PAMECO CORPORATION
NOTE AGREEMENT
Dated as of February 18, 2000
$20,000,000 Senior Subordinated Notes due March 31, 2005
TABLE OF CONTENTS
(Not Part of Agreement)
Page
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1. PAYMENTS......................................................... 1
1.1. Interest Payments.......................................... 1
1.2. Mandatory Principal Payments............................... 3
1.3. Optional Principal Payments................................ 3
1.4. Delivery of Notes in Payment of Warrant Purchase Price..... 4
1.5. Payments Among Noteholders................................. 4
1.6. Notation of Notes on Payment............................... 4
1.7. Offer to Pay Upon Change in Control........................ 4
1.8. No Other Payments of Principal; Acquisition of Notes....... 6
1.9. Manner of Payments......................................... 6
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.................... 7
2.1. Registration of Notes...................................... 7
2.2. Exchange of Notes.......................................... 8
2.3. Replacement of Notes....................................... 9
2.4. Issuance Taxes............................................ 10
3. GENERAL COVENANTS............................................... 10
3.1. Visits and Inspections.................................... 10
3.2. Notices................................................... 10
3.3. Financial and Other Information........................... 11
3.4. Intentionally Omitted..................................... 13
3.5. Taxes..................................................... 13
3.6. Compliance with Laws...................................... 14
3.7. Insurance................................................. 14
3.8. Year 2000 Compatibility................................... 14
3.9. Intellectual Property..................................... 14
3.10. Dividends of Subsidiaries After Default................... 14
3.11. Pledged Shares............................................ 15
3.12. Payment of Notes and Maintenance of Office................ 15
3.13. Private Offering.......................................... 15
3.14. Subsidiary Guaranties..................................... 15
4. NEGATIVE AND FINANCIAL COVENANTS................................ 15
4.1. Fundamental Changes....................................... 16
4.2. Loans..................................................... 16
4.3. Debt...................................................... 16
4.4. Affiliate Transactions.................................... 17
4.5. Liens..................................................... 18
4.6. Distributions............................................. 19
4.7. Upstream Payments......................................... 19
4.8. Capital Expenditures...................................... 19
4.9. Disposition of Assets..................................... 20
4.10. Restricted Investments.................................... 20
4.11. Tax Consolidation......................................... 20
4.12. Accounting Changes........................................ 20
4.13. Organization Documents.................................... 20
4.14. Restrictive Agreements.................................... 21
4.15. Conduct of Business....................................... 21
4.16. Consolidated Net Worth.................................... 21
4.17. Consolidated EBITDA....................................... 21
4.18. Fixed Charge Ratio........................................ 21
4.19. Senior Credit Facility Provisions......................... 22
5. EVENTS OF DEFAULT............................................... 22
5.1. Events of Default......................................... 22
5.2. Default Remedies.......................................... 26
5.3. Annulment of Acceleration of Notes........................ 27
6. INTERPRETATION OF THIS AGREEMENT................................ 28
6.1. Terms Defined............................................. 28
6.2. Accounting Principles..................................... 51
6.3. Directly or Indirectly.................................... 52
6.4. Section Headings and Table of Contents and Construction... 52
6.5. Governing Law............................................. 53
6.6. General Interest Provisions............................... 53
7. MISCELLANEOUS................................................... 55
7.1. Communications............................................ 55
7.2. Reproduction of Documents................................. 55
7.3. Survival; Entire Agreement................................ 56
7.4. Successors and Assigns.................................... 56
7.5. Amendment and Waiver...................................... 56
7.6. Expenses.................................................. 58
7.7. Indemnification of Each Holder of Notes................... 59
7.8. Confidentiality........................................... 59
7.9. Waiver of Jury Trial; Consent to Jurisdiction; Etc........ 60
7.10. Execution in Counterpart.................................. 61
Annex 1 - Addresses of Purchasers; Payment Instructions
Annex 2 - Addresses for Notices
Schedule 4.5 - Certain Liens
Schedule 4.14 - Certain Restrictive Agreements
Attachment A1 - Form of PIK Note
Attachment A2 - Form of Warrant Note
NOTE AGREEMENT
NOTE AGREEMENT, dated as of February 18, 2000, among PAMECO
CORPORATION, (together with any successors and assigns who become such in
accordance herewith, the "Company"), a Georgia corporation, and the Persons
listed on Annex 1 hereto (together with their respective successors and assigns,
collectively, the "Purchasers").
RECITALS
WHEREAS, pursuant to the Securities Purchase Agreement, the Purchasers
have agreed to purchase from the Company, and the Company has agreed to sell to
the Purchasers, $20,000,000 in aggregate principal amount of Notes; and
WHEREAS, the Company and the Purchasers wish to enter into this
Agreement to govern the terms of the Notes;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties to this Agreement hereby agree as
follows:
1. PAYMENTS
1.1. Interest Payments.
Interest on the Notes shall be computed and paid in the manner provided
below.
(a) Interest Payments on Notes. Subject to Section 1.1(b) and
Section 1.1(c), interest (computed on the basis of a 360-day year of twelve
30-day months) shall accrue on the unpaid principal balance of each of the
Notes from time to time outstanding from and including the date of such
Note at a rate per annum equal to twelve percent (12%), payable quarterly
on the last day of March, June, September and December in each year (each
an "Interest Payment Date"), commencing with March 31, 2000, until the
principal amount thereof shall have become due and payable, and, to the
extent permitted by law in respect of any Note, on any overdue payment of
principal and any overdue payment of interest, payable on demand, at a rate
per annum equal to the lesser of:
(i) the highest rate allowed by applicable law; and
(ii) fourteen percent (14%) per annum.
(b) PIK Notes Capitalized Interest Amount. On each Interest Payment
Date, in lieu of making the entire interest payment due on a PIK Note in
cash, the Company shall:
(i) pay in cash on such Interest Payment Date that portion of
the interest accrued on the outstanding principal amount of such
PIK Note which would have accrued if the rate of interest on the
Notes were six percent (6%) per annum (or, in the event that
interest shall at such time be accruing at a higher rate by
operation of Section 1.1(a)(i) or Section 1.1(a)(ii), such higher
rate minus six (6) percentage points); and
(ii) add to the outstanding principal amount of such PIK Note
on such Interest Payment Date the portion of accrued interest which
is not paid in cash pursuant to the immediately preceding clause
(i) (each such addition with respect to any PIK Note, a
"Capitalized Interest Amount").
Once added to the principal amount of a PIK Note, a Capitalized Interest Amount
shall be considered principal for all purposes, and shall bear interest and be
payable in accordance with this Section 1.
(c) Delivery of Warrants with respect to Warrant Notes. On each
Interest Payment Date, in lieu of making the entire interest payment due on
a Warrant Note in cash, the Company shall:
(i) pay in cash on such Interest Payment Date that portion of
the interest accrued on the outstanding principal amount of such
Warrant Note which would have accrued if the rate of interest on
the Notes were six percent (6%) per annum (or, in the event that
interest shall at such time be accruing at a higher rate by
operation of Section 1.1(a)(i) or Section 1.1(a)(ii), such higher
rate minus six (6) percentage points);
(ii) so long as no Warrant Interest Termination Event shall
have occurred on each March Interest Payment Date (beginning with
March, 2001), deliver to each holder of Warrant Notes, with respect
to the Warrant Notes held by it at such time, one or more Warrant
Certificates representing a number of Warrants equal to the Warrant
Interest Number at such time; and
(iii) if any Warrant Interest Termination Event shall have
occurred, add to the outstanding principal amount of such Warrant
Note on such Interest Payment Date the Warrant Interest Amount.
Once added to the principal amount of a Warrant Note, a Warrant
Interest Amount shall be considered principal for all purposes, and
shall bear interest and be payable in accordance with this Section
1.1.
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1.2. Mandatory Principal Payments.
On March 31, 2003 and on March 31, 2004, the Company will prepay $2,000,000
principal amount (or such lesser principal amount as shall then be outstanding)
of the Notes at par. The entire outstanding principal amount of the Notes, and
all accrued and unpaid interest thereon and any other amounts due with respect
thereto, shall become due and payable on March 1, 2005, the maturity date of the
Notes.
1.3. Optional Principal Payments.
(a) Optional Principal Payments. The Company may pay the principal
amount of the Notes in whole or in part, at any time without premium or
penalty, in a minimum aggregate principal amount of $50,000 (or, if the
aggregate outstanding principal amount of the Notes is less than $50,000 at
such time, then such principal amount) and in multiples of $10,000,
together with interest on such principal amount then being paid accrued to
the payment date.
(b) Notice of Optional Payment. The Company will give notice of any
optional payment of the Notes pursuant to this Section 1.3 to each holder
of Notes not less than 1 day before the specified payment date, stating:
(i) the specified payment date;
(ii) that such payment is to be made pursuant to this Section
1.3;
(iii) the principal amount of each Note to be paid on such
date; and
(iv) the interest to be paid on each such Note, accrued to the
specified payment date.
Notice of payment having been so given, the aggregate principal amount of
the Notes to be paid stated in such notice, and interest thereon accrued to the
specified payment date, shall become due and payable on the specified payment
date.
(c) Application of Optional Payment. Each partial prepayment of the
Notes pursuant to this Section 1.3 will be applied first, to the amount due
on the maturity date of the Notes and second, to the mandatory prepayments
applicable to the Notes as set forth in Section 1.2, in the inverse order
of the maturity thereof.
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1.4. Delivery of Notes in Payment of Warrant Purchase Price.
The Warrant Agreement provides that a holder of Warrants may tender Notes
in partial or complete payment of the purchase price for the shares of Common
Stock issued upon exercise of the Warrants. Promptly following the receipt of
any Note so tendered, the Company shall promptly cancel and retire such
surrendered Note (and no such Note shall be reissued), and shall issue to the
holder thereof a new Note in the principal amount of such tendered Note
remaining after deduction of the principal amount thereof applied to payment of
the purchase price for the shares of Common Stock. For purposes of Rule 144
under the Securities Act, 17 C.F.R. (S)230.144, the Company and each Purchaser
agrees that a tender of Notes in payment of the exercise price in respect of the
Warrants shall not be deemed a prepayment of the Notes, but rather a conversion
of such Notes, pursuant to the terms of the Warrant Agreement and the Warrants,
into Common Stock.
1.5. Payments Among Noteholders.
If at the time any payment of the principal of the Notes made pursuant to
Section 1.2 or Section 1.3 is due there is more than one Note outstanding, the
aggregate principal amount of each such required or optional partial payment of
the Notes shall be allocated among the Notes at the time outstanding pro rata in
proportion to the respective unpaid principal amounts of all such outstanding
Notes.
1.6. Notation of Notes on Payment.
Upon any partial payment of a Note or upon the addition of any Capitalized
Interest Amount or Warrant Interest Amount, the holder of such Note may (but
shall not be required to), at its option:
(a) surrender such Note to the Company pursuant to Section 2.2 in
exchange for a new Note in a principal amount equal to the principal amount
remaining unpaid on the surrendered Note;
(b) make such Note available to the Company for notation thereon of
the portion of the principal so paid; or
(c) xxxx such Note with a notation thereon of the portion of the
principal so paid.
In case the entire principal amount of any Note is paid, such Note shall be
surrendered to the Company for cancellation and shall not be reissued, and no
Note shall be issued in lieu of the paid principal amount of any Note.
1.7. Offer to Pay Upon Change in Control.
(a) Notice of Change in Control Notice Event. In the event of the
obtaining of knowledge of a Change in Control Notice Event by any
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Senior Officer (including, without limitation, via the receipt of notice of
a Change in Control Notice Event from any holder of Notes), the Company
will, within three (3) Business Days after obtaining knowledge of the
occurrence of such event, give notice of such Change in Control Notice
Event to each holder of Notes. Each such notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) refer to this Section 1.7; and
(iv) specify, in reasonable detail, the nature and date of the
Change in Control Notice Event.
(b) Offer in Respect of a Change in Control. In the event of a
Change in Control, the Company will, within 3 Business Days after the
occurrence of such event (or, in the case of any Change in Control the
consummation or finalization of which would require any affirmative action
by of the Company, at least 30 days prior to such Change in Control), give
notice of such Change in Control to each holder of Notes. Such notice shall
contain an irrevocable separate offer to each holder of Notes to repurchase
all, but not less than all, of the Notes held by such holder at par
together with interest thereon. Such payment shall occur on a date (the
"Change in Control Payment Date") specified in such notice that is not less
than 30 days and not more than 45 days after the date of such notice. Each
such notice shall:
(i) be dated the date of the sending of such notice;
(ii) be executed by a Senior Officer;
(iii) specify, in reasonable detail, the nature and date of
the Change in Control;
(iv) specify the Change in Control Payment Date;
(v) specify the principal amount of each Note outstanding;
(vi) specify the interest that will be due on each Note offered
to be repurchased, accrued to the Change in Control Payment Date;
(vii) certify that the conditions of this Section 1.7 have
been fulfilled; and
(viii) state that a failure to respond to the notice shall be
deemed to be an acceptance of such offer.
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(c) Acceptance, Rejection. To accept such offered repurchase, a
holder of Notes shall either cause a notice of such acceptance to be
delivered to the Company not later than 30 days after the date of receipt
by such holder of the written offer of such repurchase or fail to respond
to such written offer of repurchase within such period of 30 days. To
reject such offer such holder of Notes shall deliver a written notice of
rejection of such offer within such period. If accepted (or if such offer
is deemed accepted pursuant to Section 1.7(b)(viii)), such offered
repurchase shall be due and payable on the Change in Control Payment Date.
(d) Deferral of Obligation to Purchase. The obligation of the Company
to purchase Notes pursuant to the offers required by Section 1.7(b) and
accepted in accordance with Section 1.7(c) is subject to the occurrence of
the Change in Control in respect of which such offers and acceptances shall
have been made. In the event that such Change in Control does not occur
prior to the Change in Control Payment Date in respect thereof, such
purchase shall be deferred until and shall be made on the date on which
such Change in Control occurs or, if the Company determines that efforts to
effect such Change in Control have ceased or have been abandoned, then such
offer, acceptances and obligation to purchase shall be deemed to have been
rescinded. The Company shall keep each holder of Notes reasonably and
timely informed of:
(i) any such deferral of the date of purchase;
(ii) the date on which such Change in Control and the purchase
are expected to occur; and
(iii) any determination by the Company that efforts to effect
such Change in Control have ceased or been abandoned.
1.8. No Other Payments of Principal; Acquisition of Notes.
Except for payments of principal made in accordance with this Section 1,
the Company may not make any payment of principal in respect of the Notes. The
Company will not, and will not permit any Subsidiary or any Affiliate to,
directly or indirectly, acquire or make any offer to acquire any Notes.
1.9. Manner of Payments.
(a) Manner of Payment. The Company shall pay all amounts payable
with respect to each Note (other than amounts with respect to Warrant Notes
payable by delivery of Warrants), without any presentment of such Notes and
without any notation of such payment being made thereon, by crediting, by
federal funds bank wire transfer, the account of the holder thereof in any
bank in the United States of America as may be designated in writing by
such holder, or in such other
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manner as may be reasonably directed or to such other address in the United
States of America as may be reasonably designated in writing by such
holder. Annex 1 shall be deemed to constitute notice, direction or
designation (as appropriate) by the Purchaser to the Company with respect
to payments to be made to the Purchaser as aforesaid. In the absence of
such written direction, all amounts payable with respect to each Note shall
be paid by check mailed and addressed to the registered holder of such Note
at the address shown in the register maintained by the Company pursuant to
Section 2.1.
(b) Payments Due on Holidays. If any payment due on, or with
respect to, any Note shall fall due on a day other than a Business Day,
then such payment shall be made on the first Business Day following the day
on which such payment shall have so fallen due; provided that if all or any
portion of such payment shall consist of a payment of interest, for
purposes of calculating such interest, such payment shall be deemed to have
been originally due on such first following Business Day, such interest
shall accrue and be payable to (but not including) the actual date of
payment, and the amount of the next succeeding interest payment shall be
adjusted accordingly.
