
Bicknell, Incorporated and (b) Modification of Lease Agreement dated
February 24, 1992 between Dubnoff-Koldin Realty and Bicknell Distributors,
Inc. Lease expires August 31, 1998; written consent of the landlord
required to assign.
(4) ALBANY, NEW YORK--45 Industrial Park Road. Lease Agreement dated January
11, 1995 between The Marval Company and Bicknell Distributors, Inc.;
written consent of landlord required to assign (notice by certified mail);
Landlord has 30 days to approve or can terminate lease.
(5) ZELIENOPLE, PENNSYLVANIA-Schreiber Industrial Park North, Building No. 3.
Lease Agreement dated October 4, 1996 between Schreiber Industrial Park
North Company and Bicknell Huston Distributors, Inc.; written consent of
landlord required to assign.
(6) BRIDGEWATER, NEW JERSEY--Building No. 6E, Central Jersey Industrial Park.
(a) Lease Agreement and (b) Addendum to Lease dated January 9, 1995 between
Edmar Corporation and Huston Distributors, Inc.; written consent of
landlord required to assign.
(7) DELANCO, NEW JERSEY--710 Coopertown Road. Lease Agreement dated May 1, 1996
between Andrew E. Colson, Jr. and Bicknell Huston Distributors, Inc.;
written consent of landlord required to assign; must deliver to Landlord
full assignment agreement and banking information of assignee/sublessee
adequate to demonstrate financial responsibility.
(8) WINDSOR, CONNECTICUT--436 Hayden Station Road. Lease Agreement dated
January 1, 1994 between The Teacher's Retirement System of the State of
Illinois and Bicknell Distributors, Inc.; written consent of landlord
required to assign; landlord has right of first refusal to take the
remainder of the lease.
9
<PAGE>
(9) PORTLAND, MAINE-520 Riverside Industrial Parkway. (a) Lease Agreement dated
May 30, 1991 between 500 Riverside Associates and Pacific Industries, Inc.
and (b) Assignment and Assumption and Amendment of Lease dated October 1,
1995 between 500 Riverside Associates, Pacific Industries, Inc. and
Bicknell Distributors, Inc.; written consent of landlord required to
assign.
(10) HOPKINTON, MASSACHUSETTS-12 Parkwood Drive. (a) Lease Agreement dated
January 1, 1991; (b) First Amendment to Lease Agreement dated August 13,
1993 between Realty Associates and Bicknell Distributors, Inc.; and (c)
Second Amendment to Lease Agreement dated November 10, 1997 between Elmwood
Realty Associates and Bicknell Huston Distributors, Inc.; written consent
of landlord required to assign.
(11) BATAVIA, NEW YORK-2 Treadeasy Avenue. Lease Agreement dated January 25,
1995, as amended February 23, 1995 (no formal amendment), between Mega
Properties Corp. and Bicknell Distributors, Inc.; written consent of
landlord required to assign.
(12) RONKONKOMA, NEW YORK-2133 Ocean Avenue. Lease Agreement dated March 22,
1995 between Lakeland Five Associates and Huston Distributors, Inc.;
written consent of landlord required to assign.
(13) FRAMINGHAM, MASSACHUSETTS-685 Cochituate Road. Indenture of Lease dated
January 30, 1974 between Frank W. Generazio, Jr. and John C. Acton and
Bicknell, Inc. This Lease is a sublease. Prime Lease is dated January 30,
1974 and is between Frank W. Generazio, Jr. and John C. Aton (as Tenants)
and Shopper's World, Inc. (as Landlord)- written consent of landlord
required to assign.
10
<PAGE>
SCHEDULE 4.13
-------------
PROPRIETARY RIGHTS
------------------
(1) The Seller owns the following registered trademarks/servicemarks:
<TABLE>
<CAPTION>
Mark Reg. Number Reg. Date
---- ----------- ---------
<S> <C> <C>
BICKNELL U.S 954,287 03/06/73
CITATION MA 35,731 09/11/84
stylized letters
CITATION RI 8,494 09/05/84
stylized letters
CITATION SWIMMING MA 35,590 O8/16/84
POOL SUPPLY
CITATION SWIMMING RI 84,814 08/10/84
POOL SUPPLY
HERITAGE POOLS US 925,361 12/14/71
(expired)
SHOCK-IT US 1,092,042 5/30/78
</TABLE>
(2) The Seller has used the following common law trade names:
Bicknell Huston
Huston
(3) The Seller has used the following common law servicemark:
BHD with logo
(4) The Seller has used the following brand names:
Heritage
Whale Brand
Note: (a) The Seller has used the common trade name "Huston" pursuant to a
royalty free non-exclusive perpetual license granted to Seller by Huston Supply
Company, Inc. to use the name in the pool distribution business under Section
10.3 of the Asset Purchase Agreement dated April 19, 1993 with Huston Supply
Company, Inc. (see Schedule 4.12).
(b) See License Agreement referenced as Item No. 3 on Schedule 4.12 for
restriction on use of "Bicknell".
20
<PAGE>
EXHIBIT 21.1
Subsidiaries of the Registrant
Name of Subsidiary State of Incorporation
------------------ ----------------------
South Central Pool Supply, Inc. Delaware
SCP Finance Co. Delaware
Alliance Packaging, Inc. Delaware
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-16641 and No. 333-16639) pertaining to the SCP Pool
Corporation Non-Employee Directors Equity Incentive Plan and the SCP Pool
Corporation 1995 Employee Stock Option Plan of our report dated February 16,
1998, with respect to the consolidated financial statements of SCP Pool
Corporation included in the Annual Report (Form 10-K) for the year ended
December 31, 1997.
Ernst & Young LLP
New Orleans, Louisiana
March 20, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 22,296
<SECURITIES> 0
<RECEIVABLES> 26,713
<ALLOWANCES> 1,938
<INVENTORY> 48,261
<CURRENT-ASSETS> 96,474
<PP&E> 7,013
<DEPRECIATION> 2,221
<TOTAL-ASSETS> 136,452
<CURRENT-LIABILITIES> 33,087
<BONDS> 39,889
0
0
<COMMON> 8
<OTHER-SE> 66,627
<TOTAL-LIABILITY-AND-EQUITY> 136,452
<SALES> 335,022
<TOTAL-REVENUES> 335,022
<CGS> 261,645
<TOTAL-COSTS> 319,301
<OTHER-EXPENSES> 708
<LOSS-PROVISION> 1,287
<INTEREST-EXPENSE> 4,482
<INCOME-PRETAX> 11,383
<INCOME-TAX> 4,327
<INCOME-CONTINUING> 7,056
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,056
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.07
</TABLE>
