EXHIBIT 4.1
EXECUTION COPY
SENIOR SUBORDINATED NOTE
THIS NOTE IS SUBJECT TO A SUBORDINATION AGREEMENT DATED AS OF JULY 25,
2000 AMONG ALLOU HEALTH & BEAUTY CARE, INC., ALLOU DISTRIBUTORS, INC.,
THE OTHER BORROWERS NAMED THEREIN, FLEET CAPITAL CORPORATION, AS AGENT,
AND THE NOTEHOLDERS NAMED THEREIN, WHICH, AMONG OTHER THINGS,
SUBORDINATES THE BORROWERS' OBLIGATIONS HEREUNDER TO THE BORROWERS'
OBLIGATIONS TO CERTAIN HOLDERS OF SENIOR DEBT, AS MORE FULLY DESCRIBED
IN SAID SUBORDINATION AGREEMENT.
$11,470,588.00
July 25, 2000
Brentwood, New York
FOR VALUE RECEIVED, the undersigned, ALLOU HEALTH & BEAUTY CARE, INC.,
a Delaware corporation (the "Company"), ALLOU DISTRIBUTORS, INC., a New York
corporation ( "Distributors") (the Company, Distributors and the other Borrowers
signatories hereto are hereinafter referred to as a "Borrower" and collectively
as the "Borrowers") and the other Borrowers, HEREBY, JOINTLY AND SEVERALLY,
PROMISE TO PAY to the order of RFE INVESTMENT PARTNERS VI, L.P. (the
"Noteholder"), the principal sum of ELEVEN MILLION FOUR HUNDRED SEVENTY
THOUSAND, FIVE HUNDRED EIGHTY EIGHT and 00/100 DOLLARS ($11,470,588.00),
together with interest on the unpaid principal amount in the manner and upon the
terms and conditions set forth below.
This Note is one of the Notes referred to and is subject and entitled
to certain terms and conditions, covenants and agreements (including without
limitation those relating to the right of the noteholder to accelerate payment
of this Note) set forth in the Senior Subordinated Note and Warrant Purchase
Agreement dated as of July 25, 2000 (as the same may be amended, modified or
supplemented from time to time, the "Note Purchase Agreement") by and among the
Borrowers and the Purchasers named therein. Capitalized terms used herein and
not otherwise defined shall have the meanings set forth in the Note Purchase
Agreement. Reference herein to the Note Purchase Agreement shall in no way
impair the negotiability hereof or the absolute and unconditional obligation of
the Borrowers to pay both principal of and interest on this Note as provided
herein.
Interest shall accrue on the outstanding principal balance hereof at a
rate equal to twelve percent (12%) per annum on the basis of a 360 day year,
payable quarterly, in arrears, on the 25th day of January, April, July and
October in each year (or, if such day is not a Business Day, on the next
succeeding Business Day) and on the Maturity Date (as hereinafter defined),
commencing on October 25, 2000 (the "Quarterly Interest Payments"). Interest for
the period commencing with the date of this Note through October 25, 2000 shall
be payable on October 25, 2000. If an Event of Default has occurred and is
continuing, from and after the date such Event of Default has occurred the
entire outstanding principal balance of the Notes and any unpaid interest
thereon shall bear interest, payable on demand, at the rate of fourteen and
one-half percent (14.5%) per annum or such lower rate as then may be the maximum
rate permitted by applicable law. The interest rate hereunder is also subject to
increase pursuant to Sections 2.1.2, 2.1.3 and 2.1.4 of the Note Purchase
Agreement.
The Borrowers may elect, in their sole discretion, to accrue payment of
up to two (2) Quarterly Interest Payments prior to the Maturity Date (the
"Accrued Interest Payments"). Interest on the Accrued Interest Payments shall
bear compounded interest payable quarterly in arrears at a rate equal to twelve
(12%) percent per annum, subject to increase as set forth in the preceding
paragraph and in the Note Purchase Agreement.