(c) Payments, When Received. Any payment to be made to the holders
of Notes hereunder or under the Notes shall be deemed to have been made on
the Business Day such payment actually becomes available at such holder's
bank prior to the close of business of such bank, provided that interest
for one day at the non-default interest rate of the Notes shall be due on
the amount of any such payment that actually becomes available to such
holder at such holder's bank after 12:00 noon (local time of such bank).
(d) Payments in United States Dollars. All payments under this Agreement
and the Notes shall be made in United States Dollars.
2. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
2.1. Registration of Notes.
The Company will keep at its office, maintained pursuant to Section 3.12, a
register for the registration and transfer of Notes. The name and address of
each holder of one or more Notes, each transfer thereof made in accordance with
Section 2.2 and the name and address of each transferee of one or more Notes
shall be registered in such register. The Person in whose name any Note shall
be registered shall be deemed and treated as the owner and holder thereof for
all purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary, other than in accordance with Section 2.2.
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2.2. Exchange of Notes.
(a) Exchange of Notes. Upon surrender of any Note at the office of
the Company maintained pursuant to Section 3.12, duly endorsed or
accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or such holder's attorney duly authorized in
writing, the Company will execute and deliver, at the Company's expense
(except as provided in Section 2.2(b)), a new Note or Notes in exchange
therefor, in an aggregate principal amount equal to the unpaid principal
amount of the surrendered Note. Each such new Note shall be registered in
the name of such Person as such holder may request and shall be
substantially in the form of Attachment A1 or Attachment A2, as the case
may be with respect to such surrendered Note. Each such new Note shall be
dated and bear interest from the date to which interest shall have been
paid on the surrendered Note or dated the date of the surrendered Note if
no interest shall have been paid thereon. Each such new Note shall carry
the same rights to unpaid interest, interest to accrue and delivery of
Warrants that were carried by the Note so exchanged or transferred. Notes
shall not be transferred in denominations of less than $100,000, provided
that a holder of Notes may transfer its entire holding of Notes regardless
of the principal amount of such holder's Notes.
(b) Costs. The Company will pay the cost of delivering to or from
such holder's home office or custodian bank from or to the Company, insured
to the reasonable satisfaction of such holder, the surrendered Note and any
Note issued in substitution or replacement for the surrendered Note. The
Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes.
(c) Certain Restrictions on Transfer. Notwithstanding the provisions
of Section 2.2(a):
(i) so long as no Event of Default shall exist (and subject to
clause (ii) below), no holder of Notes shall be permitted to transfer
any Notes held by it other than to its subsidiaries and/or affiliates
or to another Purchaser or its subsidiaries and/or affiliates without
the prior written consent of the Company (which consent shall not be
unreasonably withheld or delayed), provided that, upon the existence
of an Event of Default, any holder of Notes may transfer any or all of
the Notes held by it to any Person;
(ii) in connection with the termination of the Supply Agreement
of any Vendor in accordance with the provisions thereof and if no
Event of Default (other than solely in respect of such terminated
Supply Agreement) shall exist at such time, such Vendor (and any
affiliate to which such Vendor has transferred its
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Note(s)) shall, at the request of the Company and if the Company shall
have provided all Vendors with written notice of such action, transfer
all of the Notes (and if applicable, any Warrants) held by it to
another of the Company's suppliers, at a price equal to the
outstanding principal amount of such Notes, interest accrued to the
date of transfer (including any Capitalized Interest Amount and any
Warrant Purchase Amount) and any other amounts due to such Vendor as
the holder of Notes (upon the consummation of such transfer, such
supplier shall be deemed to be a "Vendor" for all purposes hereof);
and
(iii) in connection with the termination of the Supply Agreement
of any Vendor in accordance with the provisions thereof and if an
Event of Default shall exist at such time (other than one caused
solely by a breach by the Company of such Supply Agreement), such
Vendor (and any affiliate of such Vendor to which such Vendor has
transferred its Note(s)) shall, at the request of the Company and if
the Company shall have provided all Vendors with written notice of
such action, transfer all of the Notes (and if applicable, any
Warrants) held by it to another of the Company's suppliers, at a price
equal to the outstanding principal amount of such Notes, interest
accrued to the date of transfer (including any Capitalized Interest
Amount and any Warrant Purchase Amount) and any other amounts due to
such Vendor as the holder of Notes, so long as the Required Holders
(determined as though the Notes of the affected Vendor and its
affiliates were not outstanding) have consented in writing to such
transfer (such consent not to be unreasonably withheld) (upon the
consummation of such transfer, such supplier shall be deemed to be a
"Vendor" for all purposes hereof).
If and to the extent that the Warrant Purchase Amount can not be calculated at
the time that the purchase of the selling Note holder's Note is to be
consummated under clause (ii) or (iii) of this Section 2.2(c), then the
purchaser of such Note shall unconditionally agree to pay the Warrant Purchase
Amount to the selling Note holder within five (5) Business Days after the
Warrant Purchase Amount has been determined.
2.3. Replacement of Notes.
Upon receipt by the Company from the registered holder of a Note of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Note (which evidence shall be, in the case of a Purchaser,
notice from such Purchaser of such loss, theft, destruction or mutilation), and:
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to the Company; provided, however, that if the
holder of such Note is a Purchaser or a subsidiary or affiliate of a
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Purchaser, an institutional investor or a nominee of any such Person, the
unsecured agreement of indemnity of such Person shall be deemed to be
satisfactory; or
(b) in the case of mutilation, upon surrender and cancellation
thereof;
the Company at its own expense will execute and deliver, in lieu thereof, a
replacement Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
2.4. Issuance Taxes.
The Company will pay all taxes (if any) due in connection with and as the
result of the initial issuance and sale of the Notes and in connection with any
modification, waiver or amendment of this Agreement or the Notes and shall save
each holder of Notes harmless without limitation as to time against any and all
liabilities with respect to all such taxes.
3. GENERAL COVENANTS
The Company covenants that on and after the Closing Date and so long as any
of the Notes shall be outstanding:
3.1. Visits and Inspections.
The Company shall, and shall cause each Subsidiary to, permit
representatives of each holder of Notes, from time to time, as often as may be
reasonably requested, but only during normal business hours and (except when a
Default or Event of Default exists) upon reasonable prior notice to the Company
at times and in a manner not unduly disruptive to the Company, to visit and
inspect the Properties of the Company and each Subsidiary, inspect, audit and
make extracts from the Company's and each Subsidiary's books and records, and
discuss with its officers, its employees and its independent accountants the
overall business, financial condition and results of operations of the Company
and its Subsidiaries: provided, however, that in no event shall the Company or
its Subsidiaries be required to allow any Note holder to inspect, or otherwise
make available to or discuss with any Note holder, any information relating to
the particular terms of its business arrangements with any party, its profit
margins with respect to any particular party or business line, or any other
information that the Company reasonably determines is competitively sensitive
and has not been previously disclosed. Expenses incurred by the holders of the
Notes in connection with this Section shall be paid by the Company in accordance
with Section 7.6.
3.2. Notices.
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(a) The Company shall notify each holder of Notes in writing,
promptly after the Company's obtaining knowledge thereof, (i) of the
commencement of any litigation affecting any Obligor or any of its Properties,
whether or not the claims asserted in such litigation are considered by the
Company to be covered by insurance, and of the institution of any administrative
proceeding, to the extent that such litigation or proceeding, if determined
adversely to such Obligor, would reasonably be expected to have a Material
Adverse Effect; (ii) of any material labor dispute to which any Obligor may
become a party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which it is a party or
by which it is bound; (iii) of any material default by any Obligor under, or
termination of, any Material Contract or any note, indenture, loan agreement,
mortgage, lease, deed, guaranty or other similar agreement relating to any Debt
of such Obligor exceeding $600,000; (iv) of the existence of any Default or
Event of Default; (v) of any default by any Person under any note or other
evidence of Debt payable to an Obligor in an amount exceeding $600,000; (vi) of
any judgment against any Obligor in an amount exceeding $600,000; (vii) of the
assertion by any Person of any Intellectual Property Claim, the adverse
resolution of which could reasonably be expected to have a Material Adverse
Effect; (viii) of any violation or asserted violation by the Company of any
Applicable Law (including ERISA, OSHA, FLSA or any Environmental Laws), the
adverse resolution of which would reasonably be expected to have a Material
Adverse Effect; and (ix) of any Environmental Release by an Obligor or on any
Property owned or occupied by an Obligor which would reasonably be expected to
have a Material Adverse Effect. In addition, the Company shall give each holder
of Notes at least 30 Business Days' prior written notice of any Obligor's
opening of any new office or place of business.
(b) The Company shall notify the Agent in writing (i) at least 30
Business Days' prior to the Company or any of its Subsidiaries opening any new
office or place of business and shall promptly execute any and all documents
requested by Agent and (ii) at least 30 Business Days' prior to any proposed
change of name of the Company or any of its Subsidiaries and cause to be
delivered to Agent (A) at least 15 Business Days prior thereto all Lien
Perfection Documents required by Agent in connection with such name change, and
(B) within 5 Business Days after the effective date of such name change, written
notice of the effective date of such name change and any state in which such
name change is not effective.
3.3. Financial and Other Information.
(a) The Company shall keep adequate records and books of account
with respect to its business activities in which proper entries are made in
accordance with GAAP reflecting all its financial transactions; and cause
to be prepared and to be furnished to each holder of Notes the following
(all to be prepared in accordance with GAAP applied on a consistent basis,
unless the Company's certified public accountants
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concur in any change therein, such change is disclosed to each holder of
Notes and is consistent with GAAP:
(i) as soon as available, and in any event within 90 days (or to
the extent that a filing extension is granted by the SEC, within 150
days) after the close of each Fiscal Year, unqualified audited
balance sheets of the Company and its Subsidiaries as of the end of
such Fiscal Year and the related statements of income, shareholders'
equity and cash flow, all on a Consolidated basis, certified without
material qualification by a firm of independent certified public
accountants of recognized national standing selected by the Company
but reasonably acceptable to the Required Holders (except for a
qualification for a change in accounting principles with which the
accountant concurs), and setting forth in each case in comparative
form the corresponding Consolidated figures for the preceding Fiscal
Year;
(ii) as soon as available, and in any event within 30 days after
the end of each of the first six (6) months ending after the Closing
Date, unaudited balance sheets of the Company and its Subsidiaries as
of the end of such month and the related unaudited Consolidated
statements of income and cash flow for such month and for the portion
of the Company's financial year then elapsed, all on a Consolidated
basis, setting forth in comparative form the corresponding figures
for the preceding Fiscal Year and certified by the principal
financial officer of the Company as prepared in accordance with GAAP
and fairly presenting the Consolidated financial position and results
of operations of the Company and its Subsidiaries for such month and
period subject only to changes from audit and year-end adjustments
and except that such statements need not contain notes;
(iii) as soon as available, and in any event within 50 days
after the end of each Fiscal Quarter hereafter, including the last
Fiscal Quarter of the Company's Fiscal Year, unaudited balance sheets
of the Company and its Subsidiaries as of the end of such Fiscal
Quarter and the related unaudited Consolidated statements of income
and cash flow for such Fiscal Quarter and for the portion of the
Company's financial year then elapsed, on a Consolidated basis,
setting forth in comparative form the corresponding figures for the
preceding Fiscal Year and certified by the principal financial
officer of the Company as prepared in accordance with GAAP and fairly
presenting the Consolidated financial position and results of
operations of the Company and its Subsidiaries for such Fiscal
Quarter and period subject only to changes from audit and year-end
adjustments and except that such statements need not contain notes;
12
(iv) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or
reports which the Company has made generally available to its
shareholders and copies of any regular, periodic and special reports
or registration statements which the Company files with the SEC or
any Governmental Authority which may be substituted therefor, or any
national securities exchange;
(v) promptly after (and in any event within 3 Business Days of)
becoming aware (i) of the existence of any condition or event which
constitutes a Default or an Event of Default, or (ii) that the holder
of any Note, or of any Debt, shall have given notice or taken any
other action with respect to a claimed Default, Event of Default or
default or event of default, a notice specifying the nature of the
claimed Default, Event of Default or default or event of default and
the notice given or action taken (if any) by such holder and what
action the Company is taking or proposes to take with respect
thereto; and
(vi) with reasonable promptness, such other data and information
as from time to time may be reasonably requested by any holder of
Notes.
(b) Concurrently with the delivery of the financial statements
described in clause (i) of Section 3.3(a), the Company shall cause to be
prepared and shall deliver to each holder of Notes a certificate of the
Company's certified public accountants stating to such holders that, based
upon such accountants' audit of the Consolidated financial statements of
the Company and its Subsidiaries performed in connection with their
examination of said financial statements, nothing came to their attention
that caused them to believe that the Company was not in compliance with
Section 4.12, Section 4.16, Section 4.17 or Section 4.18 hereof, or, if
they are aware of such noncompliance, specifying the nature thereof.
Concurrently with the delivery of the financial statements described in
clauses (i) and (ii) of Section 3.3(a), or more frequently if requested by
any holder of Notes during any period that a Default or Event of Default
exists, the Company shall cause to be prepared and furnished to each holder
of Notes a Compliance Certificate executed by the chief financial officer
of the Company, in form and substance reasonably satisfactory to the
Required Holders.
3.4. Intentionally Omitted.
3.5. Taxes.
The Company shall pay and discharge all Taxes prior to the date on which
such Taxes become delinquent or penalties attach thereto, except and to the
extent only that such Taxes are being Properly Contested.
13
3.6. Compliance with Laws.
The Company shall comply with all Applicable Law, including ERISA, all
Environmental Laws, OSHA, FLSA and all laws, statutes, regulations and
ordinances regarding the collection, payment and deposit of Taxes, and obtain
and keep in force any and all Governmental Approvals necessary to the ownership
of its Properties or to the conduct of its business, to the extent that any such
failure to comply, obtain or keep in force could be reasonably expected to have
a Material Adverse Effect. Without limiting the generality of the foregoing, if
any Environmental Release shall occur at or on any of the Properties of the
Company or any Subsidiary, the Company shall, or shall cause the applicable
Subsidiary to, act promptly and diligently to investigate and report to each
holder of Notes and all appropriate Governmental Authorities the extent of, and
to make appropriate remedial action to eliminate, such Environmental Release all
in accordance with applicable Environmental Laws, to the extent the failure to
do so would reasonably be expected to have a Material Adverse Effect.
3.7. Insurance.
In addition to the insurance required pursuant to the Financing Documents
with respect to the Collateral, the Company shall maintain with financially
sound and reputable insurers, (i) insurance with respect to its Properties and
business against such casualties and contingencies of such type (including
product liability, workers' compensation, larceny, embezzlement, or other
criminal misappropriation insurance) and in such amounts as is customary in the
business of the Company or such Subsidiary and (ii) business interruption
insurance in an amount not less than $10,000,000.
3.8. Year 2000 Compatibility.
The Company shall take all action necessary to assure that the Company's
computer based systems are (and remain) able to operate and effectively process
data (including dates) after January 1, 2000.
3.9. Intellectual Property.
The Company shall, promptly after applying for or otherwise acquiring any
Intellectual Property, deliver to each holder of Notes (or the Agent for their
benefit), in form and substance acceptable to the Required Holders and in
recordable form, all documents necessary for the holders of Notes to perfect
their Lien on such Intellectual Property subject to the Subordination
Agreements.
3.10. Dividends of Subsidiaries After Default.
The Company shall, promptly upon (but in no case more than 5 Business Days
after) the occurrence of an Event of Default, cause each Subsidiary to declare
and pay cash Distributions on, or to make payments or Distributions
14
on account of, the shares of all classes of Equity Interests of such Subsidiary
in an amount equal to the maximum amount permitted by Applicable Law at such
time to such Subsidiary for the payment of Distributions, and turn over all such
Distributions for application to the Obligations subject to the Subordination
Agreements.
