-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E701f1tc6vQE+/moTQAZ5bDC7Zmm244Su/7VOAJsO/cTVz7WvhxmaubIXpNnK+lK g6+O4Tg/WWe3ONGH2BgTsw== 0000891554-01-502236.txt : 20010427 0000891554-01-502236.hdr.sgml : 20010427 ACCESSION NUMBER: 0000891554-01-502236 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20010126 FILED AS OF DATE: 20010426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUGHES SUPPLY INC CENTRAL INDEX KEY: 0000049029 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRICAL APPARATUS & EQUIPMENT, WIRING SUPPLIES [5063] IRS NUMBER: 590559446 STATE OF INCORPORATION: FL FISCAL YEAR END: 0125 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-08772 FILM NUMBER: 1611029 BUSINESS ADDRESS: STREET 1: 20 N ORANGE AVE, STE 200 STREET 2: P O BOX 2273 CITY: ORLANDO STATE: FL ZIP: 32802-2273 BUSINESS PHONE: 4078414755 10-K 1 d25505_form10k.txt ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 26, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________to_________________ Commission File No. 001-08772 HUGHES SUPPLY, INC. (Exact name of registrant as specified in its charter) Florida 59-0559446 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 20 North Orange Avenue, Suite 200, Orlando, Florida 32801 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (407) 841-4755 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Common Stock ($1.00 Par Value) New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Page 1 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the Registrant's voting stock held by non-affiliates: $336,001,765 as of April 20, 2001. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: 23,466,441 shares of Common Stock ($1.00 par value) as of April 20, 2001. DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated: Part I - Annual Report to Shareholders for the fiscal year ended January 26, 2001 (designated portions). Part II - Annual Report to Shareholders for the fiscal year ended January 26, 2001 (designated portions). Part III - Definitive Proxy Statement for the 2001 Annual Meeting of Shareholders (designated portions). Part IV - Annual Report to Shareholders for the fiscal year ended January 26, 2001 (designated portions). Page 2 TABLE OF CONTENTS Page PART I Item 1. Business ........................................................ 4 Item 2. Properties ...................................................... 14 Item 3. Legal Proceedings ............................................... 14 Item 4. Submission of Matters to a Vote of Security Holders.............. 14 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters ............................................ 15 Item 6. Selected Financial Data ........................................ 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................ 15 Item 7A. Quantitative and Qualitative Disclosures About Market Risk...... 15 Item 8. Financial Statements and Supplementary Data .................... 16 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ........................... 16 PART III Item 10. Directors and Executive Officers of the Registrant............. 17 Item 11. Executive Compensation ........................................ 17 Item 12. Security Ownership of Certain Beneficial Owners and Management .................................................... 17 Item 13. Certain Relationships and Related Transactions ................ 17 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ...................................................... 18 Signatures .................................................... 24 Index of Exhibits Filed with this Report ...................... 25 Page 3 PART I ITEM 1. BUSINESS GENERAL Hughes Supply, Inc. (as used throughout this report, "Hughes Supply," the "Company" or the "Registrant" refers to Hughes Supply, Inc. and its subsidiaries, except where the context otherwise requires) is one of the largest diversified wholesale distributors of construction and industrial materials, equipment and supplies to commercial construction, residential construction, industrial and public infrastructure markets in North America. The Company, founded in 1928, distributes over 240,000 products, built around five broad product categories, through 447 branches and eight central distribution centers located in 34 states and Mexico. The Company's principal customers are electrical, plumbing, mechanical, fire protection and underground utility contractors, electric utility customers, property management and property development companies, municipalities and government agencies, industrial companies and telecommunication companies. Industrial companies include companies in the petrochemical, food and beverage, pulp and paper, mining, pharmaceutical and marine industries. Effective February 1, 2000, the Company's operations were reorganized into five stand-alone strategic business units ("SBUs"), each of which is led by a group president and includes a staff dedicated to the unit. A SBU is organized around each of the following five broad product categories: o Electrical & Electric Utility o Plumbing & HVAC o Industrial Pipe, Valves & Fittings ("Industrial PVF") o Building Materials & Maintenance Supplies o Water & Sewer The SBUs represent the Company's reportable segments and constitute the basis management uses for making operating decisions and assessing performance. This product-driven organizational structure is designed to enhance the Company's competitive position in the marketplace by intensifying the Company's focus on satisfying customer needs, strengthening vendor relationships and streamlining the decision-making processes of the Company. Financial information about the Company's SBUs is set forth in Note 10 of the Notes to Consolidated Financial Statements of the Company's Annual Report to Shareholders for the fiscal year ended January 26, 2001, a copy of which is filed as an exhibit to this Report and the cited portion of which is incorporated herein by reference. The Company focuses on distributing construction and industrial products that leverage its strengths in inventory management, specialized sales forces by product group, distribution and logistics, credit management and information technology. The Company has increasingly focused on value-added products and services, including integrated supply arrangements, fabrication, facilities management and the development of national accounts. The Company employs a specialized and experienced sales force for each of its SBUs to best serve its customers. Management believes that no other company competes against Hughes Supply across all of its product groups. Page 4 The Company's SBUs are impacted by seasonality. Generally, sales of the Company's products are higher in the second and third quarters of each year due to more favorable weather conditions during these periods. DIVESTITURE In January 2001, the Company completed the sale of the assets of its pool and spa business. The pool and spa business engaged in the wholesale distribution of swimming pool and spa equipment and supplies and was principally included in the Building Materials & Maintenance Supplies SBU. The Company's decision to divest its pool and spa business was based on the seasonality of its sales along with the limited size of its marketplace. Additional information with respect to the sale of the Company's pool and spa business is set forth in Note 2 of the Notes to Consolidated Financial Statements of the Company's Annual Report to Shareholders for the fiscal year ended January 26, 2001, a copy of which is filed as an exhibit to this Report and the cited portion of which is incorporated herein by reference. The Company continues to evaluate other non-core businesses and their strategic fit with the Company's long-term goals. E-COMMERCE Hughes Supply's e-commerce strategy focuses upon: (i) expanding net sales through greater customer reach, extended hours (i.e., 24/7/365) and broader product offerings; and (ii) lowering costs through streamlined selling, general and administrative costs, improved inventory management and lower product procurement costs. In addition, e-commerce solutions in the wholesale distribution business are ideally suited to national account programs and integrated supply chain management, two important growth areas for the Company. The Company's current e-commerce strategy includes the development of its web site, hughessupply.com. This web site, when fully operational, will enable the Company's customers to order products directly via electronic commerce, as well as allow the Company to place direct electronic orders with vendors for the majority of its products. Fulfillment will be done from the existing branch network. The overall reduction in paper flow is expected to reduce procurement costs. This site is currently being developed by the Company's Information Technology ("IT") department. As a result of continued operating losses in two of the Company's e-commerce ventures, the Company recorded a write-off of goodwill and other assets during the fourth quarter of fiscal 2001. Additional information with respect to these write-offs is set forth in Notes 2 and 3 of the Notes to Consolidated Financial Statements of the Company's Annual Report to Shareholders for the fiscal year ended January 26, 2001, a copy of which is filed as an exhibit to this Report and the cited portions of which are incorporated herein by reference. INDUSTRY OVERVIEW Based on estimates available to the Company, industry sales in the United States of products sold by the Company exceeded $200 billion in 2000, and no wholesale distributor of these products accounted for more than 5% of the total market. Page 5 Many local and regional distributors are privately-owned, relationship-based companies. Such distributors often have limited purchasing power, lack sufficient resources to offer broad product lines and multiple brands, and lack the sophisticated inventory management and control systems necessary to operate multiple branches efficiently. As a result, such distributors target their services to a particular type or size of customer and/or a particular product group. To counter the limitations experienced by small distributors, certain wholesale distributors, including the Company, have grown considerably through acquisitions. This expansion has enabled Hughes Supply to service various sizes and types of customers with multiple product groups and to diversify its sales across various types of construction and users of its products. Because of Hughes Supply's strong competitive position, its size and its management infrastructure, management believes that the Company is well positioned to continue to benefit from consolidation trends within the wholesale distribution business. Unlike do-it-yourself home center retailers, the Company does not market its products to retail consumers. Consequently, the Company differentiates itself with respect to its customer base, breadth of products offered and level of service provided. Management believes that the Company's customers are typically professionals who choose their suppliers primarily on the basis of product availability, price, relationships with sales personnel, and the quality and scope of services offered by such suppliers. Furthermore, professional customers generally buy in large volumes, are repeat buyers because of their involvement in longer-term projects, and require specialized services not typically provided by do-it-yourself home center retailers. The Company provides its customers with credit services, design assistance, material specifications, scheduled job site delivery, job site visits to ensure satisfaction, technical product services (including blueprint take-off and computerized order quotes), and assistance with product returns. Accordingly, the Company has been able to serve customer groups that do-it-yourself home center retailers generally do not emphasize. OPERATING STRATEGY The Company's operating strategy is based on decentralizing, at the branch level, customer-related functions such as sales and local inventory management. The administrative responsibilities for certain functions such as credit, human resources, finance and accounting, legal and information technology are centralized at the corporate level. Effective February 1, 2000, all operating branches were assigned to one of the Company's SBUs, each of which is led by a group president. Under the new structure, the Company's branches are grouped into territories, territories into districts, and districts into SBUs. Some of the larger districts are grouped into regions. Territory managers generally have oversight responsibility for branches within a territory as well as direct responsibility for a specific branch within the territory. District managers have two or more territory managers who report to them and regional managers have two or more district managers who report to them. Prior to February 1, 2000, the Company was organized into regions which were mixtures of geographic and product group categories. This organizational structure also differed from the current structure in that district and territory managers reported to the Company's regional vice presidents who, in turn, reported to the Company's president. Management believes its current structure provides improved support for the Company's expected future growth through acquisitions, creates increased customer focus and vendor recognition by product category and improves and accelerates decision making while increasing overall administrative efficiency. Page 6 Key elements of the Company's operating strategy include: Local Market Focus Hughes Supply has organized its branches as autonomous, decentralized branches capable of meeting local market needs and offering competitive prices. Each branch handles one or more of the Company's product groups and operates as a separate profit center with its own experienced sales force which is specialized by product group. Each branch manager has the authority and responsibility to set pricing and tailor the inventory offering and mix (as well as the nature of services offered) in order to meet the local market demand. In addition, each branch manager is responsible for purchasing, maintaining adequate inventory levels, cost controls and customer relations. A substantial portion of a branch manager's compensation is dependent on their branch's financial performance. The Company has been able to tailor its branch size and product offerings to meet perceived market demand. As a result, the Company successfully operates branches in secondary cities where management believes it has achieved significant market share and in larger metropolitan areas where it has established a sound market presence. Superior Customer Service Substantially all of Hughes Supply's sales are to professional customers with whom the Company has developed long-term relationships. These relationships are based on the Company's history of providing superior service, which creates trust. Customer services provided by the Company include credit, design assistance, material specifications, scheduled job site delivery, job site visits to ensure satisfaction, technical product services (including blueprint take-off and computerized order quotes) and assistance with product returns. Comprehensive and Diversified Product Groups As part of its emphasis on superior customer service, the Company offers more than 240,000 products at competitive prices. Distribution of a wide variety of products within each product category helps the Company's customers manage their inventory, arrange for consolidated delivery requirements and provide a greater portion of total job specifications. The depth and breadth of the Company's product categories generally permits it to make add-on sales of higher margin, non-commodity items. The Company is diversified across multiple product categories, geographic regions and various sectors of the construction industry (such as commercial, residential, public infrastructure and industrial), which lessens its dependence upon market conditions applicable to any of its product categories or any single sector of the construction industry. This product diversification provides opportunities for the Company to participate in multiple phases of construction projects, capturing more of the total construction spending dollar and spanning the entire construction cycle. Page 7 Well-Trained and Experienced Workforce The Company has implemented extensive employee recruiting and training programs to ensure that its employees have the skill levels necessary to compete effectively in today's marketplace. The Company utilizes in-depth training seminars covering basic and advanced product knowledge, as well as multiple levels of selling, purchasing, negotiating and management skills workshops. The Company has also developed a recruiting and training program to increase the number of qualified applicants introduced into its management and sales ranks. The Company generally has experienced a low rate of turnover within its management and sales force ranks. As a result, the Company's corporate management group, branch managers, outside sales representatives and inside sales account executives have considerable experience with the Company. Centralized Administrative Functions The Company has centralized certain administrative functions such as credit, human resources, finance and accounting, legal and management information systems. Centralization of human resources, finance and accounting functions ensure conformity in policy and lower costs of administration. The Company's credit function is essential to its success. Each SBU has dedicated credit managers. All credit decisions are researched, analyzed and approved by the SBU credit managers to ensure conformity and quality of credit decisions across the Company's operations. Volume Purchasing Power The Company established its Preferred Vendor Program in 1991 to more effectively leverage its purchasing power. This program has reduced the number of vendors and has resulted in stronger, more strategic relationships with a more concentrated group of vendors. The concentration of vendors has also improved the Company's ability to ensure more timely delivery, to reduce errors, and to obtain better terms and greater financial incentives. Other programs currently being employed with vendors include vendor-managed inventory systems, bar coding, and electronic exchange of purchase orders and invoices. The Company's operating strategy additionally focuses on six interrelated initiatives that it believes will improve operating efficiencies, profitability and customer service. These six initiatives include the following: o inventory management o supplier relations/margin improvement o freight management o same-store sales o accounts receivable o e-business development Page 8 GROWTH STRATEGY In recent years, the Company has centered its internal growth and growth through acquisitions around customer groups and products which help it to diversify geographically and product-wise, capturing more of the total construction dollar while focusing more on products used in repair, maintenance, replacement and renovation applications. These products generally offer higher margins and are less dependent on new construction. Management believes that the Company's product, market and geographic diversification helps reduce the impact of economic cycles on its net sales and profitability. A summary of the Company's internal growth and acquisition program follows. Internal Growth Hughes Supply has grown internally through increases in same-store sales and the opening of new branches. Same-store sales increases have been attributable to new product introductions within existing branches, such as fire protection equipment and concrete fabrication products, fiber-optic products and the higher value-added services such as integrated supply, national account business and complete warehouse management contracts. Since January 26, 1996, Hughes Supply has opened 87 new branches. New branches are generally opened to fill in existing market areas or to accommodate the split out of multiple product group branches. Since January 26, 1996, the Company has closed 67 branches, excluding branches that were sold as part of the divestiture of its pool and spa business. The Company closed these branches primarily because they did not strategically fit into the Company's core businesses and/or they did not perform to expectations. Acquisitions Historically, Hughes Supply has pursued an active acquisition strategy to capitalize on the large, growing and highly-fragmented markets in which it competes. The Company's acquisition strategy focuses on acquiring profitable, private, wholesale distribution businesses with strong management teams and well-developed market positions and customer relationships. Hughes Supply identifies acquisition targets that present growth opportunities and complement Hughes Supply's existing structure, allowing Hughes Supply to benefit from synergies resulting from the integration of these targets' operations with its own. Management believes that significant acquisition opportunities exist in each of its product categories. Hughes Supply categorizes its acquisitions as fill-in acquisitions or new market acquisitions: o Fill-in acquisitions represent acquisitions of primarily small companies that distribute some of the same product groups as the Company in geographic areas already served by Hughes Supply. The Company's management believes that significant additional fill-in acquisition opportunities are available. o New market acquisitions represent the addition of new product groups, primarily within the Company's existing product categories, or the entry into new geographic markets, or both. During this period, the Company's principal acquisition criteria has been to: o add products and product groups with higher gross margins; o increase sales to the replacement and industrial markets (that tend to be less cyclical than new construction markets); o achieve greater geographical diversification; o develop additional opportunities for future fill-in acquisitions and new branch openings; and o expand its current product offering from leading suppliers. Page 9 Since January 26, 1996, the Company has completed 16 fill-in acquisitions representing 34 branches and 34 new market acquisitions representing 178 branches. RECENT ACQUISITIONS Since January 28, 2000, the Company has acquired several wholesale distributors, including: (i) Western Utilities Supply Co., with seven branches in Alaska, Montana and Washington, significantly expanded the Company's water and sewer business in new geographic markets; (ii) Kingston Pipe Industries, with four branches in Rhode Island, Delaware, Maryland and Virginia, significantly increased the presence of the fire protection part of the Company's water and sewer business in new geographic markets; and (iii) Associated Electric Supply, Inc., with one branch in Alabama, expanded the Company's electrical and electric utility business in a new geographic market. PRODUCTS The Company distributes products and offers services in the following five broad product categories: o Electrical & Electric Utility: Wire management products; distribution equipment; wire and cable; automation products; tools and fasteners; lamp/lighting controls; energy products; data/communications products; meter repair and certification; pole line hardware; and storeroom/job trailer management. o Plumbing & HVAC: Residential and commercial water heaters, furnaces, heat pumps and air conditioning units; copper, steel, cast iron, poly and PVC pipe and fittings; plumbing fixtures; faucets and accessories; pumps and sprinkler heads; commercial drains; mechanical valves; repair parts;and procurement services. o Industrial PVF: Gate valves; motor-operated valves; fittings; pressure fittings; angle and check valves; actuated valves; flanges; plate; sheet; ball valves; pipe; tubing and bar. o Building Materials & Maintenance Supplies: Concrete and masonry supplies and accessories; road and bridge products; tilt-up services; sealants, waterproofing and fireproofing; commercial washroom specialties; tools and fasteners; and multi-family housing maintenance supplies, including plumbing, electrical, appliances/parts and janitorial supplies. o Water & Sewer: All piping products (ductile iron, PVC, HDPE, and steel); hydrants; valves; fittings; storm drains; backflow devices; meters; leak detection; sewer concrete products; utility vaults; irrigation products; pumps; tanks; manhole rehab services; and fire protection fabrication and supplies. Page 10 SALES AND MARKETING The Company employs approximately 875 outside sales representatives who call on and work with professional buyers such as architects, engineers, manufacturers' representatives, purchasing agents, plant superintendents, foremen and job specifiers for contractors and subcontractors. The Company's outside sales representatives provide product specifications and usage data, design alternatives, and job quotes to professional buyers in an effort to assist them in fulfilling their material needs. This sales force also assists with custom design projects for customers providing assistance through brainstorming, story boarding, graphic design and photography. Approximately 675 inside account executives expedite orders, deliveries, quotations, requests for pricing and the release of products for delivery. Most orders and shipment releases are delivered by the Company's trucks to the customers' offices, job sites or plants. DISTRIBUTION AND LOGISTICS The Company's distribution network consists of 447 branches and eight central distribution centers in the United States and two branches in Mexico. The efficient operation of the Company's distribution network is critical in providing quality service to its specialized customer base. The Company's distribution centers and branches use technology in warehouse management to optimize receiving, inventory control, picking, packing and shipping functions. The Company's purchasing agents in its branches use a computerized inventory system to monitor stock levels, while central distribution centers in Arizona, Florida, Georgia, North Carolina and Texas provide purchasing assistance as well as a broad stock of inventory which supplements the inventory of the branches. In addition, the Company uses several of its larger branches in other parts of the country as distribution points for certain product lines. CUSTOMERS AND SUPPLIERS The Company currently serves over 75,000 customers, and no single customer accounts for more than 1% of total annual sales. Orders for larger construction projects normally require long-term delivery schedules throughout the period of construction, which in some cases may continue for several years. The substantial majority of customer orders are shipped from inventory at the Company's branches. The Company also accommodates special orders from its customers and facilitates the shipment of certain large volume orders directly from the manufacturer to the customer. The Company regularly purchases from over 11,000 manufacturers and suppliers of which approximately 700 are part of the Company's Preferred Vendor Program. The Company instituted this Preferred Vendor Program to leverage its existing relationships with a number of suppliers and to increase sales of their products in local markets through various initiatives, including sales promotions, cooperative marketing efforts, dedicated sales force and product exclusivity. In return, many of these key suppliers offer lower prices and volume incentive programs to the Company. The Company actively solicits volume-purchasing discounts and rebates from its preferred vendors and is constantly working to expand its Preferred Vendor Program. No single supplier accounted for more than 5% of the Company's total purchases during fiscal 2001. Page 11 INFORMATION TECHNOLOGY The Company's IT systems are capable of supporting numerous operational functions including purchasing, receiving, order processing, shipping, inventory management, sales analysis and accounting. The Company's customers and sales representatives rely on these systems for real-time information on product pricing, inventory availability and order status. The systems also provide management with information relating to sales, inventory levels and customer payments, and with other data that is essential for the Company to operate efficiently and provide a high level of service to its customers. The Company believes that its continued investment in upgrading and consolidating its IT systems is necessary to provide a platform to implement its e-commerce initiatives and to allow it to continue its strategic growth initiatives. In fiscal 2001, the Company selected a new distribution/logistics software provider. This integrated software is an e-commerce enabled, customer fulfillment, inventory management, logistics and distribution management system. It is designed specifically for MRO- and contractor-oriented distributors, such as the Company. The Company expects the implementation of this software to be staggered over a period of at least three years, beginning in September 2001. The Company believes that this timeframe will enable it to reduce risk, minimize customer disruption and spread implementation costs. Once implementation is complete, the Company expects to be operating primarily under one platform, compared to its 17 current operating systems. The Company believes that consolidation of its operating systems allows for increased operational efficiencies, particularly in the area of working capital management, provides a means for decreasing transaction costs and provides the Company with the infrastructure necessary to realize administrative synergies associated with past and future acquisitions. COMPETITION Management believes that the Company is one of the largest wholesale distributors of its range of products in the United States and that no other company competes against it across all of its product groups. However, there is strong competition in each product group distributed by the Company. The main sources of competition are other wholesalers, manufacturers who sell certain lines directly to contractors and, to a limited extent, retailers in the markets for plumbing, electrical fixtures and supplies, building materials, and contractors' tools. The principal competitive factors in the Company's business are product availability, pricing, technical knowledge as to application and usage, and advisory and other service capabilities which develop the trust factor needed in successful customer relationships. INVENTORIES The Company is a wholesale distributor of construction and industrial materials and maintains significant inventories to meet rapid delivery requirements and to ensure a continuous allotment of goods from suppliers. As of January 26, 2001, inventories constituted approximately 32% of the Company's total assets. Page 12 EMPLOYEES As of January 26, 2001, the Company had approximately 7,700 employees consisting of approximately 14 executives, 1,630 managers, 1,550 sales personnel and 4,506 other employees, including truck drivers, warehouse personnel, office and clerical workers. Over the last year, the Company's work force has decreased approximately 2% compared to the prior year. This decrease was primarily the result of (i) the divestiture of the Company's pool and spa business, (ii) reductions to bring headcount more in line with current economic conditions, and (iii) efforts to make the Company's operations more efficient. The decrease was partially offset by increases resulting from acquired and newly-opened wholesale branches. The Company considers its relationships with its employees to be good. FORWARD-LOOKING STATEMENTS Certain statements set forth in this Report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by such sections. When used in this Report, the words "believe," "anticipate," "estimate," "expect," "may," "will," "should," "plan," "intend," "potential," "predict," "forecast" and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. The Company's actual results may differ significantly from the results discussed in such forward-looking statements. When appropriate, certain factors that could cause results to differ materially from those projected in the forward-looking statements are enumerated. The foregoing should be read in conjunction with the Company's consolidated financial statements and the notes thereto incorporated herein by reference. Page 13 ITEM 2. PROPERTIES The Company leases approximately 60,000 square feet of an office building in Orlando, Florida for its headquarters. In addition, the Company owns or leases 447 facilities in 34 states and Mexico. The typical sales branch consists of a combined office and warehouse facility ranging in size from 3,000 to 50,000 square feet, with paved parking and storage areas. The Company also operates a computer center and eight central distribution centers. The Company believes that its properties are in good condition and are suitable and adequate to carry on the Company's business. Additional information regarding owned and leased properties of the Company is set forth as Exhibit 99.1 to this Report. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various legal proceedings arising in the normal course of its business. Management believes that none of these proceedings will have a material adverse impact on its financial condition, results of operations or cash flows. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year ended January 26, 2001. Page 14 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information with respect to the principal market for the Company's common stock, stock prices and dividend information is set forth under the caption "Corporate and Shareholder Information" and in Note 11 of the Notes to Consolidated Financial Statements of the Company's Annual Report to Shareholders for the fiscal year ended January 26, 2001, a copy of which is filed as an exhibit to this Report and the cited portions of which are incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Information with respect to selected financial data of the Company is set forth under the caption "Selected Financial Data" of the Company's Annual Report to Shareholders for the fiscal year ended January 26, 2001, a copy of which is filed as an exhibit to this Report and the cited portion of which is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information with respect to the Company's financial condition, changes in financial condition and results of operations is set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Annual Report to Shareholders for the fiscal year ended January 26, 2001, a copy of which is filed as an exhibit to this Report and the cited portion of which is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information with respect to the Company's market risk is set forth under the section "Quantitative and Qualitative Disclosure About Market Risk" under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Company's Annual Report to Shareholders for the fiscal year ended January 26, 2001, a copy of which is filed as an exhibit to this Report and the cited portion of which is incorporated herein by reference. Page 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (a) Financial Statements The financial statements filed with this report are set forth in Item 14(a). (b) Selected Quarterly Financial Data Information with respect to selected quarterly financial data of the Company is set forth in Note 11 of the Notes to Consolidated Financial Statements of the Company's Annual Report to Shareholders for the fiscal year ended January 26, 2001, a copy of which is filed as an exhibit to this Report and the cited portion of which is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Company has not had any change in, or disagreement with, its accountants or reportable event which is required to be reported in response to this item. Page 16 PART III All information required by Part III (Items 10, 11, 12 and 13) is incorporated by reference to the Company's Definitive Proxy Statement for the 2001 Annual Meeting of Shareholders. Page 17 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Report: (1) All Financial Statements The following consolidated financial statements of the Registrant and its subsidiaries included in the Registrant's Annual Report to Shareholders for the fiscal year ended January 26, 2001, are filed under Item 8 and are incorporated by reference: Annual Report Page(s) Consolidated Statements of Income for the years ended January 26, 2001, January 28, 2000 and January 29, 1999 26 Consolidated Balance Sheets as of January 26, 2001 and January 28, 2000 27 Consolidated Statements of Shareholders' Equity for the years ended January 26, 2001, January 28, 2000 and January 29, 1999 28 Consolidated Statements of Cash Flows for the years ended January 26, 2001, January 28, 2000 and January 29, 1999 29 Notes to Consolidated Financial Statements 30-39 Report of Independent Certified Public Accountants 40 Page 18 (2) Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts for the fiscal years ended January 26, 2001, January 28, 2000 and January 29, 1999.
Hughes Supply, Inc. Schedule II - Valuation and Qualifying Accounts (in thousands) Fiscal Years Ended ---------------------------------------- January 26, January 28, January 29, 2001 2000 1999 ------------ ----------- ------------ Allowance for doubtful accounts: Balance at beginning of year $ 2,777 $ 2,809 $ 3,522 Additional charged to costs and expenses 10,273 3,608 1,882 Deductions (6,944) (3,640) (2,595) -------- ------- ------- Balance at end of year $ 6,106 $ 2,777 $ 2,809 ======== ======= ======= Deferred income taxes: Beginning at beginning of year $ -- $ -- $ -- Additions charged to costs and expenses 698 -- -- -------- ------- ------- Balance at end of year $ 698 $ -- $ -- ======== ======= =======
All other schedules have been omitted as they are either not applicable, not required or the information is given in the financial statements or related notes thereto. Report of Independent Certified Public Accountants on Financial Statement Schedule To the Shareholders and Board of Directors of Hughes Supply, Inc. Our audits of the consolidated financial statements referred to in our report dated March 23, 2001 appearing in the fiscal 2001 Annual Report to Shareholders of Hughes Supply, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Orlando, Florida March 23, 2001 Page 19 (b) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter ended January 26, 2001. (c) Exhibits Filed A substantial number of the exhibits referred to below are indicated as having been previously filed as exhibits to other reports under the Securities Exchange Act of 1934, as amended, or as exhibits to registration statements under the Securities Act of 1933, as amended. Such previously filed exhibits are incorporated by reference in this Form 10-K. Exhibits not incorporated by reference herein are filed with this report. (2) Plan of acquisition, reorganization, arrangement, liquidation or succession. Not applicable. (3) Articles of incorporation and by-laws. 3.1 Restated Articles of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to Form 10-Q for the quarter ended April 30, 1997 (Commission File No. 001-08772). 3.2 Composite By-Laws, as amended, incorporated by reference to Exhibit 3.2 to Form 10-Q for the quarter ended October 31, 1999 (Commission File No. 001-08772). 3.3 Form of Articles of Amendment to Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit 99.2 to Form 8-A dated May 22, 1998 (Commission File No. 001-08772). (4) Instruments defining the rights of security holders, including indentures. 4.1 Form of Common Stock Certificate representing shares of the Registrant's common stock, $1.00 par value, incorporated by reference to Exhibit 4.1 to Form 10-Q for the quarter ended July 31, 1997 (Commission File No. 001-08772). 4.2 Rights Agreement dated as of May 20, 1998 between Hughes Supply, Inc. and American Stock Transfer & Trust Company, incorporated by reference to Exhibit 99.2 to Form 8-A dated May 22, 1998 (Commission File No. 001-08772). (9) Voting trust agreement. Not applicable. Page 20 (10) Material contracts. 10.1 Lease Agreements with Hughes, Inc. (a) Leases effective March 31, 1988, incorporated by reference to Exhibit 10.1(c) to Form 10-K for the fiscal year ended January 27, 1989 (Commission File No. 0-5235). Sub-Item Property (1) Clearwater (2) Daytona Beach (3) Fort Pierce (4) Lakeland (6) Leesburg (7) Orlando Electrical Operation (8) Orlando Plumbing Operation (9) Orlando Utility Warehouse (11) Sarasota (12) Venice (13) Winter Haven (b) Lease Agreement dated June 1, 1987, between Hughes, Inc. and the Registrant, for additional Sarasota property, incorporated by reference to Exhibit 10.1(j) to Form 10-K for the fiscal year ended January 29, 1988 (Commission File No. 0-5235). (c) Lease dated March 11, 1992, incorporated by reference to Exhibit 10.1(e) to Form 10-K for the fiscal year ended January 31, 1992 (Commission File No. 0-5235). Sub-Item Property (2) Gainesville Electrical Operation (d) Amendments to leases between Hughes, Inc. and the Registrant, dated April 1, 1998, amending the leases for the thirteen properties listed in Exhibit 10.1(b), (d) and (e), incorporated by reference to Exhibit 10.1 to Form 10-K for the fiscal year ended January 30, 1998 (Commission File No. 001-08772). 10.2 Hughes Supply, Inc. 1988 Stock Option Plan as amended March 12, 1996 incorporated by reference to Exhibit 10.2 to Form 10-K for the fiscal year ended January 26, 1996 (Commission File No. 001-08772). 10.3 Form of Supplemental Executive Retirement Plan Agreement entered into between the Registrant and eight of its executive officers, incorporated by reference to Exhibit 10.6 to Form 10-K for the fiscal year ended January 30, 1987 (Commission File No. 0-5235). Page 21 10.4 Directors' Stock Option Plan, as amended, incorporated by reference to Exhibit 10.4 to Form 10-Q for the quarter ended October 31, 1999 (Commission File No. 001-08772). 10.5 Hughes Supply, Inc. Amended Senior Executives' Long-Term Incentive Bonus Plan, adopted January 25, 1996, incorporated by reference to Exhibit 10.9 to Form 10-K for the fiscal year ended January 26, 1996 (Commission File No. 001-08772). 10.6 Note Purchase Agreement, dated as of August 28, 1997, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.15 to Form 10-Q for the quarter ended July 31, 1997 (Commission File No. 001-08772). 10.7 (a) Hughes Supply, Inc. 1997 Executive Stock Plan, incorporated by reference to Exhibit 10.7 to Form 10-K for the fiscal year ended January 28, 2000 (Commission File No. 001-08772). 10.7 (b) Amendment No. 1 to the Hughes Supply, Inc. 1997 Executive Stock Plan, incorporated by reference to Exhibit 10.7(b) to Form 10-Q for the quarter ended April 30, 2000 (Commission File No. 001-08772). 10.8 Note Purchase Agreement, dated as of May 29, 1996, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.13 to Form 10-K for the fiscal year ended January 30, 1998 (Commission File No. 001-08772). 10.9 Note Purchase Agreement, dated as of May 5, 1998, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement, incorporated by reference to Exhibit 10.11 to Form 10-Q for the quarter ended April 30, 1998 (Commission File No. 001-08772). 10.10 Revolving Credit Agreement, dated as of January 26, 1999 and amended on various dates through December 20, 2000, by and among the Company and a group of banks. The Revolving Credit Agreement contains a table of contents identifying the contents of Schedules and Exhibits, all of which have been omitted. The Company agrees to furnish a supplemental copy of any omitted Schedule or Exhibit to the Commission upon request. 10.11 Line of Credit Agreement, dated as of January 26, 1999 and amended on various dates through December 20, 2000, by and among the Company and a group of banks. The Line of Credit Agreement contains a table of contents identifying the contents of Schedules and Exhibits, all of which have been omitted. The Company agrees to furnish a supplemental copy of any omitted Schedule or Exhibit to the Commission upon request. 10.12 Note Purchase Agreement, dated as of December 21, 2000 and amended January 19, 2001, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement. Page 22 10.13 Separation and Release Agreement, dated as of March 28, 2001, by and between the Company and A. Stewart Hall, Jr. (11) Statement re computation of per share earnings. Not applicable. (12) Statements re computation of ratios. Not applicable. (13) Annual report to security holders, Form 10-Q or quarterly report to security holders. 13.1 Information incorporated by reference into Form 10-K from the Annual Report to Shareholders for the fiscal year ended January 26, 2001. (16) Letter re change in certifying accountant. Not applicable. (18) Letter re change in accounting principles. Not applicable. (21) Subsidiaries of the Registrant. 21.1 Subsidiaries of the Registrant. (22) Published report regarding matters submitted to vote of security holders. Not applicable. (23) Consents of experts and counsel. 23.1 Consent of PricewaterhouseCoopers LLP. (24) Power of attorney. Not applicable. (99) Additional exhibits. 99.1 Location of Facilities. Page 23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. HUGHES SUPPLY, INC. By: /s/ David H. Hughes -------------------------------- David H. Hughes, Chairman of the Board and Chief Executive Officer /s/ J. Stephen Zepf -------------------------------- J. Stephen Zepf, Treasurer, Chief Financial Officer and Chief Accounting Officer Date: April 23, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ David H. Hughes /s/ H. Corbin Day - ---------------------------- -------------------------------- David H. Hughes H. Corbin Day April 23, 2001 April 23, 2001 (Director) (Director) /s/ John D. Baker II /s/ Vincent S. Hughes - ---------------------------- -------------------------------- John D. Baker II Vincent S. Hughes April 23, 2001 April 23, 2001 (Director) (Director) /s/ Robert N. Blackford /s/ William P. Kennedy - ---------------------------- -------------------------------- Robert N. Blackford William P. Kennedy April 23, 2001 April 23, 2001 (Director) (Director) Page 24 INDEX OF EXHIBITS FILED WITH THIS REPORT 10.10 Revolving Credit Agreement, dated as of January 26, 1999 and amended on various dates through December 20, 2000, by and among the Company and a group of banks. The Revolving Credit Agreement contains a table of contents identifying the contents of Schedules and Exhibits, all of which have been omitted. The Company agrees to furnish a supplemental copy of any omitted Schedule or Exhibit to the Commission upon request. 10.11 Line of Credit Agreement, dated as of January 26, 1999 and amended on various dates through December 20, 2000, by and among the Company and a group of banks. The Line of Credit Agreement contains a table of contents identifying the contents of Schedules and Exhibits, all of which have been omitted. The Company agrees to furnish a supplemental copy of any omitted Schedule or Exhibit to the Commission upon request. 10.12 Note Purchase Agreement, dated as of December 21, 2000 and amended on January 19, 2001, by and among the Company and certain purchasers identified in Schedule A of the Note Purchase Agreement. 10.13 Separation and Release Agreement, dated as of March 28, 2001, by and between the Company and A. Stewart Hall, Jr. 13.1 Information incorporated by reference into Form 10-K from the Annual Report to Shareholders for the fiscal year ended January 26, 2001. 21.1 Subsidiaries of the Registrant. 23.1 Consent of PricewaterhouseCoopers LLP. 99.1 Location of Facilities. Page 25 EX-10.10 2 d25505_ex10-10.txt REVOLVING CREDIT AGREEMENT Exhibit 10.10 REVOLVING CREDIT AGREEMENT Dated as of January 26, 1999 By And Among HUGHES SUPPLY, INC. AND SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, individually and as Administrative Agent, FIRST UNION NATIONAL BANK, individually and as Documentation Agent, NATIONSBANK, N.A., individually and as Syndication Agent SOUTHTRUST BANK, NATIONAL ASSOCIATION, individually and as Co-Agent, ABN AMRO BANK, N.V., PNC BANK, N.A., WACHOVIA BANK, N.A., THE FIFTH THIRD BANK, HIBERNIA NATIONAL BANK, and other financial institutions becoming a party hereto - -------------------------------------------------------------------------------- King & Spalding 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Carolyn Zander Alford (404) 572-4600 TABLE OF CONTENTS
Page ---- Article I. DEFINITIONS; CONSTRUCTION..........................................................................1 Section 1.01 Definitions...................................................................................1 Section 1.02 Accounting Terms and Determination...........................................................16 Section 1.03 Other Definitional Terms.....................................................................17 Section 1.04 Exhibits and Schedules.......................................................................17 Article II. REVOLVING LOAN COMMITMENTS........................................................................17 Section 2.01 Revolving Loan Commitments, Use of Proceeds..................................................17 Section 2.02 Syndicate Note; Repayment of Principal.......................................................18 Section 2.03 Voluntary Reduction of Revolving Loan Commitments............................................18 Article III. GENERAL LOAN TERMS..............................................................................18 Section 3.01 Funding Notices..............................................................................18 Section 3.02 Disbursement of Funds........................................................................20 Section 3.03 Increase of Revolving Loan Commitments.......................................................22 Section 3.04 Interest.....................................................................................23 Section 3.05 Interest Periods.............................................................................24 Section 3.06 Fees.........................................................................................25 Section 3.07 Voluntary Prepayments of Borrowings..........................................................25 Section 3.08 Payments, etc................................................................................26 Section 3.09 Interest Rate Not Ascertainable, etc.........................................................28 Section 3.10 Illegally....................................................................................28 Section 3.11 Increased Costs..............................................................................29 Section 3.12 Lending Offices..............................................................................30 Section 3.13 Funding Losses...............................................................................31 Section 3.14 Assumptions Concerning Funding of Eurodollar Advances........................................31 Section 3.15 Apportionment of Payments....................................................................31 Section 3.16 Sharing of Payments, Etc.....................................................................32 Section 3.17 Capital Adequacy.............................................................................32 Section 3.18 Benefits to Guarantors.......................................................................33 Section 3.19 Limitation on Certain Payment Obligations....................................................33 Article IV. CONDITIONS TO BORROWINGS........................................................................33 Section 4.01 Conditions Precedent to Initial Revolving Loans..............................................33 Section 4.02 Conditions to All Revolving Loans............................................................35 Article V. REPRESENTATIONS AND WARRANTIES....................................................................36 Section 5.01 Organization and Qualification...............................................................36 Section 5.02 Corporate Authority..........................................................................37 Section 5.03 Financial Statements.........................................................................37 Section 5.04 Tax Returns..................................................................................37 Section 5.05 Actions Pending..............................................................................38 Section 5.06 Representations; No Defaults.................................................................38 Section 5.07 Title to Properties..........................................................................38 Section 5.08 Enforceability of Agreement..................................................................38 Section 5.09 Consent......................................................................................39 Section 5.10 Use of Proceeds, Federal Reserve Regulations.................................................39 Section 5.11 ERISA........................................................................................39 Section 5.12 Subsidiaries.................................................................................39 Section 5.13 Outstanding Indebtedness.....................................................................40 Section 5.14 Conflicting Agreements.......................................................................40
Section 5.15 Pollution and Other Regulations..............................................................40 Section 5.16 Possession of Franchises, Licenses, Etc......................................................41 Section 5.17 Patents, Etc.................................................................................41 Section 5.18 Governmental Consent.........................................................................42 Section 5.19 Disclosure...................................................................................42 Section 5.20 Insurance Coverage...........................................................................42 Section 5.21 Labor Matters................................................................................42 Section 5.22 Intercompany Loans, Dividends................................................................42 Section 5.23 Burdensome Restrictions......................................................................43 Section 5.24 Investment Company Act, Etc..................................................................43 Section 5.25 Notice of Non-Compliance with Laws...........................................................43 Section 5.26 Year 2000 Issues.............................................................................43 Article VI. AFFIRMATIVE COVENANTS...........................................................................43 Section 6.01 Corporate Existence, Etc.....................................................................43 Section 6.02 Compliance with Laws, Etc....................................................................44 Section 6.03 Payment of Taxes and Claims, Etc.............................................................44 Section 6.04 Keeping of Books.............................................................................44 Section 6.05 Visitation, Inspection, Etc..................................................................44 Section 6.06 Insurance, Maintenance of Properties.........................................................45 Section 6.07 Reporting Covenants..........................................................................45 Section 6.08 Financial Covenants..........................................................................49 Section 6.09 Notices Under Certain Other Indebtedness.....................................................50 Section 6.10 Additional Guarantors........................................................................50 Section 6.11 Financial Statements; Fiscal Year............................................................50 Section 6.12 Ownership of Guarantors......................................................................50 Article VII. NEGATIVE COVENANTS..............................................................................51 Section 7.01 Indebtedness.................................................................................51 Section 7.02 Liens........................................................................................51 Section 7.03 Mergers, Acquisitions, Sales, Etc............................................................52 Section 7.04 Investments, Loans, Etc......................................................................53 Section 7.05 Sale and Leaseback Transactions..............................................................54 Section 7.06 Transactions with Affiliates.................................................................54 Section 7.07 Optional Prepayments.........................................................................54 Section 7.08 Changes in Business..........................................................................54 Section 7.09 ERISA........................................................................................55 Section 7.10 Additional Negative Pledges..................................................................55 Section 7.11 Limitation on Payment Restrictions Affecting Consolidated Companies..........................55 Section 7.12 Actions Under Certain Documents..............................................................55 Article VIII. EVENTS OF DEFAULT............................................................................55 Section 8.01 Payments.....................................................................................56 Section 8.02 Covenants Without Notice.....................................................................56 Section 8.03 Other Covenants..............................................................................56 Section 8.04 Representations..............................................................................56 Section 8.05 Non-Payments of Other Indebtedness...........................................................56 Section 8.06 Defaults Under Other Agreements..............................................................56 Section 8.07 Bankruptcy...................................................................................56 Section 8.08 ERISA........................................................................................57 Section 8.09 Money Judgment...............................................................................57 Section 8.10 Ownership of Credit Parties and Pledged Entities.............................................58 Section 8.11 Change in Control of Borrower................................................................58 Section 8.12 Default Under Other Credit Documents.........................................................58 Section 8.13 Attachments..................................................................................58 Article IX. THE AGENTS......................................................................................59 Section 9.01 Appointment of Administrative Agent..........................................................59 Section 9.02 Nature of Duties of Administrative Agent.....................................................59 Section 9.03 Lack of Reliance on the Administrative Agent.................................................59
ii
Section 9.04 Certain Rights of the Administrative Agent...................................................60 Section 9.05 Reliance by Administrative Agent.............................................................60 Section 9.06 Indemnification of Administrative Agent......................................................60 Section 9.07 The Administrative Agent in Its Individual Capacity..........................................61 Section 9.08 Holders of Revolving Notes...................................................................61 Section 9.09 Successor Administrative Agent...............................................................61 Section 9.10 Documentation Agent..........................................................................62 Section 9.11 Syndication Agent............................................................................62 Section 9.12 Co-Agent.....................................................................................62 Article X. MISCELLANEOUS.....................................................................................62 Section 10.01 Notices......................................................................................62 Section 10.02 Amendments, Etc..............................................................................63 Section 10.03 No Waiver, Remedies Cumulative...............................................................63 Section 10.04 Payment of Expenses, Etc.....................................................................64 Section 10.05 Right of Setoff..............................................................................65 Section 10.06 Benefit of Agreement.........................................................................65 Section 10.07 Governing Law; Submission to Jurisdiction....................................................68 Section 10.08 Independent Nature of Lenders' Rights........................................................69 Section 10.09 Counterparts.................................................................................69 Section 10.10 Effectiveness; Survival......................................................................69 Section 10.11 Severability.................................................................................69 Section 10.12 Independence of Covenants....................................................................69 Section 10.13 Change in Accounting Principles, Fiscal Year or Tax Laws.....................................69 Section 10.14 Headings Descriptive, Entire Agreement.......................................................70 Section 10.15 Time is of the Essence.......................................................................70 Section 10.16 Usury........................................................................................70 Section 10.17 Construction.................................................................................70 Section 10.18 Waiver of Effect of Corporate Seal...........................................................70