The Borrowers may also elect, in their sole discretion during any
Postponement Periods (as defined in the Subordination Agreement), to pay up to
an aggregate of four (4) Quarterly Interest Payments in kind on an interest
payment date by the timely issuance and delivery to the Noteholder of whole
shares (collectively, the "PIK Stock") of Class A Common Stock, par value $.001
per share, of the Company (the "Class A Common Stock"), in the total amount
equal to the amount of each such Quarterly Interest Payment divided by the
lesser of (i) the book value per share of Class A Common Stock, computed based
upon the most recently filed audited financial statements of the Company filed
with the SEC prior to the applicable interest payment date and (ii) the average
of the Market Price (as defined below) for the twenty consecutive trading days
ending on the second trading day immediately preceding the applicable interest
payment date. Notwithstanding the foregoing, the Company shall not be entitled
to deliver shares of Class A Common Stock in lieu of a Quarterly Interest
Payment hereunder unless: (1) the Noteholder shall have concluded in its sole
discretion that a premerger notification filing is not required under the HSR
Act as a result of such issuance, (2) the Company shall have complied with all
applicable federal and state securities laws in connection with such issuance,
(3) the Class A Common Stock is then listed on a national securities exchange or
designated as a national market system security by NASD and the shares of PIK
Stock shall have been listed for trading on such national securities exchange or
shall have been so designated, (4) such shares shall be duly authorized, validly
issued, fully paid and nonassessable and the Company shall have delivered to the
Noteholders an opinion of counsel reasonably satisfactory to the Noteholder to
such effect and (5) unless the holders of greater than fifty percent (50%) in
principal amount of all Notes then outstanding (the "Required Interest")
otherwise consent in writing, an Event of Default shall not have occurred and be
continuing. No fractional shares shall be issued hereunder, and any fractional
amounts shall be rounded up (not down) to the next whole share amount. For
purposes hereof, "Market Price" means on any date specified herein, the amount
per share of Class A Common Stock equal to (a) the last sale price of Class A
Common Stock, regular way, on such date or, if no such sale takes place on such
date, the average of the closing bid and asked prices thereof on such date, in
each case as officially reported on the principal national securities
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exchange on which Class A Common Stock is then listed or admitted to trading, or
(b) if Class A Common Stock is not then listed or admitted to trading on any
national securities exchange but is designated as a national market system
security by the NASD, the last trading price of Common Stock on such date.
Notwithstanding any other provision of this Note, but subject to the
terms and conditions of the Subordination Agreement first referred to above, the
entire balance of principal and any then accrued and unpaid interest shall be
paid in full on July 25, 2005 (the "Maturity Date").
The Borrowers shall have the right, at any time, to voluntarily prepay
all or any part of the outstanding principal amount of this Note, subject to the
provisions of the Note Purchase Agreement.
Each of the Borrowers and any endorser or guarantor (collectively, the
"Obligors") hereof and each of them, hereby (i) waive(s) presentment, diligence,
demand, notice, protest, notice of demand, notice of acceptance or reliance,
notice of non-payment, notice of dishonor, notice of protest and all other
notices to parties in connection with the delivery, acceptance, performance,
default or enforcement of this Note, or any endorsement or guaranty of this
Note, (ii) consent(s) to any and all delays, extensions, renewals or other
modifications of this Note, any related document or the debt(s) evidenced hereby
or thereby, or any other failure to act by the Noteholder or any other
forebearance or indulgence shown by the Noteholder, from time to time and in one
or more instances (without notice to or assent from any of the Obligors) and
agree(s) that none of the foregoing shall release, discharge or otherwise impair
any of the liabilities; (iii) agree(s) that the full or partial release or
discharge of any Obligor(s) shall not release, discharge or otherwise impair the
liabilities of any Obligor(s); and (iv) otherwise waive(s) any other defenses
based upon suretyship or impairment of collateral.
All obligations of any and all Borrowers hereunder and under the Note
Purchase Agreement are joint and several, whether or not expressly so stated.
The Borrowers shall pay all costs and expenses, including without
limitation all reasonable attorneys' fees and disbursements and all court costs,
incurred by the Noteholder in defending, preserving and/or enforcing (including,
without limitation, collecting any amounts owed by any of the Borrowers) its
rights or remedies under this Note or the Note Purchase Agreement, and whether
or not incurred in any bankruptcy or insolvency case or proceeding or in any
workout.
All payments shall be made without any deduction whatsoever, including
deduction for set-off, recoupment or counterclaim (provided, that nothing
contained in this sentence shall be interpreted or construed to limit the
provisions of this Note with respect to Accrued Interest Payments or, to the
extent permitted hereby, the delivery of Class A Common Stock in payment in kind
for certain interest payments). All payments hereunder shall first be applied to
costs and
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expenses which the Borrowers are obligated to pay, then to accrued but unpaid
interest and then to unpaid principal.
No delay or omission on the part of the Noteholder in exercising any
right or remedy hereunder shall operate as a waiver of such right or remedy or
of any other right or remedy under this Note, and a waiver, delay or omission on
any one occasion shall not be construed as a bar to or waiver of any such right
or remedy on any future occasion.