3.11. Pledged Shares.
The Company shall pledge to the Agent, for the benefit of itself and each
holder of Notes from time to time, 100% of the Equity Interests of each Domestic
Subsidiary and 65% of the Equity Interests of each Foreign Subsidiary pursuant
to a Pledge Agreement which is subject to the Subordination Agreements.
3.12. Payment of Notes and Maintenance of Office.
The Company will punctually pay, or cause to be paid, the principal of, and
interest on, the Notes, as and when the same shall become due according to the
terms hereof and of the Notes, and will maintain an office at the address of the
Company as provided on Annex 2 hereto where notices, presentations and demands
in respect hereof or the Notes may be made upon it. Such office will be
maintained at such address until such time as the Company notifies the holders
of the Notes of any change of location of such office, which will in any event
be located within the United States of America.
3.13. Private Offering.
The Company will not, and will not permit any Person acting on its behalf
to, offer the Notes or any part thereof or any similar securities for issue or
sale to, or solicit any offer to acquire any of the same from, any Person so as
to bring the issuance and sale of the Notes within the provisions of section 5
of the Securities Act.
3.14. Subsidiary Guaranties.
The Company will cause each Subsidiary that at any time incurs, creates,
guarantees or in effect guarantees or otherwise becomes liable in respect of any
Senior Debt, to simultaneously become a guarantor pursuant to a Subsidiary
Guaranty (each, a "Subsidiary Guaranty") in form and substance reasonably
satisfactory to the Purchasers. At the time each such Subsidiary executes such
Subsidiary Guaranty, the Company shall cause such Subsidiary to deliver to each
holder of Notes a certificate of the secretary or assistant secretary of such
Subsidiary attaching and certifying as true, complete and accurate copies of the
constitutive documents of such Subsidiary and corporate resolutions (or
equivalent) authorizing such transaction, in each case certified as true and
correct by an appropriate officer of such Subsidiary.
4. NEGATIVE AND FINANCIAL COVENANTS
15
The Company covenants that on and after the Closing Date and so long as any
of the Notes shall be outstanding:
4.1. Fundamental Changes.
The Company shall not, and shall not permit any Subsidiary to, merge,
reorganize, consolidate or amalgamate with any Person, or liquidate, wind up its
affairs or dissolve itself, except for, upon prior written notice to the Agent,
mergers or consolidations of any Subsidiary with another Subsidiary or the
Company and mergers as to which the Permitted Merger Conditions are satisfied;
or change the Company's FEIN.
4.2. Loans.
The Company shall not, and shall not permit any Subsidiary to, make any
loans or other advances of money to any Person other than (i) to an officer or
employee of the Company or a Subsidiary for salary, travel advances, advances
against commissions and other similar advances in the Ordinary Course of
Business, (ii) to an officer or employee of the Company in the Ordinary Course
of Business, provided, however, that the total of such loans to officers or
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employees of a the Company under this clause (ii) shall not exceed $600,000 in
the aggregate at any time; and (iii) for so long as no Default or Event of
Default exists loans to a Subsidiary that is a Guarantor so long as such
Guarantor has granted a security interest in all of its assets in favor of the
Agent for the benefit of the Purchasers.
4.3. Debt.
The Company shall not, and shall not permit any Subsidiary to, create,
incur, assume, guarantee or suffer to exist any Debt, except:
(a) the Notes;
(b) Senior Debt existing on the Closing Date and Senior Debt
existing pursuant to an Acceptable Credit Facility;
(c) accounts payable by the Company or a Subsidiary to trade
creditors in the Ordinary Course of Business;
(d) Permitted Purchase Money Debt;
(e) Debt for accrued payroll, Taxes and other operating expenses
(other than for Money Borrowed) incurred in the Ordinary Course of Business
of the Company or such Subsidiary, so long as payment thereof is not past
due and payable unless, in the case of Taxes only, such Taxes are being
Properly Contested;
(f) Debt for Money Borrowed by the Company (other than the Notes),
but only to the extent that such Debt is outstanding on the date
16
of this Agreement and is not to be satisfied on or about the Closing Date
from the proceeds of the sale of the Notes;
(g) Permitted Contingent Obligations;
(h) Debt that is not included in any of the preceding paragraphs of
this Section 4.3, is not secured by a Lien (unless such Lien is a Permitted
Lien) and does not exceed at any time, in the aggregate, the sum of
$120,000 as to the Company and all of its Subsidiaries;
(i) Refinancing Debt so long as each of the Refinancing Conditions
is met; and
(j) Additional unsecured Debt, so long as (i) no Default or Event of
Default has occurred and is continuing at the time of the incurrence
thereof (ii) pursuant to Section 3.3(b) the Company shall have delivered to
the holders of the Notes the Company's financial statements for the most
recent Fiscal Quarter ended prior to the incurrence of such additional
Debt, and (A) the Debt to EBITDA Ratio was less than 4.5 to 1 at the end of
such Fiscal Quarter, and (B) the Pro Forma Debt to EBITDA Ratio was less
than 4.5 to 1 at the end of such Fiscal Quarter.
4.4. Affiliate Transactions.
The Company shall not, and shall not permit any Subsidiary to, enter into,
or be a party to any transaction with any Affiliate, except: (i) the
transactions contemplated by the Financing Documents; (ii) payment of reasonable
compensation to officers and employees for services actually rendered to the
Company or its Subsidiaries; (iii) payment of customary directors' fees and
indemnities; (iv) transactions with Affiliates that were consummated prior to
the date hereof and have been disclosed to each purchaser of Notes in writing
prior to the Closing Date; (v) transactions with Affiliates in the Ordinary
Course of Business and pursuant to the reasonable requirements of the Company's
or such Subsidiary's business and upon fair and reasonable terms that are fully
disclosed to the holders of the Notes and are no less favorable to the Company
or such Subsidiary than the Company or such Subsidiary would obtain in a
comparable arm's length transaction with a Person not an Affiliate of the
Company or such Subsidiary; (vi) any of the transactions contemplated by the
Pameco Securities Purchase Agreement and the Shareholders Agreement as in effect
on the Closing Date without giving effect to any amendments thereafter, provided
that management fees and other cash amounts may be paid to Xxxxxxxxxx and
Quilvest American Equity only if (x) no Default or Event of Default has occurred
and is continuing at the time of or after giving effect thereto and (y) the
Company shall have delivered to the holders of the Notes the Company's financial
statements for the most recent Fiscal Quarter ended prior to the payment of such
fees and amounts and the Debt to EBITDA Ratio was less than 4.5 to 1 at the end
of such Fiscal Quarter; and (vii) Distributions to the extent permitted by
Section 4.6 of this Agreement.
17
4.5. Liens.
The Company shall not, and shall not permit any Subsidiary to, create or
suffer to exist any Lien upon any of its Property, income or profits, whether
now owned or hereafter acquired, except the following (collectively, "Permitted
Liens"):
(a) Liens at any time granted in favor of Agent;
(b) Liens for Taxes (excluding any Lien imposed pursuant to any of
the provisions of ERISA) not yet due or being Properly Contested;
(c) statutory Liens (excluding any Lien imposed pursuant to any of
the provisions of ERISA) arising in the Ordinary Course of Business of the
Company or a Subsidiary, but only if and for so long as (x) payment in
respect of any such Lien is not at the time required or the Debt secured by
any such Liens is being Properly Contested and (y) such Liens do not
materially detract from the value of the Property of the Company or such
Subsidiary and do not materially impair the use thereof in the operation of
the Company's or such Subsidiary's business;
(d) Purchase Money Liens securing Permitted Purchase Money Debt;
(e) Liens securing Debt of a Subsidiary of the Company to the
Company or to another such Subsidiary;
(f) Liens arising by virtue of the rendition, entry or issuance
against the Company or any Subsidiary, or any Property of the Company or
any Subsidiary, of any judgment, writ, order, or decree for so long as each
such Lien (i) is in existence for less than 20 consecutive days after it
first arises or is being Properly Contested and (ii) is at all times junior
in priority to any Liens in favor of Agent;
(g) Liens incurred or deposits made in the Ordinary Course of
Business to secure the performance of tenders, bids, leases, contracts
(other than for the repayment of Money Borrowed), statutory obligations and
other similar obligations or arising as a result of progress payments under
government contracts, provided that, to the extent any such Liens attach to
any of the Collateral, such Liens are at all times subordinate and junior
to the Liens upon the Collateral in favor of the Agent;
(h) easements, rights-of-way, restrictions, covenants or other
agreements of record and other similar charges or encumbrances on real
Property of the Company or a Subsidiary that do not interfere with the
ordinary conduct of the business of the Company or such Subsidiary;
(i) normal and customary rights of setoff upon deposits of cash in
favor of banks and other depository institutions and Liens of a
18
collection bank arising under the UCC on Payment Items in the course of
collection;
(j) Liens in existence immediately prior to the Closing Date that
are satisfied in full and released on the Closing Date as a result of the
application of the Company's cash on hand at the Closing Date or the
proceeds of the sale of the Notes;
(k) Liens in favor of the holders of Senior Debt that are permitted
pursuant to the applicable Acceptable Credit Facility;
(l) such other Liens as appear on Schedule 4.5 hereof, to the extent
provided therein; and
(m) such other Liens as the Required Holders in their sole
discretion may hereafter approve in writing.
4.6. Distributions.
The Company shall not, and shall not permit any Subsidiary to, declare or
make any Distributions, except (i) for Upstream Payments and (ii) as otherwise
provided in Section 3.12 and (iii) dividends in respect of either (I) the Series
A Cumulative Preferred Stock issued pursuant to the Pameco Securities Purchase
Agreement as in effect on the date hereof and the Certificate of Designations
providing for the issuance of Series A Cumulative Preferred Stock, par value
$1.00 per share, in accordance with the terms of such Certificate of
Designations as in effect on the date hereof and (II) any additional series of
Preferred Stock issued pursuant to the Pameco Securities Purchase Agreement as
in effect on the date hereof and the Certificate of Designations providing for
the issuance of any additional series of Cumulative Payment in Kind Convertible
Preferred Stock, par value $1.00 per share, in accordance with the terms of such
Certificate of Designations as in effect on the date hereof; each of the
foregoing agreements or documents as in effect on the Closing Date without
giving effect to any amendment thereof after the Closing Date; provided,
---------
however, that such dividends can only be paid in cash after February 28, 2003
-------
and only so long as both (x) no Default or Event of Default has occurred and is
continuing at the time of or after the making of such dividend, and (y) the
Company shall have delivered to the holders o the Notes the Company's financial
statements for the most recent Fiscal Quarter ended and the Debt to EBITDA Ratio
was less than 4.5 to 1 at the end of such Fiscal Quarter.
4.7. Upstream Payments.
The Company shall not, and shall not permit any Subsidiary to, create or
suffer to exist any encumbrance or restriction on the ability of a Subsidiary to
make any Upstream Payment, except for encumbrances or restrictions (i) pursuant
to the Financing Documents or (ii) existing under Applicable Law.
4.8. Capital Expenditures.
19
The Company shall not, and shall not permit any Subsidiary to, make Capital
Expenditures (including expenditures by way of capitalized leases) which in the
aggregate, as to the Company and its Subsidiaries, exceed $6,000,000 during the
period from the date of this Agreement through February 28, 2001 or $8,000,000
during any Fiscal Year after February 28, 2001, provided, however, that the
Company may make additional Capital Expenditures in excess of the amounts set
forth herein so long as (a) no Default or Event of Default has occurred and is
continuing at the time of making such Capital Expenditure and (b) at the time of
making such Capital Expenditure the Company shall have delivered to the holders
of the Notes the Company's financial statements for the most recent Fiscal
Quarter ended prior to making such Capital Expenditure and the Debt to EBITDA
Ratio was less than 4.5 to 1 at the end of such Fiscal Quarter.
4.9. Disposition of Assets.
The Company shall not, and shall not permit any Subsidiary to, sell,
assign, lease, consign or otherwise dispose of any of its Properties or any
interest therein, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, except (i) sales of
Inventory in the Ordinary Course of Business and (ii) so long as no Default or
Event of Default shall have occurred and be continuing, the Company may sell
Property which, in the aggregate amount, does not exceed $10,000,000 in Value
after the date hereof.
4.10. Restricted Investments.
The Company shall not, and shall not permit any Subsidiary to, make or have
any Restricted Investment.
4.11. Tax Consolidation.
The Company shall not, and shall not permit any Subsidiary to, file or
consent to the filing of any consolidated income tax return with any Person
other than a Subsidiary.
4.12. Accounting Changes.
The Company shall not, and shall not permit any Subsidiary to, make any
significant change in accounting treatment or reporting practices, except as may
be required by GAAP, or establish a fiscal year different from the Fiscal Year.
4.13. Organization Documents.
The Company shall not, and shall not permit any Subsidiary to, amend,
modify or otherwise change any of the terms or provisions in any of its
Organization Documents as in effect on the date hereof, except for changes that
do not affect in any way the Company's or such Subsidiary's rights and
20
obligations to enter into and perform the Financing Documents to which it is a
party and to pay all of the Obligations and that do not otherwise have a
Material Adverse Effect.
4.14. Restrictive Agreements.
The Company shall not, and shall not permit any Subsidiary to, enter into
or become party to any Restrictive Agreement other than those disclosed in
Schedule 4.14 hereto, provided that none of such disclosed agreements shall be
amended without prior notice to and the consent of the Required Holders.
4.15. Conduct of Business.
The Company shall not, and shall not permit any Subsidiary to engage in any
business other than the business engaged in by it on the Closing Date and any
business or activities which are substantially similar, related or incidental
thereto.
4.16. Consolidated Net Worth.
The Company shall maintain a Consolidated Net Worth of at least
$43,200,000, as of the last day of each Fiscal Quarter. Commencing with the
Fiscal Quarter ending May 31, 2001, this test shall be increased by 50% of
Consolidated Net Income based upon the immediately preceding Fiscal Quarter
(without regard to any loss).
4.17. Consolidated EBITDA.
The Company shall achieve Consolidated EBITDA of at least the amount shown
below for the period corresponding thereto:
Period Amount
------ ------
February 29, 2000 through May 31, 2000 $(6,000,000)
February 29, 2000 through August 31, 2000 $ 6,400,000
February 29, 2000 through November 30, 2000 $ 9,200,000
February 29, 2000 through February 28, 2001 $ 9,600,000
Commencing on March 1, 2001, Borrower shall achieve Consolidated EBITDA of
at least the amount shown below for the period corresponding thereto, based upon
the immediately preceding four Fiscal Quarter period:
The four Fiscal Quarter Period ending May 31, 2001 $12,800,000
The four Fiscal Quarter Period ending August 31, 2001 $14,400,000
The four Fiscal Quarter Period ending November 30, 2001 $14,400,000
The four Fiscal Quarter Period ending February 28, 2002 $15,200,000
4.18. Fixed Charge Ratio.
21
Commencing March 1, 2002, the Company shall achieve a Consolidated Fixed
Charge Coverage Ratio of at least the ratios shown below for the periods
corresponding thereto:
Fiscal Quarter ended May 31, 2002 1.04 to 1.00
Each Fiscal Quarter ended thereafter 1.12 to 1.00
4.19. Senior Credit Facility Provisions.
To the extent that the provisions of the Senior Credit Agreement that
are analogous to Sections 4.16, Section 4.17 and/or Section 4.18 hereof
(including any amendment to the defined terms used therein or the manner of
calculating such covenants) are amended, waived or modified at any time while
any Notes are outstanding hereunder, Section 4.16, Section 4.17 and/or Section
4.18 hereof, as appropriate, shall be deemed to be so amended, waived or
modified upon delivery to all holders of Notes of a copy of the executed
agreement containing such amendment, waiver or modification, in the same manner
and for the same amount of time as with respect to the Senior Credit Agreement,
provided that, to the extent that an amendment or modification of such Senior
Credit Agreement provisions affects the dollar values or thresholds set forth
therein, the corresponding dollar values or thresholds contained in Section
4.16, Section 4.17 and/or Section 4.18 shall be deemed to be amended in a such
manner so as to retain a margin of 20% greater flexibility for the Company.