iii REVOLVING CREDIT AGREEMENT THIS REVOLVING CREDIT AGREEMENT, dated as of January 26,1999 (the "Agreement") by and among HUGHES SUPPLY, INC. ("Borrower"), a Florida corporation, SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, ("SunTrust Bank, Central Florida") a national banking association, FIRST UNION NATIONAL BANK, a national banking association, NATIONSBANK, N.A., a national banking association, SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national banking association, ABN AMRO BANK, N.V., a banking corporation organized under the laws of the Netherlands, PNC BANK, N.A., a national banking association, WACHOVIA BANK, N.A., a national banking association, THE FIFTH THIRD BANK, a national banking association, HIBERNIA NATIONAL BANK, a national banking association and such other financial institutions becoming a party hereto from time to time, (individually, a "Lender" and collectively, the "Lenders"), SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), FIRST UNION NATIONAL BANK, as documentation agent for the Lenders (in such capacity, the "Documentation Agent"), NATIONSBANK, N.A., as syndication agent for the Lenders (in such capacity, the "Syndication Agent") and SOUTHTRUST BANK NATIONAL ASSOCIATION, as Co-Agent for the Lenders (in such capacity, the "Co-Agent"). W I T N E S S E T H: WHEREAS, Borrower has requested that the Lenders establish a $225,000,000 revolving credit facility in favor of Borrower, and subject to the terms and conditions contained herein, the Lenders are willing to establish such revolving credit facility in favor of Borrower subject to the terms and conditions set forth below; NOW, THEREFORE, in consideration of the mutual covenants made herein, amid for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: Article I. DEFINITIONS; CONSTRUCTION Section 1.01 Definitions. As used in this Agreement, and in any instrument, certificate, document or report delivered pursuant hereto, the following terms shall have the following meanings (to be equally applicable to both the singular and plural forms of the term defined): "Administrative Agent" shall mean SunTrust Bank, Central Florida, a national banking association, as administrative agent for the Lenders hereunder and under the other Credit Documents, and each successor administrative agent. "Adjusted LIBO Rate" shall mean with respect to each Interest Period for a Eurodollar Advance, the rate obtained by dividing (A) LIBOR for such Interest Period by (B) a percentage equal to I minus the then stated maximum rate (stated as a decimal) of all reserves requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurodollar liabilities as defined in Regulation D (or against any successor category of liabilities as defined in Regulation D). The Administrative Agent shall promptly notify the Borrower of any such reserve requirements that become applicable. "Advance" shall mean any principal amount advanced and remaining outstanding at any time under the Revolving Loans, which Advance shall be made or outstanding as a Base Rate Advance, Competitive Bid Advance or Eurodollar Advance, as the case may be. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by, or under common control with, such Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by", and "under common control With") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person. "Agents" shall mean, collectively, the Administrative Agent, the Documentation Agent, the Syndication Agent and the Co-Agent. "Agreement" shall mean this Revolving Credit Agreement, either as originally executed or as it may be from time to time supplemented, amended, restated, renewed or extended and in effect. "Applicable Facility Fee Percentage" shall mean the percentage designated below based on Borrower's Leverage Ratio for the most recently ended fiscal quarter for which financial statements have been delivered pursuant to Section 6.07(a) or (b): - -------------------------------------------------------------------------------- Leverage Ratio Applicable Facility Fee Percentage for Revolving Loan Commitment: - -------------------------------------------------------------------------------- Less than 0.4: 1.0 0.15% - -------------------------------------------------------------------------------- Greater than or equal to 0.4: 1.0 0.175% but less than 0.45:1.0 - -------------------------------------------------------------------------------- Greater than or equal to 0.20% 0.45: 1.0 but less than 0.5: 1.0 - -------------------------------------------------------------------------------- Greater than or equal to 0.5:1.0 0.25% but less than 0.55:1.0 - -------------------------------------------------------------------------------- Greater than or equal to 0.30% 0.55:1.0 - -------------------------------------------------------------------------------- provided, however, that: 2 (a) The Applicable Facility Fee Percentage in effect as of the date of execution and delivery of this Agreement is .20% for Revolving Loan Commitments, and such percentage shall remain in effect until such time as the Applicable Facility Fee Percentage may be adjusted as hereinafter provided; and (b) Adjustments, if any, to the Applicable Facility Fee Percentages based on changes in the ratios set forth above shall be made and become effective (i) on the first day of the fiscal quarter immediately following delivery of the financial statements required pursuant to Section 6.07(b), and (ii) on the first day of the second fiscal quarter immediately following the last day of any fiscal year of Borrower. (c) Notwithstanding the foregoing, at any time during which Borrower has failed to deliver the financial statements and certificates when required by Section 6.07(a) and (b), as the case may be, the Applicable Facility Fee Percentage shall be 0.30% until such time as the delinquent financial statements are delivered at which time the Applicable Facility Fee Percentage shall be reset as provided above. "Applicable Margin" shall mean the percentage designated below based on Borrower's Leverage Ratio for the most recently ended fiscal quarter for which financial statements have been delivered pursuant to Section 6.07(a) or (b): - -------------------------------------------------------------------------------- Leverage Ratio Applicable Margin for Revolving Loan Commitment: - -------------------------------------------------------------------------------- Less than 0.4: 1.0 0.25% - -------------------------------------------------------------------------------- Greater than or equal to 0.325% 0.4: 1.0 but less than 0.45: 1.0 - -------------------------------------------------------------------------------- Greater than or equal to 0.55% 0.45: 1.0 but less than 0.5: 1.0 - -------------------------------------------------------------------------------- Greater than or equal to 0.625% 0.5: 1.0 but less than 0.55: 1.0 - -------------------------------------------------------------------------------- Greater than or equal to 0.825% 0.55:1.0 - -------------------------------------------------------------------------------- provided, however, that: (a) The Applicable Margin in effect as of the date of execution and delivery of this Agreement is .55% for Revolving Loan Commitments, and such percentage shall remain in effect until such time as the Applicable Margin may be adjusted as hereinafter provided; and (b) Adjustments, if any, to the Applicable Margin based on changes in the ratios set forth above shall be made and become effective (i) on the first day of the fiscal quarter immediately following delivery of the financial statements required pursuant to Section 3 6.07(b), and (ii) on the first day of the second fiscal quarter immediately following the last day of any fiscal year of Borrower. (c) Notwithstanding the foregoing, at any time during which Borrower has failed to deliver the financial statements and certificates when required by Section 6.07(a) and (b), as the case may be, the Applicable Margin shall be 0.825% until such time as the delinquent financial statements are delivered at which time the Applicable Margin shall be reset as provided above. "Asbestos Laws" means the common law in all federal, state and local and foreign jurisdictions and other laws in such jurisdictions, and regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, now or hereafter in affect relating to or concerning asbestos or asbestos-containing material, including without limitation, exposure to asbestos or asbestos-containing material. "Asset Value" shall mean, with respect to any property or asset of any Consolidated Company as of any particular date, an amount equal to the greater of (i) the then book value of such property or asset as established in accordance with GAAP, and (ii) the then fair market value of such property or asset as determined in good faith by the board of directors of such Consolidated Company. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an Eligible Assignee in accordance with the terms of this Agreement and substantially in the form of Exhibit D. "Bankruptcy Code" shall mean The Bankruptcy Code of 1978, as amended and in effect from time to time (11 U.S.C. ss. 101 et seq..). "Base Rate" shall mean (with any change in the Base Rate to be effective as of the date of change of either of the following rates) the higher of (a) the rate which the Administrative Agent designates from time to time to be its prime lending rate, as in effect from time to time, and (b) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.500A) per annum. The Administrative Agent's prime lending rate is a reference rate and does not necessarily represent the lowest or best rate charged to customers; Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Administrative Agent's prime lending rate. "Base Rate Advance" shall mean an Advance bearing interest based on the Base Rate. "Base Rate Loan" shall mean any Revolving Loan hereunder which bears interest at the Base Rate. 4 "Borrowing" shall mean the incurrence by Borrower under any Facility of Advances of one Type concurrently having the same Interest Period or the continuation or conversion of an existing Borrowing or Borrowings in whole or in part. "Business Day" shall mean, with respect to Eurodollar Loans, any day other than a day on which commercial banks are closed or required to be closed for domestic and international business, including dealings in Dollar deposits on the London interbank market, and with respect to all other Revolving Loans and matters, any day other than Saturday, Sunday and a day on which commercial banks are required to be closed for business in Atlanta, Georgia, or Orlando, Florida. "Capitalized Lease Obligations" shall mean all lease obligations which have been or are required to be, in accordance with GAAP, capitalized on the books of the lessee. "CERCLA" has the meaning set forth in Section 5.15(a) of this Agreement. "Change in Control Provision" shall mean any term or provision contained in any indenture, debenture, note, or other agreement or document evidencing or governing Indebtedness of Borrower evidencing debt or a commitment to extend loans in excess of $5,000,000 Which requires, or pen-nits the holder(s) of such Indebtedness of Borrower to require that such Indebtedness of Borrower be redeemed, repurchased, defeased, prepaid or repaid, either in whole or in part, or the maturity of such Indebtedness of Borrower to be accelerated in any respect, as a result of a change in ownership of the capital stock of Borrower or voting rights with respect thereto. "Closing Date" shall mean the date on or before January 26, 1999, on which the initial Revolving Loans are made and the conditions set forth in Section 4.01 are satisfied or waived in accordance with Section 10.02. "Co-Agent" shall mean SouthTrust Bank, National Association, a national banking association, as co-agent for the Lenders hereunder and under the other Credit Documents, and each successor co-agent. "Commitment Letter" shall mean that certain letter agreement, dated as of December 21, 1998, executed by SunTrust Equitable Securities Corporation, SunTrust Bank, Central Florida, National Association and First Union National Bank and acknowledged and agreed to by the Borrower. "Competitive Bid Advance" shall mean an Advance bearing interest based on a Competitive Bid Rate. "Competitive Bid Loans" shall mean Revolving Loans made by a Lender on a competitive bid basis as provided in Article 11. 5 "Competitive Bid Note" shall mean a promissory note evidencing Competitive Bid Loans in the form attached hereto as Exhibit B. "Competitive Bid Rate" shall mean the interest rate charged by a Lender on a Competitive Bid Loan. "Consolidated Amortization" shall mean, for any fiscal period of the Borrower, amortization of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Companies" shall mean, collectively, Borrower and all of its Subsidiaries. "Consolidated Depreciation" shall mean, for any fiscal period of the Borrower, depreciation of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Consolidated EBITR" shall mean, for any fiscal period of the Borrower, an amount equal to Consolidated Net Income (Loss) for such period, plus, to the extent deducted in determining Consolidated Net Income (Loss), (i) Consolidated Tax Expense for such period, (ii) Consolidated Interest Expense for such period, and (iii) Consolidated Rental Expense for such period. "Consolidated EBITDAR" shall mean, for any fiscal period of the Borrower, an amount equal to Consolidated Net Income (Loss) for such period plus to the extent deducted in determining Consolidated Net Income (Loss), (i) Consolidated Interest Expense for such period, (ii) Consolidated Tax Expense for such period, (iii) Consolidated Depreciation for such period, (iv) Consolidated Amortization for such period and (v) Consolidated Rental Expense for such period. "Consolidated Interest Expense" shall mean, for any fiscal period of Borrower, total interest expense (including without limitation, interest expense attributable to capitalized leases in accordance with the GAAP and any program costs incurred by Borrower in connection with sales of accounts receivable pursuant to a securitization program) of the Consolidated Companies for such period, determined on a consolidated basis. "Consolidated Net Income (Loss)" shall mean, for any fiscal period of Borrower, the net income (or loss) of the Consolidated Companies for such period (taken as a single accounting period) determined on a consolidated basis in conformity with GAAP; provided that there shall be excluded therefrom (i) any items of gain or loss which were included in determining such Consolidated Net Income and were not realized in the ordinary course of business or the result of a sale of assets other than in the ordinary course of business; and (ii) the income (or loss) of any party accrued prior to the date such becomes a Subsidiary of Borrower or is merged into or consolidated with Borrower or any of its Subsidiaries, or such party's assets are 6 acquired by any Consolidated Company, unless such party is acquired in a transaction accounted for as a pooling of interests. "Consolidated Net Worth" shall mean as of the date of determination, the Borrower's total shareholder's equity of such date as determined in accordance with GAAP. "Consolidated Rental Expense" shall mean, for any fiscal period of Borrower total operating lease expense of the Consolidated Companies for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated Tax Expense" shall mean, for any fiscal period of the Borrower, tax expense of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Contractual Obligation" of any Person shall mean any provision of any security issued by such Person or of any agreement, instrument or undertaking under which such Person is obligated or by which it or any of the property owned by it is bound. "Credit Documents" shall mean, collectively, this Agreement, the Revolving Notes, the Guaranty Agreements, and all other Guaranty Documents, if any. "Credit Parties" shall mean, collectively, each of Borrower, the Guarantors, and every other Person who, from time to time, executes a Credit Document with respect to all or any portion of the Obligations. "Default" shall mean any condition or event which, with notice or lapse of time or both, would constitute an Event of Default. "Documentation Agent" shall mean First Union National Bank, a national backing association, as documentation agent for the Lenders hereunder and under the other Credit Documents, and each successor documentation agent. "Dollar" and "U.S. Dollar" and the sign "$" shall mean lawful money of the United States of America. "Eligible Assignee" shall mean (i) a commercial bank organized under the laws of the United States of America, or any state thereof, or organized under the laws of any other country with a Lending Office in the United States of America, having total assets in excess of $1,000,000,000 or any commercial finance or asset based lending Affiliate of any such commercial bank and (ii) any Lender or any Affiliate of any Lender. "Environmental Laws" shall mean all federal, state, local and foreign statutes and codes or regulations, rules or ordinances issued, promulgated, or approved thereunder, now or hereafter in effect (including, without limitation, Asbestos Laws), relating to pollution or protection of the environment and relating to public health and safety, relating to (i) emissions, 7 discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial toxic or hazardous constituents, substances or wastes, including without limitation, any Hazardous Substance, petroleum including crude oil or any fraction thereof, any petroleum product or other waste, chemicals or substances regulated by any Environmental Law into the environment (including without limitation, ambient air, surface water, ground water, land surface or subsurface strata), or (ii) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of any Hazardous Substance, petroleum including crude oil or any fraction thereof, any petroleum product or other waste, chemicals or substances regulated by any Environmental Law, and (iii) underground storage tanks and related piping, and emissions, discharges and releases or threatened releases therefrom, such Environmental Laws to include, without limitation (i) the Clean Air Act (42 U.S.C.ss.7401 et seq.), (ii) the Clean Water Act (33 U.S.C.ss.1251 et seq.), (iii) the Resource Conservation and Recovery Act (42 U.S.C.ss.6901 et seq..), (iv) the Toxic Substances Control Act (15 U.S.C.ss.2601 et seq.) and (v) the Comprehensive Environmental Response Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act (42 U.S.C.ss. 9601 et seq.). "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended and in effect from time to time. "ERISA Affiliate" shall mean, with respect to any Person, each trade or business (whether or not incorporated) which is a member of a group of which that Person is a member and which is under common control within the meaning of the regulations promulgated under Section 414 of the Tax Code. "Eurodollar Advance" shall mean an Advance bearing interest based on the Adjusted LIBO Rate. "Eurodollar Loan" shall mean any Revolving Loan hereunder which bears interest based on the Adjusted LIBO Rate. "Event of Default" shall have the meaning set forth in Article VIII. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor statute thereto. "Executive Officer" shall mean with respect to any Person (other than a Guarantor), the President, Vice Presidents, Chief Financial Officer, Treasurer, Secretary and any Person holding comparable offices or duties, and with respect to a Guarantor, the President. "Extension of Credit" shall mean the making of a Revolving Loan or the conversion of a Revolving Loan of one Type into a Revolving Loan of another Type. "Facility" or "Facilities" shall mean the Revolving Loan Commitments and Revolving Loans. 8 "Facility Fee" shall have the meaning assigned to such term in Section 3.06(a). "Federal Funds Rate" shall mean for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of Atlanta, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent. "Fee Letter" shall mean that certain letter agreement, dated as of December 21, 1998, executed by SunTrust Equitable Securities Corporation, SunTrust Bank, Central Florida and First Union National Bank and acknowledged and agreed to by the Borrower, pursuant to which the Borrower agreed to pay certain fees set forth in such letter agreement. "Fees" shall mean, collectively, the Facility Fee and any other fees specified in the Fee Letter. "Final Maturity Date" shall mean the date on which all commitments have been terminated and all amounts outstanding under this Agreement have been declared or have automatically become due and payable pursuant to the provisions of Article VIII. "Fixed Charge Coverage Ratio" shall mean, as of any date of determination, the ratio of (A) Consolidated EBITDAR to (B) the sum of (i) Consolidated Interest Expense plus (ii) Consolidated Rental Expense, in each case measured for the four fiscal quarter period ending on such date (or if such date is not the last day of any fiscal quarter, for the four fiscal quarter period ending immediately prior to such date). "GAAP" shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. "Guaranteed Indebtedness" shall mean, as to any Person, any obligation of such Person guaranteeing any indebtedness, lease, dividend, or other obligation ("primary obligation") of any other Person (the "primary obligor") in any manner including, without limitation, any obligation or arrangement of such Person (a) to purchase or repurchase any such primary obligation, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition 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 9 obligation, or (d) to indemnify the owner of such primary obligation against loss in respect thereof. "Guarantors" shall mean, collectively, each Material Subsidiary of the Borrower that has executed the Guaranty Agreement as of the Closing Date, together with all other Material Subsidiaries that hereafter execute supplements to the Guaranty Agreement, and their respective successors and permitted assigns. "Guaranty Agreement" shall mean the Subsidiary Guaranty Agreement, dated as of the date hereof, executed by certain of Borrower's Subsidiaries in favor of the Lenders and the Administrative Agent, as the same may be amended, restated or supplemented from time to time. "Guaranty Documents" shall mean, collectively, the Guaranty Agreement, and each other guaranty agreement, mortgage, deed of trust, security agreement, pledge agreement, or other security or collateral document guaranteeing or securing the Obligations, as the same may be amended, restated, or supplemented from time to time. "Hazardous Materials" shall mean oil, petroleum or chemical liquids or solids, liquid or gaseous products, asbestos, or any other hazardous waste or hazardous substances, including, without limitation, hazardous medical waste or any other substance described in any Hazardous Materials Law. "Hazardous Materials Law" shall mean the Comprehensive Environmental Response Compensation and Liability Act as amended by the Super Fund Amendments and Reauthorization Act, 42 U.S.C. ss. 9601, the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, the state hazardous waste laws, as such laws may from time to time be in effect, and related regulations, and all similar laws and regulations. "Hazardous Substances" has the meaning assigned to that term in CERCLA. "Hughes Family " shall mean (i) David H. Hughes, Vincent S. Hughes, Russell V. Hughes, (ii) any of their direct family members (including, without limitation, lineal ancestors and descendants, siblings, and lineal descendants of siblings), (iii) any trusts and profit sharing plats and stock option plans established for the sole benefit of the foregoing, and (iv) the heirs and personal representatives of the foregoing. "Indebtedness" of any Person shall mean, without duplication (i) all obligations of such Person which in accordance with GAAP would be shown on the balance sheet of such Person as a liability (including, without limitation, obligations for borrowed money and for the deferred purchase price of property or services, and obligations evidenced by bonds, debentures, notes or other similar instruments); (ii) all Guaranteed Indebtedness of such Person (including contingent reimbursements obligations under undrawn financial letters of credit but not performance letters of credit) (iii) all Capitalized Lease Obligations; (iv) all Indebtedness of others secured by any Lien upon property owned by such Person, whether or not assumed; and (v) all obligations or other liabilities under currency contracts, interest rate contracts, interest rate 10 protection agreements, or similar agreements or combinations thereof. Notwithstanding the foregoing, in determining the Indebtedness of any Person, there shall be included all obligations of such Person of the character referred to in clauses (i) through (v) above deemed to be extinguished under GAAP but for which such Person remains legally liable except to the extent that such obligations (x) have been defeased in accordance with the terms of the applicable instruments governing such obligations and (y) the accounts or other assets dedicated to such defeasance are not included as assets on the balance sheet of such Person. "Intercompany Loan Documents" shall mean, collectively, the promissory notes and all related loan, subordination, and other agreements, to the extent that they exist, relating in any manner to the Intercompany Loans. "Intercompany Loans" shall mean, collectively, (i) the loans more particularly described on Schedule 5.22 and (ii) those loans or other extensions of credit made by any Consolidated Company to another Consolidated Company satisfying the terms and conditions set forth in Section 7.01 or as may otherwise be approved in writing by the Administrative Agent and the Required Lenders. "Interest Period" shall mean (i) with respect to Competitive Bid Loans, such periods agreed upon between Borrower and Lenders, and (ii) with respect to Eurodollar Advances, the period of 1, 2, 3 or 6 months selected by the Borrower, in case of clause (ii) pursuant to the terms of the credit facility and subject to customary adjustments in duration; provided, that (a) the first day of an Interest Period must be a Business Day, (b) any Interest Period that would otherwise end on 4 day that is not a Business Day for Eurodollar Loans shall be extended to the next succeeding Business Day for Eurodollar Loans, unless such Business Day falls in the next calendar month, in which case the Interest Period shall end on the next preceding Business Day for Eurodollar Loans, and (c) Borrower may not elect an Interest Period that would extend beyond the Revolving Credit Termination Date. "Investment" shall mean, when used with respect to any Person, any direct or indirect advance, loan or other extension of credit (other than the creation of receivables in the ordinary course of business) or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any Person, or any direct or indirect purchase or other acquisition by such Person of, or of a beneficial interest in, capital stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. "Lender" or "Lenders" shall mean the banks and lending institutions listed on the signature pages hereof, and each assignee thereof, if any, pursuant to Section 10.06. "Lending Office" shall mean for each Lender the office such Lender may designate in writing from time to time to Borrower and the Administrative Agent with respect to each Type of Revolving Loan. 11 "Leverage Ratio" shall mean, as of any date of determination, the ratio of Total Funded Debt as of such date to Total Capitalization as of such date. "LIBOR" shall mean, for any Interest Period, the offered rates for deposits in U.S. dollars for a period comparable to the Interest Period appearing on the Telerate Page 3750, as of I 1:00 a.m. London time on the day that is two business days prior to the Interest Period. If at least two such rates appear on the Telerate Page 3750, the rate for that Interest Period will be the arithmetic mean of such rates, rounded, if necessary, to the next higher 1/16 of 1.0%. If the foregoing rate is unavailable from the Telerate Page 3750 for any reason, then such rate shall be determined by the Administrative Agent from the Reuters Screen LIBOR Page, or if such rate is also unavailable on such service, then on any other interest rate reporting service of recognized standing designated in writing by the Administrative Agent to Borrower and the Lenders; it any such case rounded, if necessary, to the next higher 1/16 of 1.0%, if the rate is not such a multiple. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lion or charge of any kind or description and shall include, without limitation, any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any capital lease in the nature thereof including any lease or similar arrangement with a public authority executed in connection with the issuance of industrial development revenue bonds or pollution control revenue bonds, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction. "Line of Credit Agreement" shall mean that certain Line of Credit Agreement, dated as of the date hereof, by and among Borrower, SunTrust Bank, Central Florida, as Administrative Agent, First Union National Bank, as Documentation Agent, NationsBank N.A., as Syndication Agent, SouthTrust Bank, National Association, as Co-Agent, and the banks and lending institutions from time to time parties thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Materially Adverse Effect" shall mean the occurrence of an event, which would (i) cause the recognition of a liability, as required by Statement of Financial Accounting Standard No. 5, in the current quarter financial statements in the amount of $15,000,000 or more, or (ii) cause an auditor to have a substantial doubt about the ability of Borrower to continue as a going concern after consideration of management's plans as described in Statement of Auditing Standards, No. 50. "Material Subsidiary" shall mean each Subsidiary of Borrower, now existing or hereinafter established or acquired, that at any time prior to the Final Maturity Date, has or acquires total assets in excess of $1,000,000 or that accounted for or produced more than 5% of the Consolidated EBITR of Borrower on a consolidated basis during any of the three most recently completed fiscal years of Borrower. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. 12 "Notice of Borrowing" shall have the meaning provided in Section 3.01. "Notice of Continuation/Conversion" shall have the meaning provided in Section 3.01. "Obligations" shall mean all amounts owing to the Agents and all Lenders pursuant to the terms of this Agreement or any other Credit Document, including without limitation, all Revolving Loans (including all principal and interest payments due thereunder), fees, expenses, indemnification and reimbursement obligations, payments, indebtedness, liabilities, and obligations of the Credit Parties, direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising, together with all renewals, extensions, modifications or refinancings thereof "Payment Office" shall mean, for any Lender, the "Payment Office" listed on its signature page to this Agreement. "PBGC" shall mean the Pension Benefit Guaranty Corporation, and any successor thereto. "Permitted Liens" shall mean those Liens expressly permitted by Section 7.02. "Person" shall mean and shall include an individual, a partnership, a joint venture, a corporation, a trust., an unincorporated association, a government or any department or agency thereof and any other entity whatsoever. "Plan" shall mean any employee benefit plan, program, arrangement, practice or contract, maintained by or on behalf of the Borrower or an ERISA Affiliate, which provides benefits or compensation to or on behalf of employees or former employees, whether formal or informal, whether or not written, including but not limited to the following types of plans: (i) Executive Arrangements - any bonus, incentive compensation, stock option, deferred compensation, commission, severance, "golden parachute", "rabbi trust", or Other executive compensation plan, program, contract, arrangement or practice; (ii) ERISA Plans - any "employee benefit plan" as defined in Section 3(5) of ERISA), including, but not limited to, any defined benefit pension plan, profit sharing plan, money purchase pension plan, savings or thrift plan, stock bonus plan, employee stock ownership plan, Multiemployer Plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits; (iii) Other Employee Fringe Benefits - any stock purchase, vacation, scholarship, day care, prepaid legal services, severance pay or other fringe benefit plan, program, arrangement, contract or practice. 13 "Pro Rata Share" shall mean, with respect to each of the Revolving Loan Commitments of each Lender and each Loan to be made by and each payment (including, without limitation, any payment of principal, interest or fees) to be made to each Lender, the percentage designated as such Lender's Pro Rata Share of such Revolving Loan Commitments, such Revolving Loans or such payments, as applicable, set forth under the name of such Lender on the respective signature page for such Lender or in any assignment hereafter executed by an assignee of a Lender pursuant to Section 10.06, in each case as such Pro Rata Share may change from time to time as a result of assignments or amendments made pursuant to this Agreement. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time. "Required Lenders" shall mean, at any time, Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the then aggregate amount of the Revolving Loan Commitments and the aggregate outstanding Revolving Loans. "Requested Commitment Amount" shall have the meaning assigned to it in Section 3.03. "Requirement of Law" for any Person shall mean the articles or certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Reuters Screen" shall mean, when used in connection with any designated page and LIBOR, the display page so designated on the Reuter Monitor Money Rates Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to LIBOR). "Revolving, Loans" or "Loans" shall mean, collectively, the revolving credit loans made to Borrower by the Lenders pursuant to Section 2.01. "Revolving Loan Commitment" or "Commitment" shall mean, at any time for any Lender, the amount of such commitment set forth opposite such Lender's name on the signature pages hereof or in any assignment hereafter executed by any assignee of a Lender pursuant to Section 10.06, as the same may be increased or decreased from time to time as a result of any reduction thereof pursuant to Section 2.03, any assignment thereof pursuant to Section 10.06, or any amendment thereof pursuant to Section 10.02. "Revolving Loan Termination Date" shall mean the earlier of (i) January 25, 2004 and (ii) the date on which the Revolving Loan Commitments are terminated in accordance with Article VIII. 14 "Revolving Note" or "Note" shall mean any of the Syndicate Notes or Competitive Bid Notes either as originally executed or as the same may be from time to time supplemented, modified, amended, renewed or extended. "Subordinated Debt" shall mean all Indebtedness of Borrower and its Subsidiaries subordinated to all obligations of Borrower and its Subsidiaries or any other Credit Party arising under this Agreement, the Revolving Notes and the Guaranty Agreement on terms and conditions satisfactory in all respects to the Administrative Agent and the Required Lenders, including without limitation, with respect to interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies, and subordination provisions, as evidenced by the written approval of the Administrative Agent and Required Lenders. "Subsidiary" shall mean, with respect to any Person, any corporation or other entity (including, without limitation, partnerships, joint ventures, and associations) regardless of its jurisdiction of organization or formation, at least a majority of the total combined voting power of all classes of voting stock or other ownership interests of which shall, at the time as of which any determination is being made, be owned by such Person, either directly or indirectly through one or more other Subsidiaries. "Syndicate Loans" shall mean, collectively, the Revolving Loans made to Borrower hereunder other than Competitive Bid Loans. "Syndicate Note" shall mean a promissory note evidencing Syndicate Loans in the form attached hereto as Exhibit A. "Syndication Agent" shall mean NationsBank, N.A., a national banking association, as syndication agent for the Lenders hereunder and under the other Credit Documents, and each successor syndication agent. "Tax Code" shall mean the Internal Revenue Code of 1986, as amended and in affect from time to time. "Taxes" shall mean any present or future taxes, levies, imposts, duties, fees, assessments, deductions, withholdings or other charges of whatever nature, including without limitation, income, receipts, excise, property, sales, transfer, license, payroll, withholding, Social security and franchise taxes now or hereafter imposed or levied by the United States of America, or any state, local or foreign government or by any department, agency or other political subdivision or taxing authority thereof or therein and all interest, penalties, additions to tax and similar liabilities with respect thereto. "Telerate" shall mean, when used in connection with any designated page and "LIBOR," the display page so designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to "LIBOR"). 15 "Total Capitalization" shall mean, as of any date of determination, the sum of (i) Total Funded Debt plus (ii) Consolidated Net Worth as of such date. "Total Commitment" shall mean the sum of the Lenders' Revolving Loan Commitments as such Total Commitment may be reduced by voluntary reduction, prepayment or nonrenewal of a Lender's Revolving Loan Commitment as provided herein. "Total Funded Debt" shall mean all Indebtedness of the Consolidated Companies that by its terms or by the terms of any instrument or agreement relating thereto matures, or which is otherwise payable or unpaid, one year or more from, or is directly or indirectly renewable or extendable at the option of the debtor to a date one year or more (including an option of the debtor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more) from, the date of the creation thereof, provided that Total Funded Debt shall include, as at any date of determination, any portion of such Indebtedness outstanding on such date which matures on demand or within one year from such date (whether by sinking fund, other required prepayment, or final payment at maturity) and shall also include all Indebtedness of the Consolidated Companies for borrowed money under a line of credit, guidance line, revolving credit, bankers acceptance facility or similar arrangement for borrowed money, including, without limitation, all unpaid drawings under letters of credit and unreimbursed amounts pursuant to letter of credit reimbursement agreements, regardless of the maturity date thereof. "Type" of Borrowing shall mean a Borrowing consisting of Base Rate Advances, Eurodollar Advances or Competitive Bid Advances. "United States of America" shall mean the fifty (50) States and the District of Columbia "Wholly Owned Subsidiary" shall mean any Subsidiary, all the stock or ownership interest of every class of which, except directors' qualifying shares, shall, at the time as of which any determination is being made, be owned by Borrower either directly or indirectly. "Year 2000 Issues" shall mean the actual and anticipated costs, claims, losses, and liabilities associated with the inability of certain computer and software applications to effectively handle data that includes dates prior to, on, spanning or after January 1, 2000, as such inability in respect of any Consolidated Company affects the business, operations, and financial conditioner any Consolidated Company. Section 1.02 Accounting Terms and Determination. Unless otherwise defined or specified herein, all accounting terms shall be construed herein, all accounting determinations hereunder shall be made, all financial statements required to be delivered hereunder shall be prepared, and all financial records shall be maintained in accordance with, GAAP. 16 Section 1.03 Other Definitional Terms. The words "hereof', "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule, Exhibit and like references are to this Agreement unless otherwise specified. Section 1.04 Exhibits and Schedules. All Exhibits and Schedules attached hereto are by reference made a part hereof. Article II. REVOLVING LOAN COMMITMENTS Section 2.01 Revolving Loan Commitments, Use of Proceeds. (a) Subject to and upon the terms and conditions herein set forth, each Lender severally agrees to make to Borrower from time to time on and after the Closing Date, but prior to the Revolving Loan Termination Date, Revolving Loans in an aggregate amount outstanding at any time not to exceed such Lender's Revolving Loan Commitment. Borrower shall be entitled to repay and reborrow Revolving Loans in accordance with the provisions hereof. (b) Each Revolving Loan shall, at the option of Borrower, be made or continued as, or converted into, part of one or more Borrowings that shall consist entirely of Syndicate Loans (comprised of Base Rate Advances or Eurodollar Advances) or Competitive Bid Loans. The aggregate principal amount of each Borrowing of Revolving Loans comprised of Eurodollar Advances shall not be less than $5,000,000 or a greater integral multiple of $1,000,000. The aggregate principal amount of each Borrowing of Competitive Bid Loans shall not be less than $5,000,000. The aggregate principal amount of each Borrowing of Revolving Loans comprised of Base Rate Advances shall not be less than $ 1,000,000 or a greater integral multiple of $ 1,000,000. At no time shall the number of Borrowings outstanding under this Article II exceed ten; provided that, for the purpose of determining the number of Borrowings outstanding and the minimum amount for Borrowings resulting from conversions or continuations, all Borrowings of Base Rate Advances under this Facility shall be considered as one Borrowing. The parties hereto agree that (i) the aggregate principal balance of the Revolving Loans (including the Competitive Bid Loans) of the Lenders as a group shall not exceed the aggregate principal amount of all Revolving Loan Commitments, (ii) no Lender shall be obligated to make Syndicate Loans in excess of the Revolving Loan Commitment of such Lender, (iii) no Lender shall be obligated hereunder to extend Competitive Bid Loans or to make quotes for such Competitive Bid Loans, and (iv) a Lender may elect, in its discretion, to extend Competitive Bid Loans which, either alone or together with the Syndicate Loans of such Lender, exceed the Revolving Loan Commitment of such Lender. 17 (c) The proceeds of Revolving Loans shall be used solely to refinance existing indebtedness, to fund future acquisitions, to fund share repurchase agreements, to fund the working capital needs of the Borrower and its Subsidiaries, and for general corporate purposes. Section 2.02 Syndicate Note; Repayment of Principal. (a) Borrower's obligations to pay the principal of, and interest on, the Syndicate Loans and the Competitive Bid Loans to each Lender shall be evidenced by the records of the Administrative Agent and such Lender and by the Syndicate Note and the Competitive Bid Note, respectively, payable to such Lender (or the assignor of such Lender) completed in conformity with this Agreement. (b) All outstanding principal amounts under the Revolving Loans shall be due and payable in full at the earlier of (i) the Revolving Loan Termination Date or (ii) acceleration of the indebtedness as provided in Article VIII. Section 2.03 Voluntary Reduction of Revolving Loan Commitments. Upon at least three (3) Business Days' prior telephonic notice (promptly confirmed in writing) to the Administrative Agent, Borrower shall have the right, without premium or penalty, to terminate the Revolving Loan Commitments, in part or in whole, provided that (i) any such termination shall Apply to proportionately and permanently reduce the Revolving Loan Commitments of each of the Lenders, (ii) any partial termination pursuant to this Section 2.03 shall be in an amount of at least $5,000,000 and integral multiples of $1,000,000, and (iii) no such reduction shall be permitted if prohibited or without payment of all costs required to be paid hereunder with respect to a prepayment. If the aggregate outstanding amount of the Revolving Loans exceeds the amount Of the Revolving Loan Commitments as so reduced, Borrower shall immediately repay the Revolving Loans by an amount equal to such excess, together with all accrued but unpaid interest on such excess amount and any amounts due under Section 3.13 hereof. Article III. GENERAL LOAN TERMS Section 3.01 Funding Notices. (a) (i) Whenever Borrower desires to make a Borrowing of Syndicate Loans under its Revolving Loan Commitments (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)(i)), it shall give the Administrative Agent prior written notice (or telephonic notice promptly confirmed in writing) of such Borrowing (a "Notice of Borrowing") at its Payment Office such Notice of Borrowing to be given prior to (x) I 1:00 A.M. (local time for the Administrative Agent) one (1) Business Day prior to the requested date of such Borrowing in the case of Base Rate Advances, (y) 11:00 A.M. 18 (local time for the Administrative Agent) three (3) Business Days prior to the requested date of such Borrowing in the case of Eurodollar Advances and (z) prior to 1:00 P.M. (local time for the Administrative Agent) on the requested date of such Borrowing in the case of Competitive Bid Advances. Notices received after 1 1:00 A.M. for Base Rate Advances and Eurodollar Advances and 1:00 P.M. for Competitive Bid Advances shall be deemed received on the next Business Day. Each Notice of Borrowing shall be irrevocable and shall specify the aggregate principal amount of the Borrowing, the date of Borrowing (which shall be a Business Day), and whether the Borrowing is to consist of Base Rate Advances or Eurodollar Advances and (in the case of Eurodollar Advances) the Interest Period to be applicable thereto. (ii) Whenever Borrower desires to make a Borrowing of Competitive Bid Loans under its Revolving Loan Commitments (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)(ii)), it shall give the Administrative Agent notice that the Lenders are requested to provide Competitive Bid Rates for Interest Periods identified by Borrower, such Interest Periods not to exceed 180 days. Notices must comply with notice requirements of each respective Lender, which shall be communicated by Lenders to Borrower from time to time. Each Lender in its discretion may, but shall not be obligated to, submit a quote to the Borrower in connection with such request. The Borrower shall then be entitled, in its sole discretion, to elect to incur all or any part of the Competitive Bid Loan offered by one or more of the Lenders that have elected to provide quotes for any of the Interest Periods and at the rate(s) quoted by such Lender(s). The Competitive Bid Loans incurred by the Borrower in connection with such a request for quotes shall not exceed (i) with respect to all Lenders then providing quotes, the then unutilized Revolving Loan Commitments of all Lenders as a group, and (ii) with respect to each Lender providing a quote, the amount bid by such Lender in connection with such Lender's quote. The Borrower shall notice the Administrative Agent and such Lender or Lenders of its election in accordance with the procedures established with such Lender or Lenders, having no obligation to report the terms thereof; Provided, however, that if any Borrowing of Eurodollar Advances must be made as Base Rate Advances as a result of a determination made by the Administrative Agent pursuant to Section 3.09, such Notice of Borrowing may be revoked by Borrower no later than one (1) Business Day prior to the date of funding. (b) (i) Whenever Borrower desires to convert all or a portion of an outstanding Borrowing of Syndicate Loans under its Revolving Loan Commitments, Which Borrowing consists of Base Rate Advances into one or more Borrowings consisting of Eurodollar Advances or to continue outstanding a Borrowing consisting of Eurodollar Advances for a new Interest Period, it shall give the Administrative Agent at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each such Borrowing to be converted into or continued as Eurodollar Advances. Such notice (a "Notice of Continuation/Conversion") shall be given prior to I 1:00 A.M. (local time for the Administrative Agent) on the date specified at the Payment Office of the Administrative Agent. Each such Notice of Continuation/Conversion shall be irrevocable and shall specify the aggregate principal amount of the Advances to be converted or continued, the date of such conversion or continuation and the Interest Period applicable 19 thereto. If, upon the expiration of any Interest Period in respect of any Borrowing, Borrower shall have failed to deliver the Notice of Continuation/Conversion, Borrower shall be deemed to have elected to convert or continue such Borrowing to a Borrowing consisting of Base Rate Advances. So long as any Executive Officer of Borrower has knowledge that any Default or Event of Default shall have occurred and be continuing, no Borrowing may be converted into or continued as (upon expiration of the current Interest Period) Eurodollar Advances unless the Administrative Agent and each of the Lenders shall have otherwise consented in writing. No conversion of any Borrowing of Eurodollar Advances shall be permitted except on the last day of the interest Period in respect thereof (ii) Whenever Borrower desires to continue all or a portion of an outstanding Borrowing of Competitive Bid Loans under its Revolving Loan Commitments, for a new Interest Period, it may request that the Lenders provide quotes for Competitive Bid Rates in the same manner prescribed in Section 3.01 (a)(ii) for funding. Whenever Borrower desires to convert all or a portion of an outstanding Borrowing of Competitive Bid Loans under its Revolving Loan Commitments into a Borrowing of Syndicate Loans, it shall comply with the provisions prescribed in Section 3.01(b)(i) for conversion of Syndicate Loans. If, upon the expiration of any Interest Period in respect of any Competitive Bid Borrowing, Borrower shall have failed to deliver the Notice of Continuation/Conversion, or Lenders fail to provide such quotes, Borrower shall be deemed to have elected to convert or continue such Borrowing to a Borrowing of a Syndicate Loan consisting of Base Rate Advances. So long as any Default or Event of Default shall have occurred and be continuing, no Borrowing may be converted into (upon expiration of the current Interest Period) Eurodollar Advances. No conversion of any Borrowing into Eurodollar Advances shall be permitted except on the last day of the Interest Period in respect thereof. (c) Without in any way limiting Borrower's obligation to confirm in writing any telephonic notice, the Administrative Agent and the Lenders may act without liability upon the basis of telephonic notice believed by the Administrative Agent or the Lender in good faith to be from Borrower prior to receipt of written confirmation. In each such case, Borrower hereby waives the right to dispute the Administrative Agent's and the Lender's record of the terms of such telephonic notice. (d) The Administrative Agent shall promptly give each Lender notice by telephone (confirmed in writing) or by telex, telecopy or facsimile transmission of the matters covered by the notices given to the Administrative Agent pursuant to this Section 3.01 with respect to the Revolving Loan Commitments. Section 3.02 Disbursement of Funds. (a) No later than 11:00 A.M. (local time for the Administrative Agent) on the date of each Borrowing of Syndicate Loans pursuant to the Revolving Loan Commitments (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)(i)), each Lender will make available its Pro Rata Share of the amount of such 20 Borrowing in immediately available funds at the Payment Office of the Administrative Agent. The Administrative Agent will make available to Borrower the aggregate of the amounts (if any) so made available by the Lenders to the Administrative Agent in a timely manner by crediting such amounts to Borrower's demand deposit account maintained with the Administrative Agent or at Borrower's option, to effect a wire transfer of such amounts to Borrower's account specified by the Borrower, by the close of business oil such Business Day. In the event that the Lenders do not make such amounts available to the Administrative Agent by the time prescribed above, but such amount is received later that day, such amount may be credited to Borrower in the manner described in the preceding sentence on the next Business Day (with interest on such amount to begin accruing hereunder on such next Business Day). (b) No later than 2:00 P.M. (local time for the applicable Lender) on the date of each Borrowing of Competitive Bid Loans (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)(ii)), the Lender making any Competitive Bid Loan will make available the amount of such Borrowing in immediately available funds by wire transfer to an account specified by the Borrower on the date of each Borrowing pursuant to the Revolving Loan Commitments (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)(ii)). (c) Unless the Administrative Agent shall have been notified by the Lender making any Syndicate Loan prior to the date of a Borrowing that such Lender does not intend to make available to the Administrative Agent such Lender's portion of the Borrowing to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date and the Administrative Agent may make available to Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender on the date of Borrowing, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest at the Federal Funds Rate. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly Notify Borrower, and Borrower shall immediately pay such corresponding amount to the Administrative Agent together with interest at the rate specified for the Borrowing. Nothing in this subsection shall be deemed to relieve any Lender from its obligation to fund its Revolving Loan Commitments hereunder or to prejudice any rights which Borrower may have against any Lender as a result of any default by such Lender hereunder. (d) All Borrowings of Syndicate Loans shall be loaned by the Lenders on the basis of their Pro Rata Share of the Revolving Loan Commitments. All Borrowings of Competitive Bid Loans under the Revolving Loan Commitments shall be loaned by the Lenders whose quotes were accepted by the Borrower. No Lender shall be responsible for any default by any other Lender in its obligations hereunder, and each Lender shall be obligated to make the Revolving Loans provided to be made by it hereunder, regardless of the failure of any other Lender to fund its Revolving Loan Commitments hereunder. 21 Section 3.03 Increase of Revolving Loan Commitments. (a) So long as no Event of Default has occurred and is continuing, Borrower may, at any time by written notice to the Administrative Agent, who shall promptly notify the Lenders, request that the Revolving Loan Commitments be increased up to an amount not to exceed $275,000,000 in the aggregate (the "Requested Commitment Amount") on a pro rata basis based on the Pro Rata Shares of the Lenders. No Lender (or any successor thereto) shall have any obligation to increase its Revolving Loan Commitment or its other obligations under this Agreement and the other Credit Documents, and any decision by a Lender to increase its Revolving Loan Commitment shall be made in its sole discretion independently from any other Lender. Within fifteen (15) Business Days from each Lender's receipt of such request from the Borrower, each Lender shall notify the Administrative Agent in writing of whether or not it will agree to increase its Revolving Loan Commitment and by what amount it will agree to increase such Revolving Loan Commitment, up to its Pro Rata Share of the Requested Commitment Amount. Decisions to increase a Revolving Loan Commitment must be affirmatively communicated in writing and shall not be presumed based upon a failure to respond to Borrower's request. (b) In the event that the aggregate amount to which the Lenders are willing to increase their Revolving Loan Commitments is less than the Requested Commitment Amount based on the written notices delivered by the Lenders to the Administrative Agent, the Administrative Agent shall first offer to the Lenders who have agreed to increase their Revolving Loan Commitments the opportunity to further increase their Revolving Loan Commitments up to an amount equal to the Requested Commitment Amount. Such Lenders shall promptly respond in writing to the Administrative Agent of whether or not it will agree to further increase its Revolving Loan Commitment and by what amount it will agree to further increase its Revolving Loan Commitment. Within five (5) Business Days after receipt of all responses from such Lenders, the Administrative Agent shall inform the Borrower and all Lenders in writing of the amount by Which each Lender will increase its Revolving Loan Commitment. (c) In the event that the aggregate amount to which the Lenders are willing to increase their Revolving Loan Commitments is less than the Requested Commitment Amount based on the notice from the Administrative Agent to the Borrower and all Lenders, the Borrower shall have the right, within sixty days (60) after receipt of such notice from the Administrative Agent, to obtain commitments from new banks or financial institutions in an aggregate amount such that the existing Revolving Loan Commitments, plus the aggregate principal amount by which the Lenders are willing to increase their Revolving Loan Commitments, plus the aggregate principal amount of the new commitments by the new banks or financial institutions does not exceed the Requested Commitment Amount; provided, however, that (1) the new banks or financial institutions must be acceptable to the Administrative Agent, which acceptance will not be unreasonably withhold or delayed, and (2) the new banks or financial institutions must become parties to this Agreement pursuant to a joinder agreement in form and substance satisfactory to the Administrative Agent and the Required Lenders, pursuant to which (x) 22 they shall be granted all of the rights that existing Lenders have under this Agreement and the other Credit Documents and (y) they shall assume the same liabilities and obligations that the existing Lenders have under this Agreement. Section 3.04 Interest. (a) Borrower agrees to pay interest in respect of all unpaid principal amounts of the Syndicate Loans from the respective dates such principal amounts were advanced to maturity (whether by acceleration, notice of prepayment or otherwise) at rates per annum (on the basis of a 360-day year) equal to the applicable rates indicated below: (i) For Base Rate Advances--The Base Rate in effect from time to time; and (ii) For Eurodollar Advances--The relevant Adjusted LIBO Rate plus the Applicable Margin. (b) Borrower agrees to pay interest in respect of all unpaid principal amounts of the Competitive Bid Loans made to Borrower from the respective dates such principal amounts were advanced to maturity (whether by acceleration, notice of prepayment or otherwise) at times and at rates per annum (on the basis of a 360-day year) equal to the applicable rates agreed upon between Borrower and the Lender making such Competitive Bid Loans. (c) Overdue principal and, to the extent not prohibited by applicable law, overdue interest, in respect of the Revolving Loans, whether Syndicate Loans or Competitive Bid Loans, and all other overdue amounts owing hereunder, shall bear interest from each date that such amounts are overdue: (i) in the case of overdue principal and interest with respect to all Revolving Loans outstanding as Eurodollar Advances and Competitive Bid Advances, at the rate otherwise applicable for the then-cur-rent Interest Period plus an additional two percent (2.0%) per annum; thereafter at the rate in effect for Base Rate Advances plus an additional two percent (2.0%) per annum; and (ii) in the case of overdue principal and interest with respect to all other Revolving Loans outstanding as Base Rate Advances, and all other Obligations hereunder (other than Revolving Loans), at a rate equal to the applicable Base Rate plus an additional two percent (2.0%) per annum; provided that no Revolving Loan shall bear interest after maturity, whether by non-payment at scheduled due date, acceleration, notice of prepayment or otherwise at a rate per annum less then two percent (2.0%) per annum in excess of the rate of interest applicable thereto at maturity. 