THE BORROWERS ACKNOWLEDGE THAT THE TRANSACTION OF WHICH THIS NOTE IS A
PART IS A COMMERCIAL TRANSACTION. THE BORROWERS HEREBY KNOWINGLY AND VOLUNTARILY
WAIVE TRIAL BY JURY AND THE RIGHT THERETO IN ANY ACTION OR PROCEEDING OF ANY
KIND, ARISING UNDER OR OUT OF, OR OTHERWISE RELATED TO OR OTHERWISE CONNECTED
WITH, THIS NOTE, THE NOTE PURCHASE AGREEMENT AND/OR ANY RELATED DOCUMENT OR THE
DEALINGS OR THE RELATIONSHIP BETWEEN THE BORROWERS AND THE NOTEHOLDER AND
FURTHERMORE AGREE NOT TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE BORROWERS FURTHER
ACKNOWLEDGE THAT THEY HAVE HAD AN OPPORTUNITY TO REVIEW THIS NOTE AND THE OTHER
FINANCING DOCUMENTS PERTAINING TO THE NOTE PURCHASE AGREEMENT WITH THEIR COUNSEL
AND THAT THEY ON THEIR OWN HAVE MADE THE DETERMINATION TO EXECUTE THIS NOTE AND
ALL OTHER FINANCING DOCUMENTS PERTAINING TO THE NOTE PURCHASE AGREEMENT TO WHICH
THEY ARE PARTIES AFTER CONSIDERATION OF ALL OF THE TERMS OF THIS NOTE AND SUCH
OTHER DOCUMENTS (INCLUDING THE INTEREST RATE) AND ALL OTHER FACTORS WHICH THEY
CONSIDER RELEVANT.
This Note shall bind the Borrowers and the Borrowers' successors and
permitted assigns and shall inure to the benefit of the Noteholder and the
Noteholder's representatives, successors and assigns. The term "Noteholders" as
used herein shall include, in addition to the initial payee, any successors,
endorsees or other assignees of such Noteholder and shall include any other
holder of this Note.
This Note shall be deemed to be under seal, and all rights and
obligations hereunder shall be governed by the laws of the State of New York
(without giving effect to any conflicts of law provisions contained therein).
No delay or omission by the Noteholder in exercising any right or
remedy hereunder shall operate as a waiver of such right or remedy or any other
right or remedy; and a waiver on one occasion shall not be a bar to or waiver of
any right or remedy on any other occasion. All rights and remedies of the
Noteholder hereunder, any other applicable document and under applicable law
shall be cumulative and not in the alternative. No provision of this Note may be
waived or modified orally but only by a writing (a) signed by the party against
whom enforcement of such
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amendment, waiver or other modification is sought or (b) consented to in writing
by the Required Interest; provided however, that no such consent shall be
effective to reduce or to postpone the date fixed for the payment of the
principal (including any required redemption) or interest payable hereon without
the consent of the holder, or to alter or amend the consent mechanism provided
for herein. All notices, requests, consents and demands shall be made in writing
and shall be mailed first class postage prepaid, or delivered by hand or
messenger to the Borrowers or to the Noteholder hereof at their respective
addresses, as provided for in the Note Purchase Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, each of the Borrowers has executed and delivered
this Note as of the day and year first written above.
ALLOU HEALTH & BEAUTY CARE, INC.
By:_______________________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
ALLOU DISTRIBUTORS, INC.
By:_______________________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
ALLOU PERSONAL CARE CORPORATION
By:______________________________________
Name: Xxxxx Xxxxxxxxxxx
Title: Chief Financial Officer
X. XXXXX, INC.
By:______________________________________
Name: Xxxxx Xxxxxxxxxxx
Title: Chief Financial Officer
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SUPERBUY OF NEW YORK, INC.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
RONA BEAUTY SUPPLIES, INC.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
HEMPSTEAD HEALTH & BEAUTY AIDS, INC.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
PASTEL COSMETIC AND BEAUTY AIDS, INC.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
HBA NATIONAL SALES CORP.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
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HBA DISTRIBUTORS, INC.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
TRANS WORLD GROCERS, INC.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
DOMINO PAPER COMPANY, INC.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
XXXX XXXXXX PERSONAL CARE CORP.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
STANFORD PERSONAL CARE
MANUFACTURING, INC.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
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COSMETICS PLUS TWO, INC.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: President and Chief Financial Officer
DIRECT FRAGRANCES, INC.
By:_______________________________
Name: Xxxxx Xxxxxxxxxxx
Title: Chief Financial Officer
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