5. EVENTS OF DEFAULT
5.1. Events of Default.
An "Event of Default" exists at any time if any of the following occurs and
is continuing thereafter for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
law or otherwise):
(a) Payments on Notes. The Company fails to make any payment of
principal, interest or any other amount on any Note on or before the date
such payment is due; or
(b) Other Defaults.
(i) Negative Covenant Defaults - the Company or any Subsidiary
--------------------------
fails to comply with any provision of Section 3.1, Section 3.2,
Section 3.3, Section 3.14 or Section 4; or
(ii) Other Defaults - any Obligor fails to comply with any
--------------
other provision hereof or of any other Financing Document, and the
breach of such other provision is not cured to Agent's and the
Required Holders' satisfaction within 15 days after the sooner to
22
occur of any Senior Officer's receipt of notice of such breach from
Agent or the date on which such failure first becomes known to any
Senior Officer; provided, however, that such notice and opportunity
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to cure shall not apply in the case of any failure which is not
capable of being cured at all or is not capable of being cured
within such 15-day period or which is a willful and knowing failure
or breach by Company; or
(c) Warranties or Representations. Any warranty, representation or
other written statement by or on behalf of any Obligor contained in the
Securities Purchase Agreement or any other Financing Document, in any
written amendment, supplement, modification or waiver with respect to any
Financing Document or in any instrument furnished in compliance herewith or
in reference hereto, shall have been false or misleading in any material
respect when made; or
(d) Default in Respect of Other Debt. Any event shall occur or any
condition shall exist in respect of Debt for Money Borrowed, or under any
agreement securing or relating to such Debt for Money Borrowed, (i) as a
result of which the holders of such Debt for Money Borrowed, or an agent or
trustee therefor, has accelerated the maturity of such Debt for Money
Borrowed or otherwise demanded its immediate repayment or (ii) that permits
any one or more of the holders thereof or a trustee therefor to require the
Company or any Subsidiary to repurchase such Debt for Money Borrowed from
the holders thereof, and such holder or holders have required the Company
or any Subsidiary to do so, provided that the aggregate amount of all
obligations in respect of all such Debt for Money Borrowed exceeds at such
time $500,000; or
(e) Insolvency.
(i) Involuntary Bankruptcy Proceedings:
----------------------------------
(A) a receiver, liquidator, custodian or trustee of any
Obligor, or of all or any substantial part of the Property of
any of them, is appointed by court order; or an order for
relief is entered with respect any Obligor, or any Obligor is
adjudicated a bankrupt or insolvent;
(B) all or any substantial part of the Property of any
Obligor is sequestered by court order; or
(C) a petition is filed against any Obligor under any
bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, and is not
dismissed within thirty (30) days after such filing;
23
(ii) Voluntary Petitions. any Obligor files a petition in
-------------------
voluntary bankruptcy or seeks relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether
now or hereafter in effect, or consents to the filing of any
petition against it under any such law; or
(iii) Assignments for Benefit of Creditors, etc. any Obligor
-----------------------------------------
makes an assignment for the benefit of its creditors, or admits in
writing its inability, or fails, to pay its debts generally as they
become due, or consents to the appointment of a receiver, liquidator
or trustee of the any Obligor or of all or a substantial part of its
Property; or
(f) Undischarged Final Judgments. A final judgment or final,
judgments for the payment of money aggregating in excess of $500,000 is or
are outstanding against one or more of the Obligors and any one of such
judgments shall have been outstanding for more than 30 days from the date
of its entry and shall not have been discharged in full or stayed; or
(g) Financing Documents. Any Financing Document or the Supply
Agreement shall cease to be in full force and effect or shall be declared
by a court or other Governmental Authority of competent jurisdiction to be
void, voidable or unenforceable against any Obligor or any Affiliate; the
validity or enforceability of any Financing Document or the Supply
Agreement against any Obligor or any Affiliate shall be contested by any
Obligor or Affiliate; or any Obligor or Affiliate shall deny that any
Obligor has any further liability or obligation under any Financing
Document or any provision thereof; or
(h) Material Event of Default under Vendor's Supply Agreement. Any
"material event of default" as defined in any Supply Agreement (or any term
sheet with respect to any Supply Agreement that has not been superceded
thereby) shall exist provided, that subject to Section 5.1(i) hereof, such
material event of default under a Supply Agreement shall only constitute an
Event of Default with respect to the Notes held by the Vendor that is a
party to such Supply Agreement; or
(i) Acceleration under Other Supply Agreements. Any Vendor shall
have accelerated Notes held by it through the operation of Section
5.2(a)(iii); or
(j) Uninsured Losses. Any loss, theft, damage or destruction of any
of the Collateral not fully covered (subject to such deductibles as the
Required Holders shall have permitted) by insurance if the amount not
covered by insurance exceeds $1,000,000; or
24
(k) Material Adverse Effect. There shall occur any event or
condition that has a Material Adverse Effect; or
(l) Business Disruption; Condemnation. There shall occur a cessation
of a substantial part of the business of any Obligor (other than as a
result of a transaction permitted by Section 4.1 hereof) for a period which
may be reasonably expected to have a Material Adverse Effect; or any
Obligor shall suffer the loss or revocation of any license or permit now
held or hereafter acquired by such Obligor which is necessary to the
continued or lawful operation of its business; or any Obligor shall be
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its
business affairs; or any material lease or agreement pursuant to which any
Obligor leases or occupies any premises on which any Collateral is located
shall be canceled or terminated prior to the expiration of its stated term
and such cancellation or termination has a Material Adverse Effect; or any
material part of the Collateral shall be taken through condemnation or the
value of such Property shall be materially impaired through condemnation;
or
(m) ERISA. A Reportable Event shall occur which could reasonably be
expected to constitute grounds for the termination by the Pension Benefit
Guaranty Corporation of any Plan or for the appointment by the appropriate
United States district court of a trustee for any Plan, or if any Plan
shall be terminated or any such trustee shall be requested or appointed, or
if the Company, any Subsidiary or any Obligor is in "default" (as defined
in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer
Plan resulting from the Company's, such Subsidiary's or such Obligor's
complete or partial withdrawal from such Plan if such termination, trustee
appointment or default could reasonably be expected to result in a Material
Adverse Effect; or
(n) Challenge to Financing Documents. Any Obligor or any of its
Affiliates shall challenge or contest in any action, suit or proceeding the
validity or enforceability of any of the Financing Documents, the legality
or enforceability of any of the Obligations or the perfection or priority
of any Lien granted to Agent or any of the holders of Notes, or any of the
Financing Documents ceases to be in full force or effect for any reason
other than a full or partial waiver or release by Agent and the holders of
the Notes in accordance with the terms thereof; or
(o) Repudiation of or Default Under Subsidiary Guaranty. Any
Subsidiary Guarantor shall revoke or attempt to revoke the Subsidiary
Guaranty signed by such Subsidiary Guarantor, shall repudiate such
Subsidiary Guarantor's liability thereunder, or shall be in default under
the terms thereof, or shall fail to confirm in writing, promptly after
receipt of any holder of Notes' written request therefor,
25
such Subsidiary Guarantor's ongoing liability under the Subsidiary Guaranty
in accordance with the terms thereof; or
(p) Criminal Forfeiture. Any Obligor shall be convicted under any
criminal law that could lead to a forfeiture of any material Property of
such Obligor.
5.2. Default Remedies.
(a) Acceleration of Maturity of Notes.
(i) Acceleration on Event of Default.
--------------------------------
(A) Automatic. If any Event of Default specified in
Section 5.1(e) shall exist, all of the Notes at the time
outstanding shall automatically become immediately due and
payable together with interest accrued thereon, without
presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived.
(B) By Action of Holders. If any Event of Default (other
than an Event of Default specified in Section 5.1(e) or Section
5.1(h)) shall exist, the Required Holders may exercise any
right, power or remedy permitted to such holder or holders by
law, and shall have, in particular, without limiting the
generality of the foregoing, the right to declare, the entire
principal of, and all interest accrued on, all the Notes then
outstanding to be due and payable, and such Notes shall
thereupon become forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived, and the Company shall
forthwith pay to the holder or holders of all the Notes then
outstanding the entire principal of, and interest accrued on,
the Notes.
(ii) Acceleration on Payment Default. During the existence of
-------------------------------
an Event of Default described in Section 5.1(a), and irrespective of
whether the Notes then outstanding shall have become due and payable
pursuant to Section 5.2(a)(i)(B), any holder of Notes who or which
shall have not consented to any waiver with respect to such Event of
Default may, at his or its option, by notice in writing to the
Company, declare the Notes then held by such holder to be, and such
Notes shall thereupon become, forthwith due and payable together with
all interest accrued thereon, without any presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived, and the Company shall forthwith pay to such holder
the entire principal of and interest accrued on such Notes.
26
(iii) Acceleration upon Supply Agreement Material Event of
----------------------------------------------------
Default. With respect to any individual Vendor, during the existence
-------
of an Event of Default described in Section 5.1(h) with respect to
the Supply Agreement of such Vendor, and irrespective of whether the
Notes then outstanding shall have become due and payable pursuant to
Section 5.2(a)(i)(B), such Vendor may, at his or its option, by
notice in writing to the Company, declare the Notes then held by such
holder to be, and such Notes shall thereupon become, forthwith due
and payable together with all interest accrued thereon, without any
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, and the Company shall forthwith
pay to such Vendor the entire principal of and interest accrued on
such Notes.
(b) Other Remedies. During the existence of an Event of Default.
irrespective of whether the Notes then outstanding shall become due and
payable pursuant to Section 5.2(a),and irrespective of whether any holder
of Notes then outstanding shall otherwise have pursued or be pursuing any
other rights or remedies, any holder of Notes may proceed to protect and
enforce its rights hereunder and under such Notes by exercising such
remedies as are available to such holder in respect thereof under
applicable law, either by suit in equity or by action at law, or both,
whether for specific performance of any agreement contained herein or in
aid of the exercise of any power granted herein; provided, however, that
the maturity of such holder's Notes may be accelerated only in accordance
with Section 5.2(a).
(c) Nonwaiver; Remedies Cumulative. No course of dealing on the part
of any holder of Notes nor any delay or failure on the part of any holder
of Notes to exercise any right shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. All rights
and remedies of each holder of Notes hereunder and under applicable law are
cumulative to, and not exclusive of, any other rights or remedies any such
holder of Notes would otherwise have.
(d) Subordination. The rights of the holders of the Notes to receive
payments in respect of this Agreement and the Notes, and to exercise any
remedies, solely as between the holders of the Notes and the holders of the
Senior Debt, shall be subject in all respects to the provisions of the
Subordination Agreement; provided, however, that all such rights shall
remain unconditional and absolute as between the holders of the Notes and
the Company and the other Obligors.
5.3. Annulment of Acceleration of Notes.
If a declaration is made pursuant to Section 5.2(a)(i), then and in
every such case, the Required Holders may, by written instrument filed with the
27
Company, rescind and annul such declaration, and the consequences thereof;
provided, however, that at the time such declaration is annulled and rescinded:
(a) no judgment or decree shall have been entered for the payment of
any moneys due on or pursuant hereto or the Notes;
(b) all arrears of interest upon all of the Notes and all of the
other sums payable hereunder and under the Notes (except any principal of,
or interest on, the Notes which shall have become due and payable by reason
of such declaration under Section 5.2(a)(i)) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have been
waived pursuant to Section 7.5 or otherwise made good or cured;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
6. INTERPRETATION OF THIS AGREEMENT
6.1. Terms Defined.
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
Acceptable Credit Facility - means and includes:
(a) the Senior Credit Agreement, as in effect on the date hereof;
and
(b) the Senior Credit Agreement, as amended, modified supplemented,
renewed or extended after the date hereof; and each and every agreement or
document refinancing, renewing or refunding the Senior Credit Agreement, as
amended, modified supplemented, renewed or extended after the date; but, in
each case, only so long as:
(i) the aggregate principal amount of the Debt committed to
thereunder does not exceed at any time the Senior Debt Limit;
(ii) such loan or credit agreement does not expressly restrict
payments on the Subordinated Debt so as to create any default or event
of default in respect of such facility by virtue of no other fact
except the making by the Company of a payment required to be made in
respect of the Notes, and shall not restrict the payment of dividends
or distributions from the Subsidiaries to the Company in any manner
which would have such effect.
28
Acquisition - any transaction, or any series of related transactions, by
which the Company directly or indirectly (i) acquires any ongoing business or
all or substantially all of the assets of any Person, whether through the
purchase of assets, merger or otherwise, (ii) acquires (in one transaction or as
the most recent transaction in a series of transactions) control of at least a
majority of the Voting Securities of a corporation having ordinary Voting Power
for the election of directors, or (iii) acquires control of 50% or more of the
Equity Interests in any other Person.
Acquisition Subsidiary - a Subsidiary that is formed by the Company to
purchase assets or stock of a Person in connection with a Permitted Acquisition
or an existing Subsidiary that purchases assets or stock of another Person in
connection with a Permitted Acquisition.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, another Person; (ii) which beneficially owns or
holds 10% or more of any class of the Equity Interests of a Person; or (iii) 10%
or more of the Equity Interests with power to vote of which is beneficially
owned or held by another Person or a Subsidiary of another Person. For purposes
hereof, "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of any Equity Interest, by contract or otherwise.
Agent - means International Comfort Products Corporation (USA), as agent
pursuant to the Collateral Agency Agreement.
Agreement, this - and references thereto shall mean this Note Agreement as
it may from time to time be amended or supplemented.
Applicable Interest Law - means any present or future law which has
application to the interest and other charges pursuant to this Agreement and the
Notes; provided, however, that pursuant to Section 6.5, the parties have
selected the internal laws of the State of New York as the Applicable Interest
Law for purposes of this Agreement.
Applicable Law - all laws, rules and regulations applicable to the Person,
conduct, transaction, covenant, Financing Document or Material Contract in
question, including all applicable common law and equitable principles; all
provisions of all applicable state, federal and foreign constitutions, statutes,
rules, regulations and orders of governmental bodies; and all orders, judgments
and decrees of all courts and arbitrators.
Bankruptcy Code - title 11 of the United States Code, as amended and in
effect from time to time.
29
Business Day - means a day other than a Saturday, a Sunday or a day on
which banks in the State of New York are required or permitted by law (other
than a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
Capital Expenditures - expenditures made or liabilities incurred for the
acquisition of any fixed assets or improvements, replacements, substitutions or
additions thereto which have a useful life of more than one year, including the
total principal portion of Capitalized Lease Obligations.
Capitalized Interest Amount - Section 1.1(b).
Capitalized Lease Obligation - any Debt represented by obligations under a
lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP.
Cash Equivalents - (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government having maturities of not
more than 12 months from the date of acquisition; (ii) domestic certificates of
deposit and time deposits having maturities of not more than 12 months from the
date of acquisition, bankers' acceptances having maturities of not more than 12
months from the date of acquisition and overnight bank deposits, in each case
issued by any commercial bank organized under the laws of the United States, any
state thereof or the District of Columbia, which at the time of acquisition are
rated A-1 (or better) by S&P or P-1 (or better) by Xxxxx'x, and (unless issued
by a holder of Senior Debt) not subject to offset rights in favor of such bank
arising from any banking relationship with such bank; (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clauses (i) and (ii) entered into with any financial
institution meeting the qualifications specified in clause (ii) above; and (iv)
commercial paper having at the time of investment therein or a contractual
commitment to invest therein a rating of A-1 (or better) by S&P or P-1 (or
better) by Xxxxx'x, and having a maturity within 9 months after the date of
acquisition thereof.