23 (d) Interest on each Revolving Loan shall accrue from and including the date of such Revolving Loan to, but excluding, the date of any repayment thereof; provided that, if a Revolving Loan is repaid on the same day made, one day's interest shall be paid on such Revolving Loan. Interest on all outstanding Base Rate Advances shall be payable quarterly in arrears on the last calendar day of each fiscal quarter of Borrower in each year. Interest on all outstanding Eurodollar Advances and Competitive Bid Advances shall be payable on the last day of each Interest Period applicable thereto, and, in the case of Eurodollar Advances having an Interest Period in excess of three months, on each day which occurs every three months, as the case may be, after the initial date of such Interest Period. Interest on all Revolving Loans shall be payable on any conversion of any Advances comprising such Revolving Loans into Advances of another Type, prepayment (on the amount prepaid), at maturity (whether by acceleration, notice of prepayment or otherwise) and, after maturity, on demand. (e) The Administrative Agent, upon determining the Adjusted LEBO Rate for any interest Period, shall promptly notify by telephone (confirmed in writing) or in writing Borrower and the other Lenders. Any such determination shall, absent manifest error, be final, conclusive and binding for all purposes. A Lender making a Competitive Bid Loan has no obligation to notice any other Lender of the interest rates charged to Borrower. Section 3.05 Interest Periods. (a) In connection with the making or continuation of, or conversion into, each Borrowing of Syndicate Loans comprised of Eurodollar Advances, Borrower shall select an interest period (each an "Interest Period") to be applicable to such Eurodollar Advances, which Interest Period shall be either a 1, 2, 3 or 6 month period; provided that: (i) The initial Interest Period for any Borrowing of Eurodollar Advances shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing consisting of Advances of another Type) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (ii) If any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provide that if any Interest Period in respect of Eurodollar Advances would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iii) Any Interest Period in respect of Eurodollar Advances which begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall, subject to part (iv) below, expire on the last Business Day of such calendar month; 24 (iv) No Interest Period shall extend beyond any date upon which any principal payment is due with respect to the Revolving Loans. (b) When Borrower requests a quote for a Competitive Bid Loan, the Borrower shall specify the Interest Period to be applicable to such Revolving Loan, which Interest Period shall be as agreed upon by the Borrower and such Lender; provided, however, that (i) no Interest Period shall exceed 180 days, (ii) no Interest Period shall extend beyond the Revolving Loan Termination Date and (iii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day. Interest shall be payable in respect of each Competitive Bid Loan on the last day of each Interest Period applicable to such Competitive Bid Loan, and at maturity (whether by acceleration or otherwise). Section 3.06 Fees. (a) Borrower shall pay to the Administrative Agent, for the account of and distribution of the respective Pro Rata Share to each Lender, a facility fee (the "Facility Fee") for the period commencing on the Closing Date to and including the Revolving Loan Termination Date, equal to (i) the Applicable Facility Fee Percentage per annum multiplied by (ii) on the daily average of the aggregate Revolving Loan Commitments of the Lenders, such fee being payable quarterly in arrears on the last calendar day of each fiscal quarter of Borrower and on the Revolving Loan Termination Date. (b) Borrower shall pay to the Administrative Agent such other fees as are specified, and in accordance with, the Fee Letter. Section 3.07 Voluntary Prepayments of Borrowings. (a) Borrower may, at its option, prepay Borrowings consisting of Base Rate Advances at any time in whole, or from time to time in part, in amounts aggregating $2,500,000 or any greater integral multiple of $500,000, by paying the principal amount to be prepaid together with interest accrued and unpaid thereon to the date of prepayment. Those Borrowings consisting of Eurodollar Advances may be prepaid, at Borrower's option, in whole, or from time to time in part, in amounts aggregating $5,000,000 or any greater integral multiple of $1,000,000, by paying the principal amount to be prepaid, together with interest accrued and unpaid thereon to the date of prepayment and all compensation payments pursuant to Section 3.13 if such prepayment is made on a date other than the last day of an Interest Period applicable thereto. Each such optional prepayment shall be applied in accordance with Section 3.07(c) below. (b) Borrower shall give written notice (or telephonic notice confirmed in writing) to the Administrative Agent of any intended prepayment of (i) Base Rate Advances not less than one Business Day prior to any such prepayments and (ii) Eurodollar Advances not less than three Business Days prior to any such prepayment. Borrower shall give 25 written notice (or telephonic notice confirmed in writing) to the respective Lender who made any Competitive Bid Loan of any intended prepayment of such Competitive Bid Loan not less than one Business Day prior to any prepayment of such Competitive Bid Loan. Such notice, once given, shall be irrevocable. Upon receipt of such notice of prepayment pursuant to the first sentence of this paragraph (b), the Administrative Agent shall promptly notify each Lender of the contents of such notice and of such Lender's share of such prepayment. (c) Borrower, when providing notice of prepayment pursuant to Section 3.07(b) may designate the Types of Advances and the specific Borrowing or Borrowings which are to be prepaid, provided that (i) if any prepayment of Eurodollar Advances made pursuant to a single Borrowing of the Revolving Loans shall reduce the outstanding Advances made pursuant to such Borrowing to an amount less than $1,000,000, such Borrowing shall immediately be converted into Base Rate Advances; and (ii) each prepayment made pursuant to a single Borrowing shall be applied pro rata among the Revolving Loans comprising such Borrowing, if such prepayment is not a prepayment of a Competitive Bid Loan. All voluntary prepayments shall be applied to the payment of any unpaid interest before application to principal. Section 3.08 Payments, etc. (a) (i) Except as otherwise specifically provided herein, all payments under this Agreement and the other Credit Documents, other than the payments specified in clause (ii) below, shall be made without defense, set-off or counterclaim to the Administrative Agent, not later than 2:00 P.M. (local time for the Administrative Agent) on the date when due and shall be made in Dollars in immediately available funds at the respective Payment Office. (ii) Except as otherwise specifically provided herein, all payments under this Agreement with respect to the Lenders making any Competitive Bid Loans shall be made without defense, set-off or counterclaim to such Lender not later than 2:00 P.M. (local time for such Lender) on the date when due and in immediately available funds at its Payment Office or at any other location of the Lender as such Lender may specify in writing to Borrower not later than 12:00 Noon (local time for the Lender) on the Business Day such payment is due. (b) (i) All such payments shall be made free and clear of and without deduction or withholding for any Taxes in respect of this Agreement, the Revolving Notes or other Credit Documents, or any payments of principal, interest, fees or other amounts payable hereunder or thereunder (but excluding any Taxes imposed on the overall net income of the Lenders pursuant to the laws of the jurisdiction in which the principal executive office or appropriate Lending Office of such Lender is located). If any Taxes are so levied or imposed, Borrower agrees (A) to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every net payment of all amounts due hereunder and under the Revolving Notes and other Credit Documents, after withholding or deduction for or on account of any such Taxes (including additional sums payable under this Section 3.08), 26 will not be less than the full amount provided for herein had no such deduction or withholding been required, (B) to make such withholding or deduction and (C) to pay the full amount deducted to the relevant authority in accordance with applicable law. Borrower will furnish to the Administrative Agent and each Lender, within 30 days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by Borrower. Borrower will indemnify and hold harmless the Administrative Agent and each Lender and reimburse the Administrative Agent and each Lender upon written request for the amount of any Taxes so levied or imposed and paid by the Administrative Agent or Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or illegally asserted. A certificate as to the amount of such payment by such Lender or the Administrative Agent, absent manifest error, shall be final, conclusive and binding for all purposes. (ii) Each Lender that is organized under the laws of any jurisdiction other than the United States of America agrees to furnish to Borrower and the Administrative Agent, prior to the time it becomes a Lender hereunder, two copies of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 or any successor forms thereto (wherein such Lender claims entitlement to complete exemption from or reduced rate of U.S. Federal withholding tax on interest paid by Borrower hereunder) and to provide to Borrower and the Administrative Agent a new Form 4224 or Form 1001 or any successor forms thereto if any previously delivered form is found to be incomplete or incorrect in any material respect or upon the obsolescence Of any previously delivered form; provided, however, that no Lender shall be required to furnish a form under this paragraph (ii) if it is not entitled to claim an exemption from or a reduced rate of withholding under applicable law. A Lender that is not entitled to claim an exemption from or a reduced rate of withholding under applicable law, promptly upon written request of Borrower, shall so inform Borrower in writing. (c) Subject to Section 3.05(a)(ii), whenever any payment to be made hereunder or under any Revolving Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the applicable rate during such extension. (d) On other than Competitive Bid Loans, which shall be negotiated from time to time, all computations of interest and fees shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable (to the extent computed on the basis of days elapsed), except that interest on Base Rate Advances shall be computed on the basis of a year of 360 days for the actual number of days. Interest on Base Rate Advances shall be calculated based on the Base Rate from and including the date of such Revolving Loan to but excluding the date of the repayment or conversion thereof. Interest on Eurodollar Advances shall be calculated as to each Interest Period from and including the first day thereof to but excluding the last day thereof. Each determination by the Administrative Agent or the Lender making any Competitive Bid 27 Loan of an interest rate or fee hereunder shall be made in good faith and, except for manifest error, shall be final, conclusive and binding for all purposes. (e) Payment by Borrower to the Administrative Agent in accordance with the terms of this Agreement shall, as to Borrower, constitute payment to the Lenders under this Agreement. Section 3.09 Interest Rate Not Ascertainable, etc. In the event that the Administrative Agent, in the case of the Adjusted LIBO Rate, shall have determined (which determination shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all parties) that on any date for determining the Adjusted LIBO Rate for any Interest Period, by reason of any changes arising after the date of this Agreement affecting the London interbank market or the Administrative Agent's position in such market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Adjusted LIBO Rate then, and in any such event, the Administrative Agent shall forthwith give notice (by telephone confirmed in writing) to Borrower and to the Lenders of such determination and a summary of the basis for such determination. Until the Administrative Agent notifies Borrower that the circumstances giving rise to the suspension described herein no longer exist, the obligations of the Lenders to make or permit portions of the Revolving Loans to remain outstanding past the last day of the then current Interest Periods as Eurodollar Advances shall be suspended, and such affected Advances shall bear the same interest as Base Rate Advances. Section 3.10 Illegally. (a) In the event that any Lender shall have determined (which determination shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon 41 parties) at any time that the making or continuance of any Eurodollar Advance has become unlawful by compliance by such Lender in good faith with any applicable law, governmental rule, regulation, guideline or order (whether or not having the force of law and whether or not failure to comply therewith would be unlawful), then, in any such event, the Lender shall give prompt notice (by telephone confirmed in writing) to Borrower and to the Administrative Agent of such determination and a summary of the basis for such determination (which notice the Administrative Agent shall promptly transmit to the other Lenders). (b) Upon the giving of the notice to Borrower referred to in subsection (a) above, Borrower's right to request and such Lender's obligation to make Eurodollar Advances shall be immediately suspended, and such Lender shall make an Advance as part of the requested Borrowing of Eurodollar Advances as a Base Rate Advance, provided, Borrower does not negotiate a Competitive Bid Loan, which Base Rate Advance shall, for all other purposes, be considered part of such Borrowing, and (ii) if the affected Eurodollar Advance or Advances are then outstanding, Borrower shall immediately, or if permitted by applicable law, no later than the date permitted thereby, upon at least one Business Day's written notice to the Administrative Agent and the affected Lender, 28 convert each such Advance into an Advance or Advances of a different Type with an Interest Period ending on the date on which the Interest Period applicable to the affected Eurodollar Advances expires, provided that if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section 3. 1 0(b). Section 3.11 Increased Costs. (a) If, by reason of (x) after the date hereof, the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation, or (y) the compliance with any guideline or request from any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having the force of law): (i) any Lender (or its applicable Lending Office) shall be subject to any tax)q duty or other charge with respect to its Eurodollar Advances or its obligation to make Eurodollar Advances, or the basis of taxation of payments to any Lender of the principal of or interest on its Eurodollar Advances or its obligation to make Eurodollar Advances shall have changed (except for changes in the tax on the overall net income of such Lender or its applicable Lending Office imposed by the jurisdiction in which such Lender's principal executive office or applicable Lending Office is located); or (ii) any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender's applicable Lending Office shall be imposed or deemed applicable or any other condition affecting its Eurodollar Advances or its obligation to make Eurodollar Advances shall be imposed on any Lender or its applicable Lending Office or the London interbank market; and as a result thereof there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining Eurodollar Advances (except to the extent already included in the determination of the applicable Adjusted LIBO Rate for Eurodollar Advances), or there shall be a reduction in the amount received or receivable by such Lender or its applicable Lending Office; then Borrower shall from time to time (subject, in the case of certain Taxes, to the applicable provisions of Section 3.08(b)), upon written notice from and demand by such Lender on Borrower (with a copy of such notice and demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender within five Business Days after the date of such notice and demand, additional amounts sufficient to indemnify such Lender against such increased cost. A certificate as to the amount of such increased cost, submitted to Borrower and the Administrative Agent by such Lender in good faith and accompanied by a statement prepared by such Lender describing in reasonable detail the basis for and calculation of such increased cost, shall, except for manifest error, be final, conclusive and binding for all purposes. 29 (b) If any Lender shall advise the Administrative Agent that at any time, because of the circumstances described in clauses (x) or (y) in Section 3.1 l(a) or any other circumstances beyond such Lender's reasonable control arising after the date of this Agreement affecting such Lender or the London interbank market or the United States of America secondary certificate of deposit market or such Lender's position in such markets, the Adjusted LIBO Rate, as determined by the Administrative Agent, will not adequately and fairly reflect the cost to such Lender of funding its Eurodollar Advances, then, and in any such event: (i) the Administrative Agent shall forthwith give notice (by telephone confirmed in writing) to Borrower and to the other Lenders of such advice; (ii) Borrower's right to request and such Lender's obligation to make or permit portions of the Revolving Loans to remain outstanding past the last day of the then current Interest Periods as Eurodollar Advances shall be immediately suspended; and (iii) such Lender shall make a Revolving Loan as part of the requested Borrowing of Eurodollar Advances, as the case may be, as a Base Rate Advance, which such Base Rate Advance shall, for all other purposes, be considered part of such Borrowing. Section 3.12 Lending Offices. (a) Each Lender agrees that, if requested by Borrower, it will use reasonable efforts (subject to overall policy considerations of such Lender) to designate an alternate Lending Office with respect to any of its Eurodollar Advances affected by the matters or circumstances described in Sections 3.08(b), 3.09, 3.10 or 3.11 to reduce the liability of Borrower or avoid the results provided thereunder, so long as such designation is not disadvantageous to such Lender as determined by such Lender, which determination if made in good faith, shall be conclusive and binding on all parties hereto. Nothing in this Section 3.12 shall affect or postpone any of the obligations of Borrower or any right of any Lender provided hereunder. (b) If any Lender that is organized under the laws of any jurisdiction other than the United States of America issues a public announcement with respect to the closing of its lending offices in the United States of America or any State thereof (including the District of Columbia) such that any withholdings or deductions and additional payments with respect to Taxes may be required to be made by Borrower thereafter pursuant to Section 3.08(b), such Lender shall use reasonable efforts to furnish Borrower notice thereof as soon as practicable thereafter; provided, however, that no delay or failure to furnish such notice shall in any event release or discharge Borrower from its obligations to such Lender pursuant to Section 3.08(b) or otherwise result in any liability of such Lender. 30 Section 3.13 Funding Losses. Borrower shall compensate each Lender, upon its written request to Borrower (which request shall set forth the basis for requesting such amounts in reasonable detail and which request shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all of the parties hereto), for all losses, expenses and liabilities (including, without limitation, any interest paid by such Lender to lenders of funds borrowed by it to make or carry its Eurodollar Advances, in either case to the extent not recovered by such Lender in connection with the re-employment of such funds and including loss of anticipated profits), which the Lender may sustain: (i) if for any reason (other than a default by such Lender) a borrowing of, or conversion to or continuation of Eurodollar Advances to Borrower does not occur on the date specified therefor in a Notice of Borrowing or Notice of Continuation/Conversion (whether or not withdrawn), (ii) if any repayment (including mandatory prepayments and any conversions pursuant to Section 3.10(b)) of any Eurodollar Advances to Borrower occurs on a date which is not the last day of an Interest Period applicable thereto, or (iii), if, for any reason, Borrower defaults in its obligation to repay its Eurodollar Advances when required by the terms of this Agreement. Section 3.14 Assumptions Concerning Funding of Eurodollar Advances. Calculation of all amounts payable to a Lender under this Article III shall be made as though that Lender had actually funded its relevant Eurodollar Advances through the purchase of deposits in the relevant market bearing interest at the rate applicable to such Eurodollar Advances in an amount equal to the amount of the Eurodollar Advances and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar Advances from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, that each Lender may fund each of its Eurodollar Advances in any manner it sees fit and the foregoing assumption shall be used only for calculation of amounts payable under this Article III. Section 3.15 Apportionment of Payments. Aggregate principal and interest payments in respect of Revolving Loans and payments in respect of the Facility Fee shall be apportioned among all outstanding Revolving Loan Commitments and Revolving Loans to which such payments relate, proportionately to the Lenders' respective pro rata portions of such Revolving Loan Commitments and outstanding Revolving Loans. The Administrative Agent shall promptly distribute to each Lender at its Payment Office set forth beside its name on the appropriate signature page hereof or such other address as any Lender may request its share of all such payments received by the Administrative Agent. Section 3.16 Sharing of Payments, Etc. If any Lender shall obtain any payment or reduction (including, without limitation, any amounts received as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code) of the Obligations (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its pro rata portion of payments or reductions on account of such obligations obtained by all the Lenders, such Lender shall forthwith (i) notify each of the other Lenders and Administrative Agent of such receipt, and (ii) purchase from the other Lenders such participation's in the affected obligations as shall be necessary to cause such purchasing Lender to share the excess 31 payment or reduction, net of costs incurred in connection therewith, ratably with each of them, provided that if all or any portion of such excess payment or reduction is thereafter recovered from such purchasing Lender or additional costs are incurred, the purchase shall be rescinded and the purchase price restored to the extent of such recovery or such additional costs, but without interest unless the Lender obligated to return such funds is required to pay interest on such funds. Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 3.16 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participation. Section 3.17 Capital Adequacy. Without limiting any other provision of this Agreement, in the event that any Lender shall have determined that any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy not currently in effect or fully applicable as of the Closing Date, or any change therein or in the interpretation or application thereof after the Closing Date, or compliance by such Lender with any request or directive regarding capital adequacy not currently in effect or fully applicable as of the Closing Date (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) from a central bank or governmental authority or body having jurisdiction, does or shall have the effect of reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder to a level below that which such Lender could have achieved but for such law, treaty, rule, regulation, guideline or order, or such change or compliance by an amount reasonably deemed by such Lender to be material, then within ten (10) Business Days after written notice and demand by such Lender (with copies thereof to the Administrative Agent), Borrower shall from time to time pay to such Lender additional amounts sufficient to compensate such Lender for such reduction (but, in the case of outstanding Base Rate Advances, without duplication of any amounts already recovered by such Lender by reason of an adjustment in the applicable Base Rate). Each certificate as to the amount payable under this Section 3.17 (which certificate shall set forth the basis for requesting such amounts in reasonable detail), submitted to Borrower by any Lender in good faith, shall, absent manifest error, be final, conclusive and binding for all purposes. Section 3.18 Benefits to Guarantors. In consideration for the execution and delivery by the Guarantors of the Guaranty Agreement, Borrower agrees to make the benefit Of extensions of credit hereunder available to the Guarantors. Section 3.19 Limitation on Certain Payment Obligations. (a) Each Lender or Administrative Agent shall make written demand on Borrower for indemnification or compensation pursuant to Section 3.08 no later than 90 days after the earlier of (i) the date on which such Lender or the Administrative Agent makes payment of such Taxes, and (ii) the date on which the relevant taxing authority or other governmental authority makes written demand upon such Lender or the Administrative Agent for payment of such Taxes. 32 (b) Each Lender or the Administrative Agent shall make written demand on Borrower for indemnification or compensation pursuant to Sections 3.13 and 3.14 no later than 90 days after the event giving rise to the claim for indemnification or compensation occurs. (c) Each Lender or the Administrative Agent shall make written demand on Borrower for indemnification or compensation pursuant to Sections 3.11 and 3.17 no later than 90 days after such Lender or the Administrative Agent receives actual notice or obtains actual knowledge of the promulgation of a law, rule, order or interpretation or occurrence of another event giving rise to a claim pursuant to such sections. (d) In the event that the Lenders or the Administrative Agent fail to give Borrower notice within the time limitations prescribed in (a) or (b) above, Borrower shall not have any obligation to pay such claim for compensation or indemnification. In the event that the Under or the Administrative Agent fail to give Borrower notice within the time limitation prescribed in (c) above, Borrower shall not have any obligation to pay any amount with respect to claims accruing prior to the ninetieth day preceding such written demand. Article IV. CONDITIONS TO BORROWINGS The obligations of each Lender to make Advances to Borrower hereunder is subject to the satisfaction of the following conditions: Section 4.01 Conditions Precedent to Initial Revolving Loans. At the time of the making of the initial Revolving Loans hereunder on the Closing Date, all obligations of Borrower hereunder incurred prior to the initial Revolving Loans (including, without limitation, Borrower's obligations to reimburse the reasonable fees and expenses of counsel to the Administrative Agent and any fees and expenses payable to the Administrative Agent and the Lenders as previously agreed with Borrower), shall have been paid in full, and the Administrative Agent shall have received the following, in form and substance reasonably satisfactory in all respects to the Administrative Agent: (a) the duly executed counterparts of this Agreement; (b) the duly completed Revolving Notes evidencing the Revolving Loan Commitments; (c) the duly executed Guaranty Agreement; (d) certificate of Borrower in substantially the form of Exhibit C attached hereto and appropriately completed; 33 (e) the duly executed Commitment Letter; (f) the duly executed Fee Letter; (g) certificates of the Secretary or Assistant Secretary of each of the Credit Parties attaching and certifying copies of the resolutions of the boards of directors of the Credit Parties, authorizing as applicable the execution, delivery and performance of the Credit Documents; (h) certificates of the Secretary or an Assistant Secretary of each of the Credit Parties certifying (i) the name, title and true signature of each officer of such entities executing the Credit Documents, (ii) the bylaws or comparable governing documents of such entities; and (iii) the certificate or articles of incorporation of each Credit Party; (i) certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of incorporation or organization of such Credit Party; (j) copies of all documents and instruments, including all consents, authorizations and filings, required or advisable under any Requirement of Law or by any material Contractual Obligation of the Credit Parties, in connection with the execution, delivery, performance, validity and enforceability of the Credit Documents and the other documents to be executed and delivered hereunder, and such consents, authorizations, filings and orders shall be in full force and effect and all applicable waiting periods shall have expired; (k) certified copies of the Intercompany Loan Documents, to the extent that they exist and have not previously been certified to the Lenders; (l) duly executed solvency certificates of Borrower and each of the Guarantors, in form and substance satisfactory to the Agents and Lenders; (m) acknowledgment from CSC Network Corporation System, Inc. as to its appointment as agent for service of process for the various Credit Parties; (n) certified copies of indentures, credit agreements, leases, capital leases, instruments, and other documents evidencing or securing Indebtedness of any Consolidated Company described on Schedule 7.01(b), in any single case in an amount not less than $500,000 and to the extent not previously certified to the Lenders; (o) certificates, reports and other information as the Administrative Agent may reasonably request from any Consolidated Company in order to satisfy the Lenders as to the absence of any material liabilities or obligations arising from matters relating to employees of the Consolidated Companies, including employee relations, collective bargaining agreements, Plans, and other compensation and employee benefit plans; 34 (p) certificates, reports, environmental audits and investigations, and other information as the Administrative Agent may reasonably request from any Consolidated Company in order to satisfy the Lenders as to the absence of any material liabilities or obligations arising from environmental and employee health and safety exposures to which the Consolidated Companies may be subject, and the plans of the Consolidated Companies with respect thereto; (q) certificates, reports and other information as the Administrative Agent may reasonably request from any Consolidated Company in order to satisfy the Lenders as to the absence of any material liabilities or obligations arising from litigation (including without limitation, products liability and patent infringement claims) pending or threatened against the Consolidated Companies; (r) a certificate of insurance summarizing, in form and detail reasonably acceptable to the Administrative Agent, of the types and amounts of insurance (property and liability) maintained by the Consolidated Companies; (s) the favorable opinion of counsel to the Credit Parties addressed to the Administrative Agent and each of the Lenders; and (t) financial statements of Borrower and its Subsidiaries, audited on a consolidated basis for the fiscal year ended on the last Friday in January, 1998 and unaudited on a consolidated basis for the fiscal quarter ended on the last Friday in October, 1998. In addition to the foregoing, the following conditions shall have been satisfied or shall exist, all to the satisfaction of the Administrative Agent, as of the time the initial Revolving Loans are made hereunder: (u) the Revolving Loans to be made on the Closing Date and the use of proceeds thereof shall not contravene, violate or conflict with, or involve the Administrative Agent or any Lender in a violation of, any law, rule, injunction, or regulation, or determination of any court of law or other governmental authority; (v) all corporate proceedings and all other legal matters in connection with the authorization, legality, validity and enforceability of the Credit Documents shall be reasonably satisfactory in form and substance to the Required Lenders; and (w) the status of all pending and threatened litigation (including products liability and patent claims) which might result in a Materially Adverse Effect, including a description of any damages sought and the claims constituting the basis therefor, shall have been reported in writing to the Administrative Agent, the Administrative Agent shall have reported such matters to the Lenders, and the Lenders shall be satisfied with such status. Section 4.02 Conditions to All Revolving Loans. At the time of the making of all Revolving Loans (before as well as after giving effect to such Revolving Loans and to the 35 proposed use of the proceeds thereof), the following conditions shall have been satisfied or shall exist: (a) there shall exist no Default or Event of Default; (b) all representations and warranties by Borrower contained herein shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Revolving Loans; (c) since the date of the most recent financial statements of the Consolidated Companies described in Section 5.03, there shall have been no change which has had or could reasonably be expected to have a Materially Adverse Effect. (d) there shall be no action or proceeding instituted or pending before any court or other governmental authority or, to the knowledge of Borrower, threatened (i) which reasonably could be expected to have a Materially Adverse Effect, or (ii) seeking to prohibit or restrict one or more Credit Party's ownership or operation of any portion of its business or assets, or to compel one or more Credit Party to dispose of or hold separate all or any portion of its businesses or assets, where such portion or portions of such business(es) or assets, as the case may be, constitute a material portion of the total businesses or assets of the Consolidated Companies; (e) the Revolving Loans to be made and the use of proceeds thereof shall not contravene, violate or conflict with, or involve the Administrative Agent or any Lender in a violation of, any law, rule, injunction, or regulation, or determination of any court of law or other governmental authority applicable to Borrower; and (f) the Administrative Agent shall have received such other documents or legal opinions as the Administrative Agent or any Lender may reasonably request, all in form and substance reasonably satisfactory to the Administrative Agent. Each request for a Borrowing and the acceptance by Borrower of the proceeds thereof shall constitute a representation and warranty by Borrower, as of the date of the Revolving loans comprising such Borrowing, that the applicable conditions specified in Sections 4.01 and 4.02 have been satisfied. Article V. REPRESENTATIONS AND WARRANTIES Borrower represents, warrants and covenants to Lenders that: Section 5.01 Organization and Qualification. Borrower is a corporation duly organized and existing in good standing under the laws of the State of Florida. Each Subsidiary of Borrower is a corporation duly organized and existing under the laws of the jurisdiction of its 36 incorporation. Borrower and each of its Subsidiaries are duly qualified to do business as a foreign corporation and are in good standing in each jurisdiction in which the character of their properties or the nature of their business makes such qualification necessary, except for such jurisdictions in which a failure to qualify to do business would not have a Materially Adverse Effect. Borrower and each of its Subsidiaries have the corporate power to own their respective properties and to each on their respective businesses as now being conducted. The jurisdiction of incorporation or organization, and the ownership of all issued and outstanding capital stock, for each Subsidiary as of the date of this Agreement is accurately described on Schedule 5.01. Schedule 5.Q4 also designates the Material Subsidiaries as of the Closing Date. Section 5.02 Corporate Authority. The execution and delivery by Borrower and the Guarantors of and the performance by Borrower and Guarantors of their obligations under the Credit Documents have been duly authorized by all requisite corporate action and all requisite shareholder action, if any, on the part of Borrower and the Guarantors and do not and will not (i) violate any provision of any law, rule or regulation, any judgment, order or ruling of any court or governmental agency, the organizational papers or bylaws of Borrower or the Guarantors, or any indenture, agreement or other instrument to which Borrower or the Guarantors are a party or by which Borrower or the Guarantors or any of their properties is bound, or (ii) be in conflict with, result in a breach of, or constitute with notice or lapse of time or both a default under any such indenture, agreement or other instrument. Section 5.03 Financial Statements. Borrower has furnished Lenders with the following financial statements: (i) consolidated balance sheets and consolidated statements of income, stockholders' equity and cash flow of Borrower for the fiscal year ended on the last Friday in January, 1998, audited by Price Waterhouse Coopers LLP and (ii) unaudited consolidated balance sheets and consolidated statements of income, stockholders' equity and cash flow of Borrower for the fiscal quarter ending on the last Friday in October, 1998. Such financial statements (including any related schedules and notes) are true and correct in all material respects (subject, as to interim statements, to changes resulting from audits and year end adjustments), have been prepared in accordance with GAAP consistently applied throughout the period or periods in question and show, in the case of audited statements, all liabilities, direct or contingent, of Borrower and its Subsidiaries, required to be shown in accordance with GAAP consistently applied throughout the period or periods in question and fairly present the consolidated financial position and the consolidated results of operations of Borrower and its Subsidiaries for the periods indicated therein. There has been no material adverse change in the business, condition or operations, financial or otherwise, of Borrower and its Subsidiaries since the last Friday in October, 1998. Section 5.04 Tax Returns. Each of Borrower and its Subsidiaries has filed all federal, state and other income tax returns which, to the best knowledge of the executive officers of Borrower and its Subsidiaries, are required to be filed, and each has paid all taxes as shown on said returns and on all assessments received by it to the extent that such taxes have become due or except such as are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP. 37 Section 5.05 Actions Pending. There is no action, suit, investigation or proceeding pending or, to the knowledge of Borrower, threatened against or affecting Borrower or any of its Subsidiaries or any of their properties or rights, by or before any court, arbitrator or administrative or governmental body, which might result in any Materially Adverse Effect. Section 5.06 Representations; No Defaults. At the time of each Extension of Credit there shall exist no Default or Event of Default, and each Extension of Credit shall be deemed a renewal by Borrower of the representations and warranties contained in this Agreement and an affirmative statement by Borrower that such representations and warranties are true and correct on and as of such time with the same effect as though such representations and warranties had been made on and as of such time. Section 5.07 Title to Properties. Each of Borrower and its Subsidiaries has (i) good and marketable fee simple title to its respective real properties (other than real properties which it leases from others), including such real properties reflected in the consolidated balance sheet of Borrower and its Subsidiaries as of the last Friday of October, 1998, here in above described (other than real properties disposed of in the ordinary course of business), subject to no Lien of any kind except Liens permitted by Section 7.02 and (ii) good title to all of its other respective properties and assets (other than properties and assets which it leases from others), including the other properties and assets reflected in the consolidated balance sheet of Borrower and its Subsidiaries at the last Friday of October, 1998, here in above described (other than properties and assets disposed of in the ordinary course of business), subject to no Lien of any kind except Liens permitted by Section 1.02. Each of Borrower and its Subsidiaries enjoys peaceful and undisturbed possession under all leases necessary in any material respect for the operation of its respective properties and assets, none of which contains any unusual or burdensome provisions which might materially affect or impair the operation of such properties and assets, and all such leases are valid and subsisting and in full force and effect. Section 5.08 Enforceability of Agreement. This Agreement is the legal, valid and binding agreement of Borrower enforceable against Borrower in accordance with its terms, and the Revolving Notes, and all other Credit Documents, when executed and delivered, will be similarly legal, valid, binding and enforceable, except as the enforceability of the Revolving Notes and other Credit Documents may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditor's rights and remedies in general and by general principles of equity, whether considered in a proceeding at law or in equity. Section 5.09 Consent. No consent, permission, authorization, order or license of any governmental authority or Person is necessary in connection with the execution, delivery, performance or enforcement of the Credit Documents, or in order to constitute the indebtedness to be incurred hereunder and under the Revolving Notes and the other Credit Documents as "Senior Debt" or any similar term defined within the documents evidencing any Subordinated Debt. 38 Section 5.10 Use of Proceeds, Federal Reserve Regulations. The proceeds of the Revolving Notes will be used solely for the purposes specified in Section 2.01 (c) and none of such proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin security" or "margin stock" or for the purpose of reducing or retiring any indebtedness that originally was incurred to purchase or carry a "margin security" or "margin stock" or for any other purpose that might constitute this transaction a "purpose credit" within the meaning of the regulations of the Board of Governors of the Federal Reserve System. Section 5.11 ERISA. (a) Identification of Certain Plans. Schedule 5.11 hereto sets forth all Plans of Borrower and its Subsidiaries; (b) Compliance. Each Plan is being maintained, by its terms and in operation, in accordance with all applicable laws, except such noncompliance's (when taken as a whole) that will not have a Materially Adverse Effect; (c) Liabilities. Neither the Borrower nor any Subsidiary is currently or will become subject to any liability (including withdrawal liability), tax or penalty whatsoever to any person whomsoever with respect to any Plan including, but not limited to, any tax, penalty or liability arising under Title I or Title IV of ERISA or Chapter 43 of the Tax Code, except such liabilities (when taken as a whole) as will not have a Materially Adverse Effect; and (d) Funding. The Borrower and each ERISA Affiliate has made full and timely payment of all amounts (i) required to be contributed under the terms of each Plan and applicable law and (ii) required to be paid as expenses of each Plan, except where such non-payment would not have a Materially Adverse Effect. No Plan has an "amount of unfunded benefit liabilities' (as defined in Section 4001(a)(18) of ERISA) except as disclosed on Schedule 5.11. No Plan is subject to a waiver or extension of the minimum funding requirements under ERISA or the Tax Code, and no request for such waiver or extension is pending. Section 5.12 Subsidiaries. All the outstanding shares of stock of each such Subsidiary have been validly issued and are fully paid and nonassessable and all such outstanding shares, except as noted on such Schedule 5.01, are owned by Borrower or a Wholly Owned Subsidiary of Borrower free of any Lien or claim. Each Subsidiary (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of its incorporation with the power and authority (corpora* and other) to carry on its business as it is now conducted and (ii) is qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required under applicable law. 39 Section 5.13 Outstanding Indebtedness. As of the date of closing and after giving effect to the transactions contemplated by this Agreement, neither Borrower nor any of its Subsidiaries has outstanding any Indebtedness except as permitted by Section 7.01 and there exists no default under the provisions of any instrument evidencing such Indebtedness or of any agreement relating thereto. Section 5.14 Conflicting Agreements. Neither Borrower nor any of its Subsidiaries is a party to any contract or agreement or other burdensome restrictions or subject to any charter or other corporate restriction which materially and adversely affects its business, property or assets, or financial condition. Assuming the consummation of the transactions contemplated by this Agreement, neither the execution or delivery of this Agreement or the Credit Document, nor fulfillment of or compliance with the terms and provisions hereof and thereof, will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien upon any of the properties or assets of Borrower or any of its Subsidiaries pursuant to, the charter or By-Laws of Borrower or any of its Subsidiaries, any award of any arbitrator or any agreement (including any agreement with stockholders), instrument, order, judgment, decree, statute, law, rule or regulation to which Borrower or any of its Subsidiaries is subject, and neither Borrower nor any of its Subsidiaries is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of Borrower or any of its Subsidiaries, any agreement relating thereto or any other contract or agreement (including its charter) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the type to be evidenced by the Revolving Notes or contains dividend or redemption limitations on Common Stock of Borrower, except for this Agreement, Borrower's Certificate of Incorporation and those matters listed on Schedule 5.14 attached hereto. Section 5.15 Pollution and Other Regulations. (a) Each of the Borrower and its Subsidiaries has complied in all material respects with all applicable Environmental Laws, including without limitation, compliance with permits, licenses, standards, schedules and timetables, and is not in violation of, and does not presently have outstanding any liability under, has not been notified that it is or may be liable under and does not have knowledge of any liability or potential liability (including any liability relating to matters set forth on Schedule 5.15(a)) except as set forth on Schedule 5.15(a), under any applicable Environmental Law, including without limitation, the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), the Federal Water Pollution Control Act, as amended ("FWPCA"), the Federal Clean Air Act, as amended ("FCAA"), and the Toxic Substance Control Act ("TSCA"), which violation, liability or potential liability could reasonably be expected to have a Materially Adverse Effect. 40 (b) Neither the Borrower nor any of its Subsidiaries has received a written request for information under CERCLA, any other Environmental Laws or any comparable state law, or any public health or safety or welfare law or written notice that any such entity has been identified as a potential responsible party under CERCLA, and other Environmental Laws, or any comparable state law, or any public health or safety or welfare law, nor has any such entity received any Written notification that any Hazardous Substance that it or any of its respective predecessors in interest has generated, stored, treated, handled, transported, or disposed of, has been released or is threatened to be released at any site at which any Person intends to conduct or is conducting a remedial investigation or other action pursuant to any applicable Environmental Law, or any other Environmental Laws. (c) Each of the Borrower and its Subsidiaries has obtained all permits, licenses or other authorizations required for the conduct of their respective operations under all applicable Environmental Laws and each such authorization is in full force and effect. (d) Each of Borrower and its Subsidiaries complies in all material respects with all laws and regulations relating to equal employment opportunity and employee safety in all jurisdictions in which it is presently doing business, and Borrower will use its best efforts to comply, and to cause each of its Subsidiaries to comply, with all such laws and regulations which may be legally imposed in the future in jurisdictions in which Borrower or any of its Subsidiaries may then be doing business. Section 5.16 Possession of Franchises, Licenses, Etc. Each of Borrower and its Subsidiaries possesses all franchises, certificates, licenses, permits and other authorizations from governmental political subdivisions or regulatory authorities, free from burdensome restrictions, that are necessary in any material respect for the ownership, maintenance and operation of its properties and assets, and neither Borrower nor any of its Subsidiaries is in violation of any thereof in any material respect. Section 5.17 Patents, Etc. Each of Borrower and its Subsidiaries owns or has the right to use all patents, trademarks, service marks, trade names, copyrights, licenses and other rights, free from burdensome restrictions, which are necessary for the operation of its business as presently conducted. Nothing has come to the attention of Borrower, any of its Subsidiaries or any of their respective directors and officers to the effect that (i) any product, process, method, substances part or other material presently contemplated to be sold by or employed by Borrower or any of its Subsidiaries in connection with its business may infringe any patent, trademark, service mark, trade name, copyright, license or other right owned by any other Person, (ii) there is pending or threatened any claim or litigation against or affecting Borrower or any of its Subsidiaries contesting its right to sell or use any such product, process, method, substance, part or other material or (iii) there is, or there is pending or proposed, any patent, invention, device, application or principle or any statute, law, rule, regulation, standard or code which would prevent, inhibit or render obsolete the production or sale of any products of, or substantially reduce the projected revenues of, or otherwise materially adversely affect the business, condition or operations of, Borrower or any of its Subsidiaries, 41 Section 5.18 Governmental Consent. Neither the nature of Borrower or any of its Subsidiaries nor any of their respective businesses or properties, nor any relationship between Borrower and any other Person, nor any circumstance in connection with the execution and delivery of the Credit Documents and the consummation of the transactions contemplated thereby is such as to require on behalf of Borrower or any of its Subsidiaries any consent, approval or other action by or any notice to or filing with any court or administrative or governmental body in connection with the execution and delivery of this Agreement and the Credit Documents. Section 5.19 Disclosure. Neither this Agreement nor the Credit Documents nor any other document, certificate or written statement furnished to Lenders by or on behalf of Borrower in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. There is no fact peculiar to Borrower which materially adversely affects or in the future may (so far as Borrower can now foresee) materially adversely affect the business, property or assets, financial condition or prospects of Borrower which has not been set forth in this Agreement or in the Credit Documents, certificates and written statements furnished to Lenders by or on behalf of Borrower prior to the date hereof in connection with the transactions contemplated hereby. Section 5.20 Insurance Coverage. Each property of Borrower or any of its Subsidiaries is insured within terms acceptable to Lenders for the benefit of Borrower or a Subsidiary of Borrower in amounts deemed adequate by Borrower's management and no less than those amounts customary in the industry in which Borrower and its Subsidiaries operate against risks usually insured against by Persons operating businesses similar to those of Borrower or its Subsidiaries in the localities where such properties are located. Section 5.21 Labor Matters. The Borrower and the Borrower's Subsidiaries have experienced no strikes, labor disputes, slow downs or work stoppages due to labor disagreements which have had, or would reasonably be expected to have, a Materially Adverse Effect, and, to the best knowledge of Borrower's executive officers, there are no such strikes, disputes, slow downs or work stoppages threatened against any Borrower or any of Borrower's Subsidiaries. The hours worked and payment made to employees of the Borrower and Borrower's Subsidiaries have not been in violation in any material respect of the Fair Labor Standards, Act or any other applicable law dealing with such matters. All payments due from the Borrower and Borrower's Subsidiaries, or for which any claim may be made against the Consolidated Companies, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as liabilities on the books of the Borrower and Borrower's Subsidiaries where the failure to pay or accrue such liabilities would reasonably be expected to have a Materially Adverse Effect. Section 5.22 Intercompany Loans, Dividends. The Intercompany Loans and the Intercompany Loan Documents, to the extent that they exist, have been duly authorized and approved by all necessary corporate and shareholder action on the part of the parties thereto, and 42 constitute the legal, valid and binding obligations of the parties thereto, enforceable against each of them in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors' rights generally, and by general principles of equity. There are no restrictions on the power of any Consolidated Company to repay any Intercompany Loan or to pay dividends on the capital stock. Intercompany Loans as of the Closing Date are described in Schedule 5.22. Section 5.23 Burdensome Restrictions. None of the Consolidated Companies is a party to or bound by any Contractual Obligation or Requirement of Law which has had or would reasonably be expected to have a Materially Adverse Effect. Section 5.24 Investment Company Act, Etc. Neither the Borrower nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company" (as each of the quoted terms is defined or used in the Investment Company Act of 1940, as amended). Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any foreign, federal or local statute or regulation limiting its ability to incur indebtedness for money borrowed, guarantee such indebtedness, or pledge its assets to secure such indebtedness, as contemplated hereby or by any other Credit Document. Section 5.25 Notice of Non-Compliance with Laws. Neither the Borrower not any of its Subsidiaries has received notice of any violation of Law, statute, order, rule, regulation, or judgment entered by any court that may reasonably be expected to have a Materially Adverse Effect. Section 5.26 Year 2000 Issues. Borrower and the other Consolidated Companies are performing a comprehensive review of their computers and software applications to identify the systems that would be affected by Year 2000 Issues as such issues pertain to the computer programs and systems of the Consolidated Companies, (ii) based on their review, and all other information currently available to them, do not reasonably anticipate that Year 2000 Issues will have a Materially Adverse Effect, and (iii) are in compliance with all laws, rules and regulations Of the Securities and Exchange Commission. Article VI. AFFIRMATIVE COVENANTS Borrower covenants and agrees that so long as it may borrow under this Agreement or so long as any indebtedness remains outstanding under the Revolving Notes that it will: Section 6.01 Corporate Existence, Etc. Preserve and maintain, and cause each of its Material Subsidiaries to preserve and maintain, its corporate existence, its material rights, franchises, and licenses, and its material patents and copyrights (for the scheduled duration 43 thereof), trademarks, trade names, and service marks, necessary or desirable in the normal conduct of its business, and its qualification to do business as a foreign corporation in all jurisdictions where it conducts business or other activities making such qualification necessary, where the failure to do so would reasonably be expected to have a Materially Adverse Effect. Section 6.02 Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply with all Requirements of Law (including, without limitation, the Environmental Laws, subject to the exception set forth in Section 6.07(f) where the penalties, claims, fines, and other liabilities resulting from noncompliance with such Environmental Laws do not involve amounts in excess of $1 0,000,000 in the aggregate) and Contractual Obligations applicable to or binding on any of them where the failure to comply with such Requirements of Law and Contractual Obligations would reasonably be expected to have a Materially Adverse Effect. Section 6.03 Payment of Taxes and Claims, Etc. Pay, and cause each of its Subsidiaries to pay, (i) all taxes, assessments and governmental charges imposed upon it or upon its property, and (ii) all claims (including, without limitation, claims for labor, materials, supplies or services) which might, if unpaid, become a Lien upon its property, unless, in each case, the validity or amount thereof is being contested in good faith by appropriate proceedings and adequate reserves are maintained with respect thereto. Section 6.04 Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, containing complete and accurate entries of all their respective financial and business transactions. Section 6.05 Visitation, Inspection, Etc. Permit, and cause each of its Subsidiaries to pen-nit, any representative of the Administrative Agent or any Lender to visit and inspect any of its property, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with its officers, all at such reasonable times and as often as the Administrative Agent or such Lender may reasonably request after reasonable prior notice to Borrower; provided, however, that at any time following the occurrence and during the continuance of a Default or an Event of Default, no prior notice to Borrower shall be required. 44 Section 6.06 Insurance, Maintenance of Properties. (a) Maintain or cause to be maintained with financially sound and reputable insurers, insurance with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds customarily insured against by reputable companies in the same or similar businesses, such insurance to be of such types and in such amounts, including such self-insurance and deductible provisions, as is customary for such companies under similar circumstances; provided, however, that in any event Borrower shall use its best efforts to maintain, or cause to be maintained, insurance in amounts and with coverage's not materially less favorable to any Consolidated Company as in effect on the date of this Agreement, except where the costs of maintaining such insurance would, in the judgment of both Borrower and the Administrative Agent, be excessive. (b) Cause, and cause each of the Consolidated Companies to cause, all properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, settlements and improvements thereof, all as in the judgment of Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent Borrower from discontinuing the operation or maintenance of any such properties if such discontinuance is, in the judgment of Borrower, desirable in the conduct of its business or the business of any Consolidated Company. Section 6.07 Reporting Covenants. Furnish to each Lender: (a) Annual Financial Statements. As soon as available and in any event within 95 days after the end of each fiscal year of Borrower, balance sheets of the Consolidated Companies as at the end of such year, presented on a consolidated basis, and the related statements of income, shareholders' equity, and cash flows of the Consolidated Companies for such fiscal year, presented on a consolidated basis, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and accompanied by a report thereon of independent public accountants of recognized national standing reasonably acceptable to the Administrative Agent, which such report shall be unqualified as to going concern and scope of audit and shall state that such financial statements present fairly in all material respects the financial condition as at the end of such fiscal year on a consolidated basis, and the results of operations and statements of cash flows of the Consolidated Companies for such fiscal year in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (b) Quarterly Financial Statements. As soon as available and in any event Within 60 days after the end of each fiscal quarter of Borrower (other than the fourth fiscal 45 quarter), balance sheets of the Consolidated Companies as at the end of such quarter presented on a consolidated basis and the related statements of income, shareholders' equity, and cash flows of the Consolidated Companies for such fiscal quarter and for the portion of Borrower's fiscal year ended at the end of such quarter, presented on a consolidated basis setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Borrower's previous fiscal year, all in reasonable detail and certified by the chief financial officer or principal accounting officer of Borrower that such financial statements fairly present in all material respects the financial condition of the Consolidated Companies as at the end of such fiscal quarter on a consolidated basis, and the results of operations and statements of cash flows of the Consolidated Companies for such fiscal quarter and such portion of Borrower's fiscal year, in accordance with GAAP consistently applied (subject to normal year-end audit adjustments and the absence of certain footnotes); (c) No Default/Compliance Certificate. Together with the financial statements required pursuant to subsections (a) and (b) above, a certificate of the president, chief financial officer or principal accounting officer of Borrower (the "Compliance Certificate") (i) to the effect that, based upon a review of the activities of the Consolidated Companies and such financial statements during the period covered thereby, there exists no Event of Default and no Default Under this Agreement, or if there exists an Event of Default or a Default hereunder, specifying the nature thereof and the proposed response thereto, and (ii) demonstrating in reasonable detail compliance as at the end of such fiscal year or such fiscal quarter with Section 6.08 and Sections 7.01 through 7.04; (d) Notice of Default. Promptly after any Executive Officer of Borrower has notice or knowledge of the occurrence of an Event of Default or a Default, a certificate of the chief financial officer or principal accounting officer of Borrower specifying the nature thereof and the proposed response thereto; 46 (e) Litigation. Promptly after (i) the occurrence thereof, notice of the institution of or any adverse development in any action, suit or proceeding or any governmental investigation or any arbitration, before any court or arbitrator or any governmental or administrative body, agency or official, against any Consolidated Company, or any material property thereof which might have a Materially Adverse Effect, or (ii) actual knowledge thereof, notice of the threat of any such action, suit, proceeding, investigation or arbitration; (f) Environmental Notices. Promptly after receipt thereof, notice of any actual or alleged violation, or notice of any action, claim or request for information, either judicial or administrative, from any governmental authority relating to any actual or alleged claim, notice of potential responsibility under or violation of any Environmental Law, or any actual or alleged spill, leak, disposal or other release of any waste, petroleum product, or hazardous waste or Hazardous Substance by any Consolidated Company which could result in penalties, fines, claims or other liabilities to any Consolidated Company in amounts in excess of $5,000,000 individually or in the aggregate; (g) ERISA. (i) Promptly after the occurrence thereof with respect to any Plan of any Consolidated Company or any ERISA Affiliate thereof, or any trust established thereunder, notice of (x) a "reportable event" described in Section 4043 of ERISA and the regulations issued from time to time thereunder (other than a "reportable event" not subject to the provisions for 30-day notice to the PBGC under such regulations), or (y) any other event which could subject any Consolidated Company to any tax, penalty or liability under Title I or Title IV of ERISA or Chapter 43 of the Tax Code, or any tax or penalty resulting from a loss of deduction under Sections 162, 404 or 419 of the Tax Code, where any such taxes, penalties or liabilities exceed or could exceed $1,000,000 in the aggregate; (ii) Promptly after such notice must be provided to the PBGC, or to a Plan participant, beneficiary or alternative payee, any notice required under Section 101(d), 302(f)(4), 303, 307, 4041 (b)(1)(A) or 4041 (c)(1)(A) of ERISA or under Section 401(4)(29) or 412 of the Tax Code with respect to any Plan of any Consolidated Company or any ERISA Affiliate thereof, (iii) Promptly after receipt, any notice received by any Consolidated Company or any ERISA Affiliate thereof concerning the intent of the PBGC or any other governmental authority to terminate a Plan of such Company or ERISA Affiliate thereof which is subject to Title IV of ERISA, to impose any liability on such Company or ERISA Affiliate "der Title IV of ERISA or Chapter 43 of the Tax Code; (iv) Upon the request of the Administrative Agent, promptly upon the filing thereof with the Internal Revenue Service ("IRS") or the Department of Labor 47 ("DOL"), a copy of IRS Form 5500 or annual report for each Plan of any Consolidated Company or ERISA Affiliate thereof which is subject to Title IV of ERISA; (v) Upon the request of the Administrative Agent, (A) true and complete copies of any and all documents, government reports and IRS determination or opinion letters or rulings for any Plan of any Consolidated Company from the IRS, PBGC or DOL, (B) any reports filed with the IRS, PBGC or DOL with respect to a Plan of the Consolidated Companies or any ERISA Affiliate thereof, or (C) a current statement of withdrawal liability for each Multiemployer Plan of any Consolidated Company or any ERISA Affiliate thereof; (h) Liens. Promptly upon any Consolidated Company becoming aware thereof, notice of the filing of any federal statutory Lien, tax or other state or local government Lien or any other Lien affecting their respective properties, other than those Liens expressly permitted by Section 7.02; (i) Public Filings, Etc. Promtly upon the filing thereof or otherwise becoming available, copies of all financial statements, annual, quarterly and special reports, proxy statements and notices sent or made available generally by Borrower to its public security holders, of all regular and periodic reports and all registration statements and prospectuses (other than registration statements filed on Form S-3 of the Securities and Exchange Commission regarding the issuance of restricted stock in acquisitions), if any, filed by any of them with any securities exchange, and of all press releases and other statements made available generally to the public containing material developments in the business or financial condition of Borrower and the other Consolidated Companies; (j) Accountants Reports. Promptly upon receipt thereof, copies of all financial statements of, and all reports submitted by, independent public accountants to Borrower in connection with each annual, interim, or special audit of Borrower's consolidated financial statements; (k) Burdensome Restrictions, Etc. Promptly upon the existence or occurrence thereof, notice of the existence or occurrence of (i) any Contractual Obligation or Requirement of Law described in Section 5.23, (ii) failure of any Consolidated Company to hold in full force and effect those material trademarks, service marks, patents, trade names, copyrights, licenses and similar rights necessary in the normal conduct of its business, and (iii) any strike, labor dispute slow down or work stoppage as described in Section 5.2 1; (l) New Material Subsidiaries. Simultaneously with the delivery of each Compliance Certificate, a written list of all Material Subsidiaries formed, acquired, or created from a transfer of assets or through any other event, during the period commencing on the Closing Date and ending on the date on which the first Compliance Certificate is delivered, and thereafter since the date of the most recently delivered Compliance Certificate; such written list shall include the name of each new Material 48 Subsidiary, its state of incorporation, list of its officers and any other information that the Administrative Agent shall reasonably request. (m) Intercompany Asset Transfers. Promptly upon the occurrence thereof, notice of the transfer of any assets from Borrower or any Guarantor to any other Consolidated Company that is not Borrower or a Guarantor (in any transaction or series of related transactions), excluding sales or other transfers of assets in the ordinary course of business, where the Asset Value of such assets is greater than $5,000,000 per transfer; (n) Year 2000 Issues. Promptly upon any Executive Officer of Borrower has notice or knowledge thereof, notice that any computer programs and systems of the Consolidated Companies are subject to any Year 2000 Issues that could reasonable be expected to have a Materially Adverse Effect; and (o) Other Information. With reasonable promptness, such other information about the Consolidated Companies as the Administrative Agent or any Lender may reasonably request from time to time. Section 6.08 Financial Covenants. (a) Fixed Charge Coverage Ratio. Maintain as of the last day of each fiscal quarter, a Fixed Charge Coverage Ratio of greater than 1.50:1.0. (b) Leverage Ratio. Maintain as of the last day of each fiscal quarter, a Leverage Ratio of less than or equal to 0.60: 1.0. (c) Minimum Net Worth. Maintain a Consolidated Net Worth of not less than $425,000,000 plus (ii) 50% of Consolidated Net Income (but not Loss) for each fiscal quarter ended after January 30, 1998 and on or prior to the date of determination. (d) Dividends. Not declare or pay any dividend on its capital stock, or make any payment to purchase, redeem, retire or acquire any of its Subordinated Debt or capital stock Or any option, warrant, or other right to acquire such Subordinated Debt or capital stock, other than: (i) dividends payable solely in shares of capital stock; and (ii) cash dividends declared and paid, and all other such payments made, after January 29, 1993, in an aggregate amount at any time not to exceed (x) $1,000,000, plus (y) 50% of Consolidated Net Income (or minus 100% of Consolidated Net Loss) earned during Borrower's fiscal year ended January 29, 1993, and thereafter (such period to be treated as one accounting period); provided, further, however, no such dividend or other payment may be declared or paid pursuant to clause (ii) above unless no Default or 49 Event of Default exists at the time of such declaration or payment, or would exist as a result of such declaration or payment. Section 6.09 Notices Under Certain Other Indebtedness. Immediately Upon its receipt thereof, Borrower shall furnish the Administrative Agent a copy of any notice received by it or any other Consolidated Company from the holder(s) of Indebtedness referred to in Section 7.01 (or from any trustee, agent, attorney, or other party acting on behalf of such holder(s)) in an amount which, in the aggregate, exceeds $5,000,000, where such notice states or claims (i) the existence or occurrence of any default or event of default with respect to such Indebtedness under the terms of any indenture, loan or credit agreement, debenture, note, or other document evidencing or governing such Indebtedness, or (ii) the existence or occurrence of any event or condition which requires or pen-nits holder(s) of any Indebtedness to exercise rights under any Change in Control Provision. Borrower agrees to take such actions as may be necessary to require the holder(s) of any Indebtedness (or any trustee or agent acting on their behalf incurred pursuant to documents executed or amended and restated after the Closing Date, to furnish copies of all such notices directly to the Administrative Agent simultaneously with the furnishing thereof to Borrower, and that such requirement may not be altered or rescinded without the prior written consent of the Administrative Agent. Section 6.10 Additional Guarantors. Borrower shall cause each new Material Subsidiary reported to the Administrative Agent and the Lenders pursuant to Section 6.07(l) above to execute and deliver to the Administrative Agent, simultaneously with the report given pursuant to Section 6.07(l) above, a supplement to the Guaranty Agreement, together with related documents of the kind described in Section 4.01, as appropriate, all in form and substance satisfactory to the Administrative Agent and the Required Lenders. Section 6.11 Financial Statements; Fiscal Year. Borrower shall make no change in the dates of the fiscal year now employed for accounting and reporting purposes without the prior written consent of the Required Lenders, which consent shall not be unreasonably withheld. Section 6.12 Ownership of Guarantors. Borrower shall maintain its percentage of ownership existing as of the date hereof of all Guarantors, and shall not decrease its ownership percentage in each Person which becomes a Guarantor after the date hereof, as such ownership exists at the time such Person becomes a Guarantor. 