CERCLA - the Comprehensive Environmental Response Compensation and
Liability Act, 42 U.S.C. (S) 9601 et seq. and its implementing regulations, as
amended and in effect from time to time.
Change in Control - means either (a) Xxxxxxxxxx Fund II, L.P. shall cease
to beneficially own (as determined under Rule 13d-3(a)(1) under the Exchange
Act) 20% of the common stock, par value $.01 per share, of the Company, or shall
at least cease to have pursuant to contractual rights, control of the Company,
(b) the transfer of all or substantially all of the Property of the Company as
an entirety in one or a series of transactions or (c) the acquisition by any
Person or group of Persons (other than Xxxxxxxxxx Fund II, L.P. or
30
Xxxxxxxxxx Fund II, L.P. and Quilvest American Equity, Ltd. as a group) of
control of a majority of the Voting Securities of the Company.
Change in Control Notice Event - means:
(a) the execution of any written agreement (including, without
limitation, any "letter of intent" or other similar agreement which
contemplates more complete documentation or agreement) which, when fully
performed by the parties thereto, would result in a Change in Control; or
(b) the making of any written offer by any person (as such term is used
in section 13(d) and section 14(d)(2) of the Exchange Act as in effect on
the Closing Date) or related persons constituting a group (as such term is
used in Rule 13d-5 under the Exchange Act as in effect on the Closing
Date), which offer, if accepted by the requisite number of such holders,
would result in a Change in Control.
Change in Control Payment Date - see Section 1.7.
Closing Date - means the date any Notes are first sold.
Collateral - all of the Property and interests in Property described in
Section 1 of the Company Security Agreement; all Property described in any other
security documents as security for the payment or performance of any of the
Obligations; and all other Property and interests in Property that now or
hereafter secure (or are intended to secure) the payment and performance of any
of the Obligations.
Collateral Agency Agreement - means that certain Collateral Agency
Agreement, dated as of even date herewith, by and among the Agent, the
Purchasers, the Company and the Guarantor pursuant to which the Purchasers
appoint the Agent with respect to certain matters relating to the Collateral, as
amended from time to time.
Common Stock - means the voting Class A Common Stock, par value $0.1 per
share, of the Company.
Company - see the introductory paragraph.
Company Security Agreement - the security agreement of even date herewith
between the Company and the Agent, as amended from time to time.
Compliance Certificate - a Compliance Certificate to be provided by the
Company in accordance with Section 3.3.
31
Consolidated - the consolidation in accordance with GAAP of the accounts or
other items as to which such term applies.
Consolidated Adjusted Net Earnings - with respect to any fiscal period,
means the net earnings (or loss) for such fiscal period of the Company and its
Subsidiaries, all as reflected on the financial statements of the Company and
its Subsidiaries supplied to Agent pursuant to Section 3.3 hereof, but
excluding: (i) any gain or loss arising from the sale of capital assets; (ii)
any gain or loss arising from any write-up or write-down of assets during such
period; (iii) earnings of any Subsidiary accrued prior to the date it became a
Subsidiary; (iv) earnings of any Person, substantially all the assets of which
have been acquired in any manner by the Company, realized by such Person prior
to the date of such acquisition; (v) net earnings of any entity (other than a
Subsidiary of the Company) in which the Company has an ownership interest
unless such net earnings have actually been received by the Company in the form
of cash Distributions; (vi) any portion of the net earnings of any Subsidiary
which for any reason is unavailable for payment of Distributions to the
Company; (vii) the earnings of any Person to which any assets of the Company
shall have been sold, transferred or disposed of, or into which the Company
shall have merged, or been a party to any consolidation or other form of
reorganization, prior to the date of such transaction; (viii) any gain arising
from the acquisition of any Securities of the Company; and (ix) any gain or
loss arising from extraordinary or non-recurring items, all as determined on a
Consolidated basis in accordance with GAAP.
Consolidated EBITDA - for any fiscal period of the Company, an amount equal
to the sum for such fiscal period of (i) Consolidated Adjusted Net Earnings,
plus (ii) provision for Taxes based on income, plus (iii) Consolidated Interest
Expense, plus (iv) depreciation, amortization and other non-cash charges of the
Company and its Subsidiaries on a Consolidated basis.
Consolidated Fixed Charge Coverage Ratio - with respect to any fiscal
period, the ratio of (i) Consolidated EBITDA minus cash income taxes paid and
Unfinanced Capital Expenditures made during such period, to (ii) Consolidated
Fixed Charges for such period.
Consolidated Fixed Charges - with respect to any fiscal period, the sum of
the Company's and its Subsidiaries' (a) Consolidated Interest Expense, plus (b)
the aggregate of all actual principal payments of Debt, plus (c) cash
Distributions permitted by the Agreement.
Consolidated Interest Expense - for any period, total interest expense
(including that portion attributable to capitalized leases in accordance with
GAAP and capitalized interest) of the Company and its Subsidiaries on a
Consolidated basis with respect to all outstanding Debts of the Company and its
Subsidiaries, including all commissions, discounts, and other fees and
32
charges owed with respect to letters of credit and bankers' acceptance financing
and net cost under Interest Rate Contracts.
Consolidated Net Income - net income of the Company and its Subsidiaries on
a Consolidated basis, as determined in accordance with GAAP.
Consolidated Net Worth - on any date of determination thereof, (i) the
Consolidated net worth of the Company and its Subsidiaries on such date after
deducting therefrom the amount of all intangible items reflected therein,
including all unamortized debt discount and expense, unamortized research and
development expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights, unamortized excess cost of
investment in Subsidiaries over equity at dates of acquisition and all similar
items that could properly be treated as intangibles in accordance with GAAP,
plus (ii) Subordinated Debt on such date, plus (iii) accrued but undeclared
Distributions to the extent not reflected on the balance sheet of Company and
its Subsidiaries in accordance with GAAP.
Contingent Obligation - with respect to any Person, any obligation of such
Person arising from any guaranty, indemnity or other assurance of payment or
performance of any Debt, lease, dividend or other obligation ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including (i) the direct or indirect guaranty,
endorsement (other than for collection or deposit in the Ordinary Course of
Business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of a primary obligor, (ii) the obligation to make take-
or-pay or similar payments, if required, regardless of nonperformance by any
other party or parties to an agreement, (iii) any obligation of such Person,
whether or not contingent, (A) to purchase any such primary obligation or any
Property constituting direct or indirect security therefor, (B) to advance or
supply funds (1) for the purchase or payment of any such primary obligations or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (C) to
purchase Property, Securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (D) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect thereof.
The amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation with respect to
which such Contingent Obligation is made (or, if less, the maximum amount of
such primary obligation for which such Person may be liable pursuant to the
terms of the instrument evidencing such Contingent Obligation) or, if not stated
or determinable, the maximum reasonably anticipated liability with respect
thereto (assuming such Person is required to perform thereunder), as determined
by such Person in good faith.
33
Current Assets - at any date, the amount at which all of the current assets
of a Person would be properly classified as current assets shown on a balance
sheet at such date in accordance with GAAP except that amounts due from
Affiliates and investments in Affiliates shall be excluded therefrom.
Debt - as applied to a Person means, without duplication: (i) all items
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet of such Person as of the date
as of which Debt is to be determined, including Capitalized Lease Obligations;
(ii) all Contingent Obligations of such Person; (iii) all reimbursement
obligations in connection with letters of credit or letter of credit guaranties
issued for the account of such Person; and (iv) in the case of the Company
(without duplication), the Obligations. The Debt of a Person shall include any
recourse Debt of any partnership or joint venture in which such Person is a
general partner or joint venturer.
Debt to EBITDA Ratio - means, as of the end of any Fiscal Quarter of the
Company, the ratio of the aggregate Debt for Money Borrowed of the Company and
its Subsidiaries as at such date to Consolidated EBITDA for the period of four
Fiscal Quarters ending on such date.
Debt Obligations - means, with respect to any Debt, all obligations,
liabilities and indebtedness, whether now or hereafter existing and whether
fixed or contingent, for principal, premium, interest (including interest
accruing after the filing of a petition under the Bankruptcy Code, to the extent
allowed), expenses and fees incurred by the Company in respect of such Debt.
Default - means any event which, with the giving of notice or the passage
of time, or both, would become an Event of Default.
Distribution - in respect of any entity, (i) any payment of any dividends
or other distributions on Equity Interests of the entity (except distributions
in such Equity Interests) and (ii) any purchase, redemption or other acquisition
or retirement for value of any Equity Interests of the entity or any Affiliate
of the entity unless made contemporaneously from the net proceeds of the sale of
Equity Interests.
DOL - means the United States Department of Labor and any successor agency.
Domestic Subsidiary - a Subsidiary of the Company that is incorporated
under the laws of a state of the United States or the District of Columbia.
Environmental Laws - all federal, state and local laws, rules, regulations,
codes, ordinances, programs, permits, guidance documents promulgated by
regulatory agencies, orders and consent decrees, now or
34
hereafter in effect and relating to human health and safety or the protection or
pollution of the environment, including CERCLA.
Environmental Release - a release as defined in CERCLA or under any
applicable Environmental Laws.
Equipment - all of the Company's machinery, apparatus, equipment, fittings,
furniture, fixtures, motor vehicles and other tangible personal Property (other
than Inventory) of every kind and description, whether now owned or hereafter
acquired by the Company and wherever located, and all parts, accessories and
special tools therefor, all accessions thereto, and all substitutions and
replacements thereof.
Equity Interest - the interest of (i) a shareholder in a corporation, (ii)
a partner (whether general or limited) in a partnership (whether general,
limited or limited liability), (iii) a member in a limited liability company, or
(iv) any other Person having any other form of equity security or ownership
interest.
ERISA - means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA Affiliate - means any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under section 414
of the IRC.
Event of Default - Section 5.1.
Exchange Act - means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations of the SEC thereunder.
Extraordinary Expenses - all costs, expenses, fees or advances that Agent
or any holder of Notes may suffer or incur, whether prior to or after the
occurrence of an Event of Default, and whether prior to, after or during the
pendency of an Insolvency Proceeding of any Obligor, on account of or in
connection with (i) the audit, inspection, repossession, storage, repair,
appraisal, insuring, completion of the manufacture of, preparing for sale,
advertising for sale, selling, collecting or otherwise preserving or realizing
upon any Collateral; (ii) the defense of Agent's Lien upon any Collateral or the
priority thereof or any adverse claim with respect to the Notes, the Financing
Documents or the Collateral asserted by any Obligor, any receiver or trustee for
any Obligor or any creditor or representative of creditors of any Obligor; (iii)
the settlement or satisfaction of any Liens upon any Collateral (whether or not
such Liens are Permitted Liens); (iv) the collection or enforcement of any of
the Obligations; (v) the negotiation, documentation, and closing of any
restructuring or forbearance agreement with respect to the Financing Documents
or Obligations; (vi) amounts advanced by Agent pursuant to the Company Security
Agreement; or (vii) the enforcement of any of
35
the provisions of any of the Financing Documents. Such costs, expenses and
advances may include transfer fees, taxes, storage fees, insurance costs, permit
fees, utility reservation and standby fees, legal fees, appraisal fees, brokers'
fees and commissions, auctioneers' fees and commissions, accountants' fees,
environmental study fees, wages and salaries paid to employees of the Company or
independent contractors in liquidating any Collateral, travel expenses, all
other fees and expenses payable or reimbursable by the Company or any other
Obligor under any of the Financing Documents, and all other fees and expenses
associated with the enforcement of rights or remedies under any of the Financing
Documents, but excluding compensation paid to employees (including inside legal
counsel who are employees) of Agent.
FEIN - with respect to any Person, the Federal Employer Identification
Number of such Person.
Financing Documents - means and includes this Agreement, the Securities
Purchase Agreement, the Notes, the Pledge Agreement, the Stock Pledge Letter,
the Trademark Security Agreements, the Warrant Agreement, the Warrant
certificates, the Registration Rights Agreement, the Company Security Agreement,
the Pledge Agreement, the Subsidiary Guarantor Security Documents, the
Subsidiary Guaranties, the Collateral Agency Agreement, the Subordination
Agreement and the other agreements, certificates and instruments to be executed
and/or delivered pursuant to the terms of each of the foregoing, as each may be
amended, restated or otherwise modified from time to time.
Fiscal Quarter - each consecutive period of three months beginning on the
first day of a Fiscal Year.
Fiscal Year - the fiscal year of the Company and its Subsidiaries for
accounting and tax purposes, which ends on the last day of February in each
year.
FLSA - the Fair Labor Standards Act of 1938, as amended and in effect from
time to time.
Foreign Pension Plan - means any plan, fund or other similar program:
(a) established or maintained outside of the United States of America
by the Company or any Subsidiary primarily for the benefit of the employees
(substantially all of whom are aliens not residing in the United States of
America) of the Company or such Subsidiary, which plan, fund or other
similar program provides for retirement income for such employees or
results in a deferral of income for such employees in contemplation of
retirement; and
(b) not otherwise subject to ERISA.
36
Foreign Subsidiary - a Subsidiary of the Company that is not incorporated
under the laws of a state of the United States or the District of Columbia.
GAAP - means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States of
America.
General Intangibles - all general intangibles of the Company, whether now
owned or hereafter created or acquired by the Company, including all choses in
action, causes of action, company or other business records, inventions,
blueprints, designs, patents, patent applications, trademarks, trademark
applications, trade names, trade secrets, service marks, goodwill, brand names,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, computer programs, operational manuals, all claims under guaranties,
security interests or other security held by or granted to the Company to secure
payment of any of any of the Company's Accounts by an Account Debtor, all rights
to indemnification and all other intangible property of the Company of every
kind and nature (other than Accounts).
Governmental Approvals - all authorizations, consents, approvals, licenses
and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
Governmental Authority - any federal, state, municipal, national, foreign
or other governmental department, commission, board, bureau, court, agency or
instrumentality or political subdivision thereof or any entity or officer
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government or any court, in each case whether
associated with a state of the United States, the District of Columbia or a
foreign entity or government.
Guarantor Security Documents - means (i) each security agreement that is
executed after the Closing Date by a direct or indirect Subsidiary of Borrower
in favor of Agent in connection with a Permitted Acquisition and by which such
Subsidiary shall grant a security interest in favor of Agent, for its benefit
and for the ratable benefit of Lenders, in all of such Subsidiary's Properties
as security for the payment of the Obligations and such Guarantor's Guaranty,
and (ii) all Lien Perfection Documents requested by Agent from any Guarantor.
Guarantors - Pameco Investment and each other Person who guarantees payment
or performance of the whole or any part of the Obligations.
37
Guaranty - means with respect to any Person (for the purposes of this
definition, the "Guarantor") any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "Primary Obligor") in any manner,
whether directly or indirectly, including, without limitation, obligations
incurred through an agreement, contingent or otherwise, by the Guarantor:
(a) to purchase such indebtedness or obligation or any Property
constituting security therefor;
(b) to advance or supply funds
(i) for the purchase or payment of such indebtedness, dividend or
obligation; or
(ii) to maintain working capital or other balance sheet condition or
any income statement condition of the Primary Obligor or otherwise to
advance or make available funds for the purchase or payment of such
indebtedness, dividend or obligation;
(c) to lease Property or to purchase securities or other Property or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of the Primary Obligor to make
payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of the indebtedness or obligation of
the Primary Obligor against loss in respect thereof.
For purposes of computing the amount of any Guaranty, in connection with any
computation of indebtedness or other liability:
(i) in each case where the obligation that is the subject of such
Guaranty is in the nature of indebtedness for money borrowed it shall
be assumed that the amount of the Guaranty is the amount of the direct
obligation then outstanding; and
(ii) in each case where the obligation that is the subject of such
Guaranty is not in the nature of indebtedness for money borrowed it
shall be assumed that the amount of the Guaranty is the amount (if
any) of the direct obligation that is then due.
Indemnified Party - Section 7.7.
Insolvency Proceeding - any action, case or proceeding commenced by or
against a Person, or any agreement of such Person, for (i) the entry of an
38
order for relief under any chapter of the Bankruptcy Code or other insolvency or
debt adjustment law (whether state, federal or foreign), (ii) the appointment of
a receiver, trustee, liquidator or other custodian for such Person or any part
of its Property, (iii) an assignment or trust mortgage for the benefit of
creditors of such Person, or (iv) the liquidation, dissolution or winding up of
the affairs of such Person.
Intellectual Property - Property constituting under any Applicable Law a
patent, patent application, copyright, trademark, service xxxx, tradename, mask
work, trade secret or license or other right to use any of the foregoing.
Intellectual Property Claim - the assertion by any Person of a claim
(whether asserted in writing, by action, suit or proceeding or otherwise) that
the Company's ownership, use, marketing, sale or distribution of any Inventory,
Equipment, Intellectual Property or other Property is violative of any ownership
or right to use any Intellectual Property of such Person.
Interest Payment Date- Section 1.1(b).
Interest Rate Contract - any interest rate agreement, interest rate collar
agreement, interest rate swap agreement, or other agreement or arrangement at
any time entered into by the Company with a bank or financial institution that
is designed to protect against fluctuations in interest rates.
Inventory - all of the Company's inventory, whether now owned or hereafter
acquired, including all goods intended for sale or lease by the Company, to be
furnished by the Company under contracts of service, or for display or
demonstration; all work in process; all raw materials and other materials and
supplies of every nature and description used or which might be used in
connection with the manufacture, printing, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or consumed in
the Company's business; and all Documents evidencing and General Intangibles
relating to any of the foregoing, whether now owned or hereafter acquired by the
Company.
IRC - means the Internal Revenue Code of 1986, together with all rules and
regulations promulgated pursuant thereto, as amended from time to time.
IRS - means the Internal Revenue Service of the United States of America,
and any successor agency charged with administering or enforcing the IRC.
Lien - any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on common law, statute or contract. The term "Lien" shall also include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purpose of the Agreement, the Company shall be
39
deemed to be the owner of any Property which it has acquired or holds subject to
a conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes. The interest of a Person who delivers goods to another Person (the
"consignee") under a consignment which is not a security interest, where the
goods are not the Property of the consignee, shall not be deemed to constitute a
"Lien" for purposes of this Agreement.
Lien Perfection Documents - all instruments, agreements, filings and
recordings necessary or, in Agent's reasonable determination, necessary or
desirable to perfect, maintain or continue the perfection of, or achieve or
maintain the perfected status of any Lien granted to Agent pursuant to any of
the Financing Documents by the Company or Subsidiary Guarantor, including all
UCC-1 financing statements, pledges, assignments, hypothecations, registrations
of pledge, notifications, bailment agreements, landlord or mortgagee waivers,
processor waivers, intercreditor agreements, subordination agreements, chattel
mortgage filings or similar instruments, agreements or documents.
Xxxxxxxxxx - Xxxxxxxxxx & Co., LLC.
March Interest Payment Date - means any Interest Payment Date occurring on
March of any year (but not any Interest Payment Date occurring in June,
September or December of any year).
Material Adverse Effect - the effect of any event or condition which, alone
or when taken together with other events or conditions occurring or existing
concurrently therewith, (i) has a material adverse effect upon the business,
operations, Properties or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole; (ii) has or may be reasonably expected to
have any material adverse effect whatsoever upon the validity or enforceability
of the Agreement or any of the other Financing Documents; (iii) has any material
adverse effect upon the value of the whole or any material part of the
Collateral, the Liens of Agent with respect to such Collateral or the priority
of any such Liens; (iv) materially impairs the ability of any other Obligor to
perform its obligations under the Agreement or any of the other Financing
Documents, including repayment of any of the Obligations when due; or (v)
materially impairs the ability of Agent or any holder of Notes to enforce or
collect the Obligations or realize upon any of the Collateral in accordance with
the Financing Documents and Applicable Law.
Material Contract - an agreement to which an Obligor is a party (other than
the Financing Documents) (i) which is deemed to be a material contract as
provided in Regulation S-K promulgated by the SEC under the Securities Act of
1933 or (ii) for which breach, termination, cancellation, nonperformance or
failure to renew would reasonably be expected to have a Material Adverse Effect.
40
Maximum Legal Rate of Interest - means the maximum rate of interest that a
holder of Notes may from time to time legally charge the Company by agreement
and in regard to which the Company would be prevented successfully from raising
the claim or defense of usury under the Applicable Interest Law as now or
hereafter construed by courts having appropriate jurisdiction.
Money Borrowed - as applied to any Person, (i) Debt arising from the
lending of money by any other Person to such Person; (ii) Debt, whether or not
in any such case arising from the lending of money by another Person to such
Person, (A) which is represented by notes payable or drafts accepted that
evidence extensions of credit, (B) which constitutes obligations evidenced by
bonds, debentures, notes or similar instruments, or (C) upon which interest
charges are customarily paid (other than accounts payable) or that was issued or
assumed as full or partial payment for Property; (iii) Debt that constitutes a
Capitalized Lease Obligation; (iv) reimbursement obligations with respect to
letters of credit or guaranties of letters of credit and (v) Debt of such Person
under any guaranty of obligations that would constitute Debt for Money Borrowed
under clauses (i) through (iv) hereof, if owed directly by such Person.
Xxxxx'x - Xxxxx'x Investors Services, a division of McGraw Hill, Inc.
Multiemployer Plan - means any "multiemployer plan" (as defined in section
3(37) of ERISA) in respect of which the Company or any ERISA Affiliate is an
"employer" (as such term is defined in section 3 of ERISA).
Notes - means and includes each PIK Note and each Warrant Note.
Obligations - in each case, whether now in existence or hereafter arising,
(i) the principal of, and interest and premium, if any, on, the Notes; (ii) all
other Debts, covenants, duties and obligations (including Contingent
Obligations) now or at any time or times hereafter owing by the Company to Agent
or any holder of Notes under or pursuant to this Agreement or any of the other
Financing Documents, whether evidenced by any note or other writing, whether
arising from any extension of credit, opening of a letter of credit, acceptance,
loan, guaranty, indemnification or otherwise, and whether direct or indirect,
absolute or contingent, due or to become due, primary or secondary, or joint or
several, including all interest, charges, expenses, fees or other sums
(including Extraordinary Expenses) chargeable to any or all Obligors hereunder
or under any of the other Financing Documents.
Obligor - the Company and each Subsidiary Guarantor, and any other Person
that is at any time liable for the payment of the whole or any part of the
Obligations or that has granted in favor of Agent or any other holder of Notes a
Lien upon any of any of such Person's assets to secure payment of any of the
Obligations.
41
Ordinary Course of Business - with respect to any transaction involving any
Person, the ordinary course of such Person's business, as conducted by such
Person and undertaken by such Person in good faith and not for the purpose of
evading any covenant or restriction in any Financing Document.
Organization Documents - with respect to any Person, its charter,
certificate or articles of incorporation, bylaws, articles of organization,
operating agreement, members agreement, partnership agreement, voting trust, or
similar agreement or instrument governing the formation or operation of such
Person.
OSHA - the Occupational Safety and Hazard Act of 1970, as amended and in
effect from time to time.
Pameco Investment - Pameco Investment Company, Inc., a Delaware
corporation.
Pameco Securities Purchase Agreement - means the Securities Purchase
Agreement dated as of January [15], 2000, by and among the Company, Xxxxxxxxxx
Fund II, LLP, and Quilvest American Equity, Ltd.
Payment Items - all checks, drafts, or other items of payment payable to
the Company, including proceeds of any of the Collateral.
Permitted Acquisition - any Acquisition by the Company (or by an
Acquisition Subsidiary) in which each of the following conditions is satisfied:
(i) the business to be acquired is related or substantially similar to the
business of the Company; (ii) immediately before and after giving effect to such
Acquisition, no Default or Event of Default shall exist or result therefrom;
(iii) such Acquisition is otherwise permitted under the Acceptable Credit
Facility in effect at such time; (iv) the Company's consummation of the
Acquisition shall be in compliance with all Applicable Law and the Company shall
have obtained all required Governmental Approvals; (v) any Acquisition
Subsidiary created in connection with or resulting from the Acquisition shall be
wholly-owned by the Company, and, if requested to do so by Agent, such
Subsidiary shall execute a Subsidiary Guaranty and Subsidiary Guarantor Security
Documents; and (vi) the entire purchase price of the Permitted Acquisition is
funded with the proceeds of the issuance of additional equity of the Company and
the aggregate purchase price of all such Permitted Acquisitions made after the
Closing Date does not exceed $35,000,000 or the Company shall have delivered to
the Note holders the Company's financial statements for the most recent Fiscal
Quarter ended and prior to making such Permitted Acquisition the Debt to EBITDA
Ratio was less than 4.5 to 1 at the end of such Fiscal Quarter.
Permitted Contingent Obligations - Contingent Obligations arising from
endorsements for collection or deposit in the Ordinary Course of Business;
Contingent Obligations arising from Interest Rate Contracts entered
42
into in the Ordinary Course of Business pursuant to this Agreement or with the
Required Holders' prior written consent; Contingent Obligations of the Company
and its Subsidiaries existing as of the Closing Date, including extensions and
renewals thereof that do not increase the amount of such Contingent Obligations
as of the date of such extension or renewal; Contingent Obligations incurred in
the Ordinary Course of Business with respect to surety bonds, appeal bonds,
performance bonds and other similar obligations; Contingent Obligations arising
under indemnity agreements to title insurers to cause such title insurers to
issue to Agent title insurance policies; and Contingent Obligations with respect
to customary indemnification obligations in favor of purchasers in connection
with dispositions of Equipment permitted under Section 4.9 of this Agreement.
Permitted Lien - a Lien of a kind specified in Section 4.5 of this
Agreement.
Permitted Merger Conditions - means, with respect to any proposed merger,
that (a) no Default or Event of Default shall exist before or after giving
effect to the merger; (b) the Company is the surviving entity in the merger; (c)
on a pro forma basis, based upon the balance sheets, as of the end of the most
recent Fiscal Quarter ended prior to the merger, of the Company and the entity
merging into the Company; (i) the Company's Consolidated Net Worth after giving
effect to the merger and the consideration paid by the Company in connection
with the merger are no less than the Company's Consolidated Net Worth prior to
giving effect to the merger, and (ii) the Company is in compliance with its
covenants in Section 4 after giving effect to the merger; (d) the Company shall
have provided to the Agent such lien searches and other evidence as may be
reasonably requested by the Agent in order to confirm that there are no liens of
record against any of the assets of the entity that is to be merged into the
Company and the Agent has a perfected security interest in all the assets of
such merged entity and the Company shall have executed any and all Lien
Perfection Documents as requested by the Agent; (e) the entity that is to be
merged into the Company is engaged in the same or a related or substantially
similar to the business as that engaged in by the Company; (f) such merger is
permitted by the Acceptable Credit Facility in effect at such time; (g) the
merger shall be in compliance with Applicable Law and the Company and the
Company shall have obtained all required Governmental Approvals and (h) any
Subsidiary of the entity to be merged into the Company shall execute a
Subsidiary Guaranty and Subsidiary Guarantor Security Documents.
Permitted Purchase Money Debt - Purchase Money Debt of the Company and its
Subsidiaries which is incurred after the date of this Agreement and which is
secured by no Lien or only by a Purchase Money Lien, provided that the aggregate
amount of Purchase Money Debt outstanding at any time does not exceed $5,000,000
and the incurrence of such Purchase
43
Money Debt does not violate any limitation in the Financing Documents regarding
Capital Expenditures. For the purposes of this definition, the principal amount
of any Purchase Money Debt consisting of capitalized leases shall be computed as
a Capitalized Lease Obligation.
Person - means an individual, partnership, corporation, limited liability
company, joint venture, trust, unincorporated organization, or a government or
agency or political subdivision thereof.
PIK Notes - means those certain 12% Senior Subordinated Notes due March 31,
2005, substantially in the form set forth as Attachment A1 hereto, as such notes
are amended or restated from time to time, and including any notes issued in
substitution therefor pursuant to this Agreement.
Plan - means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability
thereof.
Pledge Agreement - means the Stock Pledge Agreement of even date herewith
by and between the Company and the Agent, as amended from time to time.
Pro Forma Debt to EBITDA Ratio - means, with respect to any incurrence of
additional Debt, the ratio of (a) the sum of (i) the aggregate Debt of the
Company and its Subsidiaries as of the end of the most recent Fiscal Quarter of
the Company prior to the incurrence of such additional Debt, plus (ii) the
amount of such additional Debt to be incurred, to (b) Consolidated EBITDA for
the four Fiscal Quarters ended at the end of such Fiscal Quarter.
Projections - the Company's forecasted Consolidated (a) balance sheets, (b)
profit and loss statements, (c) cash flow statements, and (d) capitalization
statements, all prepared on a consistent basis with the Company's historical
financial statements, together with appropriate supporting details and a
statement of underlying assumptions.
Properly Contested - in the case of any Debt of an Obligor (including any
Taxes) that is not paid as and when due or payable by reason of such Obligor's
bona fide dispute concerning its liability to pay same or concerning the amount
thereof, (i) such Debt is being properly contested in good faith by appropriate
proceedings promptly instituted and diligently conducted; (ii) such Obligor has
established appropriate reserves as shall be required in conformity with GAAP;
(iii) the non-payment of such Debt will not have a Material Adverse Effect and
will not result in a forfeiture of any assets of such Obligor; (iv) no Lien is
imposed upon any of such Obligor's assets with respect to such Debt
44
unless such Lien is at all times junior and subordinate in priority to the Liens
in favor of Agent (except only with respect to property taxes that have priority
as a matter of applicable state law) and enforcement of such Lien is stayed
during the period prior to the final resolution or disposition of such dispute;
(v) if the Debt results from, or is determined by the entry, rendition or
issuance against an Obligor or any of its assets of a judgment, writ, order or
decree, enforcement of such judgment, writ, order or decree is stayed pending a
timely appeal or other judicial review; and (vi) if such contest is abandoned,
settled or determined adversely (in whole or in part) to such Obligor, such
Obligor forthwith pays such Debt and all penalties, interest and other amounts
due in connection therewith.
Property - means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
Purchase Money Debt - means and includes (i) Debt (other than the
Obligations) for the payment of all or any part of the purchase price of any
fixed assets, (ii) any Debt (other than the Obligations) incurred at the time of
or within 10 days prior to or after the acquisition of any fixed assets for the
purpose of financing all or any part of the purchase price thereof, and (iii)
any renewals, extensions or refinancings (but not any increases in the principal
amounts) thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase Money
Debt, but only if such Lien shall at all times be confined solely to the fixed
assets acquired through the incurrence of the Purchase Money Debt secured by
such Lien and such Lien constitutes a purchase money security interest under the
UCC.
Purchasers - see the introductory paragraph.
Refinancing Conditions - the following conditions, each of which must be
satisfied before Refinancing Debt shall be permitted under Section 4.3 of this
Agreement: (i) the Refinancing Debt is in an aggregate principal amount that
does not exceed the aggregate principal amount of the Debt being extended,
renewed or refinanced plus any accrued interest, and reasonable fees or expenses
relating thereto, (ii) the Refinancing Debt has a later or equal final maturity
and a longer or equal weighted average life than the Debt being extended,
renewed or refinanced, (iii) the Refinancing Debt does not bear a rate of
interest that exceeds a market rate (as determined in good faith by a Senior
Officer) as of the date of such extension, renewal or refinancing, (iv) if the
Debt being extended, renewed or refinanced is subordinate to the Obligations,
the Refinancing Debt is subordinated to the same extent, (v) the covenants
contained in any instrument or agreement relating to the Refinancing Debt are no
less favorable to the Company than those relating to the Debt being extended,
renewed or refinanced, and (vi) at the time of and after giving effect
45
to such extension, renewal or refinancing, no Default or Event of Default shall
exist.