50 Article VII. NEGATIVE COVENANTS So long as any Revolving Loan Commitment remains in effect hereunder or any Revolving Note shall remain unpaid, Borrower will not and will not permit any Subsidiary to: Section 7.01 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, other than: (a) Indebtedness under this Agreement or the Line of Credit Agreement; (b) Indebtedness outstanding on the date hereof or pursuant to lines of credit in effect on the date hereof and described on Schedule 7.01(b). (c) purchase money Indebtedness to the extent secured by a Lien permitted by Section 7.02(b) provided such purchase money Indebtedness does not exceed $20,000,000; (d) unsecured current liabilities (other than liabilities for borrower money or liabilities evidenced by promissory notes, bonds or similar instruments) incurred in the ordinary course of business and either (i) not more than 30 days past due, or (ii) being disputed in good faith by appropriate proceedings with reserves for such disputed liability maintained in conformity with GAAP; (e) any Intercompany Loans; provided, however, that the aggregate principal amount of all Intercompany Loans made to any Consolidated Companies that are not Guarantors shall not exceed $5,000,000 in the any one time outstanding unless otherwise agreed in writing by the Administrative Agent and the Required Lenders; (f) other Subordinated Debt in form and substance acceptable to the Administrative Agent and the Required Lenders, and evidenced by their written consent thereto; (g) other Indebtedness not to exceed $75,000,000 at any one time outstanding. Section 7.02 Liens. Create, incur, assume or suffer to exist any Lien on any of its property now owned hereafter acquired to secure any Indebtedness other than: (a) Liens existing on the date hereof disclosed on Schedule 7.02; (b) any Lien on any property securing Indebtedness incurred or assumed for the purpose of financing all or any part of the acquisition cost of such property and any 51 refinancing thereof, provided that such Lien does not extend to any other property, and provided further that the aggregate principal amount of Indebtedness secured by all such Liens at any time does not exceed $20,000,000; (c) Liens for taxes not yet due, and Liens for taxes or Liens imposed by ERISA which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (d) Statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (e) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); and (f) Liens (other than those permitted by paragraphs (a) through (e) of this Section 7.02) encumbering assets having an Asset Value not greater than $20,000,000 in the aggregate any one time. Section 7.03 Mergers, Acquisitions, Sales, Etc. Merge or consolidate with any other Person, other than Borrower or another Subsidiary, or sell, lease, or otherwise dispose of its accounts, property or other assets (including capital stock of Subsidiaries), or purchase, lease or otherwise acquire all or any substantial portion of the property or assets (including capital stock) of any Person; provided, however, that the foregoing restrictions on asset sales shall not be applicable to (i) sales of equipment or other personal property being replaced by other equipment or other personal property purchased as a capital expenditure item, (ii) sales of accounts receivable pursuant to a securitization program, provided further that any program costs incurred by the Borrower in pursuing such a program shall be considered interest under this Credit Agreement, (iii) other asset sales (including the stock of Subsidiaries) where, on the date of execution of a binding obligation to make such asset sale (provided that if the asset sale is not consummated within six (6) months of such execution, then on the date of consummation of such asset sale rather than on the date of execution of such binding obligation), the Asset Value of asset sales occurring after the Closing Date, taking into account the Asset Value of the proposed asset sale, would not exceed ten percent (10%) of Borrower's Consolidated Net Worth, since the Closing Date, and (iv) sales of inventory in the ordinary course of business; provided, further, that the foregoing restrictions on mergers shall not apply to mergers involving Borrower and another entity, provided Borrower is the surviving entity, and mergers between a Subsidiary of Borrower and Borrower or between Subsidiaries of Borrower provided that, in either case, upon consummation of such mergers, Borrower is in compliance with the other provisions hereof-, provided, further, that the foregoing restrictions on asset 52 purchases shall not apply to asset purchases by Borrower to the extent that (i) after giving effect to such purchases, Borrower is in compliance with Section 7.04 hereof and (ii) the Board of Directors or other governing body of such Person whose assets or stock is being purchased has approved the terms of such acquisition; provided, however, that no transaction pursuant to clauses (i), (ii) or (iii) or the second or third provisos above shall be permitted if any Default or Event of Default otherwise exists at the time of such transaction or would otherwise exist as a result of such transaction. Section 7.04 Investments, Loans, Etc. Make, permit or hold any Investments in any Person, or otherwise acquire or hold any Subsidiaries, other than: (a) Investments in Subsidiaries that are Guarantors under this Agreement, whether such Subsidiaries are Guarantors on the Closing Date or become Guarantors in accordance with Section 6. 1 0 after the Closing Date; provided, however, nothing in this Section 7.04 shall be deemed to authorize an investment pursuant to this subsection (a) in any entity that is not a Subsidiary and a Guarantor prior to such investment; (b) Investments in Subsidiaries, other than those Subsidiaries that are or become Guarantors under this Agreement, or persons that thereafter become Subsidiaries, in an aggregate amount not to exceed $25,000,000 unless otherwise consented to in writing by the Required Lenders; (c) Investments in other Persons that are not, and do not become, Subsidiaries in an aggregate amount not to exceed $25,000,000 unless otherwise consented to in writing by the Required Lenders; (d) direct obligations of the United States of America or any agency thereof, or obligations guaranteed by the United States of America or any agency thereof, in each case supported by the full faith and credit of the United States of America and maturing within one year from the date of creation thereof; (e) commercial paper maturing within one year from the date of creation thereof rated in the highest grade by a nationally recognized credit rating agency; (f) time deposits maturing within one year from the date of creation thereof with, including certificates of deposit issued by any Lender and any office located in the United States of America of any bank or trust company which is organized under the laws of the United States of America or any state thereof and has total assets aggregating at least $500,000,000, including without limitation, any such deposits in Eurodollars issued by a foreign branch of any such bank or trust company; (g) Investments made by Plans; and 53 (h) permitted Intercompany Loans on terms and conditions acceptable to the Administrative Agent. Section 7.05 Sale and Leaseback Transactions. Sell or transfer any property, real or personal, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which any Consolidated Company intends to use for substantially the same purpose or purposes as the property being sold or transferred, except to the extent that the aggregate value of all such property sold and leased back does not exceed $5,000,000 at any one time. Section 7.06 Transactions with Affiliates. (a) Enter into any material transaction or series of related transactions which in the aggregate would be material, whether or not in the ordinary course of business, with any Affiliate of any Consolidated Company (but excluding any Affiliate which is also a Consolidated Company), other than on terms and conditions substantially as favorable to such Consolidated Company as would be obtained by such Consolidated Company at the time in a comparable arm's-length transaction with a Person other than an Affiliate. (b) Convey or transfer to any other Person (including any other Consolidated Company) any real property, buildings, or fixtures used in the manufacturing or production operations of any Consolidated Company, or convey or transfer to any other Consolidated Company any other assets (excluding conveyances or transfers in the ordinary course of business) if at the time of such conveyance or transfer any Default or Event of Default exists or would exist as a result of such conveyance or transfer. Section 7.07 Optional Prepayments. Directly or indirectly, prepay, purchase, redeem, retire, defuse or otherwise acquire, or make any optional payment on account of any principal of, interest on, or premium payable in connection with the optional prepayment, redemption or retirement of, any of its Indebtedness, or give a notice of redemption with respect to any such Indebtedness, or make any payment in violation of the subordination provisions of any Subordinated Debt, except with respect to (i) the Obligations under this Agreement and the Notes, (ii) prepayments of Indebtedness outstanding pursuant to revolving credit, overdraft and line of credit facilities permitted pursuant to Section 7.01, (iii) Intercompany Loans made or outstanding pursuant to Section 7.01, and (iv) Subordinated Debt, in form and substance acceptable to the Administrative Agent and the Required Lenders, as evidenced by their written consent, issued to refinance existing Subordinated Debt. Section 7.08 Changes in Business. Enter into any business which is substantially different from that presently conducted by the Consolidated Companies taken as a whole except where the Investment made, and other funds expended or committed with respect to such business, do not exceed $5,000,000 in each new business. 54 Section 7.09 ERISA. Take or fail to take any action with respect to any Plan of any Consolidated Company or, with respect to its ERISA Affiliates, any Plans which are subject to Title IV of ERISA or to continuation health care requirements for group health plans under the Tax Code, including without limitation (i) establishing any such Plan, (ii) amending any such Plan (except where required to comply with applicable law), (iii) terminating or withdrawing from any such Plan, or (iv) incurring an amount of unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA, or any withdrawal liability under Title IV of ERISA with respect to any such Plan, without first obtaining the written approval of the Administrative Agent and the Required Lenders, where such actions or failures could result in a Materially Adverse Effect. Section 7.10 Additional Negative Pledges. Create or otherwise cause or suffer to exist or become effective, directly or indirectly, any prohibition or restriction on the creation or existence of any Lien upon any asset of any Consolidated Company, other than pursuant to (i) the terms of any agreement, instrument or other document pursuant to which any Indebtedness permitted by Section 7.01 (a) or (b) is incurred by any Consolidated Company, so long as such prohibition or restriction applies only to the property or asset being financed by such Indebtedness, and (ii) any requirement of applicable law or any regulatory authority having jurisdiction over any of the Consolidated Companies. Section 7.11 Limitation on Payment Restrictions Affecting Consolidated Companies. Create or otherwise cause or suffer to exist or become effective, any consensual encumbrance or restriction on the ability of any Consolidated Company to (i) pay dividends or make any other distributions on such Consolidated Company's stock, or (ii) pay any indebtedness owed to Borrower or any other Consolidated Company, or (iii) transfer any of its property or assets to Borrower or any other Consolidated Company, except any consensual encumbrance or restriction existing under the Credit Documents or under the Line of Credit Agreement and related documents. Section 7.12 Actions Under Certain Documents. Without the prior written consent of the Administrative Agent (which consent shall not be unreasonably withheld), modify, amend, cancel or rescind any agreements or documents evidencing or governing Subordinated Debt or the senior Indebtedness permitted pursuant to Section 7.01 hereof, or make demand of payment or accept payment on any Intercompany Loans permitted by Section 7.01, except that current interest accrued thereon as of the date of this Agreement and all interest subsequently accruing thereon (whether or not paid currently) may be paid unless a Default or Event of Default has occurred and is continuing. Article VIII. EVENTS OF DEFAULT Upon the occurrence and during the continuance of any of the following specified events (each an "Event of Default"): 55 Section 8.01 Payments. Borrower shall fail to make promptly when due (including, without limitation, by mandatory prepayment) any principal payment with respect to the Revolving Loans, or Borrower shall fail to make within five (5) Business Days after the due date thereof any payment of interest, fee or other amount payable hereunder; Section 8.02 Covenants Without Notice. Borrower shall fail to observe or perform any covenant or agreement contained in Sections 6.07, 6.08, 6.11, and Article VII; Section 8.03 Other Covenants. Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement, other than those referred to in Sections 8.01 and 8.02, and, if capable of being remedied, such failure shall remain unremedied for 30 days after the earlier of (i) Borrower's obtaining knowledge thereof, or (ii) written notice thereof shall have been given to Borrower by the Administrative Agent or any Lender; Section 8.04 Representations. Any representation or warranty made or deemed to be made by Borrower or any other Credit Party or by any of its officers under this Agreement or any other Credit Document (including the Schedules attached thereto), or any certificate or other document submitted to the Administrative Agent or the Lenders by any such Person pursuant to the terms of this Agreement or any other Credit Document, shall be incorrect in any material respect when made or deemed to be made or submitted; Section 8.05 Non-Payments of Other Indebtedness. Any Consolidated Company shall fail to make when due (whether at stated maturity, by acceleration, on demand or otherwise, and after giving effect to any applicable grace period) any payment of principal of or interest on any Indebtedness (other than the Obligations) exceeding $5,000,000 in the aggregate including, without limitation, indebtedness outstanding under the Line of Credit Agreement; Section 8.06 Defaults Under Other Agreements. Any Consolidated Company shall fail to observe or perform within any applicable grace period any covenants or agreements contained in any agreements or instruments relating to any of its Indebtedness exceeding $5,000,000 in the aggregate including, without limitation, indebtedness outstanding under the Line of Credit Agreement, or any other event shall occur if the effect of such failure or other event is to accelerate, or to permit the holder of such Indebtedness or any other Person to accelerate, the maturity of such Indebtedness; or any such Indebtedness shall be required to be prepaid (other than by a regularly scheduled required prepayment) in whole or in part prior to its stated maturity; Section 8.07 Bankruptcy. Borrower or any other Consolidated Company shall commence a voluntary case concerning itself under the Bankruptcy Code or an involuntary case for bankruptcy is commenced against any Consolidated Company and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any substantial part of the property of any Consolidated Company; or any Consolidated Company commences proceedings of its own bankruptcy or to be granted a suspension of payments or any 56 other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction, whether now or hereafter in effect, relating to any Consolidated Company or there is commenced against any Consolidated Company any such proceeding which remains undismissed for a period of 60 days; or any Consolidated Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or any Consolidated Company suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or any Consolidated Company makes a general assignment for the benefit of creditors; or any Consolidated Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or any Consolidated Company shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; or any Consolidated Company shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate action is taken by any Consolidated Company for the purpose of effecting any of the foregoing; Section 8.08 ERISA. A Plan of a Consolidated Company or a Plan subject to Title IV of ERISA of any of its ERISA Affiliates: (i) shall fail to be funded in accordance with the minimum funding standard required by applicable law, the terms of such Plan, Section 412 of the Tax Code or Section 302 of ERISA for any plan year or a waiver of such standard is sought or granted with respect to such Plan under applicable law, the terms of such Plan or Section 412 of the Tax Code or Section 303 of ERISA; or (ii) is being, or has been, terminated or the subject of termination proceedings under applicable law or the terms of such Plan; or (iii) shall require a Consolidated Company to provide security under applicable law, the terms of such Plan, Section 401 or 412 of the Tax Code or Section 306 or 307 of ERISA; or (iv) results in a liability to a Consolidated Company under applicable law, the terms of such Plan, or Title IV of ERISA; and there shall result from any such failure, waiver, termination or other event a liability to the PBGC or a Plan that would have a Materially Adverse Effect; Section 8.09 Money Judgment. A judgment or order for the payment of money in excess of $5,000,000 or otherwise having a Materially Adverse Effect shall be rendered against Borrower or any other Consolidated Company and such judgment or order shall continue unsatisfied (in the case of a money judgment) and in effect for a period of 30 days during which execution shall not be effectively stayed or deferred (whether by action of a court, by agreement or otherwise); 57 Section 8.10 Ownership of Credit Parties and Pledged Entities. If Borrower shall at any time fail to own and control the required percentage of the voting stock of any Guarantor, either directly or indirectly through a wholly-owned Subsidiary of Borrower; Section 8.11 Change in Control of Borrower. (a) Any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than the Hughes Family shall become the "beneficial owner(s)" (as defined in said Rule 13d-3) of more than twenty-five percent (25%) of the shares of the outstanding common stock of Borrower entitled to vote for members of Borrower's board of directors, or (b) any event or condition shall occur or exist which, pursuant to the terms of any change in control provision, requires or permits the holder(s) of Indebtedness of any Consolidated Company to require that such Indebtedness be redeemed, repurchased, defeased, prepaid or repaid, in whole or in part, or the maturity of such Indebtedness to be accelerated in any respect; Section 8.12 Default Under Other Credit Documents. There shall exist or occur any "Event of Default" as provided under the terms of any other Credit Document, or any Credit Document ceases to be in full force and effect or the validity or enforceability thereof is disaffirmed by or on behalf of Borrower or any other Credit Party, or at any time it is or becomes unlawful for Borrower or any other Credit Party to perform or comply with its obligations under any Credit Document, or the obligations of Borrower or any other Credit Party under any Credit Document are not or cease to be legal, valid and binding on Borrower or any such Credit Party; Section 8.13 Attachments. An attachment or similar action shall be made on or taken against any of the assets of any Consolidated Company with an Asset Value exceeding $5,000,000 in aggregate and is not removed, suspended or enjoined within 60 days of the same being made or any suspension or injunction being lifted; then, and in any such event, and at any time thereafter if any Event of Default shall then be continuing, the Administrative Agent may, and upon the written or telex request of the Required Lenders, shall, by written notice to Borrower, take any or all of the following actions, without prejudice to the rights of the Administrative Agent, any Lender or the holder of any Revolving Note to enforce its claims against Borrower or any other Credit Party: (i) declare all Revolving Loan Commitments terminated, whereupon the Revolving Loan Commitments of each Lender shall terminate immediately and Fees shall forthwith become due and payable without any other notice of any kind; and (ii) declare the principal of and any accrued interest on the Revolving Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Borrower; provided, that, if an Event of Default specified in Section 8.07 shall occur, the result which would occur upon the giving of written notice by the Administrative Agent to any Credit Party, as specified in clauses (i) and (ii) above, shall occur automatically without the giving of any such notice. Article IX. 58 THE AGENTS Section 9.01 Appointment of Administrative Agent. Each Lender hereby designates SunTrust Bank, Central Florida, National Association as the "Administrative Agent" to administer all matters concerning the Revolving Loans and to act as herein specified. Each Lender hereby irrevocably authorizes, and each holder of any Revolving Note by the acceptance of a Revolving Note shall be deemed irrevocably to authorize, the Administrative Agent to take such actions on its behalf under the provisions of this Agreement, the other Credit Documents, amid all other instruments and agreements referred to herein or therein, and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder by or through its agents or employees. The provisions of this Section 9.01 are solely for the benefit of the Administrative Agent, and Borrower and the other Consolidated Companies shall not have any rights as third party beneficiaries of any of the provisions hereof. In performing its functions and duties under this Agreement, the Administrative Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligations towards or relationship of agency or trust with or for the Borrower and the other Consolidated Companies. Section 9.02 Nature of Duties of Administrative Agent. The Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Credit Documents. Neither the Administrative Agent nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted by it as such hereunder or in connection herewith, unless caused by its or their gross negligence or willful misconduct. The duties of the Administrative Agent shall be ministerial and administrative in nature; the Administrative Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this Agreement, express or implied, is intended to or shall be so construed as to impose upon the Administrative Agent any obligations in respect of this Agreement or the other Credit Documents except as expressly set forth herein. Section 9.03 Lack of Reliance on the Administrative Agent. (a) Independently and without reliance upon the Administrative Agent each Lender, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Credit Parties in connection with the taking or not taking of any action in connection herewith, and (ii) its own appraisal of the creditworthiness of the Credit Parties, and, except as expressly provided in this Agreement, the Administrative Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Revolving Loans or at any time or times thereafter. 59 (b) The Administrative Agent shall not be responsible to any Lender for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, priority or sufficiency of this Agreement, the Revolving Notes, the Guaranty Agreement, or any other documents contemplated hereby or thereby, or the financial condition of the Credit Parties, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, the Revolving Notes, the Guaranty Agreement, or the other documents contemplated hereby or thereby, or the financial condition of the Credit Parties, or the existence or possible existence of any Default or Event of Default; provided, however, to the extent that the Administrative Agent has been advised that a Lender has not received any information formally delivered to the Administrative Agent pursuant to Section 6.07, the Administrative Agent shall deliver or cause to be delivered such information to such Lender. Section 9.04 Certain Rights of the Administrative Agent. If the Administrative Agent shall request instructions from the Required Lenders with respect to any action or actions (including the failure to act) in connection with this Agreement, the Administrative Agent shall be entitled to refrain from such act or taking such act, unless and until the Administrative Agent shall have received instructions from the Required Lenders; and the Administrative Agent shall not incur liability in any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders. Section 9.05 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cable gram, radiogram, order or other documentary, teletransmission or telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper Person. The Administrative Agent may consult with legal counsel (including counsel for any Credit Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. Section 9.06 Indemnification of Administrative Agent. To the extent the Administrative Agent is not reimbursed and indemnified by the Credit Parties, each Lender will reimburse and indemnify the Administrative Agent, ratably according to the respective amounts of the Revolving Loans outstanding under all Facilities (or if no amounts are outstanding, ratably in accordance with the Total Commitments), in either case, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in performing its duties hereunder, in any way relating to or arising out of this Agreement or the other Credit Documents; provided that no Lender shall be liable to the Administrative Agent for any portion of such 60 liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. Section 9.07 The Administrative Agent in Its Individual Capacity. With respect to its obligation to lend under this Agreement, the Revolving Loans made by it and the Revolving Notes issued to it, the Administrative Agent shall have the same rights and powers hereunder as any other Lender or holder of a Revolving Note and may exercise the same as though it were not performing the duties specified herein; and the terms "Lenders", "Required Lenders", "holders of Revolving Notes", or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust, financial advisory or other business with the Consolidated Companies or any affiliate of the Consolidated Companies as if it were not performing the duties specified herein, and may accept fees and other consideration from the Consolidated Companies for services in connection with this Agreement and otherwise without having to account for the same to the Lenders. Section 9.08 Holders of Revolving Notes. The Administrative Agent may deem and treat the payee of any Revolving Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Administrative Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Revolving Note shall be conclusive and binding on any subsequent holder, transferee or assignee of such Revolving Note or of any Revolving Note or Revolving Notes issued in exchange therefor. Section 9.09 Successor Administrative Agent. (a) The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and Borrower and may be removed at any time with or without cause by the Required Lenders; provided, however, the Administrative Agent may not resign or be removed until a successor Administrative Agent has been appointed and shall have accepted such appointment. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent subject to Borrower's prior written approval, so long as no Event of Default has occur-red and is continuing, which approval will not be unreasonably withheld. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Administrative Agent, than the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent subject to Borrower's prior written approval, which shall be a bank which maintains an office in the United States of America, or a commercial bank organized under the laws of the United States of America or any State thereof, or any Affiliate of such bank, having a combined capital and surplus of at least $100,000,000. If at any time SunTrust Bank, Central Florida is removed as a 61 Lender, SunTrust Bank, Central Florida shall simultaneously resign as Administrative Agent. (b) Upon the acceptance of any appointment as the Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Administrative Agent under this Agreement. Section 9.10 Documentation Agent. Each Lender designates First Union National Bank as Documentation Agent and agrees that the Documentation Agent shall have no duties or obligations hereunder. Section 9.11 Syndication Agent. Each Lender designates NationsBank, N.A. as Syndication Agent and agrees that the Syndication Agent shall have no duties or obligations hereunder. Section 9.12 Co-Agent. Each Lender designates SouthTrust Bank, National Association as Co-Agent and agrees that the Co-Agent shall have no duties or obligations hereunder. Article X. MISCELLANEOUS Section 10.01 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, telecopy or similar teletransmission or writing) and shall be given to such party at its address or applicable teletransmission number set forth on the signature pages hereof, or such other address or applicable teletransmission number as such party may hereafter specify by notice to the Administrative Agent and Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answer back is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (iii) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section and the appropriate confirmation is received, or (iv) if given by any other means (including, without limitation, by air courier), when delivered or received at the address specified in this Section; provided that notices to the Administrative Agent shall not be effective until received. 62 Section 10.02 Amendments, Etc. No amendment or waiver of any provision of this Agreement or the other Credit Documents, nor consent to any departure by any Credit Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance specific purpose for which given; provided that no amendment, waiver or consent shall, and for the specific unless in writing and signed by all the Lenders do any of the following: (i) waive any of the conditions specified in Section 4.01 or 4.02, (ii) increase the Revolving Loan Commitments or other contractual obligations to Borrower under this Agreement except pursuant to Section 3.03, (iii) reduce the principal of, or interest on, the Revolving Notes or any fees hereunder, (iv) postpone any date fixed for the payment in respect of principal of, or interest on, the Revolving Notes or any fees hereunder, (v) change the percentage of the Revolving Loan Commitments or of the aggregate unpaid principal amount of the Revolving Notes, or the number or identity of Lenders which shall be required for the Lenders or any of them to take any action hereunder, (vi) release any Guarantor from its obligations under any Guaranty Agreement, (vii) modify the definition of "Required Lenders," or (viii) modify this Section 10.02. Notwithstanding the foregoing, no amendment, Waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required here in above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or under any other Credit Document. Section 10.03 No Waiver, Remedies Cumulative. No failure or delay on the part of the Administrative Agent, any Lender or any holder of a Revolving Note in exercising any right or remedy hereunder or under any other Credit Document, and no course of dealing between any Credit Party and the Administrative Agent, any Lender or the holder of any Revolving Note shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder or under any other Credit Document preclude any other or farther exercise thereof or the exercise of any other right or remedy hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Administrative Agent, any Lender or the holder of any Revolving Note would otherwise have. No notice to or demand on any Credit Party not required hereunder or under any other Credit Document in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent, the Lenders or the holder of any Revolving Note to any other or further action in any circumstances without notice or demand. 63 Section 10.04 Payment of Expenses, Etc. Borrower shall: (i) whether or not the transactions hereby contemplated are consummated, pay all reasonable, out-of-pocket costs and expenses of the Administrative Agent in the administration (both before and after the execution hereof and including reasonable expenses actually incurred relating to advice of counsel as to the rights and duties of the Administrative Agent and the Lenders with respect thereto) of, and in connection with the preparation, execution and delivery of, preservation of rights under, enforcement of, and, after a Default or Event of Default, refinancing, renegotiation or restructuring of, this Agreement and the other Credit Documents and the documents and instruments referred to therein, and any amendment, waiver or consent relating thereto (including, without limitation, the reasonable fees actually incurred and disbursements of counsel for the Administrative Agent), and in the case of enforcement of this Agreement or any Credit Document after an Event of Default, all such reasonable, out-of-pocket costs and expenses (including, without limitation, the reasonable fees actually incurred and disbursements of counsel), for any of the Lenders; (ii) subject, in the case of certain Taxes, to the applicable provisions of Section 3.08(b), pay and hold each of the Lenders harmless from and against any and all present and future stamp, documentary, and other similar Taxes with respect to this Agreement, the Revolving Notes and any other Credit Documents, any collateral described therein, or any payments due thereunder, and save each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such Taxes; and (iii) indemnified the Administrative Agent and each Lender and each director, officer, employee, affiliate and agent thereof (each, an "Indemnitee") from, and hold each of them harmless against, and reimburse each Indemnitee, upon its demand, for any losses, claims, damages, liabilities or other expenses ("Losses") incurred by such Indemnitee insofar as such Losses arise out of or are in any way related to or result from this Agreement, the Revolving Notes or any other Credit Documents or the financing provided hereby, including, without limitation, Losses arising in connection with any legal proceeding relating to any of the foregoing (whether or not such Indemnitee is a party thereto) and the reasonable attorneys fees and expenses actually incurred in connection therewith; provided, however, that the foregoing shall not apply to any Losses resulting from the gross negligence or willful misconduct of such Indemnitee. (iv) without limiting the indemnities set forth in subsection (iii) above, indemnify each indemnitee for any and all expenses and costs (including without limitation, remedial, removal, response, abatement, cleanup, investigative, closure and monitoring costs), losses, claims (including claims for contribution or indemnity and including the cost of investigating or defending any claim and whether or not such claim is ultimately defeated, and whether such claim arose before, during or after any Credit Party's ownership, operation, possession or control of its business, property or facilities or before, on or after the date hereof, and including also any amounts paid incidental to any 64 compromise or settlement by the Indemnitee or Indemnitees to the holders of any such claim), lawsuits, liabilities, obligations, actions, judgments, suits, disbursements, encumbrances, liens, damages (including Without limitation damages for contamination or destruction of natural resources), penalties and fines of any kind or nature whatsoever (including without limitation in all cases the reasonable fees actually incurred, other charges and disbursements of counsel in connection therewith) incurred, suffered or sustained by that Indemnitee based upon, arising under or relating to Environmental Laws based on, arising out of or relating to in whole or in part, the existence or exercise of any rights or remedies by any Indemnitee under this Agreement, any other Credit Document or any related documents (but excluding those incur-red, suffered or sustained by any Indemnitee as a result of any action taken by or on behalf of the Lenders with respect to any Subsidiary of Borrower (or the assets thereof owned or controlled by the Lenders. If and to the extent that the obligations of Borrower under this Section 10.04 are unenforceable for any reason, Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. Section 10.05 Right of Setoff. In addition to and not in limitation of all rights of offset that any Lender or other holder of a Revolving Note may have under applicable law, each Lender or other holder of a Revolving Note shall, upon the occurrence of any Event of Default and whether or not such Lender or such holder has made any demand or any Credit Party's obligations are matured, have the right to appropriate and apply to the payment of any Credit Party's obligations hereunder and under the other Credit Documents, all deposits of any Credit Party (general or special, time or demand, provisional or final) then or thereafter held by and other indebtedness or property then or thereafter owing by such Lender or other holder to any Credit Party, whether or not related to this Agreement or any transaction hereunder. Each Lender shall promptly notify Borrower of any offset hereunder. Section 10.06 Benefit of Agreement. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, provided that Borrower may not assign or transfer any of its interest hereunder without the prior written consent of the Lenders. (b) Any Lender may make, carry or transfer Revolving Loans at, to or for the account of, any of its branch offices or the office of an Affiliate of such Lender. (c) Each Lender may assign all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of any of its Revolving Loan Commitments and the Revolving Loans at the time owing to it and the Revolving Notes held by it) to any Eligible Assignee; provided, however, that (i) the Administrative Agent and, so long as no Event of Default has occurred and is continuing, Borrower must give their prior written consent to such assignment (which consent shall not be unreasonably 65 withheld or delayed) unless such assignment is an Affiliate of the assigning Lender, (ii) the amount of the Revolving Loan Commitments of the assigning Lender subject to each assignment (determined as of the date the assignment and acceptance With respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000, and (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a Revolving Note or Notes subject to such assignment and, unless such assignment is to an Affiliate of such Lender, a processing and recordation fee of $2,500. Borrower shall not be responsible for such processing and recordation fee or any costs or expenses incurred by any Lender or the Administrative Agent in connection with such assignment. From and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, the assignee thereunder shall be a party hereto and to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement. Within five (5) Business Days after receipt of the notice and the Assignment and Acceptance, Borrower, at its own expense, shall execute and deliver to the Administrative Agent, in exchange for the surrendered Revolving Note or Notes, a new Revolving Note or Notes to the order of such assignee in a principal amount equal to the applicable Revolving Loan Commitments or Revolving Loans assumed by it pursuant to such Assignment and Acceptance and new Revolving Note or Notes to the assigning Lender in the amount of its retained Revolving Loan Commitment or Commitments or amount of its retained Revolving Loans. Such new Revolving Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Revolving Note or Notes, shall be dated the date of the surrendered Revolving Note or Notes which they replace, and shall otherwise be in substantially the form attached hereto. (d) Each Lender may, without the consent of Borrower or the Administrative Agent, sell participation's without restriction to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Loan Commitments in the Revolving Loans owing to it and the Revolving Notes held by it), produced however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating bank or other entity shall not be entitled to the benefit (except through its selling Lender) of the cost protection provisions contained in Article III of this Agreement, and (iv) Borrower and the Administrative Agent and other Lenders shall continue to deal solely and directly with each Lender in connection with such Lender's rights and obligations under this Agreement and the other Credit Documents, and such Lender shall retain the sole right to enforce the obligations of Borrower relating to the Revolving Loans and to approve any amendment, modification or waiver of any provisions of this Agreement. Any Lender selling a participation hereunder shall provide prompt written notice to Borrower of the name of such participant. 66 (e) Any Lender or participant may, in connection with the assignment or participation or proposed assignment or participation, pursuant to this Section, disclose to the assignee or participant or proposed assignee or participant any information relating to Borrower or the other Consolidated Companies furnished to such Lender by or on behalf of Borrower or any other Consolidated Company. With respect to any disclosure of confidential, non-public, proprietary information, such proposed assignee or participant shall agree to use the information only for the purpose of making any necessary credit judgments with respect to this credit facility and not to use the information in any manner prohibited by any law, including without limitation, the securities laws of the United States of America. The proposed participant or assignee shall agree not to disclose any of such information except (i) to directors, employees, auditors or counsel to whom it is necessary to show such information, each of whom shall be informed of the confidential nature of the information, (ii) in any statement or testimony pursuant to a subpoena or order by any court, governmental body or other agency asserting jurisdiction over such entity, or as otherwise required by law (provided prior notice is given to Borrower and the Administrative Agent unless otherwise prohibited by the subpoena, order or law), and (iii) upon the request or demand of any regulatory agency or authority with proper jurisdiction. The proposed participant or assignee shall further agree to return all documents or other written material and copies thereof received from any Lender, the Administrative Agent or Borrower relating to such confidential information unless otherwise properly disposed of by such entity. (f) Any Lender may at any time assign all or any portion of its rights in this Agreement and the Revolving Notes issued to it to a Federal Reserve Bank; provided that no such assignment shall release the Lender from any of its obligations hereunder. (g) If (i) any Taxes referred to in Section 3.08(b) have been levied or imposed so as to require withholdings or deductions by Borrower and payment by Borrower of additional amounts to any Lender as a result thereof, (ii) any Lender shall make demand for payment of any material additional amounts as compensation for increased costs pursuant to Section 3.1 1 or for its reduced rate of return pursuant to Section 3.17, or (iii) any Lender shall decline to consent to a modification or waiver of the terms of this Agreement or the other Credit Documents requested by Borrower, then and in such event, upon request from Borrower delivered to such Lender and the Administrative Agent, such Lender shall assign, in accordance with the provisions of Section 10.06(c), all of its rights and obligations under this Agreement and the other Credit Documents to another Lender or an Eligible Assignee selected by Borrower, in consideration for the payment by such assignee to the Lender of the principal of, and interest on, the outstanding Revolving Loans accrued to the date of such assignment, and the assumption of such Lender's Revolving Loan Commitment hereunder, together with any and all other amounts owing to such Lender under any provisions of this Agreement or the other Credit Documents accrued to the date of such assignment. 67 Section 10.07 Governing Law; Submission to Jurisdiction. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND UNDER THE REVOLVING NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE REVOLVING NOTES OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE SUPERIOR COURT OF FULTON COUNTY, GEORGIA, OR AM OTHER COURT OF THE STATE OF GEORGIA OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF GEORGIA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. (c) BORROWER HEREBY IRREVOCABLY DESIGNATES THE CORPORATION SERVICE COMPANY, ATLANTA, GEORGIA, AS ITS DESIGNEE, APPOINTEE AND LOCAL AGENT TO RECEIVE, FOR AND ON BEHALF OF BORROWER, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE REVOLVING NOTES OR ANY DOCUMENT RELATED THERETO. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH LOCAL AGENT WILL BE PROMPTLY FORWARDED BY SUCH LOCAL AGENT AND BY THE SERVER OF SUCH PROCESS BY MAIL TO BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, BUT THE FAILURE OF BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED) OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. (d) Nothing herein shall affect the right of the Administrative Agent, any Lender, any holder of a Revolving Note or any Credit Party to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against Borrower in any other jurisdiction. 68 Section 10.08 Independent Nature of Lenders' Rights. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights pursuant to this Agreement and its Revolving Notes, and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. Section 10.09 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Section 10.10 Effectiveness; Survival. (a) This Agreement shall become effective on the date (the "Effective Date") on which all of the parties hereto shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Administrative Agent pursuant to Section 10.01 or, in the case of the Lenders, shall have given to the Administrative Agent written or telex notice (actually received) that the same has been signed and mailed to them. (b) The obligations of Borrower under Sections 3.08(b), 3.11, 3.13, 3.14, 3.17, and 10.04 hereof shall survive for ninety (90) days after the payment in full of the Revolving Notes after the Final Maturity Date. All representations and warranties made herein, in the certificates, reports, notices, and other documents delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement, the other Credit Documents, and such other agreements and documents, the making of the Revolving Loans hereunder, and the execution and delivery of the Revolving Notes. Section 10.11 Severability. In case any provision in or obligation under this Agreement or the other Credit Documents shall be invalid, illegal or unenforceable, in whole or in part, in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. Section 10.12 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitation of, another covenant, shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. Section 10.13 Change in Accounting Principles, Fiscal Year or Tax Laws. If (i) any preparation of the financial statements referred to in Section 6.07 hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accounts (or 69 successors thereto or agencies with similar functions) (other than changes mandated by FASB 106) result in a material change in the method of calculation of financial covenants, standards or terms found in this Agreement, (ii) there is any change in Borrower's fiscal quarter or fiscal year, or (iii) there is a material change in federal tax laws which materially affects any of the Consolidated Companies' ability to comply with the financial covenants, standards or terms found in this Agreement, Borrower and the Required Lenders agree to enter into negotiations in order to amend such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating any of the Consolidated Companies' financial condition shall be the same after such changes as if such changes had not been made. Unless and until such provisions have been so amended, the provisions of this Agreement shall govern. Section 10.14 Headings Descriptive, Entire Agreement. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. This Agreement, the other Credit Documents, and the agreements and documents required to be delivered pursuant to the terms of this Agreement constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements, representations and understandings related to such subject matters. Section 10.15 Time is of the Essence. Time is of the essence in interpreting and performing this Agreement and all other Credit Documents. Section 10.16 Usury. It is the intent of the parties hereto not to violate any federal or state law, rule or regulation pertaining either to usury or to the contracting for or charging or collecting of interest, and Borrower and Lenders agree that, should any provision of this agreement or of the Revolving Notes, or any act performed hereunder or thereunder, violate any such law, rule or regulation, then the excess of interest contracted for or charged or collected over the maximum lawful rate of interest shall be applied to the outstanding principal indebtedness due to lenders by Borrower under this Agreement. Section 10.17 Construction. Should any provision of this Agreement require judicial interpretation, the parties hereto agree that the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be more strictly construed against the party who itself or through its agents prepared the same, it being agreed that Borrower, the Administrative Agent, the Lenders and their respective agents have participated in the preparation hereof Section 10.18 Waiver of Effect of Corporate Seal. Borrower represents and warrants that it is not required to affix its corporate seal to this Agreement or any other Credit Document pursuant to any Requirement of Law and waives any shortening of the statute of limitations that may result from not affixing the corporate seal to this Agreement or the other Credit Documents. 70 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in Atlanta, Georgia, by their duly authorized officers as of the day and year first above written. Address for Notices: BORROWER: 20 N. Orange Avenue HUGHES SUPPLY, INC. Suite 200 Orlando, Florida 32801 Attention: J. Stephen Zepf. By: --------------------------------------- J. Stephen Zepf Treasurer By: --------------------------------------- Ben Butterfield Secretary [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 71 Address for Notices: SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, individually and as 200 S. Orange Avenue Administrative Agent MC 2064 Orlando, Florida 32801 Attn: Mr. William C. Barr By: --------------------------------------- Name: Telecopy No. 407/237-4076 Title: Payment Office: 200 S. Orange Avenue MC 2064 Orlando, Florida 32801 - ----------------------------------------- Revolving Loan Commitment: $41,250,000.00 Pro Rata Share of Revolving Loan Commitment: 18.33% [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 72 Address for Notices: FIRST UNION NATIONAL BANK, individually and as Documentation Agent 225 Water Street 4th Floor Mail Code FL0060 Jacksonville, Florida 32202 By: --------------------------------------- Attn: Mr. Michael L. Williamson Name: Michael L. Williamson Title: Vice President Telecopy No. 904/361-3560 Payment Office: 100 S. Ashley Drive Suite 1000 Mail Code FL4009 Tampa, Florida 32602 Attn: Ms. Mary Doonan - ----------------------------------------- Revolving Loan Commitment: $37,500,000.00 Pro Rata Share of Revolving Loan Commitment: 16.67% [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 73 Address for Notices: NATIONSBANK, N.A., individually and as Syndication Agent 100 SE 2nd Street, 14th Floor Miami, Florida 33131 Attn: Mr. Richard Starke By: --------------------------------------- Name: Title: Telecopy No. Payment Office: NationsBank, N.A. 101 N. Tryon Street Charlotte, North Carolina 28255 Attn: Ms. Deon Wright - ------------------------------------------- Revolving Loan Conunitment: $37,500,000.00 Pro Rata Share of Revolving Loan Conunitment: 16.67% [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 74 Address for Notices: SOUTHTRUST BANK, NATIONAL ASSOCIATION, individually and as 420 N. 20th Street Co-Agent Birmingham, AL 35203 Attn: FL Corp. Banking, 9th Floor By: --------------------------------------- Telecopy No. 727/898-5319 Name: Title: Payment Office: P.O. Box 830716 Birmingham, AL 35203 - ------------------------------------------ Revolving Loan Commitment: $30,000,000.00 Pro Rata Share of Revolving Loan Commitment: 13.33% [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 75 Address for Notices: ABN AMRO Bank N.V. Southeast Financial Center 200 S. Biscayne Boulevard, 22nd Floor Miami, Florida 33131-5311 Attn: Ms. Deborah Day Orozco By: --------------------------------------- Telecopy No.: (305) 577-0825 Name: Deborah Day Orozco Title: Vice President Payment Office: 208 S. LaSalle Street, Suite 1500 By: --------------------------------------- Chicago, IL 60604-1003 Name: Miguel Castillo Attention: Loan Administration Title: Corporate Officer Telephone: (312) 992-5152 Fax: (312) 992-5157 - ----------------------------------------- Revolving Loan Commitment: $18,750,000.00 Pro Rata Share of Revolving Loan Commitment: 8.33% [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 76 Address for Notices: PNC BANK, N.A. 249 5th Avenue Pittsburgh, Pennsylvania 15222 Attn: Mr. James D. Neil By: --------------------------------------- Name: James D. Neil Telecopy No. 412/762-6484 Title: Vice President Payment Office: Two PNC Plaza/ Liberty Avenue Pittsburgh, Pennsylvania 15222 Attn: Ms. Anita Truchman - ----------------------------------------- Revolving Loan Commitment: $18,750,000.00 Pro Rata Share of Revolving Loan Commitment: 8.33% [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 77 Address for Notices: WACHOVIA BANK, N.A. 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Mr. Shawn Janko By: --------------------------------------- Name: Shawn Janko Title: Banking Officer Telecopy No. (404) 332-5016 Payment Office: 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Ms. Sharon Westmoreland - ------------------------------------------ Revolving Loan Commitment: $18,750,000.00 Pro Rata Share of Revolving Loan Commitment: 8.33% [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 78 Address for Notices: THE FIFTH THIRD BANK MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Mr. Kevin J. Walter. By: --------------------------------------- Name: Telecopy No. 513/579-5226 Title: Payment Office: NM 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Ms. Megan Heisel - ----------------------------------------- Revolving Loan Commitment: $11,250,000.00 Pro Rata Share of Revolving Loan Commitment: 5.00% [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 79 Address for Notices: HIBERNIA NATIONAL BANK 313 Carondelet Street New Orleans, LA 70130 Attn: Ms. Kristie Peychaud By: --------------------------------------- Name: Telecopy No. 504/533-5344 Title: Payment Office: 313 Carondelet Street New Orleans, LA 70130 Attn: Ms. Shelly Strada - ------------------------------------------ Revolving Loan Commitment: $11,250,000.00 Pro Rata Share of Revolving Loan Commitment: 5.00% [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 80 FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT THIS FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (the "First Amendment") is made and entered into as of September 29, 1999, by and among HUGHES SUPPLY, INC. ("Borrower"), a Florida corporation, SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, a national banking association, FIRST UNION NATIONAL BANK, a national banking association, BANK OF AMERICA, N.A., formerly known as NATIONSBANK, N.A., a national banking association, SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national banking association, ABN AMRO BANK, N.V., a banking corporation organized under the laws of the Netherlands, PNC BANK, N.A., a national banking association, WACHOVIA BANK, N.A., a national banking association, THE FIFTH THIRD BANK, a national banking association, HIBERNIA NATIONAL BANK, a national banking association and such other financial institutions becoming a party hereto from time to time, (individually, a "Lender" and collectively, the "Lenders"), SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), FIRST UNION NATIONAL BANK, as documentation agent for the Lenders (in such capacity, the "Documentation Agent"), BANK OF AMERICA, N.A., formerly known as NATIONSBANK, N.A., as syndication agent for the Lenders (in such capacity, the "Syndication Agent") and SOUTHTRUST BANK, NATIONAL ASSOCIATION, as Co-Agent for the Lenders (in such capacity, the "Co-Agent"). W I T N E S S E T H: WHEREAS, the Lenders, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Borrower are party to that certain Revolving Credit Agreement dated as of January 26, 1999 (the "Revolving Credit Agreement"), pursuant to which the Lenders made available to Borrower credit facilities subject to the terms and conditions set forth therein; and WHEREAS, the Lenders, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Borrower, at the request of the Borrower, desire to (i) increase the aggregate principal amount of Revolving Loan Commitments by $50,000,000 to $275,000,000 pursuant to Section 3.03 of the Revolving Credit Agreement and (ii) amend certain terms of the Revolving Credit Agreement, all as more particularly set forth below. NOW, THEREFORE, in consideration of the terms and conditions contained herein, the parties hereto, intending to be legally bound, hereby amend the Revolving Credit Agreement and agree as follows: 1. The Revolving Credit Agreement is hereby amended by replacing the first Recital in its entirety with the following: 81 WHEREAS, Borrower has requested that the Lenders establish a $275,000,000 revolving credit facility in favor of Borrower, and subject to the terms and conditions contained herein, the Lenders are willing to establish such revolving credit facility in favor of Borrower subject to the terms and conditions set forth below; 2. The Revolving Credit Agreement is hereby amended by replacing the definition of "Revolving Loan Commitment" or "Commitment" in Section 1.01 in its entirety with the following: "Revolving Loan Commitment" or "Commitment" shall mean, at any time for any Lender, the amount of such commitment set forth opposite such Lender's name on the signature pages of the First Amendment to Revolving Credit Agreement, dated as of September 29, 1999, by and among the Borrower, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Lenders, or in any assignment hereafter executed by any assignee of a Lender pursuant to Section 10.06, as the same may be increased or decreased from time to time as a result of any reduction thereof pursuant to Section 2.03, any assignment thereof pursuant to Section 10.06, or any amendment thereof pursuant to Section 10.02. 3. The Revolving Credit Agreement is hereby amended by replacing Section 6.08(c) in its entirety with the following: (c) Minimum Net Worth. Maintain a Consolidated Net Worth of not less than (i) $365,000,000 plus (ii) 50% of Consolidated Net Income (but not Consolidated Net Loss) for each fiscal quarter ended after January 30, 1998 and on or prior to the date of determination. 4. The Revolving Credit Agreement is hereby amended by replacing Section 6.08(d) in its entirety with the following: (d) Dividends. Not declare or pay any dividend on its capital stock, or make any payment to purchase, redeem, retire or acquire any of its Subordinated Debt or capital stock or any option, warrant, or other right to acquire such Subordinated Debt or capital stock, other than: (i) dividends payable solely in shares of capital stock; (ii) any payments made for the repurchase of outstanding capital stock previously issued by Borrower in an aggregate amount at any time not to exceed $60,000,000; and (iii) cash dividends declared and paid and all other such payments made, after January 29, 1993, in an aggregate amount at any time not to exceed (x) $1,000,000, plus (y) 50% of Consolidated Net Income (or minus 100% of [SIGNATURE PAGE TO FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT] 82 Consolidated Net Loss) earned during Borrower's fiscal year ended January 29, 1993, and thereafter (such period to be treated as one accounting period); provided, further, however, no such dividend or other payment may be declared or paid pursuant to clause (ii) or (iii) above unless no Default or Event of Default exists at the time of such declaration or payment, or would exist as a result of such declaration or payment. 