Refinancing Debt - Debt for Money Borrowed that is permitted by Section 4.3
and that is the subject or the result of an extension, renewal or refinancing.
Registration Rights Agreement - means, the Registration Rights Agreement,
of even date herewith, by and among the Company, Xxxxxxxxxx Xxxx XX, X.X.,
Xxxxxxxx Xxxxxxx Equity, Ltd. and International Comfort Products Corporation
(USA).
Related Transaction Documents - means, collectively, the Pameco Securities
Purchase Agreement, of even date herewith, by and among the Company, Xxxxxxxxxx
Fund II, L.P., and Quilvest America Equity, Ltd.; the Shareholders Agreement;
the several Voting Agreements by and among the Company, Xxxxxxxxxx Fund II, L.P.
and the shareholders named therein; and the Registration Rights Agreement.
Release - has the meaning set forth in the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. 39601 et seq.
Reportable Event - the occurrence, with respect to any Plan, of any of the
events set forth in Section 4043(b) of ERISA provided that the requirement to
report such event has not been waived by the Pension Benefit Guaranty
Corporation or pursuant to regulations issued by the Pension Benefit Guaranty
Corporation.
Required Holders - means, at any time, the holders of fifty-one percent
(51%) in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by any one or more of the Company, any Subsidiary or any
Affiliate).
Restricted Investment - any acquisition of Property by the Company or any
of its Subsidiaries in exchange for cash or other Property, whether in the form
of an acquisition of Equity Interests or Debt, or the purchase or acquisition by
the Company or any Subsidiary of any other Property, or a loan, advance, capital
contribution or subscription, except acquisitions of the following: (i) fixed
assets to be used in the Ordinary Course of Business of the Company or any
Subsidiary so long as the acquisition costs thereof constitute Capital
Expenditures permitted hereunder; (ii) goods held for sale or lease or to be
used in the manufacture of goods or the provision of services by the Company or
any Subsidiary in the Ordinary Course of Business; (iii) Current Assets arising
from the sale or lease of goods or the rendition of services in the Ordinary
Course of Business of the Company or any Subsidiary; (iv) investments in
Subsidiaries to the extent existing on the Closing Date; and (v) Cash
Equivalents to the extent they are not subject to rights of offset in
46
favor of any Person other than the holder of Senior Debt; (vi) loans and other
advances of money to the extent not prohibited by Section 4.2; and (vii)
Permitted Acquisitions.
Restrictive Agreement - an agreement (other than any of the Financing
Documents) that, if and for so long as an Obligor or any Subsidiary of such
Obligor is a party thereto, would prohibit, condition or restrict such Obligor's
or Subsidiary's right to incur or repay Debt for Money Borrowed (including any
of the Obligations); grant Liens upon any of such Obligor's or Subsidiary's
assets (including Liens granted in favor of Agent or the Required Holders
pursuant to the Financing Documents); declare or make Distributions; amend,
modify, extend or renew any agreement evidencing Debt for Money Borrowed
(including any of the Financing Documents); or repay any Debt owed to any
Obligor.
S&P - Standard & Poor's Corporation.
SEC - means, at any time, the Securities and Exchange Commission or any
other federal agency at such time administering the Securities Act.
Securities Act - means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
Securities Purchase Agreement - means, collectively, each of the several
substantially identical Securities Purchase Agreements, of even date herewith,
between the Company and each of the Purchasers, relating to the offering and
sale of the Notes and the Warrants.
Security - means "security" as defined by section 2(1) of the Securities
Act.
Senior Credit Agreement - means the Loan and Security Agreement dated
February 18, 2000 between the Company, Fleet Capital Corporation, as Agent,
FleetBoston Xxxxxxxxx Xxxxxxxx Inc., as Arranger and the financial institutions
party thereto.
Senior Debt - means all Debt Obligations arising under an Acceptable Credit
Facility; provided, however, that if the aggregate principal amount of all such
Debt Obligations shall exceed the Senior Debt Limit, such excess shall not
constitute Senior Debt for purposes of this Agreement.
Senior Debt Limit - shall have the meaning assigned to it in the
Subordination Agreement.
Senior Officer - means any one of the chief executive officer, the chief
financial officer, and the president of the Company.
47
Shareholders Agreement - the Shareholders Agreement, of even date herewith,
by and among the Company, Xxxxxxxxxx Xxxx XX, X.X., Xxxxxxxx Xxxxxxx Equity,
Ltd. and Willem X.X. xxXxxxx.
Stock Pledge Letter - means the letter of even date herewith by and among
the Company, Fleet Capital Corporation and the Agent in respect of the pledge of
the capital stock of the Company's Subsidiaries, as amended from time to time.
Subsidiary - any Person in which more than 50% of its outstanding Voting
Securities or more than 50% of all Equity Interests is owned directly or
indirectly by the Company, by one or more other Subsidiaries of the Company or
by the Company and one or more other Subsidiaries.
Subsidiary Guaranty - Section 3.14.
Subsidiary Guarantors - Pameco Investment and each other Person who
guarantees payment or performance of the whole or any part of the Obligations.
Subsidiary Guarantor Security Documents - (i) each security agreement that
may be duly executed by a Subsidiary Guarantor in favor of Agent, in form and
content acceptable to the Agent, in connection with the consummation of the
transactions contemplated by this Agreement or in connection with a Permitted
Acquisition and by which such Subsidiary Guarantor shall grant a security
interest in favor of Agent, for its benefit and for the ratable benefit of all
holders of Notes from time to time, in all of such Subsidiary Guarantor's
properties as security for the Obligations and such Subsidiary Guarantor's
Subsidiary Guaranty and (ii) all Lien Perfection Documents requested by Agent.
Subordinated Debt - Debt of the Company that is fully and absolutely
subordinated in right of payment to Senior Debt.
Subordination Agreement - means, collectively, the Lien Subordination
Agreement dated as of February 18, 2000, between the Agent and Fleet Capital
Corporation, in its capacity as collateral and administrative agent, and the
Debt Subordination Agreement dated as of February 18, 2000, among the Company,
the Purchasers and Fleet Capital Corporation, in its capacity as collateral and
administrative agent, as each such agreement is amended from time to time.
Supply Agreement - means any of the individual supply agreements, or any of
the term sheets with respect thereto, between the Company and any Vendor and/or
any of its subsidiaries and/or affiliates entered into on or around the date
hereof, providing for the provision of goods or services by such Vendor and/or
any of its subsidiaries and/or affiliates to the Company, as each such agreement
is amended and in effect from time to time.
48
Taxes - means any present or future taxes, levies, imposts, duties, fees,
assessments, deductions, withholdings or other charges of whatever nature,
including income, receipts, excise, property, sales, use, transfer, license,
payroll, withholding, social security and franchise taxes now or hereafter
imposed or levied by the United States or any other Governmental Authority and
all interest, penalties, additions to tax and similar liabilities with respect
thereto, but excluding, in the case of each holder of Notes, taxes imposed on or
measured by the net income or overall gross receipts of such holder of Notes.
Trademark Security Agreements - means, collectively, each of the Trademark
Security Agreements of even date herewith between the Agent and each of the
Company and its Significant Subsidiaries, as amended from time to time.
Unfinanced Capital Expenditures - for any Person, Capital Expenditures of
such Person that have not been financed by Debt for Money Borrowed of such
Person.
Upstream Payment - a payment or Distribution of cash or other Property by a
Subsidiary to the Company, whether in repayment of Debt owed by such Subsidiary
to the Company, to pay dividends on account of the Company's ownership of Equity
Interests or otherwise.
Value - with reference to the value of Inventory, value determined on the
basis of the lower of cost or market of such Inventory, with the cost thereof
calculated on a first-in, first-out basis determined in accordance with GAAP.
Vendor - means any of Xxxxxxx, ICP, Xxxxxxx or XxXxxx, and their respective
subsidiaries and affiliates.
Voting Power - with respect to any Person, the power ordinarily (without
the occurrence of a contingency) to elect the members of the Board of Directors
(or persons performing similar functions) of such Person.
Voting Securities - Equity Interests of any class or classes of a
corporation or other entity the holders of which are ordinarily, in the absence
of contingencies, entitled to elect a majority of the corporate directors or
Persons performing similar functions.
Warrant - means each warrant to purchase Common Stock issued pursuant to
the Securities Purchase Agreement and the Warrant Agreement.
Warrant Agreement - means the Warrant Agreement, of even date herewith,
between the Company and one or more of the Purchasers pursuant to which the
Warrants are issued from time to time.
49
Warrant Interest Amount - means, with respect to any Warrant Note on any
March Interest Payment Date, the difference of:
(a) the aggregate amount of interest accrued in respect of such
Warrant Note pursuant to Section 1.1(a) from and including the later of
the date of such Note and the next previous March Interest Payment Date on
which interest in respect of the Notes pursuant to Section 1.1(c)(ii) was
actually paid by the issuance of Warrants to the then-current March
Interest Payment Date; minus
(b) the aggregate amount of interest required to have been paid in
cash pursuant to Section 1.1(c)(i) from and including the later of the
date of such Note and the next previous March Interest Payment Date on
which interest in respect of the Notes pursuant to Section 1.1(c)(ii) was
actually paid by the issuance of Warrants to the then-current March
Interest Payment Date.
Warrant Interest Number - means, on any March Interest Payment Date on any
Warrant Note, a number of Warrants equal to the quotient of:
(a) the Warrant Interest Amount: divided by
(b) $9.14634 per Warrant.
In the event that any adjustment is made to the Purchase Price (as such
term is defined in the Warrant Agreement) or the number of shares of Common
Stock issuable upon exercise of one Warrant pursuant to Section 4 of the Warrant
Agreement or by written agreement of the parties thereto, no adjustment shall be
made to the price per Warrant set forth in clause (b) of this definition, but
each Warrant issued pursuant to Section 1.1(c)(ii) shall have such Purchase
Price as adjusted and shall be exercisable into such adjusted number of shares
of Common Stock.
Warrant Interest Termination Event - means and includes any and all of the
following:
(a) a Change in Control;
(b) any consolidation of the Company with, or merger of the Company
with or into, another Person (other than a merger in which the Company is
the surviving corporation and that does not result in any reclassification
or change of shares of Common Stock outstanding immediately prior to such
merger or a merger or consolidation in which the state of incorporation of
the Company changes and does not result in any reclassification or change
in the terms and conditions applicable to the then outstanding capital
stock of the Company, other than those arising from the applicability of
the laws of another jurisdiction);
50
(c) the sale, lease, conveyance, exchange or other transfer of all or
substantially all of the Property of the Company;
(d) any reclassification of the Common Stock that results in the
issuance of other Securities of the Company (other than a reclassification
of the Class B Common Stock, par value $.01 per share, of the Company, into
Common Stock); or
(e) the occurrence of any event by virtue of which the Common Stock
either ceases to exist as a class or ceases to be registered under section
12 of the Exchange Act.
Warrant Notes - means those certain 12% Senior Subordinated Notes due March
31, 2005, substantially in the form set forth as Attachment A2 hereto, as such
notes are amended or restated from time to time, and including any notes issued
in substitution therefor pursuant to this Agreement.
Warrant Purchase Amount - means, with respect to a sale of Notes by a Note
holder pursuant to Section 2.2(c) hereof who has Warrant Notes, the sum of the
product of (a) the number of shares of Common Stock that the selling Note holder
has Warrants to purchase, multiplied by (b) the result of (i) the Market Price
(as defined in the Warrant Agreement) per share of such Common Stock minus (ii)
-----
the Purchase Price per share of such Common Stock under the Warrants held by
such selling Note holder (each of the capitalized terms used in this definition
that are not otherwise defined in this Agreement having the meanings ascribed to
them in the Warrant Agreement between the selling Note holder and the Company.
For the purposes of this definition, the selling Note holder will be deemed to
own, in addition to any Warrants previously issued to such Note holder,
additional Warrants to purchase a number of shares of Common Stock equal to the
product of (x) the number of shares for which such Note holder would be entitled
to receive Warrants on the next date that Warrant Certificates are to be issued
to such Note holder under Section 1.1(c) hereof (such number to be determined as
if the principal amount of the Notes held by such Note holder remained the same
between the date of sale and the date of such issuance of additional Warrants),
multiplied by (y) a fraction, the numerator of which is the number of days
between the later of the Closing Date and the most recent March Interest Payment
Date, and the denominator of which is 365.
6.2. Accounting Principles.
(a) Generally. Unless otherwise provided herein, all financial
statements delivered in connection herewith will be prepared in accordance
with GAAP. Where the character or amount of any asset or liability or item
of income or expense, or any consolidation or other accounting computation
is required to be made for any purpose
51
hereunder, it shall be done in accordance with GAAP; provided, however,
that if any term defined herein includes or excludes amounts, items or
concepts that would not be included in or excluded from such term if such
term were defined with reference solely to GAAP, such term will be deemed
to include or exclude such amounts, items or concepts as set forth herein.
(b) Consolidation. Whenever accounting amounts of a group of Persons
are to be determined "on a consolidated basis" it shall mean that, as to
balance sheet amounts to be determined as of a specific time, the amount
that would appear on a consolidated balance sheet of such Persons prepared
as of such time, and as to income statement amounts to be determined for a
specific period, the amount that would appear on a consolidated income
statement of such Persons prepared in respect of such period, in each case
with all transactions among such Persons eliminated, and prepared in
accordance with GAAP except as otherwise required hereby.
(c) Currency. With respect to any determination, consolidation or
accounting computation required hereby, any amounts not denominated in the
currency in which this Agreement specifies shall be converted to such
currency in accordance with the requirements of GAAP (as such requirements
relate to such determination, consolidation or computation) and, if no such
requirements shall exist, converted to such currency in accordance with
normal banking procedures, at the closing rate as reported in The Wall
Street Journal published most recently as of the date of such
determination, consolidation or computation or, if no such quotation shall
then be available, as quoted on such date by any bank or trust company
reasonably acceptable to the Required Holders.
6.3. Directly or Indirectly.
Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
including actions taken by or on behalf of any partnership in which such Person
is a general partner.
6.4. Section Headings and Table of Contents and Construction.
(a) Section Headings and Table of Contents, etc. The titles of the
Sections of this Agreement and the Table of Contents of this Agreement
appear as a matter of convenience only, do not constitute a part hereof and
shall not affect the construction hereof. The words "herein," "hereof,"
"hereunder" and "hereto" refer to this Agreement as a whole and not to any
particular Section or other subdivision. References to Sections are, unless
otherwise specified, references to Sections of this
52
Agreement. References to Annexes and Exhibits are, unless otherwise
specified, references to Annexes and Exhibits attached to this Agreement.
(b) Construction. Each covenant contained herein shall be construed
(absent an express contrary provision herein) as being independent of each
other covenant contained herein, and compliance with any one covenant shall
not (absent such an express contrary provision) be deemed to excuse
compliance with one or more other covenants.
6.5. Governing Law.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. IN
ADDITION, THE PARTIES HERETO SELECT, TO THE EXTENT THEY MAY LAWFULLY DO SO, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT LIMITATION, THE
PROVISIONS OF SECTIONS 5-501(6) AND SECTION 5-521 OF THE GENERAL OBLIGATIONS
LAW) AS THE APPLICABLE INTEREST LAW.
6.6. General Interest Provisions.
(a) Interest in Respect of the Notes. The Purchasers and the Company
agree that the provisions of section 5-501(6) and section 5-521 of the
General Obligations Law of the State of New York apply to the transactions
contemplated by the Financing Documents. Notwithstanding the foregoing, it
is the intention of the Company and the Purchasers to conform strictly to
the Applicable Interest Law, and the parties agree that the aggregate of
all interest, and any other charges or consideration constituting interest
under the Applicable Interest Law that is taken, reserved, contracted for,
charged or received pursuant to this Agreement or the Notes shall under no
circumstances exceed the maximum amount of interest allowed by the
Applicable Interest Law. Thus, if any such excess interest is ever charged,
received or collected on account of or relating to this Agreement and the
Notes (including any charge or amount which is not denominated as
"interest" but is legally deemed to be interest under Applicable Interest
Law) for any reason, then in such event:
(i) the provisions of this Section 6.6 shall govern and control;
(ii) the Company shall not be obligated to pay the amount of such
interest to the extent that it is in excess of the maximum amount of
interest allowed by the Applicable Interest Law;
53
(iii) any excess shall be deemed a mistake and cancelled
automatically and, if theretofore paid, shall be credited to the
principal amount of the Notes by the holders thereof, and if the
principal balance of the Notes is paid in full, any remaining excess
shall be forthwith paid to the Company; and
(iv) the effective rate of interest shall be automatically
subject to reduction to the Maximum Legal Rate of Interest.
If at any time thereafter, the Maximum Legal Rate of Interest is
increased, then, to the extent that it shall be permissible under the
Applicable Interest Law, the Company shall forthwith pay to the holders of
the Notes, on a pro rata basis, all amounts of such excess interest that
the holders of the Notes would have been entitled to receive pursuant to
the terms of this Agreement and the Notes had such increased Maximum Legal
Rate of Interest been in effect at all times when such excess interest
accrued. To the extent permitted by the Applicable Interest Law, all sums
paid or agreed to be paid to the holders of the Notes for the use,
forbearance or detention of the indebtedness evidenced thereby shall be
amortized, prorated, allocated and spread throughout the full term of the
Notes.
(b) Effect of Issuance of Notes Together with Warrants. The Company
and the Purchasers agree, to the extent permitted by the Applicable
Interest Law, that, for purposes of computing the interest in respect of
the Notes under the Applicable Interest Law:
(i) the aggregate purchase price of the Notes shall equal the
difference of:
(A) the initial aggregate principal amount of the Notes;
minus
(B) the amount of original issue discount attributable to the
Notes in respect of the issuance of the Warrants together with
the Notes, as set forth in section 1.3 of the Securities Purchase
Agreement;
(ii) the amount of original issue discount attributable to the
Notes in respect of the issuance of the Warrants, as set forth in
section 1.3 of the Securities Purchase Agreement, shall be deemed to
be the purchase price of the Warrants;
(iii) the Warrants and the Notes shall be deemed to have been
separately issued for the respective purchase prices set forth above;
and
54
(iv) no portion of the return, if any, to the holders of the
Warrants in respect of their investment therein shall be deemed to be
interest in respect of the Notes.
7. MISCELLANEOUS
7.1. Communications.
(a) Method; Address. All communications hereunder or under the Notes
shall be in writing and shall be delivered either by nationwide overnight
courier or by facsimile transmission (confirmed by delivery by nationwide
overnight courier sent on the day of the sending of such facsimile
transmission). Communications to the Company shall be addressed as set
forth on Annex 2, or at such other address of which the Company shall have
notified each holder of Notes. Communications to the holders of the Notes
shall be addressed as set forth on Annex 1 by such holder, or at such other
address of which such holder shall have notified the Company (and the
Company shall record such address in the register for the registration and
transfer of Notes maintained pursuant to Section 2.1).
(b) When Given. Any communication addressed and delivered as herein
provided shall be deemed to be received when actually delivered to the
address of the addressee (whether or not delivery is accepted) or received
by the telecopy machine of the recipient. Any communication not so
addressed and delivered shall be ineffective.
(c) Service of Process. Notwithstanding the foregoing provisions of
this Section 7.1, service of process in any suit, action or proceeding
arising out of or relating to this agreement or any document, agreement or
transaction contemplated hereby, or any action or proceeding to execute or
otherwise enforce any judgment in respect of any breach hereunder or under
any document or agreement contemplated hereby, shall be delivered in the
manner provided in Section 7.9(c).
7.2. Reproduction of Documents.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by the Purchasers at the closing of the sale of the Notes
(except the Notes themselves), and financial statements, certificates and other
information previously or hereafter furnished to any holder of Notes, may be
reproduced by the Company or any holder of Notes by any photographic,
photostatic, microfilm, micro-card, miniature photographic, digital or other
similar process and each holder of Notes may destroy any original document so
reproduced. Any such reproduction shall be admissible in evidence as the
55
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by the
Company or such holder of Notes in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. Nothing in this Section 7.2 shall prohibit
the Company or any holder of Notes from contesting the accuracy or validity of
any such reproduction.
7.3. Survival; Entire Agreement.
All warranties, representations, certifications and covenants contained
herein, in the Securities Purchase Agreement or in any certificate or other
instrument delivered hereunder shall be considered to have been relied upon by
the other parties hereto and shall survive the delivery of the Notes regardless
of any investigation made by or on behalf of any party hereto. All statements
in any certificate or other instrument delivered pursuant to the terms hereof or
of the Securities Purchase Agreement shall constitute warranties and
representations hereunder. All obligations hereunder (other than payment of the
Notes, but including, without limitation, reimbursement obligations in respect
of costs, expenses and fees) shall survive the payment of the Notes and the
termination hereof. Subject to the preceding sentence, this Agreement, the
Notes and the other Financing Documents embody the entire agreement and
understanding among the Company and the Purchasers, and supersede all prior
agreements and understandings, relating to the subject matter hereof.
7.4. Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of Notes, and
shall be enforceable by any such holder whether or not an express assignment to
such holder shall have been made by any Purchaser or its successor or assign.
Anything contained in this Section 7.4 notwithstanding, (i) the Company may not
assign any of its respective rights, duties or obligations hereunder or under
any of the other Financing Documents without the prior written consent of all
holders of Notes and (ii) no holder of the Notes may assign any of its
respective rights, debts or obligations hereunder or under any of the other
Financing Documents except as provided in Section 2.2.
7.5. Amendment and Waiver.
(a) Requirements. This Agreement may be amended, and the observance
of any term hereof may be waived, with (and only with) the written consent
of the Company and the Required Holders; provided, however, that no such
amendment or waiver shall, without the written consent of the holders of
all Notes (exclusive of Notes held by the Company, any Subsidiary or any
Affiliate) at the time outstanding;
56
(i) change the amount or time of any prepayment or payment of
principal or the rate or time of payment of interest;
(ii) amend or waive the provisions of Section 5.1(a), Section
5.2, or Section 5.3, or amend or waive any defined term to the extent
used therein;
(iii) amend or waive the definition of "Required Holders;" or
(iv) amend or waive this Section 7.5 or amend or waive any
defined term to the extent used herein.
Notwithstanding the foregoing, the waiver of any Default or Event of
Default under Section 5.1(h) may be waived individually by such Purchaser
and only by such Purchaser in respect of its Note affected thereby.
(b) Solicitation of Noteholders.
(i) Solicitation. Each holder of the Notes (irrespective of the
amount of Notes then owned by it) shall be provided by the Company
with all material information provided by the Company to any other
holder of Notes with respect to any proposed waiver or amendment of
any of the provisions hereof or the Notes. Executed or true and
correct copies of any amendment or waiver effected pursuant to the
provisions of this Section 7.5 shall be delivered by the Company to
each holder of outstanding Notes forthwith following the date on
which such amendment or waiver becomes effective.
(ii) Payment. The Company shall not, nor shall any Subsidiary or
Affiliate, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest,
fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any
holder of Notes of any waiver or amendment of any of the provisions
hereof or of the Notes unless such remuneration is concurrently paid,
or security is concurrently granted, on the same terms, ratably to
the holders of all Notes then outstanding.
(iii) Scope of Consent. Any amendment or waiver made pursuant to
this Section 7.5 by a holder of Notes that has transferred or has
agreed to transfer its Notes to the Company, any Subsidiary or any
Affiliate and has provided or has agreed to provide such amendment or
waiver as a condition to such transfer shall be void and of no force
and effect except solely as to such holder, and any amendments
effected or waivers granted that would
57
not have been or would not be so effected or granted but for such
amendment or waiver (and the amendments or waivers of all other
holders of Notes that were acquired under the same or similar
conditions) shall be void and of no force and effect, retroactive to
the date such amendment or waiver initially took or takes effect,
except solely as to such holder.
(c) Binding Effect. Except as provided in Section 7.5(b)(iii), any
amendment or waiver consented to as provided in this Section 7.5 shall
apply equally to all holders of Notes and shall be binding upon them and
upon each future holder of any Note and upon the Company whether or not
such Note shall have been marked to indicate such amendment or waiver. No
such amendment or waiver shall extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or
waived or impair any consequent thereon.
7.6. Expenses.
(a) Amendments and Waivers. The Company shall pay when billed the
reasonable costs and expenses (including reasonable attorneys' fees)
incurred by the holders of the Notes in connection with the consideration,
negotiation, preparation or execution of any amendments, waivers, consents,
standstill agreements and other similar agreements with respect to this
Agreement or any other Financing Document (whether or not any such
amendments, waivers, consents, standstill agreements or other similar
agreements are executed).
(b) Restructuring and Workout, Inspections. At any time when the
Company and the holders of Notes are conducting restructuring or workout
negotiations in respect hereof, or a Default or Event of Default exists,
the Company shall pay when billed the reasonable costs and expenses
(including reasonable attorneys' fees and the fees of professional
advisors) incurred by the holders of the Notes in connection with the
assessment, analysis or enforcement of any rights or remedies that are or
may be available to the holders of Notes, including, without limitation, in
connection with inspections made pursuant to Section 3.1; provided,
however, that at all times during which no restructuring or workout
negotiations are continuing and no Default or Event of Default exists,
inspections in excess of a single annual inspection undertaken by one or
more of the holders of Notes for the benefit of all of such holders will be
at the expense of the inspecting holder of Notes.
(c) Collection. If the Company shall fail to pay when due any
principal of, or interest on, any Note, the Company shall pay to each
holder of Notes, to the extent permitted by law, such amounts as shall be
sufficient to cover the reasonable costs and expenses, including but not
58
limited to reasonable attorneys' fees, incurred by such holder in
collecting any sums due on such Note.
7.7. Indemnification of Each Holder of Notes.
From and at all times after the date of this Agreement, and in addition to
all other rights and remedies of each holder of Notes against the Company, the
Company agrees to indemnify and hold harmless each holder of Notes and each
director, trustee, officer, employee, agent, investment advisor and affiliate of
each such holder (each, an "Indemnified Party") against any and all claims
(whether valid or not), losses, damages, liabilities, costs and expenses of any
kind or nature whatsoever (including, without limitation, reasonable attorneys'
fees, costs and expenses), incurred by or asserted against any Indemnified
Party, from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating to any
suit, action or proceeding (including any inquiry or investigation) by any
Person, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any Person under any statute or regulation, including,
but not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or enforcement of this
Agreement, the Notes or the other Financing Documents or any transactions
contemplated herein or therein, or any of the transactions contemplated
hereunder or thereunder, whether or not such Indemnified Party is a party to any
such action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have the right
to be indemnified hereunder for any liability resulting from the willful
misconduct or gross negligence of such Indemnified Party or breach by such
Indemnified Party of its own obligations under this Agreement. All of the
foregoing losses, damages, costs and expenses of any Indemnified Party shall be
payable as and when incurred upon demand by such Indemnified Party and shall be
additional obligations hereunder. The rights of the Indemnified Parties under
this Section 7.7 shall survive the termination of this Agreement.
7.8. Confidentiality.
Each holder of any Note agrees to use commercially reasonable efforts to
maintain and to cause its officers, employees and agents to maintain procedures
appropriate to maintain the confidentiality of Confidential Information. Each
such Note holder shall not disclose such Confidential Information to any party,
or in any manner use any such Confidential Information, except as reasonably
necessary in connection with monitoring and administering such holder's
relationship with the Company pursuant to the Note and this Agreement and other
Financing Documents, and shall ensure that the Confidential Information is not
disclosed to any Person except for those employees, officers or agents,
including without limitation, employees, officers or agents of any subsidiary or
affiliate or any holder of any Note, with
59
specific responsibility for monitoring and administering such relationship,
provided that nothing herein shall limit the disclosure of any such Confidential
--------
Information (a) after such Confidential Information shall have become public
other than through a violation of this Section 7.8, (b) to the extent required
by statute, rule, regulation or judicial process, (c) to counsel for any of the
holders of the Notes or the Agent, (d) in connection with any litigation to
which any one or more of the holders of the Notes or the Agent is a party, or in
connection with the enforcement of rights or remedies hereunder or under any
other Financing Document or (e) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant agrees to be
bound by the provisions of this Section 7.8. As used herein, "Confidential
Information" means information that is furnished to either Agent or any Note by
the Company or any of its Subsidiaries or Affiliates in connection with the
Notes or this Agreement or any of the transactions contemplated thereby pursuant
to Section 3.1 (other than any such Confidential Information that may also be
provided pursuant to a different Section of this Agreement), or that is
otherwise identified in writing by the Company as being confidential at the time
the same is delivered to the holder of any Note, but does not include any such
information that is or becomes generally available to the public or to the
holders of the Notes (other than as a result of a breach by Agent or any Note
holder of its confidentiality obligations hereunder or otherwise).
7.9. Waiver of Jury Trial; Consent to Jurisdiction; Etc.
(a) Waiver of Jury Trial. THE PARTIES HERETO VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED
HEREBY.
(b) Consent to Jurisdiction. ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE DOCUMENTS, AGREEMENTS
OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACTION OR PROCEEDING TO EXECUTE
OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH UNDER THIS
AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT
BY SUCH PARTY IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW
YORK, OR ANY NEW YORK STATE COURT LOCATED IN NEW YORK CITY, NEW YORK AS
SUCH PARTY MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF
EACH SUCH COURT, AND EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES AND
AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF
MOTION,
60
AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE
IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY BROUGHT IN
ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(c) Service of Process. EACH PARTY HERETO IRREVOCABLY AGREES THAT
PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED MAIL AT THE
ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE, TO THE EXTENT
PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT,
AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY, OR ANY ACTION OR PROCEEDING
TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH
HEREUNDER OR UNDER ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY. RECEIPT
OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A
DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY
COMMERCIAL DELIVERY SERVICE.
(d) Other Forums. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
THE ABILITY OF ANY HOLDER OF NOTES TO SERVE ANY WRITS, PROCESS OR SUMMONSES
IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER
THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH OTHER MANNER, AS MAY BE
PERMITTED BY APPLICABLE LAW.
7.10. Execution in Counterpart.
This Agreement may be executed in one or more counterparts and shall be
effective when at least one counterpart shall have been executed by each party
hereto, and each set of counterparts that, collectively, show execution by each
party hereto shall constitute one duplicate original.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
61
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered by one of its duly authorized
officers or representatives.
PAMECO CORPORATION
By: /s/ Xxxxxxx Xxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxx
Title: Vice President
INTERNATIONAL COMFORT PRODUCTS
CORPORATION (USA)
By: /s/ Xxxxxxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxxxxxx X. Xxxxxx
Title: Assistant Secretary
E.I. DU PONT DE NEMOURS AND COMPANY
By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
--------------------------------
Name: Xxxxxx X. Xxxxxxxx, Xx.
Title: Vice President & General Manager
DuPont Flouroproducts
XXXXXXX INDUSTRIES, INC.
By: /s/ Xxxx XxXxx
--------------------------------
Name: Xxxx XxXxx
Title: Vice President & CFO
XXXXXXX ELECTRIC CO.
By: /s/ X. X. Xxx, Xx.
--------------------------------
Name: X. X. Xxx, Xx.
Title: Sr. Vice President--Acquisitions &
Development