5. The Revolving Credit Agreement is hereby amended by replacing Section 7.05 in its entirety with the following: Section 7.05 Sale and Leaseback Transactions. Sell or transfer any property, real or personal, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which any Consolidated Company intends to use for substantially the same purpose or purposes as the property being sold or transferred, except to the extent that at the time any such property is sold and leased back, and after giving effect thereto, the aggregate amount paid (whether in cash or otherwise) for all such property sold and leased back by the Consolidated Companies since the Closing Date does not exceed five percent (5%) of the Consolidated Companies' total assets as reported in the most recent audited annual financial statements delivered to the Administrative Agent pursuant to Section 6.07(a). 6. The effectiveness of this Amendment is conditioned upon the Administrative Agent's receipt of the following, each dated as of the date hereof, in form and substance reasonably satisfactory in all respects to the Administrative Agent: (a) The duly executed original counterparts of this First Amendment; (b) The duly completed Revolving Notes evidencing the Revolving Loan Commitments, as increased by this First Amendment; (c) The duly executed Consent and Ratification of Guaranty (Revolving Credit Agreement), dated as of the date hereof, by and among each of the Subsidiaries of Borrower, listed on the signature pages thereof, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Lenders; (d) Certificates of the Secretary or Assistant Secretary of each of the Credit Parties certifying (i) the name, title and true signature of each officer of such entities executing this First Amendment and the other Credit Documents, (ii) the bylaws or comparable governing documents of such entities, and (iii) the certificates or articles of incorporation of each Credit Party; 83 (e) Certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of incorporation or organization of such Credit Party; and (f) The favorable opinion of counsel to the Credit Parties addressed to the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and each of the Lenders. 7. Borrower represents and warrants that as of the date hereof and after giving effect to the transactions contemplated by the First Amendment and the Credit Documents, (i) the assets of Borrower, at fair valuation and based on their present fair saleable value, will exceed Borrower's debts, including contingent liabilities, (ii) the remaining capital of Borrower will not be unreasonably small to conduct Borrower's business, and (iii) Borrower will not have incurred debts, or have intended to incur debts, beyond its ability to pay such debts as they mature. For purposes of this paragraph, "debt" means any liability on a claim, and "claim" means (a) the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (b) the right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. 8. Except as expressly provided herein, the Revolving Credit Agreement shall continue in full force and effect, and the unamended terms and conditions of the Revolving Credit Agreement are expressly incorporated herein and ratified and confirmed in all respects. This First Amendment is not intended to be or to create, nor shall it be construed as, a novation or an accord and satisfaction. 9. From and after the date hereof, references to the Revolving Credit Agreement shall be references to the Revolving Credit Agreement as amended hereby. 10. This First Amendment constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. Neither this First Amendment nor any provision hereof may be changed, waived, discharged, modified or terminated orally, but only by an instrument in writing signed by the parties required to be a party thereto pursuant to Section 10.02 of the Revolving Credit Agreement. 11. THIS FIRST AMENDMENT SHALL BE GOVERNED IN ALL RESPECTS BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF). 84 12. This First Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same document, and shall be effective as of the date first above written. 13. Borrower shall reimburse the Administrative Agent for the reasonable fees and expenses of counsel for the Administrative Agent in connection with this First Amendment. 85 IN WITNESS WHEREOF, Borrower, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Lenders have caused this First Amendment to be executed as of the date first above written. Address for Notices: BORROWER: 20 N. Orange Avenue HUGHES SUPPLY, INC. Suite 200 Orlando, Florida 32801 Attention: J. Stephen Zepf By: ------------------------------- J. Stephen Zepf Treasurer By: ------------------------------- Ben Butterfield Secretary [SIGNATURE PAGE TO FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, individually and as 200 S. Orange Avenue Administrative Agent MC 2064 Orlando, Florida 32801 Attn: Mr. William C. Barr By: ------------------------------- William C. Barr, III Telecopy No. 407/237-4076 First Vice President Payment Office: 200 S. Orange Avenue MC 2064 Orlando, Florida 32801 - -------------------------------- Revolving Loan Commitment: $58,750,000.00 Pro Rata Share of Revolving Loan Commitment: 21.36364% [SIGNATURE PAGE TO FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: FIRST UNION NATIONAL BANK, individually and as Documentation Agent 225 Water Street 4th Floor Mail Code FL0060 Jacksonville, Florida 32202 Attn: Mr. Mike Carlin By: ------------------------------ Telecopy No. 904/361-3560 Name: Title: Payment Office: 100 S. Ashley Drive Suite 1000 Mail Code FL4009 Tampa, Florida 32602 Attn: Ms. Mary Doonan - -------------------------------- Revolving Loan Commitment: $45,833,333.33 Pro Rata Share of Revolving Loan Commitment: 16.66667% [SIGNATURE PAGE TO FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: BANK OF AMERICA, N.A., formerly known as NATIONSBANK, N.A., individually and as Syndication Agent 100 SE 2nd Street, 14th Floor Miami, Florida 33131 Attn: Mr. Richard Starke By: ------------------------------- Telecopy No. Name: Title: Payment Office: Bank of America, N.A. 101 N. Tryon Street Charlotte, North Carolina 28255 Attn: Ms. Deon Wright - ------------------------------- Revolving Loan Commitment: $50,833,333.33 Pro Rata Share of Revolving Loan Commitment: 18.48485% [SIGNATURE PAGE TO FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: SOUTHTRUST BANK, NATIONAL ASSOCIATION, individually and as Co-Agent 420 North 20th Street Birmingham, AL 35203 Attn: Florida Corporate Banking (Orlando) Telecopy No. 727/898-5319 By: ------------------------------- Name: Title: Payment Office: P.O. Box 830716 Birmingham, AL 35283-0716 Attn: Ms. Joanne Gundling (727/825-2733) Telecopy No. 727/898-5419 - -------------------------------- Revolving Loan Commitment: $30,000,000 Pro Rata Share of Revolving Loan Commitment: 10.90909% [SIGNATURE PAGE TO FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: ABN AMRO BANK, N.V. Southwest Financial Center 200 S. Biscayne Boulevard, 22nd Floor Miami, Florida 33131-5311 Attn: Ms. Deborah Day Orozco Telecopy No. (305)372-2397 By: ------------------------------- Name: Title: By: ------------------------------- Name: Title: - -------------------------------- Revolving Loan Commitment: $22,916,666.67 Pro Rata Share of Revolving Loan Commitment: 8.33333% [SIGNATURE PAGE TO FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: PNC BANK, N.A. 249 5th Avenue Pittsburgh, Pennsylvania 15222 Attn: Mr. Doug King Telecopy No. 412/762-6484 By: ------------------------------- Name: Title: Payment Office: Two PNC Plaza/ Liberty Avenue. Pittsburgh, Pennsylvania 15222 Attn: Ms. Joan McMahon - -------------------------------- Revolving Loan Commitment: $18,750,000.00 Pro Rata Share of Revolving Loan Commitment: 6.81818% [SIGNATURE PAGE TO FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: WACHOVIA BANK, N.A. 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Mr. Bill McCamey Telecopy No. (404)332-5016 By: ------------------------------- Name: Title: Payment Office: 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Ms. Sharon Westmoreland - -------------------------------- Revolving Loan Commitment: $22,916,666.67 Pro Rata Share of Revolving Loan Commitment: 8.33333% [SIGNATURE PAGE TO FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: THE FIFTH THIRD BANK MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Mr. Kevin J. Walter Telecopy No. 513/579-5226 By: ------------------------------- Name: Title: Payment Office: MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Ms. Megan Heisel - -------------------------------- Revolving Loan Commitment: $13,750,000.00 Pro Rata Share of Revolving Loan Commitment: 5.00000% Address for Notices: HIBERNIA NATIONAL BANK 313 Carondelet Street New Orleans, LA 70130 Attn: Ms. Kristie Peychaud Telecopy No. 504/533-5344 By: ------------------------------- Name: Title: Payment Office: 313 Carondelet Street New Orleans, LA 70130 Attn: Ms. Shelly Strada - -------------------------------- Revolving Loan Commitment: $11,250,000.00 Pro Rata Share of Revolving Loan Commitment: 4.09091% [SIGNATURE PAGE TO FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT] SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT THIS SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Amendment") is made and entered into as of December 20, 2000, by and among HUGHES SUPPLY, INC. ("Borrower"), a Florida corporation, SUNTRUST BANK, a Georgia banking corporation and successor by merger to SunTrust Bank, Central Florida, National Association, FIRST UNION NATIONAL BANK, a national banking association, BANK OF AMERICA, N.A., a national banking association, formerly known as NATIONSBANK, N.A., SOUTHTRUST BANK, an Alabama corporation, formerly known as SouthTrust Bank, N.A., ABN AMRO BANK, N.V., a banking corporation organized under the laws of the Netherlands, PNC BANK, N.A., a national banking association, WACHOVIA BANK, N.A., a national banking association, THE FIFTH THIRD BANK, a national banking association, HIBERNIA NATIONAL BANK, a national banking association and such other financial institutions becoming a party hereto from time to time (individually, a "Lender" and collectively, the "Lenders"), SUNTRUST BANK, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), FIRST UNION NATIONAL BANK, as documentation agent for the Lenders (in such capacity, the "Documentation Agent"), BANK OF AMERICA, N.A., as syndication agent for the Lenders (in such capacity, the "Syndication Agent") and SOUTHTRUST BANK, as Co-Agent for the Lenders (in such capacity, the "Co-Agent"). W I T N E S S E T H: WHEREAS, the Lenders, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Borrower are party to that certain Revolving Credit Agreement dated as of January 26, 1999, as amended by that certain First Amendment to Revolving Credit Agreement dated as of September 29, 1999 (as so amended and as further amended restated or otherwise modified from time to time, the "Revolving Credit Agreement"), pursuant to which the Lenders made available to Borrower credit facilities subject to the terms and conditions set forth therein; WHEREAS, the Lenders, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Borrower, at the request of the Borrower, desire to amend certain terms of the Revolving Credit Agreement, all as more particularly set forth below; NOW, THEREFORE, in consideration of the terms and conditions contained herein, the parties hereto, intending to be legally bound, hereby amend the Revolving Credit Agreement and agree as follows: A. AMENDMENTS 14. Section 7.01 of the Revolving Credit Agreement is hereby amended by adding the following subsections (h) and (i) in order: 97 (h) Indebtedness consisting of (x) Series A Senior Notes dated December 21, 2000 due November 30, 2003, with an average life of three years in the aggregate amount of $19,000,000 with an interest rate of 8.27%; (y) Series B Senior Notes dated December 21, 2000 due November 30, 2005, with an average life of three years in the aggregate amount of $28,000,000 with an interest rate of 8.27%; and (z) Series C Senior Notes dated December 21, 2000 due November 30, 2007, with an average life of five years in the aggregate amount of $103,000,000 with an interest rate of 8.42%. (i) Indebtedness incurred in connection with financing the construction of the Borrower's new branch located in Miami, Florida; provided that the aggregate principal amount of Indebtedness incurred in connection with the Miami branch does not exceed $15,000,000; and Indebtedness incurred in connection with financing the construction of the Borrower's headquarters located in Orlando, Florida; provided that the aggregate principal amount of Indebtedness incurred in connection with the Orlando headquarters does not exceed $25,000,000. 15. Section 7.02 of the Revolving Credit Agreement is hereby amended by replacing subsection (f) with the following subsection (f) and adding the following subsection (g) in order: (f) any Lien on any property securing Indebtedness described in Section 7.01(i), incurred for the purpose of financing all or any part of the construction cost of such property and any refinancing thereof; provided that such Lien does not extend to any other property; and (g) Liens (other than those permitted by paragraphs (a) through (f) of this Section 7.02) encumbering assets having an Asset Value not greater than $20,000,000 in the aggregate at any one time. B. MISCELLANEOUS 1. Borrower represents and warrants that after giving effect to this Amendment and the transactions contemplated hereby, all of the representations and warranties set forth in Article V of the Revolving Credit Agreement are true and correct in all material respects and no Default or Event of Default has occurred and is continuing as of the date hereof. 2. Except as expressly provided herein, the Revolving Credit Agreement shall continue in full force and effect, and the unamended terms and conditions of the Revolving Credit Agreement are expressly incorporated herein and ratified and confirmed in all respects. This Amendment is not intended to be or to create, nor shall it be construed as, a novation or an accord and satisfaction. 98 3. From and after the date hereof, references to the Revolving Credit Agreement shall be references to the Revolving Credit Agreement as amended hereby. 4. This Amendment constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. Neither this Amendment nor any provision hereof may be changed, waived, discharged, modified or terminated orally, but only by an instrument in writing signed by the parties required to be a party thereto pursuant to Section 10.02 of the Revolving Credit Agreement. 5. THIS AMENDMENT SHALL BE GOVERNED IN ALL RESPECTS BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF). 6. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same document, and shall be effective as of the date first above written. 7. Borrower shall reimburse the Administrative Agent for the reasonable fees and expenses of counsel for the Administrative Agent in connection with this Amendment. 99 IN WITNESS WHEREOF, Borrower, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Lenders have caused this Amendment to be executed as of the date first above written. Address for Notices: BORROWER: 20 N. Orange Avenue HUGHES SUPPLY, INC. Suite 200 Orlando, Florida 32801 Attention: J. Stephen Zepf By: ------------------------------- J. Stephen Zepf Treasurer Attest: --------------------------- Ben Butterfield Secretary [SIGNATURE PAGE TO SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: SUNTRUST BANK, successor by merger to SunTrust Bank, Central Florida, National Association, as a Lender and as 200 S. Orange Avenue Administrative Agent MC 2064 Orlando, Florida 32801 Attn: Mr. William C. Barr Telecopy No. 407/237-4076 By: -------------------------------- William C. Barr, III Payment Office: Vice President 200 S. Orange Avenue MC 2064 Orlando, Florida 32801 - -------------------------------- Revolving Loan Commitment: $58,750,000.00 Pro Rata Share of Revolving Loan Commitment: 21.36364% [SIGNATURE PAGE TO SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: FIRST UNION NATIONAL BANK, as a Lender and as Documentation Agent 225 Water Street 4th Floor Mail Code FL0060 Jacksonville, Florida 32202 Attn: Mr. Mike Carlin By: ------------------------------- Name: Telecopy No. 904/361-3560 Title: Payment Office: 100 S. Ashley Drive Suite 1000 Mail Code FL4009 Tampa, Florida 32602 Attn: Ms. Mary Doonan - -------------------------------- Revolving Loan Commitment: $45,833,333.33 Pro Rata Share of Revolving Loan Commitment: 16.66667% [SIGNATURE PAGE TO SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: BANK OF AMERICA, N.A., formerly known as NATIONSBANK, N.A., as a Lender and as Syndication Agent 100 SE 2nd Street, 14th Floor Miami, Florida 33131 Attn: Mr. Richard Starke By: ------------------------------- Telecopy No. Name: Title: Payment Office: Bank of America, N.A. 101 N. Tryon Street Charlotte, North Carolina 28255 Attn: Ms. Deon Wright - ------------------------------- Revolving Loan Commitment: $50,833,333.33 Pro Rata Share of Revolving Loan Commitment: 18.48485% [SIGNATURE PAGE TO SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: SOUTHTRUST BANK, formerly known as SouthTrust Bank, N.A., as a Lender and as Co-Agent 420 North 20th Street Birmingham, AL 35203 Attn: Florida Corporate Banking Telecopy No. 727/898-5319 By: ------------------------------- Name: Title: Payment Office: P.O. Box 830716 Birmingham, AL 35283-0716 Attn: Ms. Joanne Gundling (727/825-2733) Telecopy No. 727/898-5419 - -------------------------------- Revolving Loan Commitment: $30,000,000 Pro Rata Share of Revolving Loan Commitment: 10.90909% [SIGNATURE PAGE TO SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: ABN AMRO BANK, N.V. 208 South LaSalle Street, Suite 1500 Chicago, Illinois 60604 Attn: Credit Administration Telecopy No. 312/992-5111 By: ------------------------------- Name: Title: and One Ravinia Drive, Suite 1200 Atlanta, Georgia 30346 Attn: Mr. Pat Fischer Telecopy No. 770/399-7397 Payment Office: 208 South LaSalle Street, Suite 1500 Chicago, Illinois 60604 Attn: Loan Administration - -------------------------------- Revolving Loan Commitment: $22,916,666.67 Pro Rata Share of Revolving Loan Commitment: 8.33333% [SIGNATURE PAGE TO SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: PNC BANK, N.A. 249 5th Avenue Pittsburgh, Pennsylvania 15222 Attn: Mr. Doug King By: ------------------------------- Telecopy No. 412/762-6484 Name: Title: Payment Office: Two PNC Plaza/ Liberty Avenue. Pittsburgh, Pennsylvania 15222 Attn: Ms. Joan McMahon - -------------------------------- Revolving Loan Commitment: $18,750,000.00 Pro Rata Share of Revolving Loan Commitment: 6.81818% [SIGNATURE PAGE TO SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: WACHOVIA BANK, N.A. 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Mr. Bill McCamey Telecopy No. 404/332-5016 By: ------------------------------- Name: Title: Payment Office: 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Ms. Sharon Westmoreland - -------------------------------- Revolving Loan Commitment: $22,916,666.67 Pro Rata Share of Revolving Loan Commitment: 8.33333% [SIGNATURE PAGE TO SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: THE FIFTH THIRD BANK MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Mr. Kevin J. Walter Telecopy No. 513/579-5226 By: ---------------------------- Name: Title: Payment Office: MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Ms. Megan Heisel - -------------------------------- Revolving Loan Commitment: $13,750,000.00 Pro Rata Share of Revolving Loan Commitment: 5.00000% [SIGNATURE PAGE TO SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT] Address for Notices: HIBERNIA NATIONAL BANK 313 Carondelet Street New Orleans, LA 70130 Attn: Ms. Kristie Peychaud By:_______________________________ Name: Telecopy No. 504/533-5344 Title: Payment Office: 313 Carondelet Street New Orleans, LA 70130 Attn: Ms. Shelly Strada - -------------------------------- Revolving Loan Commitment: $11,250,000.00 Pro Rata Share of Revolving Loan Commitment: 4.09091% [SIGNATURE PAGE TO SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT] 109 EX-10.11 3 d25505_ex10-11.txt LINE OF CREDIT AGREEMENT LINE OF CREDIT AGREEMENT Dated as of January 26 , 1999 By And Among HUGHES SUPPLY, INC. AND SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, individually and as Administrative Agent, FIRST UNION NATIONAL BANK, individually and as Documentation Agent, NATIONSBANK, N.A., individually and as Syndication Agent SOUTHTRUST BANK, NATIONAL ASSOCIATION, individually and as Co-Agent, ABN AMRO BANK, N.V., PNC BANK, N.A., WACHOVIA BANK, N.A., THE FIFTH THIRD BANK, HIBERNIA NATIONAL BANK and other financial institutions becoming a party hereto ================================================================================ King & Spalding 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Carolyn Zander Alford (404) 572-4600 TABLE OF CONTENTS PAGE DEFINITIONS; CONSTRUCTION.....................................................1 Definitions..............................................................2 Accounting Terms and Determination......................................18 Other Definitional Terms................................................18 Exhibits and Schedules..................................................18 LINE OF CREDIT COMMITMENT....................................................18 Line of Credit Commitment; Use of Proceeds..............................18 Line of Credit Notes; Repayment of Principal............................19 Voluntary Reduction of Line of Credit Commitments.......................19 Extension of the Line of Credit Termination Date........................20 GENERAL LOAN TERMS...........................................................20 Funding Notices.........................................................20 Disbursement of Funds...................................................22 Interest................................................................23 Interest Periods........................................................25 Fees....................................................................26 Voluntary Prepayments of Borrowings.....................................26 Payments, etc...........................................................27 Interest Rate Not Ascertainable, etc....................................28 Illegality..............................................................29 Increased Costs.........................................................29 Lending Offices.........................................................31 Funding Losses..........................................................31 Assumptions Concerning Funding of Eurodollar Advances...................31 Apportionment of Payments...............................................32 Sharing of Payments, Etc................................................32 Capital Adequacy........................................................32 Benefits to Guarantors..................................................33 Limitation on Certain Payment Obligations...............................33 CONDITIONS TO BORROWINGS.....................................................34 Conditions Precedent to Initial Line of Credit Loans....................34 Conditions to All Line of Credit Loans..................................36 REPRESENTATIONS AND WARRANTIES...............................................37 Organization and Qualification..........................................37 Corporate Authority.....................................................38 Financial Statements....................................................38 Tax Returns.............................................................38 Actions Pending.........................................................38 Representations; No Defaults............................................38 Title to Properties.....................................................39 -ii- Enforceability of Agreement.............................................39 Consent.................................................................39 Use of Proceeds; Federal Reserve Regulations............................39 ERISA...................................................................39 Subsidiaries............................................................40 Outstanding Indebtedness................................................40 Conflicting Agreements..................................................40 Pollution and Other Regulations.........................................41 Possession of Franchises, Licenses, Etc.................................42 Patents, Etc............................................................42 Governmental Consent....................................................42 Disclosure..............................................................43 Insurance Coverage......................................................43 Labor Matters...........................................................43 Intercompany Loans; Dividends...........................................43 Burdensome Restrictions.................................................44 Investment Company Act, Etc.............................................44 Notice of Non-Compliance with Laws......................................44 Year 2000 Issues........................................................44 AFFIRMATIVE COVENANTS........................................................44 Corporate Existence, Etc................................................44 Compliance with Laws, Etc...............................................45 Payment of Taxes and Claims, Etc........................................45 Keeping of Books........................................................45 Visitation, Inspection, Etc.............................................45 Insurance; Maintenance of Properties....................................45 Reporting Covenants.....................................................46 Financial Covenants.....................................................49 Notices Under Certain Other Indebtedness................................50 Additional Guarantors...................................................50 Financial Statements; Fiscal Year.......................................50 Ownership of Guarantors.................................................50 NEGATIVE COVENANTS...........................................................51 Indebtedness............................................................51 Liens...................................................................51 Mergers, Acquisitions, Sales, Etc.......................................52 Investments, Loans, Etc.................................................53 Sale and Leaseback Transactions.........................................54 Transactions with Affiliates............................................54 Optional Prepayments....................................................54 Changes in Business.....................................................54 ERISA...................................................................54 Additional Negative Pledges.............................................55 Limitation on Payment Restrictions Affecting Consolidated Companies.....55 -iii- Actions Under Certain Documents.........................................55 EVENTS OF DEFAULT............................................................55 Payments................................................................55 Covenants Without Notice................................................56 Other Covenants.........................................................56 Representations.........................................................56 Non-Payments of Other Indebtedness......................................56 Defaults Under Other Agreements.........................................56 Bankruptcy..............................................................56 ERISA...................................................................57 Money Judgment..........................................................57 Ownership of Credit Parties and Pledged Entities........................58 Change in Control of Borrower...........................................58 Default Under Other Credit Documents....................................58 Attachments.............................................................58 THE AGENT....................................................................59 Appointment of Administrative Agent.....................................59 Nature of Duties of Administrative Agent................................59 Lack of Reliance on the Administrative Agent............................59 Certain Rights of the Administrative Agent..............................60 Reliance by Administrative Agent........................................60 Indemnification of Administrative Agent.................................60 The Administrative Agent in Its Individual Capacity.....................61 Holders of Line of Credit Notes.........................................61 Successor Administrative Agent..........................................61 Documentation Agent.....................................................62 Syndication Agent.......................................................62 MISCELLANEOUS................................................................62 Notices.................................................................62 Amendments, Etc.........................................................63 No Waiver; Remedies Cumulative..........................................63 Payment of Expenses, Etc................................................63 Right of Setoff.........................................................65 Benefit of Agreement....................................................65 Governing Law; Submission to Jurisdiction...............................67 Independent Nature of Lenders' Rights...................................68 Counterparts............................................................68 Effectiveness; Survival.................................................69 Severability............................................................69 Independence of Covenants...............................................69 Change in Accounting Principles, Fiscal Year or Tax Laws................69 Headings Descriptive; Entire Agreement..................................70 Time is of the Essence..................................................70 Usury...................................................................70 -iv- Construction...........................................................70 Waiver of Effect of Corporate Seal.....................................70 IN.....................................................................71 -v- SCHEDULES Schedule 5.01 Organization and Ownership of Subsidiaries Schedule 5.11 Employee Benefit Matters Schedule 5.14 Conflicting Agreements Schedule 5.15(a) Environmental Compliance Schedule 5.22 Intercompany Loans Schedule 7.01(b) Existing Indebtedness Schedule 7.02 Existing Liens EXHIBITS Exhibit A Form of Syndicate Note Exhibit B Form of Competitive Bid Note Exhibit C Form of Closing Certificate Exhibit D Form of Assignment and Acceptance -vi- LINE OF CREDIT AGREEMENT THIS LINE OF CREDIT AGREEMENT, dated as of January 26, 1999 (the "Agreement") by and among HUGHES SUPPLY, INC. ("Borrower"), a Florida corporation, SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, ("SunTrust Bank, Central Florida") a national banking association, FIRST UNION NATIONAL BANK, a national banking association, NATIONSBANK, N.A., a national banking association, SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national banking association, ABN AMRO BANK, N.V., a banking corporation organized under the laws of the Netherlands, PNC BANK, N.A., a national banking association, WACHOVIA BANK, N.A., a national banking association, THE FIFTH THIRD BANK, a national banking association, HIBERNIA NATIONAL BANK, a national banking association and such other financial institutions becoming a party hereto from time to time, (individually, a "Lender" and collectively, the "Lenders"), SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), FIRST UNION NATIONAL BANK, as documentation agent for the Lenders (in such capacity, the "Documentation Agent"), NATIONSBANK, N.A., as syndication agent for the Lenders (in such capacity, the "Syndication Agent"), and SOUTHTRUST BANK, NATIONAL ASSOCIATION, as Co-agent for the Lenders (in such capacity, the "Co-Agent"). W I T N E S S E T H : WHEREAS, Borrower has requested that the Lenders establish a $75,000,000 line of credit facility in favor of Borrower, and subject to the terms and conditions contained herein, the Lenders are willing to establish such line of credit facility in favor of Borrower subject to the terms and conditions set forth below; NOW, THEREFORE, in consideration of the mutual covenants made herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: ARTICLE 1 DEFINITIONS; CONSTRUCTION Section 1.1. Definitions. As used in this Agreement, and in any instrument, certificate, document or report delivered pursuant hereto, the following terms shall have the following meanings (to be equally applicable to both the singular and plural forms of the term defined): "Administrative Agent" shall mean SunTrust Bank, Central Florida, a national banking association, as administrative agent for the Lenders hereunder and under the other Credit Documents, and each successor administrative agent. "Adjusted LIBO Rate" shall mean with respect to each Interest Period for a Eurodollar Advance, the rate obtained by dividing (A) LIBOR for such Interest Period by (B) a percentage equal to 1 minus the then stated maximum rate (stated as a decimal) of all reserves requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurodollar liabilities as defined in Regulation D (or against any successor category of liabilities as defined in Regulation D). The Administrative Agent shall promptly notify the Borrower of any such reserve requirements that become applicable. "Advance" shall mean any principal amount advanced and remaining outstanding at any time under the Line of Credit Loans, which Advance shall be made or outstanding as a Base Rate Advance, Competitive Bid Advance or Eurodollar Advance, as the case may be. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by, or under common control with, such Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by", and "under common control with") as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person. "Agents" shall mean, collectively, the Administrative Agent, the Documentation Agent, the Syndication Agent and the Co-Agent. "Agreement" shall mean this Line of Credit Agreement, either as originally executed or as it may be from time to time supplemented, amended, restated, renewed or extended and in effect. "Applicable Facility Fee Percentage" shall mean the percentage designated below based on Borrower's Leverage Ratio for the most recently ended fiscal quarter for which financial statements have been delivered pursuant to Section 6.07(a) or (b): Leverage Ratio Applicable Facility Fee Percentage for Line of Credit Commitments: -------------------------------------------------------------- Less than 0.4:1.0 0.125% -------------------------------------------------------------- Greater than or equal to 0.4:1.0 but less than 0.45:1.0 0.15% -------------------------------------------------------------- Greater than or equal to 0.45:1.0 but less than 0.5:1.0 0.175% -------------------------------------------------------------- Greater than or equal to 0.5:1.0 but less than 0.55:1.0 0.225% -------------------------------------------------------------- Greater than or equal to 0.55:1.0 0.275% -------------------------------------------------------------- -2- provided, however, that: (a) The Applicable Facility Fee Percentage in effect as of the date of execution and delivery of this Agreement is .175% for the Line of Credit Commitments, and such percentage shall remain in effect until such time as the Applicable Facility Fee Percentage may be adjusted as hereinafter provided; and (b) Adjustments, if any, to the Applicable Facility Fee Percentages based on changes in the ratios set forth above shall be made and become effective on the first day of the fiscal quarter immediately following delivery of the financial statements required pursuant to Section 6.07(b), and (ii) on the first day of the second fiscal quarter immediately following the last day of any fiscal year of Borrower. (c) Notwithstanding the foregoing, at any time during which Borrower has failed to deliver the financial statements and certificates when required by Section 6.07(a) and (b), as the case may be, the Applicable Facility Fee Percentage shall be 0.275% until such time as the delinquent financial statements are delivered at which time the Applicable Facility Fee Percentage shall be reset as provided above. "Applicable Margin" shall mean the percentage designated below based on Borrower's Leverage Ratio for the most recently ended fiscal quarter for which financial statements have been delivered pursuant to Section 6.07(a) or (b): Leverage Ratio Applicable Margin for Line of Credit Commitments: -------------------------------------------------------------- Less than 0.4:1.0 0.275% -------------------------------------------------------------- Greater than or equal to 0.4:1.0 but less than 0.45:1.0 0.35% -------------------------------------------------------------- Greater than or equal to 0.45:1.0 but less than 0.5:1.0 0.575% -------------------------------------------------------------- Greater than or equal to 0.5:1.0 but less than 0.55:1.0 0.65% -------------------------------------------------------------- Greater than or equal to 0.55:1.0 0.85% -------------------------------------------------------------- -3- provided, however, that: (a) The Applicable Margin in effect as of the date of execution and delivery of this Agreement is .575% for the Line of Credit Commitments, and such percentage shall remain in effect until such time as the Applicable Margin may be adjusted as hereinafter provided; and (b) Adjustments, if any, to the Applicable Margin based on changes in the ratios set forth above shall be made and become effective on the first day of the fiscal quarter immediately following delivery of the financial statements required pursuant to Section 6.07(b), and (ii) on the first day of the second fiscal quarter immediately following the last day of any fiscal year of Borrower. (c) Notwithstanding the foregoing, at any time during which Borrower has failed to deliver the financial statements and certificates when required by Section 6.07(a) and (b), as the case may be, the Applicable Margin shall be 0.85% until such time as the delinquent financial statements are delivered at which time the Applicable Margin shall be reset as provided above "Asbestos Laws" means the common law in all federal, state and local and foreign jurisdictions and other laws in such jurisdictions, and regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, now or hereafter in effect relating to or concerning asbestos or asbestos-containing material, including without limitation, exposure to asbestos or asbestos-containing material. "Asset Value" shall mean, with respect to any property or asset of any Consolidated Company as of any particular date, an amount equal to the greater of (i) the then book value of such property or asset as established in accordance with GAAP, and (ii) the then fair market value of such property or asset as determined in good faith by the board of directors of such Consolidated Company. "Assignment and Acceptance" shall mean an assignment and acceptance entered into by a Lender and an Eligible Assignee in accordance with the terms of this Agreement and substantially in the form of Exhibit D. "Bankruptcy Code" shall mean The Bankruptcy Code of 1978, as amended and in effect from time to time (11 U.S.C.ss. 101 et seq.). -4- "Base Rate" shall mean (with any change in the Base Rate to be effective as of the date of change of either of the following rates) the higher of (a) the rate which the Administrative Agent designates from time to time to be its prime lending rate, as in effect from time to time, and (b) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%) per annum. The Administrative Agent's prime lending rate is a reference rate and does not necessarily represent the lowest or best rate charged to customers; Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Administrative Agent's prime lending rate. "Base Rate Advance" shall mean an Advance bearing interest based on the Base Rate. "Base Rate Loan" shall mean any Line of Credit Loan hereunder which bears interest at the Base Rate. "Borrowing" shall mean the incurrence by Borrower under any Facility of Advances of one Type concurrently having the same Interest Period or the continuation or conversion of an existing Borrowing or Borrowings in whole or in part. "Business Day" shall mean, with respect to Eurodollar Loans, any day other than a day on which commercial banks are closed or required to be closed for domestic and international business, including dealings in Dollar deposits on the London interbank market, and with respect to all other Line of Credit Loans and matters, any day other than Saturday, Sunday and a day on which commercial banks are required to be closed for business in Atlanta, Georgia, or Orlando, Florida. "Capitalized Lease Obligations" shall mean all lease obligations which have been or are required to be, in accordance with GAAP, capitalized on the books of the lessee. "CERCLA" has the meaning set forth in Section 5.15(a) of this Agreement. "Change in Control Provision" shall mean any term or provision contained in any indenture, debenture, note, or other agreement or document evidencing or governing Indebtedness of Borrower evidencing debt or a commitment to extend loans in excess of $5,000,000 which requires, or permits the holder(s) of such Indebtedness of Borrower to require that such Indebtedness of Borrower be redeemed, repurchased, defeased, prepaid or repaid, either in whole or in part, or the maturity of such Indebtedness of Borrower to be accelerated in any respect, as a result of a change in ownership of the capital stock of Borrower or voting rights with respect thereto. "Closing Date" shall mean the date on or before January 26, 1999, on which the initial Line of Credit Loans are made and the conditions set forth in Section 4.01 are satisfied or waived in accordance with Section 10.02. -5- "Co-Agent" shall mean SouthTrust Bank, National Association, a national banking association, as co-agent for the Lenders hereunder and under the other Credit Documents, and each successor co-agent. "Commitment Letter" shall mean that certain letter agreement, dated as of December 21, 1998, executed by SunTrust Equitable Securities Corporation, SunTrust Bank, Central Florida, and First Union National Bank and acknowledged and agreed to by the Borrower. "Competitive Bid Advance" shall mean an Advance bearing interest based on a Competitive Bid Rate. "Competitive Bid Loan" shall mean a Line of Credit Loan made by a Lender on a competitive bid basis as provided in Article II. "Competitive Bid Note" shall mean a promissory note evidencing Competitive Bid Loans in the form attached hereto as Exhibit B. "Competitive Bid Rate" shall mean the interest rate charged by a Lender on a Competitive Bid Loan. "Consolidated Amortization" shall mean, for any fiscal period of the Borrower, amortization of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Companies" shall mean, collectively, Borrower and all of its Subsidiaries. "Consolidated Depreciation" shall mean, for any fiscal period of the Borrower, depreciation of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Consolidated EBITR" shall mean, for any fiscal period of the Borrower, an amount equal to Consolidated Net Income (Loss) for such period, plus, to the extent deducted in determining Consolidated Net Income (Loss), (i) Consolidated Tax Expense for such period, (ii) Consolidated Interest Expense for such period, and (iii) Consolidated Rental Expense for such period. "Consolidated EBITDAR" shall mean, for any fiscal period of the Borrower, an amount equal to Consolidated Net Income (Loss) for such period plus to the extent deducted in determining Consolidated Net Income (Loss), (i) Consolidated Interest Expense for such period, (ii) Consolidated Tax Expense for such period, (iii) Consolidated Depreciation for such period, -6- (iv) Consolidated Amortization for such period and (v) Consolidated Rental Expense for such period. "Consolidated Interest Expense" shall mean, for any fiscal period of Borrower, total interest expense (including without limitation, interest expense attributable to capitalized leases in accordance with the GAAP and any program costs incurred by Borrower in connection with sales of accounts receivable pursuant to a securitization program) of the Consolidated Companies for such period, determined on a consolidated basis. "Consolidated Net Income (Loss)" shall mean, for any fiscal period of Borrower, the net income (or loss) of the Consolidated Companies for such period (taken as a single accounting period) determined on a consolidated basis in conformity with GAAP; provided that there shall be excluded therefrom (i) any items of gain or loss which were included in determining such Consolidated Net Income and were not realized in the ordinary course of business or the result of a sale of assets other than in the ordinary course of business; and (ii) the income (or loss) of any party accrued prior to the date such becomes a Subsidiary of Borrower or is merged into or consolidated with Borrower or any of its Subsidiaries, or such party's assets are acquired by any Consolidated Company, unless such party is acquired in a transaction accounted for as a pooling of interests. "Consolidated Net Worth" shall mean as of the date of determination, the Borrower's total shareholder's equity of such date as determined in accordance with GAAP. "Consolidated Rental Expense" shall mean, for any fiscal period of Borrower, total operating lease expense of the Consolidated Companies for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated Tax Expense" shall mean, for any fiscal period of the Borrower, tax expense of the Consolidated Companies for such period determined on a consolidated basis in accordance with GAAP. "Contractual Obligation" of any Person shall mean any provision of any security issued by such Person or of any agreement, instrument or undertaking under which such Person is obligated or by which it or any of the property owned by it is bound. "Credit Documents" shall mean, collectively, this Agreement, the Line of Credit Notes, the Guaranty Agreements, and all other Guaranty Documents, if any. "Credit Parties" shall mean, collectively, each of Borrower, the Guarantors, and every other Person who, from time to time, executes a Credit Document with respect to all or any portion of the Obligations. "Default" shall mean any condition or event which, with notice or lapse of time or both, would constitute an Event of Default. -7- "Documentation Agent" shall mean First Union National Bank, a national banking association, as documentation agent for the Lenders hereunder and under the other Credit Documents, and each successor documentation agent. "Dollar" and "U.S. Dollar" and the sign "$" shall mean lawful money of the United States of America. "Eligible Assignee" shall mean (i) a commercial bank organized under the laws of the United States of America, or any state thereof, , or organized under the laws of any other country with a Lending Office in the United States of America, having total assets in excess of $1,000,000,000 or any commercial finance or asset-based lending Affiliate of any such commercial bank and (ii) any Lender or any Affiliate of any Lender. "Environmental Laws" shall mean all federal, state, local and foreign statutes and codes or regulations, rules or ordinances issued, promulgated, or approved thereunder, now or hereafter in effect (including, without limitation, Asbestos Laws), relating to pollution or protection of the environment and relating to public health and safety, relating to (i) emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial toxic or hazardous constituents, substances or wastes, including without limitation, any Hazardous Substance, petroleum including crude oil or any fraction thereof, any petroleum product or other waste, chemicals or substances regulated by any Environmental Law into the environment (including without limitation, ambient air, surface water, ground water, land surface or subsurface strata), or (ii) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of any Hazardous Substance, petroleum including crude oil or any fraction thereof, any petroleum product or other waste, chemicals or substances regulated by any Environmental Law, and (iii) underground storage tanks and related piping, and emissions, discharges and releases or threatened releases therefrom, such Environmental Laws to include, without limitation (i) the Clean Air Act (42 U.S.C.ss.7401 et seq.), (ii) the Clean Water Act (33 U.S.C.ss. 1251 et seq.), (iii) the Resource Conservation and Recovery Act (42 U.S.C.ss. 6901 et seq.), (iv) the Toxic Substances Control Act (15 U.S.C.ss.2601 et seq.) and (v) the Comprehensive Environmental Response Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act (42 U.S.C.ss. 9601 et seq.). "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended and in effect from time to time. "ERISA Affiliate" shall mean, with respect to any Person, each trade or business (whether or not incorporated) which is a member of a group of which that Person is a member and which is under common control within the meaning of the regulations promulgated under Section 414 of the Tax Code. "Eurodollar Advance" shall mean an Advance bearing interest based on the Adjusted LIBO Rate. -8- "Eurodollar Loan" shall mean any Line of Credit Loan hereunder which bears interest based on the Adjusted LIBO Rate. "Event of Default" shall have the meaning set forth in Article VIII. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor statute thereto. "Executive Officer" shall mean with respect to any Person (other than a Guarantor), the President, Vice Presidents, Chief Financial Officer, Treasurer, Secretary and any Person holding comparable offices or duties, and with respect to a Guarantor, the President. "Extension of Credit" shall mean the making of a Line of Credit Loan or the conversion of a Line of Credit Loan of one Type into a Line of Credit Loan of another Type. "Facility" or "Facilities" shall mean the Line of Credit Commitment and Line of Credit Loans. "Facility Fee" shall have the meaning assigned to such term in Section 3.05(a). "Federal Funds Rate" shall mean for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of Atlanta, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent. "Fee Letter" shall mean that certain letter agreement, dated as of December 21, 1998, executed by SunTrust Equitable Securities Corporation, SunTrust Bank, Central Florida and First Union National Bank and acknowledged and agreed to by the Borrower, pursuant to which the Borrower agreed to pay certain fees specified in such letter agreement. "Fees" shall mean, collectively, the Facility Fee and any other fees specified in the Fee Letter. "Final Maturity Date" shall mean the date on which all commitments have been terminated and all amounts outstanding under this Agreement have been declared or have automatically become due and payable pursuant to the provisions of Article VIII. "Fixed Charge Coverage Ratio" shall mean, as of any date of determination, the ratio of (A) Consolidated EBITDAR to (B) the sum of (i) Consolidated Interest Expense plus (ii) Consolidated Rental Expense, in each case measured for the four fiscal quarter period ending on -9- such date (or if such date is not the last day of any fiscal quarter, for the four fiscal quarter period ending immediately prior to such date). "GAAP" shall mean generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. "Guaranteed Indebtedness" shall mean, as to any Person, any obligation of such Person guaranteeing any indebtedness, lease, dividend, or other obligation ("primary obligation") of any other Person (the "primary obligor") in any manner including, without limitation, any obligation or arrangement of such Person (a) to purchase or repurchase any such primary obligation, (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition 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) to indemnify the owner of such primary obligation against loss in respect thereof. "Guarantors" shall mean, collectively, each Material Subsidiary of the Borrower that has executed the Guaranty Agreement as of the Closing Date, together with all other Material Subsidiaries that hereafter execute supplements to the Guaranty Agreement, and their respective successors and permitted assigns. "Guaranty Agreement" shall mean the Subsidiary Guaranty Agreement, dated as of the date hereof, executed by certain of Borrower's Subsidiaries in favor of the Lenders and the Administrative Agent, as the same may be amended, restated or supplemented from time to time. "Guaranty Documents" shall mean, collectively, the Guaranty Agreement, and each other guaranty agreement, mortgage, deed of trust, security agreement, pledge agreement, or other security or collateral document guaranteeing or securing the Obligations, as the same may be amended, restated, or supplemented from time to time. "Hazardous Materials" shall mean oil, petroleum or chemical liquids or solids, liquid or gaseous products, asbestos, or any other hazardous waste or hazardous substances, including, without limitation, hazardous medical waste or any other substance described in any Hazardous Materials Law. "Hazardous Materials Law" shall mean the Comprehensive Environmental Response Compensation and Liability Act as amended by the Super Fund Amendments and Reauthorization Act, 42 U.S.C. -10- ss. 9601, the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901, the state hazardous waste laws, as such laws may from time to time be in effect, and related regulations, and all similar laws and regulations. "Hazardous Substances" has the meaning assigned to that term in CERCLA. "Hughes Family" shall mean (i) David H. Hughes, Vincent S. Hughes, Russell V. Hughes, (ii) any of their direct family members (including, without limitation, lineal ancestors and descendants, siblings, and lineal descendants of siblings), (iii) any trusts and profit sharing plans and stock option plans established for the sole benefit of the foregoing, and (iv) the heirs and personal representatives of the foregoing. "Indebtedness" of any Person shall mean, without duplication (i) all obligations of such Person which in accordance with GAAP would be shown on the balance sheet of such Person as a liability (including, without limitation, obligations for borrowed money and for the deferred purchase price of property or services, and obligations evidenced by bonds, debentures, notes or other similar instruments); (ii) all Guaranteed Indebtedness of such Person (including contingent reimbursements obligations under undrawn financial letters of credit but not performance letters of credit) (iii) all Capitalized Lease Obligations; (iv) all Indebtedness of others secured by any Lien upon property owned by such Person, whether or not assumed; and (v) all obligations or other liabilities under currency contracts, interest rate contracts, interest rate protection agreements or similar agreements or combinations thereof. Notwithstanding the foregoing, in determining the Indebtedness of any Person, there shall be included all obligations of such Person of the character referred to in clauses (i) through (v) above deemed to be extinguished under GAAP but for which such Person remains legally liable except to the extent that such obligations (x) have been defeased in accordance with the terms of the applicable instruments governing such obligations and (y) the accounts or other assets dedicated to such defeasance are not included as assets on the balance sheet of such Person. "Intercompany Loan Documents" shall mean, collectively, the promissory notes and all related loan, subordination, and other agreements, to the extent that they exist, relating in any manner to the Intercompany Loans. "Intercompany Loans" shall mean, collectively, (i) the loans more particularly described on Schedule 5.22 and (ii) those loans or other extensions of credit made by any Consolidated Company to another Consolidated Company satisfying the terms and conditions set forth in Section 7.01 or as may otherwise be approved in writing by the Administrative Agent and the Required Lenders. "Interest Period" shall mean (i) with respect to Competitive Bid Loans, such periods agreed upon between Borrower and Lenders, and (ii) with respect to Eurodollar Advances, the period of 1, 2, 3 or 6 months selected by the Borrower, in case of clause (ii) pursuant to the terms of the credit facility and subject to customary adjustments in duration; provided, that (a) the first day of an Interest Period must be a Business Day, (b) any Interest Period that would otherwise end on a day that is not a Business Day for Eurodollar Loans shall be -11- extended to the next succeeding Business Day for Eurodollar Loans, unless such Business Day falls in the next calendar month, in which case the Interest Period shall end on the next preceding Business Day for Eurodollar Loans, and (c) Borrower may not elect an Interest Period that would extend beyond the Line of Credit Termination Date. "Investment" shall mean, when used with respect to any Person, any direct or indirect advance, loan or other extension of credit (other than the creation of receivables in the ordinary course of business) or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any Person, or any direct or indirect purchase or other acquisition by such Person of, or of a beneficial interest in, capital stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. "Lender" or "Lenders" shall mean the banks and lending institutions listed on the signature pages hereof, and each assignee thereof, if any, pursuant to Section 10.06. "Lending Office" shall mean for each Lender the office such Lender may designate in writing from time to time to Borrower and the Administrative Agent with respect to each Type of Line of Credit Loan. "Leverage Ratio" shall mean, as of any date of determination, the ratio of Total Funded Debt as of such date to Total Capitalization as of such date. "LIBOR" shall mean, for any Interest Period, the offered rates for deposits in U.S. dollars for a period comparable to the Interest Period appearing on the Telerate Page 3750, as of 11:00 a.m. London time on the day that is two business days prior to the Interest Period. If at least two such rates appear on the Telerate Page 3750, the rate for that Interest Period will be the arithmetic mean of such rates, rounded, if necessary, to the next higher 1/16 of 1.0%. If the foregoing rate is unavailable from the Telerate Page 3750 for any reason, then such rate shall be determined by the Administrative Agent from the Reuters Screen LIBOR Page, or if such rate is also unavailable on such service, then on any other interest rate reporting service of recognized standing designated in writing by the Administrative Agent to Borrower and the Lenders; in any such case rounded, if necessary, to the next higher 1/16 of 1.0%, if the rate is not such a multiple. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind or description and shall include, without limitation, any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any capital lease in the nature thereof including any lease or similar arrangement with a public authority executed in connection with the issuance of industrial development revenue bonds or pollution control revenue bonds, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction. "Line of Credit Commitment" or "Commitment" shall mean at any time for any Lender, the amount of such commitment set forth opposite such Lender's name on the signature pages hereof or in any assignment hereafter executed by any assignee of a Lender pursuant to -12- Section 10.06, as the same may be increased or decreased from time to time as a result of any reduction thereof pursuant to Section 2.03, any assignment thereof pursuant to Section 10.06, or any amendment thereof pursuant to Section 10.02. "Line of Credit Loans" or "Loans" shall mean, collectively, the line of credit loans made to Borrower by the Lenders pursuant to Section 2.01. "Line of Credit Note" shall mean any of the Syndicate Notes or the Competitive Bid Notes either as originally executed or as the same may be from time to time supplemented, modified, amended, renewed or extended. "Line of Credit Termination Date" shall mean the earlier of (i) January 25, 2000 and (ii) the date on which the Line of Credit Commitments are terminated in accordance with Article VIII. "Materially Adverse Effect" shall mean the occurrence of an event, which would (i) cause the recognition of a liability, as required by Statement of Financial Accounting Standards No. 5, in the current quarter financial statements in the amount of $15,000,000 or more, or (ii) cause an auditor to have a substantial doubt about the ability of Borrower to continue as a going concern after consideration of management's plans as described in Statement of Auditing Standards, No. 59. "Material Subsidiary" shall mean each Subsidiary of Borrower, now existing or hereinafter established or acquired, that at any time prior to the Final Maturity Date, has or acquires total assets in excess of $1,000,000 or that accounted for or produced more than 5% of the Consolidated EBITR of Borrower on a consolidated basis during any of the three most recently completed fiscal years of Borrower. "Multiemployer Plan" shall have the meaning set forth in Section 4001(a)(3) of ERISA. "Notice of Borrowing" shall have the meaning provided in Section 3.01. "Notice of Continuation/Conversion" shall have the meaning provided in Section 3.01. "Obligations" shall mean all amounts owing to the Agents and all Lenders pursuant to the terms of this Agreement or any other Credit Document, including without limitation, all Line of Credit Loans (including all principal and interest payments due thereunder), fees, expenses, indemnification and reimbursement obligations, payments, indebtedness, liabilities, and obligations of the Credit Parties, direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising, together with all renewals, extensions, modifications or refinancings thereof. -13- "Payment Office" shall mean, for any Lender, the "Payment Office" listed on its signature page to this Agreement. "PBGC" shall mean the Pension Benefit Guaranty Corporation, and any successor thereto. "Permitted Liens" shall mean those Liens expressly permitted by Section 7.02. "Person" shall mean and shall include an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated association, a government or any department or agency thereof and any other entity whatsoever. "Plan" shall mean any employee benefit plan, program, arrangement, practice or contract, maintained by or on behalf of the Borrower or an ERISA Affiliate, which provides benefits or compensation to or on behalf of employees or former employees, whether formal or informal, whether or not written, including but not limited to the following types of plans: (i) Executive Arrangements - any bonus, incentive compensation, stock option, deferred compensation, commission, severance, "golden parachute", "rabbi trust", or other executive compensation plan, program, contract, arrangement or practice; (ii) ERISA Plans - any "employee benefit plan" as defined in Section 3(3) of ERISA), including, but not limited to, any defined benefit pension plan, profit sharing plan, money purchase pension plan, savings or thrift plan, stock bonus plan, employee stock ownership plan, Multiemployer Plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits; (iii) Other Employee Fringe Benefits - any stock purchase, vacation, scholarship, day care, prepaid legal services, severance pay or other fringe benefit plan, program, arrangement, contract or practice. "Pro Rata Share" shall mean, with respect to each of the Line of Credit Commitments of each Lender and each Line of Credit Loan to be made by and each payment (including, without limitation, any payment of principal, interest or fees) to be made to each Lender, the percentage designated as such Lender's Pro Rata Share of such Line of Credit Commitments, such Line of Credit Loans or such payments, as applicable, set forth under the name of such Lender on the respective signature page for such Lender or in any assignment hereafter executed by an assignee of a Lender pursuant to Section 10.06, in each case as such Pro Rata Share may change from time to time as a result of assignments or amendments made pursuant to this Agreement. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time. -14- "Required Lenders" shall mean, at any time, Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the then aggregate amount of the Line of Credit Commitments and the aggregate outstanding Line of Credit Loans. "Requirement of Law" for any Person shall mean the articles or certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or determination of an arbitrator or a court or other governmental authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Reuters Screen" shall mean, when used in connection with any designated page and LIBOR, the display page so designated on the Reuter Monitor Money Rates Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to LIBOR). "Revolving Credit Agreement" shall mean that certain Revolving Credit Agreement, dated as of the date hereof, by and among Borrower, SunTrust Bank, Central Florida, as Administrative Agent, First Union National Bank, as Documentation Agent, NationsBank N.A., as Syndication Agent, SouthTrust Bank, National Association, as Co-Agent, and the banks and lending institutions from time to time parties thereto, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Subordinated Debt" shall mean all Indebtedness of Borrower and its Subsidiaries subordinated to all obligations of Borrower and its Subsidiaries or any other Credit Party arising under this Agreement, the Line of Credit Notes and the Guaranty Agreement on terms and conditions satisfactory in all respects to the Administrative Agent and the Required Lenders, including without limitation, with respect to interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies, and subordination provisions, as evidenced by the written approval of the Administrative Agent and Required Lenders. "Subsidiary" shall mean, with respect to any Person, any corporation or other entity (including, without limitation, partnerships, joint ventures, and associations) regardless of its jurisdiction of organization or formation, at least a majority of the total combined voting power of all classes of voting stock or other ownership interests of which shall, at the time as of which any determination is being made, be owned by such Person, either directly or indirectly through one or more other Subsidiaries. "Syndicate Loan" shall mean the Line of Credit Loans made to Borrower hereunder other than Competitive Bid Loans. "Syndicate Note" shall mean a promissory note evidencing Syndicate Loans in the form attached hereto as Exhibit A. -15- "Syndication Agent" shall mean NationsBank, N.A., a national banking association, as syndication agent for the Lenders hereunder and under the other Credit Documents, and each successor syndication agent. "Tax Code" shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time. "Taxes" shall mean any present or future taxes, levies, imposts, duties, fees, assessments, deductions, withholdings or other charges of whatever nature, including without limitation, income, receipts, excise, property, sales, transfer, license, payroll, withholding, social security and franchise taxes now or hereafter imposed or levied by the United States of America, or any state, local or foreign government or by any department, agency or other political subdivision or taxing authority thereof or therein and all interest, penalties, additions to tax and similar liabilities with respect thereto. "Telerate" shall mean, when used in connection with any designated page and "LIBOR," the display page so designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service for the purpose of displaying rates comparable to "LIBOR"). "Total Capitalization" shall mean, as of any date of determination, the sum of (i) Total Funded Debt plus (ii) Consolidated Net Worth as of such date. "Total Commitment" shall mean the sum of the Lenders' Line of Credit Commitments as such Total Commitment may be reduced by voluntary reduction, prepayment or nonrenewal of a Lender's Line of Credit Commitment as provided herein. "Total Funded Debt" shall mean all Indebtedness of the Consolidated Companies that by its terms or by the terms of any instrument or agreement relating thereto matures, or which is otherwise payable or unpaid, one year or more from, or is directly or indirectly renewable or extendable at the option of the debtor to a date one year or more (including an option of the debtor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more) from, the date of the creation thereof, provided that Total Funded Debt shall include, as at any date of determination, any portion of such Indebtedness outstanding on such date which matures on demand or within one year from such date (whether by sinking fund, other required prepayment, or final payment at maturity) and shall also include all Indebtedness of the Consolidated Companies for borrowed money under a line of credit, guidance line, revolving credit, bankers acceptance facility or similar arrangement for borrowed money, including, without limitation, all unpaid drawings under letters of credit and unreimbursed amounts pursuant to letter of credit reimbursement agreements, regardless of the maturity date thereof. "Type" of Borrowing shall mean a Borrowing consisting of Base Rate Advances, Eurodollar Advances or Competitive Bid Advances. -16- "United States of America" shall mean the fifty (50) States and the District of Columbia "Wholly Owned Subsidiary" shall mean any Subsidiary, all the stock or ownership interest of every class of which, except directors' qualifying shares, shall, at the time as of which any determination is being made, be owned by Borrower either directly or indirectly. "Year 2000 Issues" shall mean the actual and anticipated costs, claims, losses, and liabilities associated with the inability of certain computer and software applications to effectively handle data that includes dates prior to, on, spanning or after January 1, 2000, as such inability in respect of any Consolidated Company affects the business, operations, and financial condition of any Consolidated Company. Section 1.2. Accounting Terms and Determination. Unless otherwise defined or specified herein, all accounting terms shall be construed herein, all accounting determinations hereunder shall be made, all financial statements required to be delivered hereunder shall be prepared, and all financial records shall be maintained in accordance with, GAAP. Section 1.3. Other Definitional Terms. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule, Exhibit and like references are to this Agreement unless otherwise specified. Section 1.4. Exhibits and Schedules. All Exhibits and Schedules attached hereto are by reference made a part hereof. ARTICLE 2 LINE OF CREDIT COMMITMENT Section 2.1. Line of Credit Commitment; Use of Proceeds. (1) Subject to and upon the terms and conditions herein set forth, each Lender severally agrees to make to Borrower from time to time on and after the Closing Date, but prior to the Line of Credit Termination Date, Line of Credit Loans in an aggregate amount outstanding at any time not to exceed such Lender's Line of Credit Commitment. Borrower shall be entitled to repay and reborrow Line of Credit Loans in accordance with the provisions hereof. (2) Each Line of Credit Loan shall, at the option of Borrower, be made or continued as, or converted into, part of one or more Borrowings that shall consist entirely of Syndicate Loans (comprised of Base Rate Advances or Eurodollar Advances) or Competitive Bid Loans. The aggregate principal amount of each Borrowing of Line of Credit Loans -18- comprised of Eurodollar Advances shallnot be less than $2,000,000 or a greater integral multiple of $100,000. The aggregate principal amount of each Borrowing of Competitive Bid Loans shall not be less than $2,000,000. The aggregate principal amount of each Borrowing of Line of Credit Loans comprised of Base Rate Advances shall not be less than $250,000 or a greater integral multiple of $10,000. At no time shall the number of Borrowings outstanding under this Article II exceed ten; provided that, for the purpose of determining the number of Borrowings outstanding and the minimum amount for Borrowings resulting from conversions or continuations, all Borrowings of Base Rate Advances under this Facility shall be considered as one Borrowing. The parties hereto agree that (i) the aggregate principal balance of the Line of Credit Loans (including the Competitive Bid Loans) of the Lenders as a group shall not exceed the aggregate principal amounts of all Line of Credit Commitments, (ii) no Lender shall be obligated to make Syndicate Loans in excess of the Line of Credit Commitment of such Lender, (iii) no Lender shall be obligated hereunder to extend Competitive Bid Loans or to make quotes for such Line of Credit Loans and (iv) a Lender may elect, in its discretion, to extend Competitive Bid Loans which, either alone or together with the Syndicate Loans of such Lender, exceed the Line of Credit Commitment of such Lender. (3) The proceeds of the Line of Credit Loans shall be used solely to provide liquidity for the payment of commercial paper issued by Borrower from time to time pursuant to the Borrower's unrated commercial paper program with SunTrust Bank, Atlanta or any of its Affiliates. Line of Credit Loans plus the amount of all commercial paper issued by Borrower may not at any one time exceed seventy-five million dollars ($75,000,000). Section 2.2. Line of Credit Notes; Repayment of Principal. (1) Borrower's obligations to pay the principal of, and interest on, the Syndicate Loans and the Competitive Bid Loans to each Lender shall be evidenced by the records of the Administrative Agent and such Lender and by the Syndicate Note and the Competitive Bid Note, respectively, payable to such Lender (or the assignor of such Lender) completed in conformity with this Agreement. (2) All outstanding principal amounts under the Line of Credit Loans shall be due and payable at the earlier of (i) the Line of Credit Termination Date or (ii) acceleration of the indebtedness as provided in Article VIII. Section 2.3. Voluntary Reduction of Line of Credit Commitments. Upon at least three (3) Business Days' prior telephonic notice (promptly confirmed in writing) to the Administrative Agent, Borrower shall have the right, without premium or penalty, to terminate the Line of Credit Commitments, in part or in whole, provided that (i) any such termination shall apply to proportionately and permanently reduce the Line of Credit Commitments of each of the Lenders, (ii) any partial termination pursuant to this Section 2.03 shall be in an amount of at least $5,000,000 and integral multiples of $1,000,000, and (iii) no such reduction shall be permitted if prohibited or without payment of all costs required to be paid hereunder with respect to a prepayment. If the aggregate outstanding amount of the Line of Credit Loans exceeds the -19- amount of the Line of Credit Commitments as so reduced, Borrower shall immediately repay the Line of Credit Loans by an amount equal to such excess, together with all accrued but unpaid interest on such excess amount and any amounts due under Section 3.12 hereof. Section 2.4. Extension of the Line of Credit Termination Date. Borrower may, on and before two hundred ten (210) days prior to the then current Line of Credit Termination Date, request in writing an extension of the Line of Credit Termination Date. The Lenders may, in the exercise of their sole discretion, extend the Line of Credit Termination Date for an additional one hundred eighty (180) days. The Lenders shall notify the Borrower in writing of such election no later than one hundred eighty (180) days prior to then Line of Credit Termination Date. If any Lender elects to extend the Line of credit Termination Date for such one hundred eighty (180) day period beyond the Line of Credit Termination Date, then effective as of the then current Line of Credit Termination Date, the Line of Credit Termination Date for such Lender's Line of Credit Commitment shall be extended to the date one hundred eighty (180) days from the then current Line of Credit Termination Date. In the event that any Lender elects not to extend the then current Line of Credit Termination Date, such Lender's Line of Credit Commitment shall terminate on the then current Line of Credit Termination Date, and all Line of Credit Loans made by such Lender to the Borrower shall be due and payable in full on the then current Line of Credit Termination Date. Failure by any Lender to respond to the request by the Borrower to extend the Line of Credit Termination Date shall be deemed to be an election by such Lender not to extend the Line of Credit Termination Date. ARTICLE 3 GENERAL LOAN TERMS Section 3.1. Funding Notices. (1) (i) Whenever Borrower desires to make a Borrowing of Syndicate Loans under its Line of Credit Commitments (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)(i)), it shall give the Administrative Agent prior written notice (or telephonic notice promptly confirmed in writing) of such Borrowing (a "Notice of Borrowing") at its Payment Office such Notice of Borrowing to be given prior to (x) 11:00 A.M. (local time for the Administrative Agent) one (1) Business Day prior to the requested date of such Borrowing in the case of Base Rate Advances, (y) 11:00 A.M. (local time for the Administrative Agent) three (3) Business Days prior to the requested date of such Borrowing in the case of Eurodollar Advances and (z) prior to 1:00 P.M. (local time for the Administrative Agent) on the requested date of such Borrowing in the case of Competitive Bid Advances. Notices received after 11:00 A.M. for Base Rate Advances and Eurodollar Advances and 1:00 P.M. for Competitive Bid Advances shall be deemed received on the next Business Day. Each Notice of Borrowing shall be irrevocable and shall specify the aggregate principal amount of the Borrowing, the date of Borrowing (which shall be a Business Day), and whether the Borrowing -20- is to consist of Base Rate Advances or Eurodollar Advances and (in the case of Eurodollar Advances) the Interest Period to be applicable thereto. (ii) Whenever Borrower desires to make a Borrowing of Competitive Bid Loans under its Line of Credit Commitments (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)(ii)), it shall give the Administrative Agent notice that the Lenders are requested to provide Competitive Bid Rates for Interest Periods identified by Borrower, such Interest Periods not to exceed 180 days. Notices must comply with notice requirements of each respective Lender, which shall be communicated by Lenders to Borrower from time to time. Each Lender in its discretion may, but shall not be obligated to, submit a quote to the Borrower in connection with such request. The Borrower shall then be entitled, in its sole discretion, to elect to incur all or any part of the Competitive Bid Loan offered by one or more of the Lenders that have elected to provide quotes for any of the Interest Periods and at the rate(s) quoted by such Lender(s). The Competitive Bid Loans incurred by the Borrower in connection with such a request for quotes shall not exceed (i) with respect to all Lenders then providing quotes, the then unutilized Line of Credit Commitments of all Lenders as a group, and (ii) with respect to each Lender providing a quote, the amount bid by such Lender in connection with such Lender's quote. The Borrower shall notify the Administrative Agent and such Lender or Lenders of its election in accordance with the procedures established with such Lender or Lenders, having no obligation to report the terms thereof; provided, however, that if any Borrowing of Eurodollar Advances must be made as Base Rate Advances as a result of a determination made by the Administrative Agent pursuant to Section 3.09, such Notice of Borrowing may be revoked by Borrower no later than one (1) Business Day prior to the date of funding. (2) (i) Whenever Borrower desires to convert all or a portion of an outstanding Borrowing of Syndicate Loans under its Line of Credit Commitments, which Borrowing consists of Base Rate Advances into one or more Borrowings consisting of Eurodollar Advances or to continue outstanding a Borrowing consisting of Eurodollar Advances for a new Interest Period, it shall give the Administrative Agent at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each such Borrowing to be converted into or continued as Eurodollar Advances. Such notice (a "Notice of Continuation/Conversion") shall be given prior to 11:00 A.M. (local time for the Administrative Agent) on the date specified at the Payment Office of the Administrative Agent. Each such Notice of Continuation/Conversion shall be irrevocable and shall specify the aggregate principal amount of the Advances to be converted or continued, the date of such conversion or continuation and the Interest Period applicable thereto. If, upon the expiration of any Interest Period in respect of any Borrowing, Borrower shall have failed to deliver the Notice of Continuation/Conversion, Borrower shall be deemed to have elected to convert or continue such Borrowing to a Borrowing consisting of Base Rate Advances. So long as any Executive Officer of Borrower has knowledge that any Default or Event of Default shall have occurred and be continuing, no Borrowing may be converted into or continued as (upon expiration of the current Interest Period) Eurodollar Advances unless the Administrative Agent and each of the -21- Lenders shall have otherwise consented in writing. No conversion of any Borrowing of Eurodollar Advances shall be permitted except on the last day of the Interest Period in respect thereof. (ii) Whenever Borrower desires to continue all or a portion of an outstanding Borrowing of Competitive Bid Loans under its Line of Credit Commitments for a new Interest Period, it may request that the Lenders provide quotes for Competitive Bid Rates in the same manner prescribed in Section 3.01(a)(ii) for funding. Whenever Borrower desires to convert all or a portion of an outstanding Borrowing of Competitive Bid Loans under its Line of Credit Commitments into a Borrowing of Syndicate Loans it shall comply with the provisions prescribed in Section 3.01(b)(i) for conversion of Syndicate Loans. If, upon the expiration of any Interest Period in respect of any Competitive Bid Borrowing, Borrower shall have failed to deliver the Notice of Continuation/Conversion, or Lenders fail to provide such quotes, Borrower shall be deemed to have elected to convert or continue such Borrowing to a Borrowing of a Syndicate Loan consisting of Base Rate Advances. So long as any Default or Event of Default shall have occurred and be continuing, no Borrowing may be converted into (upon expiration of the current Interest Period) Eurodollar Advances. No conversion of any Borrowing into Eurodollar Advances shall be permitted except on the last day of the Interest Period in respect thereof. (3) Without in any way limiting Borrower's obligation to confirm in writing any telephonic notice, the Administrative Agent and the Lenders may act without liability upon the basis of telephonic notice believed by the Administrative Agent or the Lender in good faith to be from Borrower prior to receipt of written confirmation. In each such case, Borrower hereby waives the right to dispute the Administrative Agent's and the Lender's record of the terms of such telephonic notice. (4) The Administrative Agent shall promptly give each Lender notice by telephone (confirmed in writing) or by telex, telecopy or facsimile transmission of the matters covered by the notices given to the Administrative Agent pursuant to this Section 3.01 with respect to the Line of Credit Commitments. Section 3.2. Disbursement of Funds. (1) No later than 11:00 A.M. (local time for the Administrative Agent) on the date of each Borrowing of Syndicate Loans pursuant to the Line of Credit Commitments (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)(i)), each Lender will make available its Pro Rata Share of the amount of such Borrowing in immediately available funds at the Payment Office of the Administrative Agent. The Administrative Agent will make available to Borrower the aggregate of the amounts (if any) so made available by the Lenders to the Administrative Agent in a timely manner by crediting such amounts to Borrower's demand deposit account maintained with the Administrative Agent or at Borrower's option, to effect a wire transfer of such amounts to Borrower's account specified by the Borrower, by the close of business on such Business Day. In the event that the Lenders do not make such amounts available to the Administrative Agent by the time prescribed above, but such amount is received -22- later that day, such amount may be credited to Borrower in the manner described in the preceding sentence on the next Business Day (with interest on such amount to begin accruing hereunder on such next Business Day). (2) No later than 2:00 P.M. (local time for the applicable Lender) on the date of each Borrowing of Competitive Bid Loans (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)(ii)), the Lender making any Competitive Bid Loan will make available the amount of such Borrowing in immediately available funds by wire transfer to an account specified by the Borrower, by the close of business on such Business Day on the date of each Borrowing pursuant to the Line of Credit Commitments (other than one resulting from a conversion or continuation pursuant to Section 3.01(b)(ii)). (3) Unless the Administrative Agent shall have been notified by the Lender making any Syndicate Loan prior to the date of a Borrowing that such Lender does not intend to make available to the Administrative Agent such Lender's portion of the Borrowing to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date and the Administrative Agent may make available to Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender on the date of Borrowing, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest at the Federal Funds Rate. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify Borrower, and Borrower shall immediately pay such corresponding amount to the Administrative Agent together with interest at the rate specified for the Borrowing. Nothing in this subsection shall be deemed to relieve any Lender from its obligation to fund its Line of Credit Commitments hereunder or to prejudice any rights which Borrower may have against any Lender as a result of any default by such Lender hereunder. (4) All Borrowings of Syndicate Loans shall be loaned by the Lenders on the basis of their Pro Rata Share of the Line of Credit Commitments. All Borrowings of Competitive Bid Loans under the Line of Credit Commitments shall be loaned by the Lenders whose quotes were accepted by the Borrower. No Lender shall be responsible for any default by any other Lender in its obligations hereunder, and each Lender shall be obligated to make the Line of Credit Loans provided to be made by it hereunder, regardless of the failure of any other Lender to fund its Line of Credit Commitments hereunder. Section 3.3. Interest. (1) Borrower agrees to pay interest in respect of all unpaid principal amounts of the Syndicate Loans from the respective dates such principal amounts were advanced to maturity (whether by acceleration, notice of prepayment or otherwise) at rates per annum (on the basis of a 360-day year) equal to the applicable rates indicated below: -23- (i) For Base Rate Advances--The Base Rate in effect from time to time; and (ii) For Eurodollar Advances--The relevant Adjusted LIBO Rate plus the Applicable Margin. (2) Borrower agrees to pay interest in respect of all unpaid principal amounts of the Competitive Bid Loans made to Borrower from the respective dates such principal amounts were advanced to maturity (whether by acceleration, notice of prepayment or otherwise) at times and at rates per annum (on the basis of a 360-day year) equal to the applicable rates agreed upon between Borrower and the Lender making such Competitive Bid Loans. (3) Overdue principal and, to the extent not prohibited by applicable law, overdue interest, in respect of the Line of Credit Loans, whether Syndicate Loans or Competitive Bid Loans, and all other overdue amounts owing hereunder, shall bear interest from each date that such amounts are overdue: (i) in the case of overdue principal and interest with respect to all Line of Credit Loans outstanding as Eurodollar Advances and Competitive Bid Advances, at the rate otherwise applicable for the then-current Interest Period plus an additional two percent (2.0%) per annum; thereafter at the rate in effect for Base Rate Advances plus an additional two percent (2.0%) per annum; and (ii) in the case of overdue principal and interest with respect to all other Line of Credit Loans outstanding as Base Rate Advances, and all other Obligations hereunder (other than Line of Credit Loans), at a rate equal to the applicable Base Rate plus an additional two percent (2.0%) per annum; provided that no Line of Credit Loan shall bear interest after maturity, whether by non-payment at scheduled due date, acceleration, notice of prepayment or otherwise at a rate per annum less than two percent (2.0%) per annum in excess of the rate of interest applicable thereto at maturity. (4) Interest on each Line of Credit Loan shall accrue from and including the date of such Line of Credit Loan to, but excluding, the date of any repayment thereof; provided that, if a Line of Credit Loan is repaid on the same day made, one day's interest shall be paid on such Line of Credit Loan. Interest on all outstanding Base Rate Advances shall be payable quarterly in arrears on the last calendar day of each fiscal quarter of Borrower in each year. Interest on all outstanding Eurodollar Advances and Competitive Bid Advances shall be payable on the last day of each Interest Period applicable thereto, and, in the case of Eurodollar Advances having an Interest Period in excess of three months, on each day which occurs every three months, as the case may be, after the initial date of such Interest Period. Interest on all Line of Credit Loans shall be payable on any conversion of any Advances comprising such Line of Credit Loans into Advances of another Type, prepayment (on the amount prepaid), at maturity (whether by acceleration, notice of prepayment or otherwise) and, after maturity, on demand. -24- (5) The Administrative Agent, upon determining the Adjusted LIBO Rate for any Interest Period, shall promptly notify by telephone (confirmed in writing) or in writing Borrower and the other Lenders. Any such determination shall, absent manifest error, be final, conclusive and binding for all purposes. A Lender making a Competitive Bid Loan has no obligation to notify any other Lender of the interest rates charged to Borrower. Section 3.4. Interest Periods. (1) In connection with the making or continuation of, or conversion into, each Borrowing of Syndicate Loans comprised of Eurodollar Advances, Borrower shall select an interest period (each an "Interest Period") to be applicable to such Eurodollar Advances, which Interest Period shall be either a 1, 2, 3 or 6 month period; provided that: (i) The initial Interest Period for any Borrowing of Eurodollar Advances shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing consisting of Advances of another Type) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (ii) If any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided that if any Interest Period in respect of Eurodollar Advances would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iii) Any Interest Period in respect of Eurodollar Advances which begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall, subject to part (iv) below, expire on the last Business Day of such calendar month; (iv) No Interest Period shall extend beyond any date upon which any principal payment is due with respect to the Line of Credit Loans. (2) When Borrower requests a quote for a Competitive Bid Loan, the Borrower shall specify the Interest Period to be applicable to such Line of Credit Loan, which Interest Period shall be as agreed upon by the Borrower and such Lender; provided, however, that (i) no Interest Period shall exceed 180 days, (ii) no Interest Period shall extend beyond the Line of Credit Termination Date and (iii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day. Interest shall be payable in respect of each Competitive Bid Loan on the last day of each Interest Period applicable to such Competitive Bid Loan, and at maturity (whether by acceleration or otherwise). -25- Section 3.5. Fees. (1) Borrower shall pay to the Administrative Agent, for the account of and distribution of the respective Pro Rata Share to each Lender, a facility fee (the "Facility Fee") for the period commencing on the Closing Date to and including the Line of Credit Termination Date, computed at a rate equal to the Applicable Facility Fee Percentage per annum multiplied by (ii) on the daily average of the aggregate Line of Credit Commitments of the Lenders, such fee being payable quarterly in arrears on the last calendar day of each fiscal quarter of Borrower and on the Line of Credit Termination Date. (2) Borrower shall pay to the Administrative Agent such other fees as are specified, and in accordance with, the Fee Letter. Section 3.6. Voluntary Prepayments of Borrowings. (1) Borrower may, at its option, prepay Borrowings consisting of Base Rate Advances at any time in whole, or from time to time in part, in amounts aggregating $2,500,000 or any greater integral multiple of $500,000, by paying the principal amount to be prepaid together with interest accrued and unpaid thereon to the date of prepayment. Those Borrowings consisting of Eurodollar Advances may be prepaid, at Borrower's option, in whole, or from time to time in part, in amounts aggregating $5,000,000 or any greater integral multiple of $1,000,000, by paying the principal amount to be prepaid, together with interest accrued and unpaid thereon to the date of prepayment and all compensation payments pursuant to Section 3.12 if such prepayment is made on a date other than the last day of an Interest Period applicable thereto. Each such optional prepayment shall be applied in accordance with Section 3.06(c) below. (2) Borrower shall give written notice (or telephonic notice confirmed in writing) to the Administrative Agent of any intended prepayment of (i) Base Rate Advances not less than one Business Day prior to any such prepayments and (ii) Eurodollar Advances not less than three Business Days prior to any such prepayment. Borrower shall give written notice (or telephonic notice confirmed in writing) to the respective Lender who made any Competitive Bid Loan of any intended prepayment of such Competitive Bid Loan not less than one Business Day prior to any prepayment of such Competitive Bid Loan. Such notice, once given, shall be irrevocable. Upon receipt of such notice of prepayment pursuant to the first sentence of this paragraph (b), the Administrative Agent shall promptly notify each Lender of the contents of such notice and of such Lender's share of such prepayment. (3) Borrower, when providing notice of prepayment pursuant to Section 3.06(b) may designate the Types of Advances and the specific Borrowing or Borrowings which are to be prepaid, provided that (i) if any prepayment of Eurodollar Advances made pursuant to a single Borrowing of the Line of Credit Loans shall reduce the outstanding Advances made pursuant to such Borrowing to an amount less than $1,000,000, such Borrowing shall -26- immediately be converted into Base Rate Advances; and (ii) each prepayment made pursuant to a single Borrowing shall be applied pro rata among the Line of Credit Loans comprising such Borrowing, if such prepayment is not a prepayment of a Competitive Bid Loan. All voluntary prepayments shall be applied to the payment of any unpaid interest before application to principal. Section 3.7. Payments, etc. (1) (i) Except as otherwise specifically provided herein, all payments under this Agreement and the other Credit Documents, other than the payments specified in clause (ii) below, shall be made without defense, set-off or counterclaim to the Administrative Agent, not later than 2:00 P.M. (local time for the Administrative Agent) on the date when due and shall be made in Dollars in immediately available funds at the respective Payment Office. (ii) Except as otherwise specifically provided herein, all payments under this Agreement with respect to the Lenders making any Competitive Bid Loans shall be made without defense, set-off or counterclaim to such Lender not later than 2:00 P.M. (local time for such Lender) on the date when due and in immediately available funds at the Payment Office of such Lender, or at any other location of the Lender as such Lender may specify in writing to Borrower not later than 12:00 Noon (local time for the Lender) on the Business Day such payment is due. (2) (i) All such payments shall be made free and clear of and without deduction or withholding for any Taxes in respect of this Agreement, the Line of Credit Notes or other Credit Documents, or any payments of principal, interest, fees or other amounts payable hereunder or thereunder (but excluding any Taxes imposed on the overall net income of the Lenders pursuant to the laws of the jurisdiction in which the principal executive office or appropriate Lending Office of such Lender is located). If any Taxes are so levied or imposed, Borrower agrees (A) to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every net payment of all amounts due hereunder and under the Line of Credit Notes and other Credit Documents, after withholding or deduction for or on account of any such Taxes (including additional sums payable under this Section 3.07), will not be less than the full amount provided for herein had no such deduction or withholding been required, (B) to make such withholding or deduction and (C) to pay the full amount deducted to the relevant authority in accordance with applicable law. Borrower will furnish to the Administrative Agent and each Lender, within 30 days after the date the payment of any Taxes is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by Borrower. Borrower will indemnify and hold harmless the Administrative Agent and each Lender and reimburse the Administrative Agent and each Lender upon written request for the amount of any Taxes so levied or imposed and paid by the Administrative Agent or Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or illegally asserted. A certificate as to the amount of such payment by such Lender or the Administrative Agent, absent manifest error, shall be final, conclusive and binding for all purposes. -27- (ii) Each Lender that is organized under the laws of any jurisdiction other than the United States of America agrees to furnish to Borrower and the Administrative Agent, prior to the time it becomes a Lender hereunder, two copies of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 or any successor forms thereto (wherein such Lender claims entitlement to complete exemption from or reduced rate of U.S. Federal withholding tax on interest paid by Borrower hereunder) and to provide to Borrower and the Administrative Agent a new Form 4224 or Form 1001 or any successor forms thereto if any previously delivered form is found to be incomplete or incorrect in any material respect or upon the obsolescence of any previously delivered form; provided, however, that no Lender shall be required to furnish a form under this paragraph (ii) if it is not entitled to claim an exemption from or a reduced rate of withholding under applicable law. A Lender that is not entitled to claim an exemption from or a reduced rate of withholding under applicable law, promptly upon written request of Borrower, shall so inform Borrower in writing. (3) Subject to Section 3.04(a)(ii), whenever any payment to be made hereunder or under any Line of Credit Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the applicable rate during such extension. (4) On other than Competitive Bid Loans, which shall be negotiated from time to time, all computations of interest and fees shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable (to the extent computed on the basis of days elapsed), except that interest on Base Rate Advances shall be computed on the basis of a year of 360 days for the actual number of days. Interest on Base Rate Advances shall be calculated based on the Base Rate from and including the date of such Line of Credit Loan to but excluding the date of the repayment or conversion thereof. Interest on Eurodollar Advances shall be calculated as to each Interest Period from and including the first day thereof to but excluding the last day thereof. Each determination by the Administrative Agent or the Lender making any Competitive Bid Loan of an interest rate or fee hereunder shall be made in good faith and, except for manifest error, shall be final, conclusive and binding for all purposes. (5) Payment by Borrower to the Administrative Agent in accordance with the terms of this Agreement shall, as to Borrower, constitute payment to the Lenders under this Agreement. Section 3.8. Interest Rate Not Ascertainable, etc. In the event that the Administrative Agent, in the case of the Adjusted LIBO Rate, shall have determined (which determination shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all parties) that on any date for determining the Adjusted LIBO Rate for any Interest Period, by reason of any changes arising after the date of this Agreement affecting the London interbank market or the Administrative Agent's position in such market, adequate and fair -28- means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Adjusted LIBO Rate then, and in any such event, the Administrative Agent shall forthwith give notice (by telephone confirmed in writing) to Borrower and to the Lenders of such determination and a summary of the basis for such determination. Until the Administrative Agent notifies Borrower that the circumstances giving rise to the suspension described herein no longer exist, the obligations of the Lenders to make or permit portions of the Line of Credit Loans to remain outstanding past the last day of the then current Interest Periods as Eurodollar Advances shall be suspended, and such affected Advances shall bear the same interest as Base Rate Advances. Section 3.9. Illegality. (1) In the event that any Lender shall have determined (which determination shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all parties) at any time that the making or continuance of any Eurodollar Advance has become unlawful by compliance by such Lender in good faith with any applicable law, governmental rule, regulation, guideline or order (whether or not having the force of law and whether or not failure to comply therewith would be unlawful), then, in any such event, the Lender shall give prompt notice (by telephone confirmed in writing) to Borrower and to the Administrative Agent of such determination and a summary of the basis for such determination (which notice the Administrative Agent shall promptly transmit to the other Lenders). (2) Upon the giving of the notice to Borrower referred to in subsection (a) above, (i) Borrower's right to request and such Lender's obligation to make Eurodollar Advances shall be immediately suspended, and such Lender shall make an Advance as part of the requested Borrowing of Eurodollar Advances as a Base Rate Advance, provided, Borrower does not negotiate a Competitive Bid Loan, which Base Rate Advance shall, for all other purposes, be considered part of such Borrowing, and (ii) if the affected Eurodollar Advance or Advances are then outstanding, Borrower shall immediately, or if permitted by applicable law, no later than the date permitted thereby, upon at least one Business Day's written notice to the Administrative Agent and the affected Lender, convert each such Advance into an Advance or Advances of a different Type with an Interest Period ending on the date on which the Interest Period applicable to the affected Eurodollar Advances expires, provided that if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section 3.09(b). Section 3.10. Increased Costs. (1) If, by reason of (x) after the date hereof, the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation, or (y) the compliance with any guideline or request from any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having the force of law): -29- (i) any Lender (or its applicable Lending Office) shall be subject to any tax, duty or other charge with respect to its Eurodollar Advances or its obligation to make Eurodollar Advances, or the basis of taxation of payments to any Lender of the principal of or interest on its Eurodollar Advances or its obligation to make Eurodollar Advances shall have changed (except for changes in the tax on the overall net income of such Lender or its applicable Lending Office imposed by the jurisdiction in which such Lender's principal executive office or applicable Lending Office is located); or (ii) any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender's applicable Lending Office shall be imposed or deemed applicable or any other condition affecting its Eurodollar Advances or its obligation to make Eurodollar Advances shall be imposed on any Lender or its applicable Lending Office or the London interbank market; and as a result thereof there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining Eurodollar Advances (except to the extent already included in the determination of the applicable Adjusted LIBO Rate for Eurodollar Advances), or there shall be a reduction in the amount received or receivable by such Lender or its applicable Lending Office, then Borrower shall from time to time (subject, in the case of certain Taxes, to the applicable provisions of Section 3.07(b)), upon written notice from and demand by such Lender on Borrower (with a copy of such notice and demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender within five Business Days after the date of such notice and demand, additional amounts sufficient to indemnify such Lender against such increased cost. A certificate as to the amount of such increased cost, submitted to Borrower and the Administrative Agent by such Lender in good faith and accompanied by a statement prepared by such Lender describing in reasonable detail the basis for and calculation of such increased cost, shall, except for manifest error, be final, conclusive and binding for all purposes. (2) If any Lender shall advise the Administrative Agent that at any time, because of the circumstances described in clauses (x) or (y) in Section 3.10(a) or any other circumstances beyond such Lender's reasonable control arising after the date of this Agreement affecting such Lender or the London interbank market or the United States of America secondary certificate of deposit market or such Lender's position in such markets, the Adjusted LIBO Rate, as determined by the Administrative Agent, will not adequately and fairly reflect the cost to such Lender of funding its Eurodollar Advances, then, and in any such event: (i) the Administrative Agent shall forthwith give notice (by telephone confirmed in writing) to Borrower and to the other Lenders of such advice; (ii) Borrower's right to request and such Lender's obligation to make or permit portions of the Line of Credit Loans to remain outstanding past the last day of the then current Interest Periods as Eurodollar Advances shall be immediately suspended; and -30- (iii) such Lender shall make a Line of Credit Loan as part of the requested Borrowing of Eurodollar Advances, as the case may be, as a Base Rate Advance, which such Base Rate Advance shall, for all other purposes, be considered part of such Borrowing. Section 3.11. Lending Offices. (1) Each Lender agrees that, if requested by Borrower, it will use reasonable efforts (subject to overall policy considerations of such Lender) to designate an alternate Lending Office with respect to any of its Eurodollar Advances affected by the matters or circumstances described in Sections 3.07(b), 3.08, 3.09 or 3.10 to reduce the liability of Borrower or avoid the results provided thereunder, so long as such designation is not disadvantageous to such Lender as determined by such Lender, which determination if made in good faith, shall be conclusive and binding on all parties hereto. Nothing in this Section 3.11 shall affect or postpone any of the obligations of Borrower or any right of any Lender provided hereunder. (2) If any Lender that is organized under the laws of any jurisdiction other than the United States of America or any State thereof (including the District of Columbia) issues a public announcement with respect to the closing of its lending offices in the United States of America such that any withholdings or deductions and additional payments with respect to Taxes may be required to be made by Borrower thereafter pursuant to Section 3.07(b), such Lender shall use reasonable efforts to furnish Borrower notice thereof as soon as practicable thereafter; provided, however, that no delay or failure to furnish such notice shall in any event release or discharge Borrower from its obligations to such Lender pursuant to Section 3.07(b) or otherwise result in any liability of such Lender. Section 3.12. Funding Losses. Borrower shall compensate each Lender, upon its written request to Borrower (which request shall set forth the basis for requesting such amounts in reasonable detail and which request shall be made in good faith and, absent manifest error, shall be final, conclusive and binding upon all of the parties hereto), for all losses, expenses and liabilities (including, without limitation, any interest paid by such Lender to lenders of funds borrowed by it to make or carry its Eurodollar Advances, in either case to the extent not recovered by such Lender in connection with the re-employment of such funds and including loss of anticipated profits), which the Lender may sustain: (i) if for any reason (other than a default by such Lender) a borrowing of, or conversion to or continuation of Eurodollar Advances to Borrower does not occur on the date specified therefor in a Notice of Borrowing or Notice of Continuation/Conversion (whether or not withdrawn), (ii) if any repayment (including mandatory prepayments and any conversions pursuant to Section 3.09(b)) of any Eurodollar Advances to Borrower occurs on a date which is not the last day of an Interest Period applicable thereto, or (iii), if, for any reason, Borrower defaults in its obligation to repay its Eurodollar Advances when required by the terms of this Agreement. Section 3.13. Assumptions Concerning Funding of Eurodollar Advances. Calculation of all amounts payable to a Lender under this Article III shall be made as though that -31- Lender had actually funded its relevant Eurodollar Advances through the purchase of deposits in the relevant market bearing interest at the rate applicable to such Eurodollar Advances in an amount equal to the amount of the Eurodollar Advances and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar Advances from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, that each Lender may fund each of its Eurodollar Advances in any manner it sees fit and the foregoing assumption shall be used only for calculation of amounts payable under this Article III. Section 3.14. Apportionment of Payments. Aggregate principal and interest payments in respect of Line of Credit Loans and payments in respect of the Facility Fee shall be apportioned among all outstanding Line of Credit Commitments and Line of Credit Loans to which such payments relate, proportionately to the Lenders' respective pro rata portions of such Line of Credit Commitments and outstanding Line of Credit Loans. The Administrative Agent shall promptly distribute to each Lender at its Payment Office set forth beside its name on the appropriate signature page hereof or such other address as any Lender may request its share of all such payments received by the Administrative Agent. Section 3.15. Sharing of Payments, Etc. If any Lender shall obtain any payment or reduction (including, without limitation, any amounts received as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code) of the Obligations (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its pro rata portion of payments or reductions on account of such obligations obtained by all the Lenders, such Lender shall forthwith (i) notify each of the other Lenders and Administrative Agent of such receipt, and (ii) purchase from the other Lenders such participations in the affected obligations as shall be necessary to cause such purchasing Lender to share the excess payment or reduction, net of costs incurred in connection therewith, ratably with each of them, provided that if all or any portion of such excess payment or reduction is thereafter recovered from such purchasing Lender or additional costs are incurred, the purchase shall be rescinded and the purchase price restored to the extent of such recovery or such additional costs, but without interest unless the Lender obligated to return such funds is required to pay interest on such funds. Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 3.15 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of Borrower in the amount of such participation. Section 3.16. Capital Adequacy. Without limiting any other provision of this Agreement, in the event that any Lender shall have determined that any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy not currently in effect or fully applicable as of the Closing Date, or any change therein or in the interpretation or application thereof after the Closing Date, or compliance by such Lender with any request or directive regarding capital adequacy not currently in effect or fully applicable as of the Closing Date (whether or not having the force of law and whether or not failure to comply therewith would be unlawful) from a central bank or governmental authority or -32- body having jurisdiction, does or shall have the effect of reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder to a level below that which such Lender could have achieved but for such law, treaty, rule, regulation, guideline or order, or such change or compliance by an amount reasonably deemed by such Lender to be material, then within ten (10) Business Days after written notice and demand by such Lender (with copies thereof to the Administrative Agent), Borrower shall from time to time pay to such Lender additional amounts sufficient to compensate such Lender for such reduction (but, in the case of outstanding Base Rate Advances, without duplication of any amounts already recovered by such Lender by reason of an adjustment in the applicable Base Rate). Each certificate as to the amount payable under this Section 3.16 (which certificate shall set forth the basis for requesting such amounts in reasonable detail), submitted to Borrower by any Lender in good faith, shall, absent manifest error, be final, conclusive and binding for all purposes. Section 3.17. Benefits to Guarantors. In consideration for the execution and delivery by the Guarantors of the Guaranty Agreement, Borrower agrees to make the benefit of extensions of credit hereunder available to the Guarantors. Section 3.18. Limitation on Certain Payment Obligations. (1) Each Lender or Administrative Agent shall make written demand on Borrower for indemnification or compensation pursuant to Section 3.07 no later than 90 days after the earlier of (i) the date on which such Lender or the Administrative Agent makes payment of such Taxes, and (ii) the date on which the relevant taxing authority or other governmental authority makes written demand upon such Lender or the Administrative Agent for payment of such Taxes. (2) Each Lender or the Administrative Agent shall make written demand on Borrower for indemnification or compensation pursuant to Sections 3.12 and 3.13 no later than 90 days after the event giving rise to the claim for indemnification or compensation occurs. (3) Each Lender or the Administrative Agent shall make written demand on Borrower for indemnification or compensation pursuant to Sections 3.10 and 3.16 no later than 90 days after such Lender or the Administrative Agent receives actual notice or obtains actual knowledge of the promulgation of a law, rule, order or interpretation or occurrence of another event giving rise to a claim pursuant to such sections. (4) In the event that the Lenders or the Administrative Agent fail to give Borrower notice within the time limitations prescribed in (a) or (b) above, Borrower shall not have any obligation to pay such claim for compensation or indemnification. In the event that the Lender or the Administrative Agent fail to give Borrower notice within the time limitation prescribed in (c) above, Borrower shall not have any obligation to pay any amount with respect to claims accruing prior to the ninetieth day preceding such written demand. -33- ARTICLE 4 CONDITIONS TO BORROWINGS The obligations of each Lender to make Advances to Borrower hereunder is subject to the satisfaction of the following conditions: Section 4.1. Conditions Precedent to Initial Line of Credit Loans. At the time of the making of the initial Line of Credit Loans hereunder on the Closing Date, all obligations of Borrower hereunder incurred prior to the initial Line of Credit Loans (including, without limitation, Borrower's obligations to reimburse the reasonable fees and expenses of counsel to the Administrative Agent and any fees and expenses payable to the Administrative Agent and the Lenders as previously agreed with Borrower), shall have been paid in full, and the Administrative Agent shall have received the following, in form and substance reasonably satisfactory in all respects to the Administrative Agent: (1) the duly executed counterparts of this Agreement; (2) the duly completed Line of Credit Notes evidencing the Line of Credit Commitment; (3) the duly executed Guaranty Agreement; (4) certificate of Borrower in substantially the form of Exhibit C attached hereto and appropriately completed; (5) the duly executed Commitment Letter; (6) the duly executed Fee Letter; (7) certificates of the Secretary or Assistant Secretary of each of the Credit Parties attaching and certifying copies of the resolutions of the boards of directors of the Credit Parties, authorizing as applicable the execution, delivery and performance of the Credit Documents; (8) certificates of the Secretary or an Assistant Secretary of each of the Credit Parties certifying (i) the name, title and true signature of each officer of such entities executing the Credit Documents, (ii) the bylaws or comparable governing documents of such entities; and (iii) the certificate or articles of incorporation of each Credit Party; (9) certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of incorporation or organization of such Credit Party; -34- (10) copies of all documents and instruments, including all consents, authorizations and filings, required or advisable under any Requirement of Law or by any material Contractual Obligation of the Credit Parties, in connection with the execution, delivery, performance, validity and enforceability of the Credit Documents and the other documents to be executed and delivered hereunder, and such consents, authorizations, filings and orders shall be in full force and effect and all applicable waiting periods shall have expired; (11) certified copies of the Intercompany Loan Documents, to the extent that they exist and have not previously been certified to the Lenders; (12) duly executed solvency certificates of Borrower and each of the Guarantors, in form and substance satisfactory to the Agents and Lenders; (13) acknowledgment from CSC Network Corporation System, Inc. as to its appointment as agent for service of process for the various Credit Parties; (14) certified copies of indentures, credit agreements, leases, capital leases, instruments, and other documents evidencing or securing Indebtedness of any Consolidated Company described on Schedule 7.01(b), in any single case in an amount not less than $500,000 and to the extent not previously certified to the Lenders; (15) certificates, reports and other information as the Administrative Agent may reasonably request from any Consolidated Company in order to satisfy the Lenders as to the absence of any material liabilities or obligations arising from matters relating to employees of the Consolidated Companies, including employee relations, collective bargaining agreements, Plans, and other compensation and employee benefit plans; (16) certificates, reports, environmental audits and investigations, and other information as the Administrative Agent may reasonably request from any Consolidated Company in order to satisfy the Lenders as to the absence of any material liabilities or obligations arising from environmental and employee health and safety exposures to which the Consolidated Companies may be subject, and the plans of the Consolidated Companies with respect thereto; (17) certificates, reports and other information as the Administrative Agent may reasonably request from any Consolidated Company in order to satisfy the Lenders as to the absence of any material liabilities or obligations arising from litigation (including without limitation, products liability and patent infringement claims) pending or threatened against the Consolidated Companies; (18) a certificate of insurance summarizing, in form and detail reasonably acceptable to the Administrative Agent, of the types and amounts of insurance (property and liability) maintained by the Consolidated Companies; -35- (19) the favorable opinion of counsel to the Credit Parties addressed to the Administrative Agent and each of the Lenders; and (20) financial statements of Borrower and its Subsidiaries, audited on a consolidated basis for the fiscal year ended on the last Friday in January, 1998 and unaudited on a consolidated basis for the fiscal quarter ended on the last Friday in October, 1998. In addition to the foregoing, the following conditions shall have been satisfied or shall exist, all to the satisfaction of the Administrative Agent, as of the time the initial Line of Credit Loans are made hereunder: (x) the Line of Credit Loans to be made on the Closing Date and the use of proceeds thereof shall not contravene, violate or conflict with, or involve the Administrative Agent or any Lender in a violation of, any law, rule, injunction, or regulation, or determination of any court of law or other governmental authority; (y) all corporate proceedings and all other legal matters in connection with the authorization, legality, validity and enforceability of the Credit Documents shall be reasonably satisfactory in form and substance to the Required Lenders; and (z) the status of all pending and threatened litigation (including products liability and patent claims) which might result in a Materially Adverse Effect, including a description of any damages sought and the claims constituting the basis therefor, shall have been reported in writing to the Administrative Agent, the Administrative Agent shall have reported such matters to the Lenders, and the Lenders shall be satisfied with such status. Section 4.2. Conditions to All Line of Credit Loans. At the time of the making of all Line of Credit Loans (before as well as after giving effect to such Line of Credit Loans and to the proposed use of the proceeds thereof), the following conditions shall have been satisfied or shall exist: (1) there shall exist no Default or Event of Default; (2) all representations and warranties by Borrower contained herein shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Line of Credit Loans; (3) since the date of the most recent financial statements of the Consolidated Companies described in Section 5.03, there shall have been no change which has had or could reasonably be expected to have a Materially Adverse Effect. -36- (4) there shall be no action or proceeding instituted or pending before any court or other governmental authority or, to the knowledge of Borrower, threatened (i) which reasonably could be expected to have a Materially Adverse Effect, or (ii) seeking to prohibit or restrict one or more Credit Party's ownership or operation of any portion of its business or assets, or to compel one or more Credit Party to dispose of or hold separate all or any portion of its businesses or assets, where such portion or portions of such business(es) or assets, as the case may be, constitute a material portion of the total businesses or assets of the Consolidated Companies; (5) the Line of Credit Loans to be made and the use of proceeds thereof shall not contravene, violate or conflict with, or involve the Administrative Agent or any Lender in a violation of, any law, rule, injunction, or regulation, or determination of any court of law or other governmental authority applicable to Borrower; and (6) the Administrative Agent shall have received such other documents or legal opinions as the Administrative Agent or any Lender may reasonably request, all in form and substance reasonably satisfactory to the Administrative Agent. Each request for a Borrowing and the acceptance by Borrower of the proceeds thereof shall constitute a representation and warranty by Borrower, as of the date of the Line of Credit Loans comprising such Borrowing, that the applicable conditions specified in Sections 4.01 and 4.02 have been satisfied. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Borrower represents, warrants and covenants to Lenders that: Section 5.1. Organization and Qualification. Borrower is a corporation duly organized and existing in good standing under the laws of the State of Florida. Each Subsidiary of Borrower is a corporation duly organized and existing under the laws of the jurisdiction of its incorporation. Borrower and each of its Subsidiaries are duly qualified to do business as a foreign corporation and are in good standing in each jurisdiction in which the character of their properties or the nature of their business makes such qualification necessary, except for such jurisdictions in which a failure to qualify to do business would not have a Materially Adverse Effect. Borrower and each of its Subsidiaries have the corporate power to own their respective properties and to carry on their respective businesses as now being conducted. The jurisdiction of incorporation or organization, and the ownership of all issued and outstanding capital stock, for each Subsidiary as of the date of this Agreement is accurately described on Schedule 5.01. Schedule 5.01 also designates the Material Subsidiaries as of the Closing Date. -37- Section 5.2. Corporate Authority. The execution and delivery by Borrower and the Guarantors of and the performance by Borrower and Guarantors of their obligations under the Credit Documents have been duly authorized by all requisite corporate action and all requisite shareholder action, if any, on the part of Borrower and the Guarantors and do not and will not (i) violate any provision of any law, rule or regulation, any judgment, order or ruling of any court or governmental agency, the organizational papers or bylaws of Borrower or the Guarantors, or any indenture, agreement or other instrument to which Borrower or the Guarantors are a party or by which Borrower or the Guarantors or any of their properties is bound, or (ii) be in conflict with, result in a breach of, or constitute with notice or lapse of time or both a default under any such indenture, agreement or other instrument. Section 5.3. Financial Statements. Borrower has furnished Lenders with the following financial statements: (i) consolidated balance sheets and consolidated statements of income, stockholders' equity and cash flow of Borrower for the fiscal year ended on the last Friday in January, 1998, audited by PriceWaterhouseCoopers LLP and (ii) unaudited consolidated balance sheets and consolidated statements of income, stockholders' equity and cash flow of Borrower for the fiscal quarter ending on the last Friday in October, 1998. Such financial statements (including any related schedules and notes) are true and correct in all material respects (subject, as to interim statements, to changes resulting from audits and year end adjustments), have been prepared in accordance with GAAP consistently applied throughout the period or periods in question and show, in the case of audited statements, all liabilities, direct or contingent, of Borrower and its Subsidiaries, required to be shown in accordance with GAAP consistently applied throughout the period or periods in question and fairly present the consolidated financial position and the consolidated results of operations of Borrower and its Subsidiaries for the periods indicated therein. There has been no material adverse change in the business, condition or operations, financial or otherwise, of Borrower and its Subsidiaries since the last Friday in October, 1998. Section 5.4. Tax Returns. Each of Borrower and its Subsidiaries has filed all federal, state and other income tax returns which, to the best knowledge of the executive officers of Borrower and its Subsidiaries, are required to be filed, and each has paid all taxes as shown on said returns and on all assessments received by it to the extent that such taxes have become due or except such as are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP. Section 5.5. Actions Pending. There is no action, suit, investigation or proceeding pending or, to the knowledge of Borrower, threatened against or affecting Borrower or any of its Subsidiaries or any of their properties or rights, by or before any court, arbitrator or administrative or governmental body, which might result in any Materially Adverse Effect. Section 5.6. Representations; No Defaults. At the time of each Extension of Credit there shall exist no Default or Event of Default, and each Extension of Credit shall be deemed a renewal by Borrower of the representations and warranties -38- contained in this Agreement and an affirmative statement by Borrower that such representations and warranties are true and correct on and as of such time with the same effect as though such representations and warranties had been made on and as of such time. Section 5.7. Title to Properties. Each of Borrower and its Subsidiaries has (i) good and marketable fee simple title to its respective real properties (other than real properties which it leases from others), including such real properties reflected in the consolidated balance sheet of Borrower and its Subsidiaries as of the last Friday of October, 1998, hereinabove described (other than real properties disposed of in the ordinary course of business), subject to no Lien of any kind except Liens permitted by Section 7.02 and (ii) good title to all of its other respective properties and assets (other than properties and assets which it leases from others), including the other properties and assets reflected in the consolidated balance sheet of Borrower and its Subsidiaries at the last Friday of October, 1998, hereinabove described (other than properties and assets disposed of in the ordinary course of business), subject to no Lien of any kind except Liens permitted by Section 7.02. Each of Borrower and its Subsidiaries enjoys peaceful and undisturbed possession under all leases necessary in any material respect for the operation of its respective properties and assets, none of which contains any unusual or burdensome provisions which might materially affect or impair the operation of such properties and assets, and all such leases are valid and subsisting and in full force and effect. Section 5.8. Enforceability of Agreement. This Agreement is the legal, valid and binding agreement of Borrower enforceable against Borrower in accordance with its terms, and the Line of Credit Notes, and all other Credit Documents, when executed and delivered, will be similarly legal, valid, binding and enforceable, except as the enforceability of the Line of Credit Notes and other Credit Documents may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditor's rights and remedies in general and by general principles of equity, whether considered in a proceeding at law or in equity. Section 5.9. Consent. No consent, permission, authorization, order or license of any governmental authority or Person is necessary in connection with the execution, delivery, performance or enforcement of the Credit Documents, or in order to constitute the indebtedness to be incurred hereunder and under the Line of Credit Notes and the other Credit Documents as "Senior Debt" or any similar term defined within the documents evidencing any Subordinated Debt. Section 5.10. Use of Proceeds; Federal Reserve Regulations. The proceeds of the Line of Credit Notes will be used solely for the purposes specified in Section 2.01(c) and none of such proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin security" or "margin stock" or for the purpose of reducing or retiring any indebtedness that originally was incurred to purchase or carry a "margin security" or "margin stock" or for any other purpose that might constitute this transaction a "purpose credit" within the meaning of the regulations of the Board of Governors of the Federal Reserve System. Section 5.11. ERISA. -39- (1) Identification of Certain Plans. Schedule 5.11 hereto sets forth all Plans of Borrower and its Subsidiaries; (2) Compliance. Each Plan is being maintained, by its terms and in operation, in accordance with all applicable laws, except such noncompliances (when taken as a whole) that will not have a Materially Adverse Effect; (3) Liabilities. Neither the Borrower nor any Subsidiary is currently or will become subject to any liability (including withdrawal liability), tax or penalty whatsoever to any person whomsoever with respect to any Plan including, but not limited to, any tax, penalty or liability arising under Title I or Title IV of ERISA or Chapter 43 of the Tax Code, except such liabilities (when taken as a whole) as will not have a Materially Adverse Effect; and (4) Funding. The Borrower and each ERISA Affiliate has made full and timely payment of all amounts (i) required to be contributed under the terms of each Plan and applicable law and (ii) required to be paid as expenses of each Plan, except where such non-payment would not have a Materially Adverse Effect. No Plan has an "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) except as disclosed on Schedule 5.11. No Plan is subject to a waiver or extension of the minimum funding requirements under ERISA or the Tax Code, and no request for such waiver or extension is pending. Section 5.12. Subsidiaries. All the outstanding shares of stock of each such Subsidiary have been validly issued and are fully paid and nonassessable and all such outstanding shares, except as noted on such Schedule 5.01, are owned by Borrower or a Wholly Owned Subsidiary of Borrower free of any Lien or claim. Each Subsidiary (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of its incorporation with the power and authority (corporate and other) to carry on its business as it is now conducted and (ii) is qualified to transact business as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required under applicable law. Section 5.13. Outstanding Indebtedness. As of the date of closing and after giving effect to the transactions contemplated by this Agreement, neither Borrower nor any of its Subsidiaries has outstanding any Indebtedness except as permitted by Section 7.01 and there exists no default under the provisions of any instrument evidencing such Indebtedness or of any agreement relating thereto. Section 5.14. Conflicting Agreements. Neither Borrower nor any of its Subsidiaries is a party to any contract or agreement or other burdensome restrictions or subject to any charter or other corporate restriction which materially and adversely affects its business, property or assets, or financial condition. Assuming the consummation of the transactions contemplated by this Agreement, neither the execution or delivery of this Agreement or the -40- Credit Documents, nor fulfillment of or compliance with the terms and provisions hereof and thereof, will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien upon any of the properties or assets of Borrower or any of its Subsidiaries pursuant to, the charter or By-Laws of Borrower or any of its Subsidiaries, any award of any arbitrator or any agreement (including any agreement with stockholders), instrument, order, judgment, decree, statute, law, rule or regulation to which Borrower or any of its Subsidiaries is subject, and neither Borrower nor any of its Subsidiaries is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of Borrower or any of its Subsidiaries, any agreement relating thereto or any other contract or agreement (including its charter) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the type to be evidenced by the Line of Credit Notes or contains dividend or redemption limitations on Common Stock of Borrower, except for this Agreement, Borrower's Certificate of Incorporation and those matters listed on Schedule 5.14 attached hereto. Section 5.15. Pollution and Other Regulations. (1) Each of the Borrower and its Subsidiaries has complied in all material respects with all applicable Environmental Laws, including without limitation, compliance with permits, licenses, standards, schedules and timetables, and is not in violation of, and does not presently have outstanding any liability under, has not been notified that it is or may be liable under and does not have knowledge of any liability or potential liability (including any liability relating to matters set forth on Schedule 5.15(a)) except as set forth on Schedule 5.15(a), under any applicable Environmental Law, including without limitation, the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"), the Federal Water Pollution Control Act, as amended ("FWPCA"), the Federal Clean Air Act, as amended ("FCAA"), and the Toxic Substance Control Act ("TSCA"), which violation, liability or potential liability could reasonably be expected to have a Materially Adverse Effect. (2) Neither the Borrower nor any of its Subsidiaries has received a written request for information under CERCLA, any other Environmental Laws or any comparable state law, or any public health or safety or welfare law or written notice that any such entity has been identified as a potential responsible party under CERCLA, and other Environmental Laws, or any comparable state law, or any public health or safety or welfare law, nor has any such entity received any written notification that any Hazardous Substance that it or any of its respective predecessors in interest has generated, stored, treated, handled, transported, or disposed of, has been released or is threatened to be released at any site at which any Person intends to conduct or is conducting a remedial investigation or other action pursuant to any applicable Environmental Law, or any other Environmental Laws. -41- (3) Each of the Borrower and its Subsidiaries has obtained all permits, licenses or other authorizations required for the conduct of their respective operations under all applicable Environmental Laws and each such authorization is in full force and effect. (4) Each of Borrower and its Subsidiaries complies in all material respects with all laws and regulations relating to equal employment opportunity and employee safety in all jurisdictions in which it is presently doing business, and Borrower will use its best efforts to comply, and to cause each of its Subsidiaries to comply, with all such laws and regulations which may be legally imposed in the future in jurisdictions in which Borrower or any of its Subsidiaries may then be doing business. Section 5.16. Possession of Franchises, Licenses, Etc. Each of Borrower and its Subsidiaries possesses all franchises, certificates, licenses, permits and other authorizations from governmental political subdivisions or regulatory authorities, free from burdensome restrictions, that are necessary in any material respect for the ownership, maintenance and operation of its properties and assets, and neither Borrower nor any of its Subsidiaries is in violation of any thereof in any material respect. Section 5.17. Patents, Etc. Each of Borrower and its Subsidiaries owns or has the right to use all patents, trademarks, service marks, trade names, copyrights, licenses and other rights, free from burdensome restrictions, which are necessary for the operation of its business as presently conducted. Nothing has come to the attention of Borrower, any of its Subsidiaries or any of their respective directors and officers to the effect that (i) any product, process, method, substance, part or other material presently contemplated to be sold by or employed by Borrower or any of its Subsidiaries in connection with its business may infringe any patent, trademark, service mark, trade name, copyright, license or other right owned by any other Person, (ii) there is pending or threatened any claim or litigation against or affecting Borrower or any of its Subsidiaries contesting its right to sell or use any such product, process, method, substance, part or other material or (iii) there is, or there is pending or proposed, any patent, invention, device, application or principle or any statute, law, rule, regulation, standard or code which would prevent, inhibit or render obsolete the production or sale of any products of, or substantially reduce the projected revenues of, or otherwise materially adversely affect the business, condition or operations of, Borrower or any of its Subsidiaries. Section 5.18. Governmental Consent. Neither the nature of Borrower or any of its Subsidiaries nor any of their respective businesses or properties, nor any relationship between Borrower and any other Person, nor any circumstance in connection with the execution and delivery of the Credit Documents and the consummation of the transactions contemplated thereby is such as to require on behalf of Borrower or any of its Subsidiaries any consent, approval or other action by or any notice to or filing with any court or administrative or governmental body in connection with the execution and delivery of this Agreement and the Credit Documents. -42- Section 5.19. Disclosure. Neither this Agreement nor the Credit Documents nor any other document, certificate or written statement furnished to Lenders by or on behalf of Borrower in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading. There is no fact peculiar to Borrower which materially adversely affects or in the future may (so far as Borrower can now foresee) materially adversely affect the business, property or assets, financial condition or prospects of Borrower which has not been set forth in this Agreement or in the Credit Documents, certificates and written statements furnished to Lenders by or on behalf of Borrower prior to the date hereof in connection with the transactions contemplated hereby. Section 5.20. Insurance Coverage. Each property of Borrower or any of its Subsidiaries is insured within terms acceptable to Lenders for the benefit of Borrower or a Subsidiary of Borrower in amounts deemed adequate by Borrower's management and no less than those amounts customary in the industry in which Borrower and its Subsidiaries operate against risks usually insured against by Persons operating businesses similar to those of Borrower or its Subsidiaries in the localities where such properties are located. Section 5.21. Labor Matters. The Borrower and the Borrower's Subsidiaries have experienced no strikes, labor disputes, slow downs or work stoppages due to labor disagreements which have had, or would reasonably be expected to have, a Materially Adverse Effect, and, to the best knowledge of Borrower's executive officers, there are no such strikes, disputes, slow downs or work stoppages threatened against any Borrower or any of Borrower's Subsidiaries. The hours worked and payment made to employees of the Borrower and Borrower's Subsidiaries have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable law dealing with such matters. All payments due from the Borrower and Borrower's Subsidiaries, or for which any claim may be made against the Consolidated Companies, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as liabilities on the books of the Borrower and Borrower's Subsidiaries where the failure to pay or accrue such liabilities would reasonably be expected to have a Materially Adverse Effect. Section 5.22. Intercompany Loans; Dividends. The Intercompany Loans and the Intercompany Loan Documents, to the extent that they exist, have been duly authorized and approved by all necessary corporate and shareholder action on the part of the parties thereto, and constitute the legal, valid and binding obligations of the parties thereto, enforceable against each of them in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors' rights generally, and by general principles of equity. There are no restrictions on the power of any Consolidated Company to repay any Intercompany Loan or to pay dividends on the capital stock. Intercompany Loans as of the Closing Date are described in Schedule 5.22. -43- Section 5.23. Burdensome Restrictions. None of the Consolidated Companies is a party to or bound by any Contractual Obligation or Requirement of Law which has had or would reasonably be expected to have a Materially Adverse Effect. Section 5.24. Investment Company Act, Etc. Neither the Borrower nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company" (as each of the quoted terms is defined or used in the Investment Company Act of 1940, as amended). Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any foreign, federal or local statute or regulation limiting its ability to incur indebtedness for money borrowed, guarantee such indebtedness, or pledge its assets to secure such indebtedness, as contemplated hereby or by any other Credit Document. Section 5.25. Notice of Non-Compliance with Laws. Neither the Borrower nor any of its Subsidiaries has received notice of any violation of Law, statute, order, rule, regulation, or judgment entered by any court that may reasonably be expected to have a Materially Adverse Effect. Section 5.26. Year 2000 Issues. Borrower and the other Consolidated Companies (i) are performing a comprehensive review of their computers and software applications to identify the systems that would be affected by Year 2000 Issues as such issues pertain to the computer programs and systems of the Consolidated Companies, (ii) based on their review and all other information currently available to them, do not reasonably anticipate that Year 2000 Issues will have a Materially Adverse Effect, and (iii) are in compliance with all laws, rules and regulations of the Securities and Exchange Commission. ARTICLE 6 AFFIRMATIVE COVENANTS Borrower covenants and agrees that so long as it may borrow under this Agreement or so long as any indebtedness remains outstanding under the Line of Credit Notes that it will: Section 6.1. Corporate Existence, Etc. Preserve and maintain, and cause each of its Material Subsidiaries to preserve and maintain, its corporate existence, its material rights, franchises, and licenses, and its material patents and copyrights (for the scheduled duration thereof), trademarks, trade names, and service marks, necessary or desirable in the normal conduct of its business, and its qualification to do business as a foreign corporation in all jurisdictions where it conducts business or other activities making such qualification necessary, where the failure to do so would reasonably be expected to have a Materially Adverse Effect. -44- Section 6.2. Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply with all Requirements of Law (including, without limitation, the Environmental Laws, subject to the exception set forth in Section 6.07(f) where the penalties, claims, fines, and other liabilities resulting from noncompliance with such Environmental Laws do not involve amounts in excess of $10,000,000 in the aggregate) and Contractual Obligations applicable to or binding on any of them where the failure to comply with such Requirements of Law and Contractual Obligations would reasonably be expected to have a Materially Adverse Effect. Section 6.3. Payment of Taxes and Claims, Etc. Pay, and cause each of its Subsidiaries to pay, (i) all taxes, assessments and governmental charges imposed upon it or upon its property, and (ii) all claims (including, without limitation, claims for labor, materials, supplies or services) which might, if unpaid, become a Lien upon its property, unless, in each case, the validity or amount thereof is being contested in good faith by appropriate proceedings and adequate reserves are maintained with respect thereto. Section 6.4. Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, containing complete and accurate entries of all their respective financial and business transactions. Section 6.5. Visitation, Inspection, Etc. Permit, and cause each of its Subsidiaries to permit, any representative of the Administrative Agent or any Lender to visit and inspect any of its property, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with its officers, all at such reasonable times and as often as the Administrative Agent or such Lender may reasonably request after reasonable prior notice to Borrower; provided, however, that at any time following the occurrence and during the continuance of a Default or an Event of Default, no prior notice to Borrower shall be required. Section 6.6. Insurance; Maintenance of Properties. (1) Maintain or cause to be maintained with financially sound and reputable insurers, insurance with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds customarily insured against by reputable companies in the same or similar businesses, such insurance to be of such types and in such amounts, including such self-insurance and deductible provisions, as is customary for such companies under similar circumstances; provided, however, that in any event Borrower shall use its best efforts to maintain, or cause to be maintained, insurance in amounts and with coverages not materially less favorable to any Consolidated Company as in effect on the date of this Agreement, except where the costs of maintaining such insurance would, in the judgment of both Borrower and the Administrative Agent, be excessive. (2) Cause, and cause each of the Consolidated Companies to cause, all properties used or useful in the conduct of its business to be maintained and kept in good -45- condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, settlements and improvements thereof, all as in the judgment of Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent Borrower from discontinuing the operation or maintenance of any such properties if such discontinuance is, in the judgment of Borrower, desirable in the conduct of its business or the business of any Consolidated Company. Section 6.7. Reporting Covenants. Furnish to each Lender: (1) Annual Financial Statements. As soon as available and in any event within 95 days after the end of each fiscal year of Borrower, balance sheets of the Consolidated Companies as at the end of such year, presented on a consolidated basis, and the related statements of income, shareholders' equity, and cash flows of the Consolidated Companies for such fiscal year, presented on a consolidated basis, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and accompanied by a report thereon of independent public accountants of recognized national standing reasonably acceptable to the Administrative Agent, which such report shall be unqualified as to going concern and scope of audit and shall state that such financial statements present fairly in all material respects the financial condition as at the end of such fiscal year on a consolidated basis, and the results of operations and statements of cash flows of the Consolidated Companies for such fiscal year in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (2) Quarterly Financial Statements. As soon as available and in any event within 60 days after the end of each fiscal quarter of Borrower (other than the fourth fiscal quarter), balance sheets of the Consolidated Companies as at the end of such quarter presented on a consolidated basis and the related statements of income, shareholders' equity, and cash flows of the Consolidated Companies for such fiscal quarter and for the portion of Borrower's fiscal year ended at the end of such quarter, presented on a consolidated basis setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of Borrower's previous fiscal year, all in reasonable detail and certified by the chief financial officer or principal accounting officer of Borrower that such financial statements fairly present in all material respects the financial condition of the Consolidated Companies as at the end of such fiscal quarter on a consolidated basis, and the results of operations and statements of cash flows of the Consolidated Companies for such fiscal quarter and such portion of Borrower's fiscal year, in accordance with GAAP consistently applied (subject to normal year-end audit adjustments and the absence of certain footnotes); (3) No Default/Compliance Certificate. Together with the financial statements required pursuant to subsections (a) and (b) above, a certificate of the president, chief financial officer or principal accounting officer of Borrower (the "Compliance Certificate") (i) to the effect that, based upon a review of the activities of the Consolidated Companies and such -46- financial statements during the period covered thereby, there exists no Event of Default and no Default under this Agreement, or if there exists an Event of Default or a Default hereunder, specifying the nature thereof and the proposed response thereto, and (ii) demonstrating in reasonable detail compliance as at the end of such fiscal year or such fiscal quarter with Section 6.08 and Sections 7.01 through 7.04; (4) Notice of Default. Promptly after any Executive Officer of Borrower has notice or knowledge of the occurrence of an Event of Default or a Default, a certificate of the chief financial officer or principal accounting officer of Borrower specifying the nature thereof and the proposed response thereto; (5) Litigation. Promptly after (i) the occurrence thereof, notice of the institution of or any adverse development in any action, suit or proceeding or any governmental investigation or any arbitration, before any court or arbitrator or any governmental or administrative body, agency or official, against any Consolidated Company, or any material property thereof which might have a Materially Adverse Effect, or (ii) actual knowledge thereof, notice of the threat of any such action, suit, proceeding, investigation or arbitration; (6) Environmental Notices. Promptly after receipt thereof, notice of any actual or alleged violation, or notice of any action, claim or request for information, either judicial or administrative, from any governmental authority relating to any actual or alleged claim, notice of potential responsibility under or violation of any Environmental Law, or any actual or alleged spill, leak, disposal or other release of any waste, petroleum product, or hazardous waste or Hazardous Substance by any Consolidated Company which could result in penalties, fines, claims or other liabilities to any Consolidated Company in amounts in excess of $5,000,000 individually or in the aggregate; (7) ERISA. (i) Promptly after the occurrence thereof with respect to any Plan of any Consolidated Company or any ERISA Affiliate thereof, or any trust established thereunder, notice of (x) a "reportable event" described in Section 4043 of ERISA and the regulations issued from time to time thereunder (other than a "reportable event" not subject to the provisions for 30-day notice to the PBGC under such regulations), or (y) any other event which could subject any Consolidated Company to any tax, penalty or liability under Title I or Title IV of ERISA or Chapter 43 of the Tax Code, or any tax or penalty resulting from a loss of deduction under Sections 162, 404 or 419 of the Tax Code, where any such taxes, penalties or liabilities exceed or could exceed $1,000,000 in the aggregate; (ii) Promptly after such notice must be provided to the PBGC, or to a Plan participant, beneficiary or alternative payee, any notice required under Section 101(d), 302(f)(4), 303, 307, 4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or under -47- Section 401(a)(29) or 412 of the Tax Code with respect to any Plan of any Consolidated Company or any ERISA Affiliate thereof; (iii) Promptly after receipt, any notice received by any Consolidated Company or any ERISA Affiliate thereof concerning the intent of the PBGC or any other governmental authority to terminate a Plan of such Company or ERISA Affiliate thereof which is subject to Title IV of ERISA, to impose any liability on such Company or ERISA Affiliate under Title IV of ERISA or Chapter 43 of the Tax Code; (iv) Upon the request of the Administrative Agent, promptly upon the filing thereof with the Internal Revenue Service ("IRS") or the Department of Labor ("DOL"), a copy of IRS Form 5500 or annual report for each Plan of any Consolidated Company or ERISA Affiliate thereof which is subject to Title IV of ERISA; (v) Upon the request of the Administrative Agent, (A) true and complete copies of any and all documents, government reports and IRS determination or opinion letters or rulings for any Plan of any Consolidated Company from the IRS, PBGC or DOL, (B) any reports filed with the IRS, PBGC or DOL with respect to a Plan of the Consolidated Companies or any ERISA Affiliate thereof, or (C) a current statement of withdrawal liability for each Multiemployer Plan of any Consolidated Company or any ERISA Affiliate thereof; (8) Liens. Promptly upon any Consolidated Company becoming aware thereof, notice of the filing of any federal statutory Lien, tax or other state or local government Lien or any other Lien affecting their respective properties, other than those Liens expressly permitted by Section 7.02; (9) Public Filings, Etc. Promptly upon the filing thereof or otherwise becoming available, copies of all financial statements, annual, quarterly and special reports, proxy statements and notices sent or made available generally by Borrower to its public security holders, of all regular and periodic reports and all registration statements and prospectuses (other than registration statements filed on Form S-3 of the Securities and Exchange Commission regarding the issuance of restricted stock in acquisitions), if any, filed by any of them with any securities exchange, and of all press releases and other statements made available generally to the public containing material developments in the business or financial condition of Borrower and the other Consolidated Companies; (10) Accountants' Reports. Promptly upon receipt thereof, copies of all financial statements of, and all reports submitted by, independent public accountants to Borrower in connection with each annual, interim, or special audit of Borrower's consolidated financial statements; (11) Burdensome Restrictions, Etc. Promptly upon the existence or occurrence thereof, notice of the existence or occurrence of (i) any Contractual Obligation or Requirement -48- of Law described in Section 5.23, (ii) failure of any Consolidated Company to hold in full force and effect those material trademarks, service marks, patents, trade names, copyrights, licenses and similar rights necessary in the normal conduct of its business, and (iii) any strike, labor dispute, slow down or work stoppage as described in Section 5.21; (12) New Material Subsidiaries. Simultaneously with the delivery of each Compliance Certificate, a written list of all Material Subsidiaries formed, acquired, or created from a transfer of assets or through any other event, during the period commencing on the Closing Date and ending on the date on which the first Compliance Certificate is delivered, and thereafter since the date of the most recently delivered Compliance Certificate; such written list shall include the name of each new Material Subsidiary, its state of incorporation, list of its officers and any other information that the Administrative Agent shall reasonably request. (13) Intercompany Asset Transfers. Promptly upon the occurrence thereof, notice of the transfer of any assets from Borrower or any Guarantor to any other Consolidated Company that is not Borrower or a Guarantor (in any transaction or series of related transactions), excluding sales or other transfers of assets in the ordinary course of business, where the Asset Value of such assets is greater than $5,000,000 per transfer; (14) Year 2000 Issues. Promptly upon any Executive Officer of Borrower has notice or knowledge thereof, notice that any computer programs and systems of the Consolidated Companies are subject to any Year 2000 Issues that could reasonable be expected to have a Materially Adverse Effect; and (15) Other Information. With reasonable promptness, such other information about the Consolidated Companies as the Administrative Agent or any Lender may reasonably request from time to time. Section 6.8. Financial Covenants. (1) Fixed Charge Coverage Ratio. Maintain as of the last day of each fiscal quarter, a Fixed Charge Coverage Ratio of greater than 1.50:1.0. (2) Leverage Ratio. Maintain as of the last day of each fiscal quarter, a Leverage Ratio of less than or equal to 0.60:1.0. (3) Minimum Net Worth. Maintain a Consolidated Net Worth of not less than (i) $425,000,000 plus (ii) 50% of Consolidated Net Income (but not Loss) for each fiscal quarter ended after January 30, 1998 and on or prior to the date of determination. (4) Dividends. Not declare or pay any dividend on its capital stock, or make any payment to purchase, redeem, retire or acquire any of its Subordinated Debt or capital stock or any option, warrant, or other right to acquire such Subordinated Debt or capital stock, other than: -49- (i) dividends payable solely in shares of capital stock; and (ii) cash dividends declared and paid, and all other such payments made, after January 29, 1993, in an aggregate amount at any time not to exceed (x) $1,000,000, plus (y) 50% of Consolidated Net Income (or minus 100% of Consolidated Net Loss) earned during Borrower's fiscal year ended January 29, 1993, and thereafter (such period to be treated as one accounting period); provided, further, however, no such dividend or other payment may be declared or paid pursuant to clause (ii) above unless no Default or Event of Default exists at the time of such declaration or payment, or would exist as a result of such declaration or payment. Section 6.9. Notices Under Certain Other Indebtedness. Immediately upon its receipt thereof, Borrower shall furnish the Administrative Agent a copy of any notice received by it or any other Consolidated Company from the holder(s) of Indebtedness referred to in Section 7.01 (or from any trustee, agent, attorney, or other party acting on behalf of such holder(s)) in an amount which, in the aggregate, exceeds $5,000,000, where such notice states or claims (i) the existence or occurrence of any default or event of default with respect to such Indebtedness under the terms of any indenture, loan or credit agreement, debenture, note, or other document evidencing or governing such Indebtedness, or (ii) the existence or occurrence of any event or condition which requires or permits holder(s) of any Indebtedness to exercise rights under any Change in Control Provision. Borrower agrees to take such actions as may be necessary to require the holder(s) of any Indebtedness (or any trustee or agent acting on their behalf) incurred pursuant to documents executed or amended and restated after the Closing Date, to furnish copies of all such notices directly to the Administrative Agent simultaneously with the furnishing thereof to Borrower, and that such requirement may not be altered or rescinded without the prior written consent of the Administrative Agent. Section 6.10. Additional Guarantors. Borrower shall cause each new Material Subsidiary reported to the Administrative Agent and the Lenders pursuant to Section 6.07(l) above to execute and deliver to the Administrative Agent, simultaneously with the report given pursuant to Section 6.07(l) above, a supplement to the Guaranty Agreement, together with related documents of the kind described in Section 4.01, as appropriate, all in form and substance satisfactory to the Administrative Agent and the Required Lenders. Section 6.11. Financial Statements; Fiscal Year. Borrower shall make no change in the dates of the fiscal year now employed for accounting and reporting purposes without the prior written consent of the Required Lenders, which consent shall not be unreasonably withheld. Section 6.12. Ownership of Guarantors. Borrower shall maintain its percentage of ownership existing as of the date hereof of all Guarantors, and shall not decrease its ownership percentage in each Person which becomes a Guarantor after the date hereof, as such ownership exists at the time such Person becomes a Guarantor. -50- ARTICLE 7 NEGATIVE COVENANTS So long as any Line of Credit Commitment remains in effect hereunder or any Line of Credit Note shall remain unpaid, Borrower will not and will not permit any Subsidiary to: Section 7.1. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, other than: (1) Indebtedness under this Agreement or the Revolving Credit Agreement; (2) Indebtedness outstanding on the date hereof or pursuant to lines of credit in effect on the date hereof and described on Schedule 7.01(b); (3) purchase money Indebtedness to the extent secured by a Lien permitted by Section 7.02(b) provided such purchase money Indebtedness does not exceed $20,000,000; (4) unsecured current liabilities (other than liabilities for borrowed money or liabilities evidenced by promissory notes, bonds or similar instruments) incurred in the ordinary course of business and either (i) not more than 30 days past due, or (ii) being disputed in good faith by appropriate proceedings with reserves for such disputed liability maintained in conformity with GAAP; (5) any Intercompany Loans; provided, however, that the aggregate principal amount of all Intercompany Loans made to any Consolidated Companies that are not Guarantors shall not exceed $5,000,000 in the any one time outstanding unless otherwise agreed in writing by the Administrative Agent and the Required Lenders; (6) other Subordinated Debt in form and substance acceptable to the Administrative Agent and the Required Lenders, and evidenced by their written consent thereto; and (7) other Indebtedness not to exceed $75,000,000 at any one time outstanding. Section 7.2. Liens. Create, incur, assume or suffer to exist any Lien on any of its property now owned or hereafter acquired to secure any Indebtedness other than: (1) Liens existing on the date hereof disclosed on Schedule 7.02; (2) any Lien on any property securing Indebtedness incurred or assumed for the purpose of financing all or any part of the acquisition cost of such property and any refinancing thereof, provided that such Lien does not extend to any other property, and provided -51- further that the aggregate principal amount of Indebtedness secured by all such Liens at any time does not exceed $20,000,000; (3) Liens for taxes not yet due, and Liens for taxes or Liens imposed by ERISA which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (4) Statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (5) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); and (6) Liens (other than those permitted by paragraphs (a) through (e) of this Section 7.02) encumbering assets having an Asset Value not greater than $20,000,000 in the aggregate at any one time. Section 7.3. Mergers, Acquisitions, Sales, Etc. Merge or consolidate with any other Person, other than Borrower or another Subsidiary, or sell, lease, or otherwise dispose of its accounts, property or other assets (including capital stock of Subsidiaries), or purchase, lease or otherwise acquire all or any substantial portion of the property or assets (including capital stock) of any Person; provided, however, that the foregoing restrictions on asset sales shall not be applicable to (i) sales of equipment or other personal property being replaced by other equipment or other personal property purchased as a capital expenditure item, (ii) sales of accounts receivable pursuant to a securitization program, provided further that any program costs incurred by the Borrower in pursuing such a program shall be considered interest under this Credit Agreement, (iii) other asset sales (including the stock of Subsidiaries) where, on the date of execution of a binding obligation to make such asset sale (provided that if the asset sale is not consummated within six (6) months of such execution, then on the date of consummation of such asset sale rather than on the date of execution of such binding obligation), the Asset Value of asset sales occurring after the Closing Date, taking into account the Asset Value of the proposed asset sale, would not exceed ten percent (10%) of Borrower's Consolidated Net Worth, since the Closing Date, and (iv) sales of inventory in the ordinary course of business; provided, further, that the foregoing restrictions on mergers shall not apply to mergers involving Borrower and another entity, provided Borrower is the surviving entity, and mergers between a Subsidiary of Borrower and Borrower or between Subsidiaries of Borrower provided that, in either case, upon consummation of such mergers, Borrower is in compliance with the other provisions hereof; provided, further, that the foregoing restrictions on asset purchases shall not apply to asset purchases by Borrower to the extent that (i) after giving effect to such purchases, Borrower is in -52- compliance with Section 7.04 hereof and (ii) the Board of Directors or other governing body of such Person whose assets or stock is being purchased has approved the terms of such acquisition; provided, however, that no transaction pursuant to clauses (i), (ii) or (iii) or the second or third provisos above shall be permitted if any Default or Event of Default otherwise exists at the time of such transaction or would otherwise exist as a result of such transaction. Section 7.4. Investments, Loans, Etc. Make, permit or hold any Investments in any Person, or otherwise acquire or hold any Subsidiaries, other than: (1) Investments in Subsidiaries that are Guarantors under this Agreement, whether such Subsidiaries are Guarantors on the Closing Date or become Guarantors in accordance with Section 6.10 after the Closing Date; provided, however, nothing in this Section 7.04 shall be deemed to authorize an investment pursuant to this subsection (a) in any entity that is not a Subsidiary and a Guarantor prior to such investment; (2) Investments in Subsidiaries, other than those Subsidiaries that are or become Guarantors under this Agreement, or persons that thereafter become Subsidiaries, in an aggregate amount not to exceed $25,000,000 unless otherwise consented to in writing by the Required Lenders; (3) Investments in other Persons that are not, and do not become, Subsidiaries in an aggregate amount not to exceed $25,000,000 unless otherwise consented to in writing by the Required Lenders; (4) direct obligations of the United States of America or any agency thereof, or obligations guaranteed by the United States of America or any agency thereof, in each case supported by the full faith and credit of the United States of America and maturing within one year from the date of creation thereof; (5) commercial paper maturing within one year from the date of creation thereof rated in the highest grade by a nationally recognized credit rating agency; (6) time deposits maturing within one year from the date of creation thereof with, including certificates of deposit issued by any Lender and any office located in the United States of America of any bank or trust company which is organized under the laws of the United States of America or any state thereof and has total assets aggregating at least $500,000,000, including without limitation, any such deposits in Eurodollars issued by a foreign branch of any such bank or trust company; (7) Investments made by Plans; and (8) permitted Intercompany Loans on terms and conditions acceptable to the Administrative Agent. -53- Section 7.5. Sale and Leaseback Transactions. Sell or transfer any property, real or personal, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which any Consolidated Company intends to use for substantially the same purpose or purposes as the property being sold or transferred, except to the extent that the aggregate value of all such property sold and leased back does not exceed $5,000,000 at any one time. Section 7.6. Transactions with Affiliates. (1) Enter into any material transaction or series of related transactions which in the aggregate would be material, whether or not in the ordinary course of business, with any Affiliate of any Consolidated Company (but excluding any Affiliate which is also a Consolidated Company), other than on terms and conditions substantially as favorable to such Consolidated Company as would be obtained by such Consolidated Company at the time in a comparable arm's-length transaction with a Person other than an Affiliate. (2) Convey or transfer to any other Person (including any other Consolidated Company) any real property, buildings, or fixtures used in the manufacturing or production operations of any Consolidated Company, or convey or transfer to any other Consolidated Company any other assets (excluding conveyances or transfers in the ordinary course of business) if at the time of such conveyance or transfer any Default or Event of Default exists or would exist as a result of such conveyance or transfer. Section 7.7. Optional Prepayments. Directly or indirectly, prepay, purchase, redeem, retire, defease or otherwise acquire, or make any optional payment on account of any principal of, interest on, or premium payable in connection with the optional prepayment, redemption or retirement of, any of its Indebtedness, or give a notice of redemption with respect to any such Indebtedness, or make any payment in violation of the subordination provisions of any Subordinated Debt, except with respect to (i) the Obligations under this Agreement and the Line of Credit Notes, (ii) prepayments of Indebtedness outstanding pursuant to revolving credit, overdraft and line of credit facilities permitted pursuant to Section 7.01, (iii) Intercompany Loans made or outstanding pursuant to Section 7.01, and (iv) Subordinated Debt, in form and substance acceptable to the Administrative Agent and the Required Lenders, as evidenced by their written consent, issued to refinance existing Subordinated Debt. Section 7.8. Changes in Business. Enter into any business which is substantially different from that presently conducted by the Consolidated Companies taken as a whole except where the Investment made, and other funds expended or committed with respect to such business, do not exceed $5,000,000 in each new business. Section 7.9. ERISA. Take or fail to take any action with respect to any Plan of any Consolidated Company or, with respect to its ERISA Affiliates, any Plans which are subject to Title IV of ERISA or to continuation health care requirements for group health plans under the Tax Code, including without limitation (i) establishing any such Plan, (ii) amending any such Plan (except -54- where required to comply with applicable law), (iii) terminating or withdrawing from any such Plan, or (iv) incurring an amount of unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA, or any withdrawal liability under Title IV of ERISA with respect to any such Plan, without first obtaining the written approval of the Administrative Agent and the Required Lenders, where such actions or failures could result in a Materially Adverse Effect. Section 7.10. Additional Negative Pledges. Create or otherwise cause or suffer to exist or become effective, directly or indirectly, any prohibition or restriction on the creation or existence of any Lien upon any asset of any Consolidated Company, other than pursuant to (i) the terms of any agreement, instrument or other document pursuant to which any Indebtedness permitted by Section 7.01(a) or (b) is incurred by any Consolidated Company, so long as such prohibition or restriction applies only to the property or asset being financed by such Indebtedness, and (ii) any requirement of applicable law or any regulatory authority having jurisdiction over any of the Consolidated Companies. Section 7.11. Limitation on Payment Restrictions Affecting Consolidated Companies. Create or otherwise cause or suffer to exist or become effective, any consensual encumbrance or restriction on the ability of any Consolidated Company to (i) pay dividends or make any other distributions on such Consolidated Company's stock, or (ii) pay any indebtedness owed to Borrower or any other Consolidated Company, or (iii) transfer any of its property or assets to Borrower or any other Consolidated Company, except any consensual encumbrance or restriction existing under the Credit Documents or under the Revolving Credit Agreement and related documents. Section 7.12. Actions Under Certain Documents. Without the prior written consent of the Administrative Agent (which consent shall not be unreasonably withheld), modify, amend, cancel or rescind any agreements or documents evidencing or governing Subordinated Debt or the senior Indebtedness permitted pursuant to Section 7.01 hereof, or make demand of payment or accept payment on any Intercompany Loans permitted by Section 7.01, except that current interest accrued thereon as of the date of this Agreement and all interest subsequently accruing thereon (whether or not paid currently) may be paid unless a Default or Event of Default has occurred and is continuing. ARTICLE 8 EVENTS OF DEFAULT Upon the occurrence and during the continuance of any of the following specified events (each an "Event of Default"): Section 8.1. Payments. Borrower shall fail to make promptly when due (including, without limitation, by mandatory prepayment) any principal payment with respect to -55- the Line of Credit Loans, or Borrower shall fail to make within five (5) Business Days after the due date thereof any payment of interest, fee or other amount payable hereunder; Section 8.2. Covenants Without Notice. Borrower shall fail to observe or perform any covenant or agreement contained in Sections 6.07, 6.08, 6.11, and Article VII; Section 8.3. Other Covenants. Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement, other than those referred to in Sections 8.01 and 8.02, and, if capable of being remedied, such failure shall remain unremedied for 30 days after the earlier of (i) Borrower's obtaining knowledge thereof, or (ii) written notice thereof shall have been given to Borrower by the Administrative Agent or any Lender; Section 8.4. Representations. Any representation or warranty made or deemed to be made by Borrower or any other Credit Party or by any of its officers under this Agreement or any other Credit Document (including the Schedules attached thereto), or any certificate or other document submitted to the Administrative Agent or the Lenders by any such Person pursuant to the terms of this Agreement or any other Credit Document, shall be incorrect in any material respect when made or deemed to be made or submitted; Section 8.5. Non-Payments of Other Indebtedness. Any Consolidated Company shall fail to make when due (whether at stated maturity, by acceleration, on demand or otherwise, and after giving effect to any applicable grace period) any payment of principal of or interest on any Indebtedness (other than the Obligations) exceeding $5,000,000 in the aggregate including, without limitation, indebtedness outstanding under the Revolving Credit Agreement; Section 8.6. Defaults Under Other Agreements. Any Consolidated Company shall fail to observe or perform within any applicable grace period any covenants or agreements contained in any agreements or instruments relating to any of its Indebtedness exceeding $5,000,000 in the aggregate including, without limitation, indebtedness outstanding under the Revolving Credit Agreement, or any other event shall occur if the effect of such failure or other event is to accelerate, or to permit the holder of such Indebtedness or any other Person to accelerate, the maturity of such Indebtedness; or any such Indebtedness shall be required to be prepaid (other than by a regularly scheduled required prepayment) in whole or in part prior to its stated maturity; Section 8.7. Bankruptcy. Borrower or any other Consolidated Company shall commence a voluntary case concerning itself under the Bankruptcy Code or an involuntary case for bankruptcy is commenced against any Consolidated Company and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any substantial part of the property of any Consolidated Company; or any Consolidated Company commences proceedings of its own bankruptcy or to be granted a suspension of payments or any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction, whether -56- now or hereafter in effect, relating to any Consolidated Company or there is commenced against any Consolidated Company any such proceeding which remains undismissed for a period of 60 days; or any Consolidated Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or any Consolidated Company suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or any Consolidated Company makes a general assignment for the benefit of creditors; or any Consolidated Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or any Consolidated Company shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; or any Consolidated Company shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate action is taken by any Consolidated Company for the purpose of effecting any of the foregoing; Section 8.8. ERISA. A Plan of a Consolidated Company or a Plan subject to Title IV of ERISA of any of its ERISA Affiliates: (i) shall fail to be funded in accordance with the minimum funding standard required by applicable law, the terms of such Plan, Section 412 of the Tax Code or Section 302 of ERISA for any plan year or a waiver of such standard is sought or granted with respect to such Plan under applicable law, the terms of such Plan or Section 412 of the Tax Code or Section 303 of ERISA; or (ii) is being, or has been, terminated or the subject of termination proceedings under applicable law or the terms of such Plan; or (iii)shall require a Consolidated Company to provide security under applicable law, the terms of such Plan, Section 401 or 412 of the Tax Code or Section 306 or 307 of ERISA; or (iv) results in a liability to a Consolidated Company under applicable law, the terms of such Plan, or Title IV of ERISA; and there shall result from any such failure, waiver, termination or other event a liability to the PBGC or a Plan that would have a Materially Adverse Effect; Section 8.9. Money Judgment. A judgment or order for the payment of money in excess of $5,000,000 or otherwise having a Materially Adverse Effect shall be rendered against Borrower or any other Consolidated Company and such judgment or order shall continue unsatisfied (in the case of a money judgment) and in effect for a period of 30 days during which execution shall not be effectively stayed or deferred (whether by action of a court, by agreement or otherwise); -57- Section 8.10. Ownership of Credit Parties and Pledged Entities. If Borrower shall at any time fail to own and control the required percentage of the voting stock of any Guarantor, either directly or indirectly through a wholly-owned Subsidiary of Borrower; Section 8.11. Change in Control of Borrower. (a) Any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than the Hughes Family shall become the "beneficial owner(s)" (as defined in said Rule 13d-3) of more than twenty-five percent (25%) of the shares of the outstanding common stock of Borrower entitled to vote for members of Borrower's board of directors, or (b) any event or condition shall occur or exist which, pursuant to the terms of any change in control provision, requires or permits the holder(s) of Indebtedness of any Consolidated Company to require that such Indebtedness be redeemed, repurchased, defeased, prepaid or repaid, in whole or in part, or the maturity of such Indebtedness to be accelerated in any respect; Section 8.12. Default Under Other Credit Documents. There shall exist or occur any "Event of Default" as provided under the terms of any other Credit Document, or any Credit Document ceases to be in full force and effect or the validity or enforceability thereof is disaffirmed by or on behalf of Borrower or any other Credit Party, or at any time it is or becomes unlawful for Borrower or any other Credit Party to perform or comply with its obligations under any Credit Document, or the obligations of Borrower or any other Credit Party under any Credit Document are not or cease to be legal, valid and binding on Borrower or any such Credit Party; Section 8.13. Attachments. An attachment or similar action shall be made on or taken against any of the assets of any Consolidated Company with an Asset Value exceeding $5,000,000 in aggregate and is not removed, suspended or enjoined within 60 days of the same being made or any suspension or injunction being lifted; then, and in any such event, and at any time thereafter if any Event of Default shall then be continuing, the Administrative Agent may, and upon the written or telex request of the Required Lenders, shall, by written notice to Borrower, take any or all of the following actions, without prejudice to the rights of the Administrative Agent, any Lender or the holder of any Line of Credit Note to enforce its claims against Borrower or any other Credit Party: (i) declare all Line of Credit Commitments terminated, whereupon the Line of Credit Commitments of each Lender shall terminate immediately and Fees shall forthwith become due and payable without any other notice of any kind; and (ii) declare the principal of and any accrued interest on the Line of Credit Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Borrower; provided, that, if an Event of Default specified in Section 8.07 shall occur, the result which would occur upon the giving of written notice by the Administrative Agent to any Credit Party, as specified in clauses (i) and (ii) above, shall occur automatically without the giving of any such notice. -58- ARTICLE 9 THE AGENTS Section 9.1. Appointment of Administrative Agent. Each Lender hereby designates SunTrust Bank, Central Florida, National Association as the "Administrative Agent" to administer all matters concerning the Line of Credit Loans and to act as herein specified. Each Lender hereby irrevocably authorizes, and each holder of any Line of Credit Note by the acceptance of a Line of Credit Note shall be deemed irrevocably to authorize, the Administrative Agent to take such actions on its behalf under the provisions of this Agreement, the other Credit Documents, and all other instruments and agreements referred to herein or therein, and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder by or through its agents or employees. The provisions of this Section 9.01 are solely for the benefit of the Administrative Agent, and Borrower and the other Consolidated Companies shall not have any rights as third party beneficiaries of any of the provisions hereof. In performing its functions and duties under this Agreement, the Administrative Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligations towards or relationship of agency or trust with or for the Borrower and the other Consolidated Companies. Section 9.2. Nature of Duties of Administrative Agent. The Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and the other Credit Documents. Neither the Administrative Agent nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted by it as such hereunder or in connection herewith, unless caused by its or their gross negligence or willful misconduct. The duties of the Administrative Agent shall be ministerial and administrative in nature; the Administrative Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender; and nothing in this Agreement, express or implied, is intended to or shall be so construed as to impose upon the Administrative Agent any obligations in respect of this Agreement or the other Credit Documents except as expressly set forth herein. Section 9.3. Lack of Reliance on the Administrative Agent. (1) Independently and without reliance upon the Administrative Agent, each Lender, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Credit Parties in connection with the taking or not taking of any action in connection herewith, and (ii) its own appraisal of the creditworthiness of the Credit Parties, and, except as expressly provided in this Agreement, the Administrative Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Line of Credit Loans or at any time or times thereafter. -59- (2) The Administrative Agent shall not be responsible to any Lender for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, priority or sufficiency of this Agreement, the Line of Credit Notes, the Guaranty Agreement, or any other documents contemplated hereby or thereby, or the financial condition of the Credit Parties, or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement, the Line of Credit Notes, the Guaranty Agreement, or the other documents contemplated hereby or thereby, or the financial condition of the Credit Parties, or the existence or possible existence of any Default or Event of Default; provided, however, to the extent that the Administrative Agent has been advised that a Lender has not received any information formally delivered to the Administrative Agent pursuant to Section 6.07, the Administrative Agent shall deliver or cause to be delivered such information to such Lender. Section 9.4. Certain Rights of the Administrative Agent. If the Administrative Agent shall request instructions from the Required Lenders with respect to any action or actions (including the failure to act) in connection with this Agreement, the Administrative Agent shall be entitled to refrain from such act or taking such act, unless and until the Administrative Agent shall have received instructions from the Required Lenders; and the Administrative Agent shall not incur liability in any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders. Section 9.5. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cable gram, radiogram, order or other documentary, teletransmission or telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper Person. The Administrative Agent may consult with legal counsel (including counsel for any Credit Party), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. Section 9.6. Indemnification of Administrative Agent. To the extent the Administrative Agent is not reimbursed and indemnified by the Credit Parties, each Lender will reimburse and indemnify the Administrative Agent, ratably according to the respective amounts of the Line of Credit Loans outstanding under all Facilities (or if no amounts are outstanding, ratably in accordance with the Total Commitments), in either case, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in performing its duties hereunder, in any way relating to or arising out of this Agreement or the other Credit Documents; provided that no Lender shall be liable to the Administrative Agent for -60- any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct. Section 9.7. The Administrative Agent in Its Individual Capacity. With respect to its obligation to lend under this Agreement, the Line of Credit Loans made by it and the Line of Credit Notes issued to it, the Administrative Agent shall have the same rights and powers hereunder as any other Lender or holder of a Line of Credit Note and may exercise the same as though it were not performing the duties specified herein; and the terms "Lenders", "Required Lenders", "holders of Line of Credit Notes", or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The Administrative Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust, financial advisory or other business with the Consolidated Companies or any affiliate of the Consolidated Companies as if it were not performing the duties specified herein, and may accept fees and other consideration from the Consolidated Companies for services in connection with this Agreement and otherwise without having to account for the same to the Lenders. Section 9.8. Holders of Line of Credit Notes. The Administrative Agent may deem and treat the payee of any Line of Credit Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Administrative Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Line of Credit Note shall be conclusive and binding on any subsequent holder, transferee or assignee of such Line of Credit Note or of any Line of Credit Note or Notes issued in exchange therefor. Section 9.9. Successor Administrative Agent. (1) The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and Borrower and may be removed at any time with or without cause by the Required Lenders; provided, however, the Administrative Agent may not resign or be removed until a successor Administrative Agent has been appointed and shall have accepted such appointment. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Administrative Agent subject to Borrower's prior written approval, so long as no Event of Default has occurred and is continuing, which approval will not be unreasonably withheld. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Required Lenders' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent subject to Borrower's prior written approval, which shall be a bank which maintains an office in the United States of America, or a commercial bank organized under the laws of the United States of America or any State thereof, or any Affiliate of such bank, having a combined capital and surplus of at least $100,000,000. If -61- at any time SunTrust Bank, Central Florida is removed as a Lender, SunTrust Bank, Central Florida shall simultaneously resign as Administrative Agent. (2) Upon the acceptance of any appointment as the Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was an Administrative Agent under this Agreement. Section 9.10. Documentation Agent. Each Lender designates First Union National Bank as Documentation Agent and agrees that the Documentation Agent shall have no duties or obligations hereunder. Section 9.11. Syndication Agent. Each Lender designates NationsBank, N.A. as Syndication Agent and agrees that the Syndication Agent shall have no duties or obligations hereunder. Section 9.12. Co-Agent. Each Lender designates SouthTrust Bank, National Association as Co-Agent and agrees that the Co-Agent shall have no duties or obligations hereunder. ARTICLE 10 MISCELLANEOUS Section 10.1. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, telecopy or similar teletransmission or writing) and shall be given to such party at its address or applicable teletransmission number set forth on the signature pages hereof, or such other address or applicable teletransmission number as such party may hereafter specify by notice to the Administrative Agent and Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (iii) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section and the appropriate confirmation is received, or (iv) if given by any other means (including, without limitation, by air courier), when delivered or received at the address specified in this Section; provided that notices to the Administrative Agent shall not be effective until received. -62- Section 10.2. Amendments, Etc. No amendment or waiver of any provision of this Agreement or the other Credit Documents, nor consent to any departure by any Credit Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders do any of the following: (i) waive any of the conditions specified in Section 4.01 or 4.02, (ii) increase the Line of Credit Commitments or other contractual obligations to Borrower under this Agreement, (iii) reduce the principal of, or interest on, the Line of Credit Notes or any fees hereunder, (iv) postpone any date fixed for the payment in respect of principal of, or interest on, the Line of Credit Notes or any fees hereunder, (v) change the percentage of the Line of Credit Commitments or of the aggregate unpaid principal amount of the Line of Credit Notes, or the number or identity of Lenders which shall be required for the Lenders or any of them to take any action hereunder, (vi) release any Guarantor from its obligations under any Guaranty Agreement, (vii) modify the definition of "Required Lenders," or (viii) modify this Section 10.02. Notwithstanding the foregoing, no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of the Administrative Agent under this Agreement or under any other Credit Document. Section 10.3. No Waiver; Remedies Cumulative. No failure or delay on the part of the Administrative Agent, any Lender or any holder of a Line of Credit Note in exercising any right or remedy hereunder or under any other Credit Document, and no course of dealing between any Credit Party and the Administrative Agent, any Lender or the holder of any Line of Credit Note shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right or remedy hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Administrative Agent, any Lender or the holder of any Line of Credit Note would otherwise have. No notice to or demand on any Credit Party not required hereunder or under any other Credit Document in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent, the Lenders or the holder of any Line of Credit Note to any other or further action in any circumstances without notice or demand. Section 10.4. Payment of Expenses, Etc. Borrower shall: (i) whether or not the transactions hereby contemplated are consummated, pay all reasonable, out-of-pocket costs and expenses of the Administrative Agent in the administration (both before and after the execution hereof and including reasonable expenses actually incurred relating to advice of counsel as to the rights and duties of the Administrative Agent and the Lenders with respect thereto) of, and in connection with the preparation, execution and delivery of, preservation of rights under, enforcement of, and, after a Default or Event of Default, refinancing, renegotiation or restructuring of, this -63- Agreement and the other Credit Documents and the documents and instruments referred to therein, and any amendment, waiver or consent relating thereto (including, without limitation, the reasonable fees actually incurred and disbursements of counsel for the Administrative Agent), and in the case of enforcement of this Agreement or any Credit Document after an Event of Default, all such reasonable, out-of-pocket costs and expenses (including, without limitation, the reasonable fees actually incurred and disbursements of counsel), for any of the Lenders; (ii) subject, in the case of certain Taxes, to the applicable provisions of Section 3.07(b), pay and hold each of the Lenders harmless from and against any and all present and future stamp, documentary, and other similar Taxes with respect to this Agreement, the Line of Credit Notes and any other Credit Documents, any collateral described therein, or any payments due thereunder, and save each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such Taxes; and (iii) indemnified the Administrative Agent and each Lender and each director, officer, employee, affiliate and agent thereof (each, an "Indemnitee") from, and hold each of them harmless against, and reimburse each Indemnitee, upon its demand, for any losses, claims, damages, liabilities or other expenses ("Losses") incurred by such Indemnitee insofar as such Losses arise out of or are in any way related to or result from this Agreement, the Line of Credit Notes or any other Credit Documents or the financing provided hereby, including, without limitation, Losses arising in connection with any legal proceeding relating to any of the foregoing (whether or not such Indemnitee is a party thereto) and the reasonable attorneys fees and expenses actually incurred in connection therewith; provided, however, that the foregoing shall not apply to any Losses resulting from the gross negligence or willful misconduct of such Indemnitee; (iv) without limiting the indemnities set forth in subsection (iii) above, indemnify each Indemnitee for any and all expenses and costs (including without limitation, remedial, removal, response, abatement, cleanup, investigative, closure and monitoring costs), losses, claims (including claims for contribution or indemnity and including the cost of investigating or defending any claim and whether or not such claim is ultimately defeated, and whether such claim arose before, during or after any Credit Party's ownership, operation, possession or control of its business, property or facilities or before, on or after the date hereof, and including also any amounts paid incidental to any compromise or settlement by the Indemnitee or Indemnitees to the holders of any such claim), lawsuits, liabilities, obligations, actions, judgments, suits, disbursements, encumbrances, liens, damages (including without limitation damages for contamination or destruction of natural resources), penalties and fines of any kind or nature whatsoever (including without limitation in all cases the reasonable fees actually incurred, other charges and disbursements of counsel in connection therewith) incurred, suffered or sustained by that Indemnitee based upon, arising under or relating to Environmental Laws based on, arising out of or relating to in whole or in part, the existence or exercise -64- of any rights or remedies by any Indemnitee under this Agreement, any other Credit Document or any related documents (but excluding those incurred, suffered or sustained by any Indemnitee as a result of any action taken by or on behalf of the Lenders with respect to any Subsidiary of Borrower (or the assets thereof) owned or controlled by the Lenders. If and to the extent that the obligations of Borrower under this Section 10.04 are unenforceable for any reason, Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. Section 10.5. Right of Setoff. In addition to and not in limitation of all rights of offset that any Lender or other holder of a Line of Credit Note may have under applicable law, each Lender or other holder of a Line of Credit Note shall, upon the occurrence of any Event of Default and whether or not such Lender or such holder has made any demand or any Credit Party's obligations are matured, have the right to appropriate and apply to the payment of any Credit Party's obligations hereunder and under the other Credit Documents, all deposits of any Credit Party (general or special, time or demand, provisional or final) then or thereafter held by and other indebtedness or property then or thereafter owing by such Lender or other holder to any Credit Party, whether or not related to this Agreement or any transaction hereunder. Each Lender shall promptly notify Borrower of any offset hereunder. Section 10.6. Benefit of Agreement. (1) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, provided that Borrower may not assign or transfer any of its interest hereunder without the prior written consent of the Lenders. (2) Any Lender may make, carry or transfer Line of Credit Loans at, to or for the account of, any of its branch offices or the office of an Affiliate of such Lender. (3) Each Lender may assign all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of any of its Line of Credit Commitments and the Line of Credit Loans at the time owing to it and the Line of Credit Notes held by it) to any Eligible Assignee; provided, however, that (i) the Administrative Agent and, so long as no Event of Default has occurred and is continuing, Borrower must give their prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed) unless such assignment is an Affiliate of the assigning Lender, (ii) the amount of the Line of Credit Commitments of the assigning Lender subject to each assignment (determined as of the date the assignment and acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000, and (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a Line of Credit Note or Notes subject to such assignment and, unless such assignment is to an Affiliate of such Lender, a processing and recordation fee of $2,500. -65- Borrower shall not be responsible for such processing and recordation fee or any costs or expenses incurred by any Lender or the Administrative Agent in connection with such assignment. From and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, the assignee thereunder shall be a party hereto and to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement. Within five (5) Business Days after receipt of the notice and the Assignment and Acceptance, Borrower, at its own expense, shall execute and deliver to the Administrative Agent, in exchange for the surrendered Line of Credit Note or Notes, a new Line of Credit Note or Notes to the order of such assignee in a principal amount equal to the applicable Line of Credit Commitments or Line of Credit Loans assumed by it pursuant to such Assignment and Acceptance and new Line of Credit Note or Notes to the assigning Lender in the amount of its retained Line of Credit Commitment or Commitments or amount of its retained Line of Credit Loans. Such new Line of Credit Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Line of Credit Note or Notes, shall be dated the date of the surrendered Line of Credit Note or Notes which they replace, and shall otherwise be in substantially the form attached hereto. (4) Each Lender may, without the consent of Borrower or the Administrative Agent, sell participations without restriction to one or more banks or other entities in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Line of Credit Commitments in the Line of Credit Loans owing to it and the Line of Credit Notes held by it), provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating bank or other entity shall not be entitled to the benefit (except through its selling Lender) of the cost protection provisions contained in Article III of this Agreement, and (iv) Borrower and the Administrative Agent and other Lenders shall continue to deal solely and directly with each Lender in connection with such Lender's rights and obligations under this Agreement and the other Credit Documents, and such Lender shall retain the sole right to enforce the obligations of Borrower relating to the Line of Credit Loans and to approve any amendment, modification or waiver of any provisions of this Agreement. Any Lender selling a participation hereunder shall provide prompt written notice to Borrower of the name of such participant. (5) Any Lender or participant may, in connection with the assignment or participation or proposed assignment or participation, pursuant to this Section, disclose to the assignee or participant or proposed assignee or participant any information relating to Borrower or the other Consolidated Companies furnished to such Lender by or on behalf of Borrower or any other Consolidated Company. With respect to any disclosure of confidential, non-public, proprietary information, such proposed assignee or participant shall agree to use the information only for the purpose of making any necessary credit judgments with respect to this credit facility and not to use the information in any manner prohibited by any law, including without limitation, the securities laws of the United States of America. The proposed participant or assignee shall agree not to disclose any of such information except (i) to directors, employees, auditors -65- or counsel to whom it is necessary to show such information, each of whom shall be informed of the confidential nature of the information, (ii) in any statement or testimony pursuant to a subpoena or order by any court, governmental body or other agency asserting jurisdiction over such entity, or as otherwise required by law (provided prior notice is given to Borrower and the Administrative Agent unless otherwise prohibited by the subpoena, order or law), and (iii) upon the request or demand of any regulatory agency or authority with proper jurisdiction. The proposed participant or assignee shall further agree to return all documents or other written material and copies thereof received from any Lender, the Administrative Agent or Borrower relating to such confidential information unless otherwise properly disposed of by such entity. (6) Any Lender may at any time assign all or any portion of its rights in this Agreement and the Line of Credit Notes issued to it to a Federal Reserve Bank; provided that no such assignment shall release the Lender from any of its obligations hereunder. (7) If (i) any Taxes referred to in Section 3.07(b) have been levied or imposed so as to require withholdings or deductions by Borrower and payment by Borrower of additional amounts to any Lender as a result thereof, (ii) any Lender shall make demand for payment of any material additional amounts as compensation for increased costs pursuant to Section 3.10 or for its reduced rate of return pursuant to Section 3.16, or (iii) any Lender shall decline to consent to a modification or waiver of the terms of this Agreement or the other Credit Documents requested by Borrower, then and in such event, upon request from Borrower delivered to such Lender and the Administrative Agent, such Lender shall assign, in accordance with the provisions of Section 10.06(c), all of its rights and obligations under this Agreement and the other Credit Documents to another Lender or an Eligible Assignee selected by Borrower, in consideration for the payment by such assignee to the Lender of the principal of, and interest on, the outstanding Line of Credit Loans accrued to the date of such assignment, and the assumption of such Lender's Line of Credit Commitment hereunder, together with any and all other amounts owing to such Lender under any provisions of this Agreement or the other Credit Documents accrued to the date of such assignment. Section 10.7. Governing Law; Submission to Jurisdiction. (1) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND UNDER THE LINE OF CREDIT NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF) OF THE STATE OF GEORGIA. (2) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE LINE OF CREDIT NOTES OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE SUPERIOR COURT OF FULTON COUNTY, GEORGIA, OR ANY OTHER COURT OF THE STATE OF GEORGIA OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF GEORGIA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, -67- BORROWER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. (3) BORROWER HEREBY IRREVOCABLY DESIGNATES THE CORPORATION SERVICE COMPANY, ATLANTA, GEORGIA, AS ITS DESIGNEE, APPOINTEE AND LOCAL AGENT TO RECEIVE, FOR AND ON BEHALF OF BORROWER, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE LINE OF CREDIT NOTES OR ANY DOCUMENT RELATED THERETO. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH LOCAL AGENT WILL BE PROMPTLY FORWARDED BY SUCH LOCAL AGENT AND BY THE SERVER OF SUCH PROCESS BY MAIL TO BORROWER AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, BUT THE FAILURE OF BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. (4) Nothing herein shall affect the right of the Administrative Agent, any Lender, any holder of a Line of Credit Note or any Credit Party to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against Borrower in any other jurisdiction. Section 10.8. Independent Nature of Lenders' Rights. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights pursuant to this Agreement and its Line of Credit Notes, and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. Section 10.9. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. -68- Section 10.10. Effectiveness; Survival. (1) This Agreement shall become effective on the date (the "Effective Date") on which all of the parties hereto shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Administrative Agent pursuant to Section 10.01 or, in the case of the Lenders, shall have given to the Administrative Agent written or telex notice (actually received) that the same has been signed and mailed to them. (2) The obligations of Borrower under Sections 3.07(b), 3.10, 3.12, 3.13, 3.16, and 10.04 hereof shall survive for ninety (90) days after the payment in full of the Line of Credit Notes after the Final Maturity Date. All representations and warranties made herein, in the certificates, reports, notices, and other documents delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement, the other Credit Documents, and such other agreements and documents, the making of the Line of Credit Loans hereunder, and the execution and delivery of the Line of Credit Notes. Section 10.11. Severability. In case any provision in or obligation under this Agreement or the other Credit Documents shall be invalid, illegal or unenforceable, in whole or in part, in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. Section 10.12. Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitation of, another covenant, shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. Section 10.13. Change in Accounting Principles, Fiscal Year or Tax Laws. If (i) any preparation of the financial statements referred to in Section 6.07 hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board or the American Institute of Certified Public Accounts (or successors thereto or agencies with similar functions) (other than changes mandated by FASB 106) result in a material change in the method of calculation of financial covenants, standards or terms found in this Agreement, (ii) there is any change in Borrower's fiscal quarter or fiscal year, or (iii) there is a material change in federal tax laws which materially affects any of the Consolidated Companies' ability to comply with the financial covenants, standards or terms found in this Agreement, Borrower and the Required Lenders agree to enter into negotiations in order to amend such provisions so as to equitably reflect such changes with the desired result that the criteria for evaluating any of the Consolidated Companies' financial condition shall be the same after such changes as if such changes had not been made. Unless and until such provisions have been so amended, the provisions of this Agreement shall govern. -69- Section 10.14. Headings Descriptive; Entire Agreement. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. This Agreement, the other Credit Documents, and the agreements and documents required to be delivered pursuant to the terms of this Agreement constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements, representations and understandings related to such subject matters. Section 10.15. Time is of the Essence. Time is of the essence in interpreting and performing this Agreement and all other Credit Documents. Section 10.16. Usury. It is the intent of the parties hereto not to violate any federal or state law, rule or regulation pertaining either to usury or to the contracting for or charging or collecting of interest, and Borrower and Lenders agree that, should any provision of this Agreement or of the Line of Credit Notes, or any act performed hereunder or thereunder, violate any such law, rule or regulation, then the excess of interest contracted for or charged or collected over the maximum lawful rate of interest shall be applied to the outstanding principal indebtedness due to Lenders by Borrower under this Agreement. Section 10.17. Construction. Should any provision of this Agreement require judicial interpretation, the parties hereto agree that the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be more strictly construed against the party who itself or through its agents prepared the same, it being agreed that Borrower, the Administrative Agent, the Lenders and their respective agents have participated in the preparation hereof. Section 10.18. Waiver of Effect of Corporate Seal. Borrower represents and warrants that it is not required to affix its corporate seal to this Agreement or any other Credit Document pursuant to any Requirement of Law and waives any shortening of the statute of limitations that may result from not affixing the corporate seal to this Agreement or the other Credit Documents. -70- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in Atlanta, Georgia, by their duly authorized officers as of the day and year first above written. Address for Notices: BORROWER: - ------------------- 20 N. Orange Avenue HUGHES SUPPLY, INC. Suite 200 Orlando, Florida 32801 By:_______________________________ Attention: J. Stephen Zepf J. Stephen Zepf Treasurer By:_______________________________ Ben Butterfield Secretary -71- Address for Notices: SUNTRUST BANK, CENTRAL FLORIDA, - ------------------- NATIONAL ASSOCIATION, individually and as Administrative Agent 200 S. Orange Avenue MC 2064 Orlando, Florida 32801 By: ______________________________ Attn: Mr. William C. Barr Name: Title: Telecopy No. 407/237-4076 Payment Office: - -------------- 200 S. Orange Avenue MC 2064 Orlando, Florida 32801 - -------------------------------- Line of Credit Commitment: $13,750,000.00 Pro Rata Share of Line of Credit Commitment: 18.33% -72- Address for Notices: FIRST UNION NATIONAL BANK, individually - ------------------- and as Documentation Agent 225 Water Street 4th Floor Mail Code FL0060 Jacksonville, Florida 32202 By:_______________________________ Attn: Mr. Michael L. Williamson Name: Title: Telecopy No. 904/361-3560 Payment Office: - -------------- 100 S. Ashley Drive Suite 1000 Mail Code FL4009 Tampa, Florida 32602 Attn: Ms. Mary Doonan - ------------------------------- Line of Credit Commitment: $12,500,000.00 Pro Rata Share of Line of Credit Commitment: 16.67% -73- Address for Notices: - ------------------- NATIONSBANK, N.A., individually and as 100 SE 2nd Street, 14th Floor Syndication Agent Miami, Florida 33131 Attn: Mr. Richard Starke By:_______________________________ Telecopy No. Name: Title: Payment Office: - -------------- NationsBank, N.A. 101 N. Tryon Street Charlotte, North Carolina 28255 Attn: Ms. Deon Wright - ------------------------------- Line of Credit Commitment: $12,500,000.00 Pro Rata Share of Line of Credit Commitment: 16.67% -74- Address for Notices: - ------------------- SOUTHTRUST BANK, NATIONAL 150 2nd Avenue North ASSOCIATION, individually and as Co-Agent Suite 470 St. Petersburg, Florida 33701 By:_______________________________ Attn: Mr. Lee Culbreath Name: Title: Telecopy No. 727/898-5319 Payment Office: - -------------- 150 2nd Avenue North Suite 470 St. Petersburg, Florida 33701 Attn: Ms. Joanne Gundling - -------------------------------- Line of Credit Commitment: $10,000,000.00 Pro Rata Share of Line of Credit Commitment: 13.33% -75- Address for Notices: ABN AMRO BANK, N.V. - ------------------- Southwest Financial Center 200 S. Biscayne Boulevard, 22nd Floor Miami, Florida 33131-5311 Attn: Ms. Deborah Day Orozco By:____________________________ Name: Title: Telecopy No. (305)372-2397 Payment Office: - -------------- 335 Madison Avenue, 16th Floor New York, New York 10017 Attn: Trade Services Department - ------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% -76- Address for Notices: PNC BANK, N.A. - ------------------- 249 5th Avenue Pittsburgh, Pennsylvania 15222 Attn: Mr. James D. Neil By:_____________________________ Telecopy No. 412/762-6484 Name: Title: Payment Office: - -------------- Two PNC Plaza/ Liberty Avenue. Pittsburgh, Pennsylvania 15222 Attn: Ms. Anita Truchman - -------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% -77- Address for Notices: WACHOVIA BANK, N.A. - ------------------- 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Mr. Shawn Janko By:______________________________ Name: Title: Telecopy No. (404)332-5016 Payment Office: - -------------- 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Ms. Sharon Westmoreland - -------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% -78- Address for Notices: THE FIFTH THIRD BANK - ------------------- MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Mr. Kevin J. Walter By:______________________________ Telecopy No. 513/579-5226 Name: Kevin J. Walter Title: Large Corporate Payment Office: Banking Officer - -------------- MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Ms. Megan Heisel - -------------------------------- Line of Credit Commitment: $3,750,000.00 Pro Rata Share of Line of Credit Commitment: 5.00% -79- Address for Notices: HIBERNIA NATIONAL BANK - ------------------- 313 Carondelet Street New Orleans, LA 70130 Attn: Ms. Kristie Peychaud By:_______________________________ Telecopy No. 504/533-5344 Name: Kristie Peychaud Title: Banking Officer Payment Office: - -------------- 313 Carondelet Street New Orleans, LA 70130 Attn: Ms. Shelly Strada - -------------------------------- Line of Credit Commitment: $3,750,000.00 Pro Rata Share of Line of Credit Commitment: 5.00% -80- FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT THIS FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT (the "First Amendment") is made and entered into as of September 29, 1999, by and among HUGHES SUPPLY, INC. ("Borrower"), a Florida corporation, SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, a national banking association, FIRST UNION NATIONAL BANK, a national banking association, BANK OF AMERICA, N.A., formerly known as NATIONSBANK, N.A., a national banking association, SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national banking association, ABN AMRO BANK, N.V., a banking corporation organized under the laws of the Netherlands, PNC BANK, N.A., a national banking association, WACHOVIA BANK, N.A., a national banking association, THE FIFTH THIRD BANK, a national banking association, HIBERNIA NATIONAL BANK, a national banking association and such other financial institutions becoming a party hereto from time to time, (individually, a "Lender" and collectively, the "Lenders"), SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), FIRST UNION NATIONAL BANK, as documentation agent for the Lenders (in such capacity, the "Documentation Agent"), BANK OF AMERICA, N.A., formerly known as NATIONSBANK, N.A., as syndication agent for the Lenders (in such capacity, the "Syndication Agent") and SOUTHTRUST BANK, NATIONAL ASSOCIATION, as Co-Agent for the Lenders (in such capacity, the "Co-Agent"). W I T N E S S E T H: WHEREAS, the Lenders, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Borrower are party to that certain Line of Credit Agreement dated as of January 26, 1999 (the "Line of Credit Agreement"), pursuant to which the Lenders made available to Borrower credit facilities subject to the terms and conditions set forth therein; and WHEREAS, the Lenders, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Borrower, at the request of the Borrower, desire to (i) extend the Line of Credit Termination Date to July 24, 2000 and (ii) amend certain other terms of the Line of Credit Agreement. NOW, THEREFORE, in consideration of the terms and conditions contained herein, the parties hereto, intending to be legally bound, hereby amend the Line of Credit Agreement and agree as follows: 1. The Line of Credit Agreement is hereby amended by replacing the definition of "Line of Credit Termination Date" in Section 1.01 in its entirety with the following: "Line of Credit Termination Date" shall mean the earlier of (i) July 24, 2000 aand (ii) the date on which the Line of Credit Commitments are terminated in accordance with Article VIII. -81- 2. The Line of Credit Agreement is hereby amended by replacing Section 6.08(c) in its entirety with the following: (c) Minimum Net Worth. Maintain a Consolidated Net Worth of not less than (i) $365,000,000 plus (ii) 50% of Consolidated Net Income (but not Consolidated Net Loss) for each fiscal quarter ended after January 30, 1998 and on or prior to the date of determination. 3. The Line of Credit Agreement is hereby amended by replacing Section 6.08(d) in its entirety with the following: (d) Dividends. Not declare or pay any dividend on its capital stock, or make any payment to purchase, redeem, retire or acquire any of its Subordinated Debt or capital stock or any option, warrant, or other right to acquire such Subordinated Debt or capital stock, other than: (i) dividends payable solely in shares of capital stock; (ii) any payments made for the repurchase of outstanding capital stock previously issued by Borrower in an aggregate amount at any time not to exceed $60,000,000; and (iii) cash dividends declared and paid and all other such payments made, after January 29, 1993, in an aggregate amount at any time not to exceed (x) $1,000,000, plus (y) 50% of Consolidated Net Income (or minus 100% of Consolidated Net Loss) earned during Borrower's fiscal year ended January 29, 1993, and thereafter (such period to be treated as one accounting period); provided, further, however, no such dividend or other payment may be declared or paid pursuant to clause (ii) or (iii) above unless no Default or Event of Default exists at the time of such declaration or payment, or would exist as a result of such declaration or payment. 4. The Line of Credit Agreement is hereby amended by replacing Section 7.05 in its entirety with the following: Section 7.05 Sale and Leaseback Transactions. Sell or transfer any property, real or personal, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property which any Consolidated Company intends to use for substantially the same purpose or purposes as the property being sold or transferred, except to the extent that at the time any such property is sold and leased back, and after giving effect thereto, the aggregate amount paid (whether in cash or otherwise) for all such property sold and leased back by the Consolidated Companies since the Closing Date does not exceed five percent (5%) of the Consolidated Companies' total assets as reported in the most recent audited annual financial statements delivered to the Administrative Agent pursuant to Section 6.07(a). -82- 5. Borrower represents and warrants that, as of the date hereof and after giving effect to the transactions contemplated by the First Amendment and the Credit Documents, (i) the assets of Borrower, at fair valuation and based on their present fair saleable value, will exceed Borrower's debts, including contingent liabilities, (ii) the remaining capital of Borrower will not be unreasonably small to conduct Borrower's business, and (iii) Borrower will not have incurred debts, or have intended to incur debts, beyond its ability to pay such debts as they mature. For purposes of this paragraph, "debt" means any liability on a claim, and "claim" means (a) the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (b) the right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. 6. Except as expressly provided herein, the Line of Credit Agreement shall continue in full force and effect, and the unamended terms and conditions of the Line of Credit Agreement are expressly incorporated herein and ratified and confirmed in all respects. This First Amendment is not intended to be or to create, nor shall it be construed as, a novation or an accord and satisfaction. 7. From and after the date hereof, references to the Line of Credit Agreement shall be references to the Line of Credit Agreement as amended hereby. 8. This First Amendment constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. Neither this First Amendment nor any provision hereof may be changed, waived, discharged, modified or terminated orally, but only by an instrument in writing signed by the parties required to be a party thereto pursuant to Section 10.02 of the Line of Credit Agreement. 9. THIS FIRST AMENDMENT SHALL BE GOVERNED IN ALL RESPECTS BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF). 10. This First Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same document, and shall be effective as of the date first above written. 11. Borrower shall reimburse the Administrative Agent for the reasonable fees and expenses of counsel for the Administrative Agent in connection with this First Amendment. -83- IN WITNESS WHEREOF, Borrower, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Required Lenders have caused this First Amendment to be executed as of the date first above written. Address for Notices: BORROWER: - ------------------- 20 N. Orange Avenue HUGHES SUPPLY, INC. Suite 200 Orlando, Florida 32801 Attention: J. Stephen Zepf By:_______________________________ J. Stephen Zepf Treasurer By:________________________________ Ben Butterfield Secretary [SIGNATURE PAGE TO FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: SUNTRUST BANK, CENTRAL FLORIDA, - ------------------- NATIONAL ASSOCIATION, individually and as Administrative Agent 200 S. Orange Avenue MC 2064 Orlando, Florida 32801 By: ______________________________ Attn: Mr. William C. Barr William C. Barr, III First Vice President Telecopy No. 407/237-4076 Payment Office: - -------------- 200 S. Orange Avenue MC 2064 Orlando, Florida 32801 - -------------------------------- Line of Credit Commitment: $13,750,000.00 Pro Rata Share of Line of Credit Commitment: 18.33% [SIGNATURE PAGE TO FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: FIRST UNION NATIONAL BANK, individually - ------------------- and as Documentation Agent 225 Water Street 4th Floor Mail Code FL0060 Jacksonville, Florida 32202 By:_______________________________ Attn: Mr. Mike Carlin Name: Title: Telecopy No. 904/361-3560 Payment Office: - -------------- 100 S. Ashley Drive Suite 1000 Mail Code FL4009 Tampa, Florida 32602 Attn: Ms. Mary Doonan - ------------------------------- Line of Credit Commitment: $12,500,000.00 Pro Rata Share of Line of Credit Commitment: 16.67% [SIGNATURE PAGE TO FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: - ------------------- BANK OF AMERICA, N.A., formerly known as NATIONSBANK, N.A., individually and 100 SE 2nd Street, 14th Floor as Syndication Agent Miami, Florida 33131 Attn: Mr. Richard Starke By:_______________________________ Telecopy No. Name: Title: Payment Office: - -------------- Bank of America, N.A. 101 N. Tryon Street Charlotte, North Carolina 28255 Attn: Ms. Deon Wright - ------------------------------- Line of Credit Commitment: $12,500,000.00 Pro Rata Share of Line of Credit Commitment: 16.67% [SIGNATURE PAGE TO FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: SOUTHTRUST BANK, NATIONAL - ------------------- ASSOCIATION, individually and as Co-Agent 420 North 20th Street Birmingham, AL 35203 Attn: Florida Corporate Banking (Orlando) By:_____________________________ Name: Telecopy No. 727/898-5319 Title: Payment Office: - -------------- P.O. Box 830716 Birmingham, AL 35283-0716 Attn: Ms. Joanne Gundling (727/825-2733) Telecopy No. 727/898-5419 - -------------------------------- Line of Credit Commitment: $10,000,000.00 Pro Rata Share of Line of Credit Commitment: 13.33% [SIGNATURE PAGE TO FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: ABN AMRO BANK, N.V. - ------------------- Southwest Financial Center 200 S. Biscayne Boulevard, 22nd Floor Miami, Florida 33131-5311 Attn: Ms. Deborah Day Orozco By:_____________________________ Name: Title: Telecopy No. (305)372-2397 Payment Office: - -------------- 335 Madison Avenue, 16th Floor New York, New York 10017 Attn: Trade Services Department - ------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% [SIGNATURE PAGE TO FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: PNC BANK, N.A. - ------------------- 249 5th Avenue Pittsburgh, Pennsylvania 15222 Attn: Mr. Doug King By:______________________________ Telecopy No. 412/762-6484 Name: Title: Payment Office: - -------------- Two PNC Plaza/ Liberty Avenue. Pittsburgh, Pennsylvania 15222 Attn: Ms. Anita Truchman - -------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% [SIGNATURE PAGE TO FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: WACHOVIA BANK, N.A. - ------------------- 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Mr. Bill McCamey By:_______________________________ Name: Title: Telecopy No. (404)332-5016 Payment Office: - ------- ------ 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Ms. Sharon Westmoreland - -------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% [SIGNATURE PAGE TO FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: THE FIFTH THIRD BANK - ------------------- MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Mr. Kevin J. Walter By:_______________________________ Telecopy No. 513/579-5226 Name: Kevin J. Walter Title: Large Corporate Banking Payment Office: Officer - -------------- MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Ms. Megan Heisel - -------------------------------- Line of Credit Commitment: $3,750,000.00 Pro Rata Share of Line of Credit Commitment: 5.00% [SIGNATURE PAGE TO FIRST AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: HIBERNIA NATIONAL BANK - ------------------- 313 Carondelet Street New Orleans, LA 70130 Attn: Ms. Kristie Peychaud By:_______________________________ Telecopy No. 504/533-5344 Name: Kristie Peychaud Title: Banking Officer Payment Office: - -------------- 313 Carondelet Street New Orleans, LA 70130 Attn: Ms. Shelly Strada - -------------------------------- Line of Credit Commitment: $3,750,000.00 Pro Rata Share of Line of Credit Commitment: 5.00% -94- SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT THIS SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT (the "Second Amendment") is made and entered into as of May 29, 2000, by and among HUGHES SUPPLY, INC. ("Borrower"), a Florida corporation, SUNTRUST BANK, a Georgia banking corporation and successor by merger to SunTrust Bank, Central Florida, National Association, FIRST UNION NATIONAL BANK, a national banking association, BANK OF AMERICA, N.A., formerly known as NATIONSBANK, N.A., a national banking association, SOUTHTRUST BANK, NATIONAL ASSOCIATION, a national banking association, ABN AMRO BANK, N.V., a banking corporation organized under the laws of the Netherlands, PNC BANK, N.A., a national banking association, WACHOVIA BANK, N.A., a national banking association, THE FIFTH THIRD BANK, a national banking association and such other financial institutions becoming a party hereto from time to time, (individually, a "Lender" and collectively, the "Lenders"), SUNTRUST BANK, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), FIRST UNION NATIONAL BANK, as documentation agent for the Lenders (in such capacity, the "Documentation Agent"), BANK OF AMERICA, N.A., formerly known as NATIONSBANK, N.A., as syndication agent for the Lenders (in such capacity, the "Syndication Agent") and SOUTHTRUST BANK, NATIONAL ASSOCIATION, as Co-Agent for the Lenders (in such capacity, the "Co-Agent"). W I T N E S S E T H: WHEREAS, the Lenders, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Borrower are party to that certain Line of Credit Agreement dated as of January 26, 1999, as amended by that certain First Amendment to Line of Credit Agreement dated as of September 29, 1999 (as so amended, the "Line of Credit Agreement"), pursuant to which the Lenders made available to Borrower credit facilities subject to the terms and conditions set forth therein; and WHEREAS, the Lenders, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Borrower, at the request of the Borrower, desire to extend the Line of Credit Termination Date to January 19, 2001. NOW, THEREFORE, in consideration of the terms and conditions contained herein, the parties hereto, intending to be legally bound, hereby amend the Line of Credit Agreement and agree as follows: 12. The Line of Credit Agreement is hereby amended by replacing the definition of "Line of Credit Termination Date" in Section 1.01 in its entirety with the following: "Line of Credit Termination Date" shall mean the earlier of (i) January 19, 2001 and (ii) the date on which the Line of Credit Commitments are terminated in accordance with Article VIII. -95- 13. The effectiveness of this Second Amendment is conditioned upon the Administrative Agent's receipt of the following, each dated as of the date hereof, in form and substance reasonably satisfactory in all respects to the Administrative Agent: (a) The duly executed original counterparts of this Second Amendment; (b) The duly executed Consent and Ratification of Guaranty (Line of Credit Agreement), dated as of the date hereof, by and among each of the Subsidiaries of Borrower, listed on the signature pages thereof and the Administrative Agent; and (c) Certificates of the Secretary or Assistant Secretary of each of the Credit Parties certifying (i) the name, title and true signature of each officer of such entities executing this Second Amendment and the other Credit Documents, (ii) that there have been no changes to the bylaws or comparable governing documents of such entities since the delivery thereof to the Lenders in connection with the Line of Credit Agreement and that such bylaws or comparable governing documents remain in full force and effect as of the date hereof, (iii) that there have been no changes to the certificates or articles of incorporation of each Credit Party since the delivery thereof to the Lenders in connection with the Line of Credit Agreement and that such certificates or articles of incorporation remain in full force and effect as of the date hereof; and (iv) the resolutions of the board of directors of such entities authorizing the transactions contemplated under the Second Amendment and the other Credit Documents. 14. Borrower represents and warrants that, as of the date hereof and after giving effect to the transactions contemplated by the Second Amendment and the Credit Documents, (i) the assets of Borrower, at fair valuation and based on their present fair saleable value, will exceed Borrower's debts, including contingent liabilities, (ii) the remaining capital of Borrower will not be unreasonably small to conduct Borrower's business, and (iii) Borrower will not have incurred debts, or have intended to incur debts, beyond its ability to pay such debts as they mature. For purposes of this paragraph, "debt" means any liability on a claim, and "claim" means (a) the right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (b) the right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. 15. Except as expressly provided herein, the Line of Credit Agreement shall continue in full force and effect, and the unamended terms and conditions of the Line of Credit Agreement are expressly incorporated herein and ratified and confirmed in all respects. This Second Amendment is not intended to be or to create, nor shall it be construed as, a novation or an accord and satisfaction. 16. From and after the date hereof, references to the Line of Credit Agreement shall be references to the Line of Credit Agreement as amended hereby. -96- 17. This Second Amendment constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. Neither this Second Amendment nor any provision hereof may be changed, waived, discharged, modified or terminated orally, but only by an instrument in writing signed by the parties required to be a party thereto pursuant to Section 10.02 of the Line of Credit Agreement. 18. THIS SECOND AMENDMENT SHALL BE GOVERNED IN ALL RESPECTS BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF). 19. This Second Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same document, and shall be effective as of the date first above written. 20. Borrower shall reimburse the Administrative Agent for the reasonable fees and expenses of counsel for the Administrative Agent in connection with this Second Amendment. -97- IN WITNESS WHEREOF, Borrower, the Administrative Agent, the Documentation Agent, the Syndication Agent, the Co-Agent and the Required Lenders have caused this Second Amendment to be executed as of the date first above written. Address for Notices: BORROWER: - ------------------- 20 N. Orange Avenue HUGHES SUPPLY, INC. Suite 200 Orlando, Florida 32801 Attention: J. Stephen Zepf By:_______________________________ J. Stephen Zepf Treasurer By:________________________________ Ben Butterfield Secretary [SIGNATURE PAGE TO SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: SUNTRUST BANK, formerly known as - ------------------- SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, individually and as Administrative 200 S. Orange Avenue Agent MC 2064 Orlando, Florida 32801 By: ______________________________ Attn: Mr. William C. Barr William C. Barr, III Vice President Telecopy No. 407/237-4076 Payment Office: - -------------- 200 S. Orange Avenue MC 2064 Orlando, Florida 32801 - -------------------------------- Line of Credit Commitment: $13,750,000.00 Pro Rata Share of Line of Credit Commitment: 18.33% [SIGNATURE PAGE TO SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: FIRST UNION NATIONAL BANK, individually - ------------------- and as Documentation Agent 225 Water Street 4th Floor Mail Code FL0060 Jacksonville, Florida 32202 By:_______________________________ Attn: Mr. Mike Carlin Name: Title: Telecopy No. 904/361-3560 Payment Office: - -------------- 100 S. Ashley Drive Suite 1000 Mail Code FL4009 Tampa, Florida 32602 Attn: Ms. Mary Doonan - ------------------------------- Line of Credit Commitment: $12,500,000.00 Pro Rata Share of Line of Credit Commitment: 16.67% [SIGNATURE PAGE TO SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: - ------------------- BANK OF AMERICA, N.A., formerly known individually and as as NATIONSBANK, N.A., Syndication 100 SE 2nd Street, 14th Floor Agent Miami, Florida 33131 Attn: Mr. Richard Starke By:_______________________________ Telecopy No. Name: Title: Payment Office: - -------------- Bank of America, N.A. 101 N. Tryon Street Charlotte, North Carolina 28255 Attn: Ms. Deon Wright - ------------------------------- Line of Credit Commitment: $12,500,000.00 Pro Rata Share of Line of Credit Commitment: 16.67% [SIGNATURE PAGE TO SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: SOUTHTRUST BANK, NATIONAL - ------------------- ASSOCIATION, individually and 420 North 20th Street as Co-Agent Birmingham, AL 35203 Attn: Florida Corporate Banking (Orlando) By:______________________________ Name: Telecopy No. 727/898-5319 Title: Payment Office: - -------------- P.O. Box 830716 Birmingham, AL 35283-0716 Attn: Ms. Joanne Gundling (727/825-2733) Telecopy No. 727/898-5419 - -------------------------------- Line of Credit Commitment: $10,000,000.00 Pro Rata Share of Line of Credit Commitment: 13.33% [SIGNATURE PAGE TO SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: ABN AMRO BANK, N.V. - ------------------- Southwest Financial Center 200 S. Biscayne Boulevard, 22nd Floor Miami, Florida 33131-5311 Attn: Ms. Deborah Day Orozco By:_____________________________ Name: Title: Telecopy No. (305)372-2397 Payment Office: - -------------- 335 Madison Avenue, 16th Floor New York, New York 10017 Attn: Trade Services Department - ------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% [SIGNATURE PAGE TO SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: PNC BANK, N.A. - ------------------- 249 5th Avenue Pittsburgh, Pennsylvania 15222 Attn: Mr. Doug King By:_______________________________ Telecopy No. 412/762-6484 Name: Title: Payment Office: - -------------- Two PNC Plaza/ Liberty Avenue. Pittsburgh, Pennsylvania 15222 Attn: Ms. Anita Truchman - -------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% [SIGNATURE PAGE TO SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: WACHOVIA BANK, N.A. - ------------------- 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Mr. Bill McCamey By:______________________________ Name: Title: Telecopy No. (404)332-5016 Payment Office: - -------------- 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Ms. Sharon Westmoreland - -------------------------------- Line of Credit Commitment: $10,000,000.00 Pro Rata Share of Line of Credit Commitment: 13.33% [SIGNATURE PAGE TO SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: THE FIFTH THIRD BANK - ------------------- MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Mr. Daniel Klus By:_______________________________ Telecopy No. 513/579-5226 Name: Daniel Klus Title: Payment Office: - -------------- MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Ms. Amy Buquo - -------------------------------- Line of Credit Commitment: $3,750,000.00 Pro Rata Share of Line of Credit Commitment: 5.00% -107- THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT THIS THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT (this "Amendment") is made and entered into as December 13, 2000, by and among HUGHES SUPPLY, INC. ("Borrower"), a Florida corporation, SUNTRUST BANK, a Georgia banking corporation and successor by merger to SunTrust Bank, Central Florida, National Association, BANK OF AMERICA, N.A., formerly known as NationsBank, N.A., a national banking association, SOUTHTRUST BANK, an Alabama corporation, formerly known as SouthTrust Bank, N.A., ABN AMRO BANK, N.V., a banking corporation organized under the laws of the Netherlands, PNC BANK, N.A., a national banking association, WACHOVIA BANK, N.A., a national banking association, THE FIFTH THIRD BANK, a national banking association, and such other financial institutions becoming a party hereto from time to time (individually, a "Lender" and collectively, the "Lenders"), SUNTRUST BANK, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), BANK OF AMERICA, N.A., as syndication agent for the Lenders (in such capacity, the "Syndication Agent"), and SOUTHTRUST BANK, as Co-Agent for the Lenders (in such capacity, the "Co-Agent"). W I T N E S S E T H: WHEREAS, the Lenders, the Administrative Agent, the Syndication Agent, the Co-Agent and the Borrower are party to that certain Line of Credit Agreement dated as of January 26, 1999, as amended by that certain First Amendment to Line of Credit Agreement dated as of September 29, 1999 and that certain Second Amendment to Line of Credit Agreement dated as of May 29, 2000 (as so amended, and as further amended, restated, supplemented, or otherwise modified, the "Line of Credit Agreement"), pursuant to which the Lenders made available to Borrower credit facilities subject to the terms and conditions set forth therein; and WHEREAS, the Lenders, the Administrative Agent, the Syndication Agent, the Co-Agent and the Borrower, at the request of the Borrower, desire to extend the Line of Credit Termination Date to July 17, 2001. NOW, THEREFORE, in consideration of the terms and conditions contained herein, the parties hereto, intending to be legally bound, hereby amend the Line of Credit Agreement and agree as follows: A. AMENDMENT 1. The Line of Credit Agreement is hereby amended by replacing the definition of "Line of Credit Termination Date" in Section 1.01 in its entirety with the following: -108- "Line of Credit Termination Date" shall mean the earlier of (i) July 17, 2001, and (ii) the date on which the Line of Credit Commitments are terminated in accordance with Article VIII. B. CONDITIONS TO EFFECTIVENESS The effectiveness of this Amendment is conditioned upon the Administrative Agent's receipt of the following, each dated as of the date hereof, in form and substance reasonably satisfactory in all respects to the Administrative Agent: (a) The duly executed original counterparts of this Amendment; and (b) The duly executed Consent and Ratification of Guaranty (Line of Credit Agreement), dated as of the date hereof, by and among each of the Subsidiaries of Borrower, listed on the signature pages thereof and the Administrative Agent. C. MISCELLANEOUS 21. Borrower represents and warrants that after giving effect to this Amendment and the transactions contemplated hereby, all of the representations and warranties set forth in Article V of the Line of Credit Agreement are true and correct in all material respects and no Default or Event of Default has occurred and is continuing as of the date hereof. 22. Except as expressly provided herein, the Line of Credit Agreement shall continue in full force and effect, and the unamended terms and conditions of the Line of Credit Agreement are expressly incorporated herein and ratified and confirmed in all respects. This Amendment is not intended to be or to create, nor shall it be construed as, a novation or an accord and satisfaction. 23. From and after the date hereof, references to the Line of Credit Agreement shall be references to the Line of Credit Agreement as amended hereby. 24. This Amendment constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. Neither this Amendment nor any provision hereof may be changed, waived, discharged, modified or terminated orally, but only by an instrument in writing signed by the parties required to be a party thereto pursuant to Section 10.02 of the Line of Credit Agreement. 25. THIS AMENDMENT SHALL BE GOVERNED IN ALL RESPECTS BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF). -109- 26. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same document, and shall be effective as of the date first above written. 27. Borrower shall reimburse the Administrative Agent for the reasonable fees and expenses of counsel for the Administrative Agent in connection with this Amendment. -110- IN WITNESS WHEREOF, the Borrower, the Administrative Agent, the Syndication Agent, the Co-Agent and the Required Lenders have caused this Amendment to be executed as of the date first above written. Address for Notices: BORROWER: - ------------------- 20 N. Orange Avenue HUGHES SUPPLY, INC. Suite 200 Orlando, Florida 32801 Attention: J. Stephen Zepf By:_______________________________ J. Stephen Zepf Treasurer Attest:________________________________ Ben Butterfield Secretary [SIGNATURE PAGE TO THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: SUNTRUST BANK, formerly known as - ------------------- SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, individually and as 200 S. Orange Avenue Administrative Agent MC 2064 Orlando, Florida 32801 By: ____________________________ Attn: Mr. William C. Barr William C. Barr, III Vice President Telecopy No. 407/237-4076 Payment Office: - -------------- 200 S. Orange Avenue MC 2064 Orlando, Florida 32801 - -------------------------------- Line of Credit Commitment: $13,750,000.00 Pro Rata Share of Line of Credit Commitment: 18.33% [SIGNATURE PAGE TO THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: - ------------------- BANK OF AMERICA, N.A., formerly known as NATIONSBANK, N.A., individually 100 SE 2nd Street, 14th Floor and as Syndication Agent Miami, Florida 33131 Attn: Mr. Richard Starke By:_______________________________ Telecopy No. Name: Title: Payment Office: - -------------- Bank of America, N.A. 101 N. Tryon Street Charlotte, North Carolina 28255 Attn: Ms. Deon Wright - ------------------------------- Line of Credit Commitment: $25,000,000.00 Pro Rata Share of Line of Credit Commitment: 33.34% [SIGNATURE PAGE TO THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: SOUTHTRUST BANK, formerly known as - ------------------- SouthTrust Bank, N.A., individually and as Co-Agent 420 North 20th Street Birmingham, AL 35203 Attn: Florida Corporate Banking (Orlando) By:_______________________________ Name: Telecopy No. 727/898-5319 Title: Payment Office: - -------------- P.O. Box 830716 Birmingham, AL 35283-0716 Attn: Ms. Joanne Gundling (727/825-2733) Telecopy No. 727/898-5419 - -------------------------------- Line of Credit Commitment: $10,000,000.00 Pro Rata Share of Line of Credit Commitment: 13.33% [SIGNATURE PAGE TO THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: ABN AMRO BANK, N.V. - ------------------- Southwest Financial Center 200 S. Biscayne Boulevard, 22nd Floor Miami, Florida 33131-5311 Attn: Ms. Deborah Day Orozco By:_______________________________ Name: Title: Telecopy No. (305)372-2397 Payment Office: - -------------- 335 Madison Avenue, 16th Floor New York, New York 10017 Attn: Trade Services Department - ------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% [SIGNATURE PAGE TO THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: PNC BANK, N.A. - ------------------- 249 5th Avenue Pittsburgh, Pennsylvania 15222 Attn: Mr. Doug King By:_______________________________ Telecopy No. 412/762-6484 Name: Title: Payment Office: - -------------- Two PNC Plaza/ Liberty Avenue. Pittsburgh, Pennsylvania 15222 Attn: Ms. Anita Truchman - -------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% [SIGNATURE PAGE TO THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: WACHOVIA BANK, N.A. - ------------------- 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Mr. Bill McCamey By:_______________________________ Name: Title: Telecopy No. (404)332-5016 Payment Office: - -------------- 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Ms. Sharon Westmoreland - -------------------------------- Line of Credit Commitment: $10,000,000.00 Pro Rata Share of Line of Credit Commitment: 13.33% [SIGNATURE PAGE TO THIRD AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: THE FIFTH THIRD BANK - ------------------- MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Mr. Daniel Klus By:_______________________________ Telecopy No. 513/579-5226 Name: Daniel Klus Title: Payment Office: - -------------- MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Ms. Amy Buquo - -------------------------------- Line of Credit Commitment: $3,750,000.00 Pro Rata Share of Line of Credit Commitment: 5.00% -119- FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT THIS FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT (this "Amendment") is made and entered into as December 20, 2000, by and among HUGHES SUPPLY, INC. ("Borrower"), a Florida corporation, SUNTRUST BANK, a Georgia banking corporation and successor by merger to SunTrust Bank, Central Florida, National Association, BANK OF AMERICA, N.A., formerly known as NationsBank, N.A., a national banking association, SOUTHTRUST BANK, an Alabama corporation, formerly known as SouthTrust Bank, N.A., ABN AMRO BANK, N.V., a banking corporation organized under the laws of the Netherlands, PNC BANK, N.A., a national banking association, WACHOVIA BANK, N.A., a national banking association, THE FIFTH THIRD BANK, a national banking association, and such other financial institutions becoming a party hereto from time to time (individually, a "Lender" and collectively, the "Lenders"), SUNTRUST BANK, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"), BANK OF AMERICA, N.A., as syndication agent for the Lenders (in such capacity, the "Syndication Agent"), and SOUTHTRUST BANK, as Co-Agent for the Lenders (in such capacity, the "Co-Agent"). W I T N E S S E T H: WHEREAS, the Lenders, the Administrative Agent, the Syndication Agent, the Co-Agent and the Borrower are party to that certain Line of Credit Agreement dated as of January 26, 1999, as amended by that certain First Amendment to Line of Credit Agreement dated as of September 29, 1999, that certain Second Amendment to Line of Credit Agreement dated as of May 29, 2000, and that certain Third Amendment to Line of Credit Agreement dated as of December __, 2000 (as so amended, and as further amended, restated, supplemented, or otherwise modified, the "Line of Credit Agreement"), pursuant to which the Lenders made available to Borrower credit facilities subject to the terms and conditions set forth therein; and WHEREAS, the Lenders, the Administrative Agent, the Syndication Agent, the Co-Agent and the Borrower, at the request of the Borrower, desire to amend certain terms of the Line of Credit Agreement, all as more particularly set forth below.. NOW, THEREFORE, in consideration of the terms and conditions contained herein, the parties hereto, intending to be legally bound, hereby amend the Line of Credit Agreement and agree as follows: A. AMENDMENTS 1. Section 7.01 of the Credit Agreement is hereby amended by adding the following subsections (h) and (i) in order: (h) Indebtedness consisting of (x) Series A Senior Notes dated December 21, -120- 2000 due November 30, 2003, with an average life of three years in the aggregate amount of $19,000,000 with an interest rate of 8.27%; (y) Series B Senior Notes dated December 21, 2000 due November 30, 2005, with an average life of three years in the aggregate amount of $28,000,000 with an interest rate of 8.27%; and (z) Series C Senior Notes dated December 21, 2000 due November 30, 2007, with an average life of five years in the aggregate amount of $103,000,000 with an interest rate of 8.42%; (i) Indebtedness incurred in connection with financing the construction of the Borrower's new branch located in Miami, Florida; provided that the aggregate principal amount of Indebtedness incurred in connection with the Miami branch does not exceed $15,000,000; and Indebtedness incurred in connection with financing the construction of the Borrower's headquarters located in Orlando, Florida; provided that the aggregate principal amount of Indebtedness incurred in connection with the Orlando headquarters does not exceed $25,000,000. 2. Section 7.02 of the Revolving Credit Agreement is hereby amended by replacing subsection (f) with the following subsection (f) and adding the following subsection (g) in order: (f) any Lien on any property securing Indebtedness described in Section 7.01(i), incurred for the purpose of financing all or any part of the construction cost of such property and any refinancing thereof; provided that such Lien does not extend to any other property; (g) Liens (other than those permitted by paragraphs (a) through (f) of this Section 7.02) encumbering assets having an Asset Value not greater than $20,000,000 in the aggregate at any one time. B. MISCELLANEOUS 28. Borrower represents and warrants that after giving effect to this Amendment and the transactions contemplated hereby, all of the representations and warranties set forth in Article V of the Line of Credit Agreement are true and correct in all material respects and no Default or Event of Default has occurred and is continuing as of the date hereof. 29. Except as expressly provided herein, the Line of Credit Agreement shall continue in full force and effect, and the unamended terms and conditions of the Line of Credit Agreement are expressly incorporated herein and ratified and confirmed in all respects. This Amendment is not intended to be or to create, nor shall it be construed as, a novation or an accord and satisfaction. 30. From and after the date hereof, references to the Line of Credit Agreement shall be references to the Line of Credit Agreement as amended hereby. 31. This Amendment constitutes the entire agreement between the parties hereto with -121- respect to the subject matter hereof. Neither this Amendment nor any provision hereof may be changed, waived, discharged, modified or terminated orally, but only by an instrument in writing signed by the parties required to be a party thereto pursuant to Section 10.02 of the Line of Credit Agreement. 32. THIS AMENDMENT SHALL BE GOVERNED IN ALL RESPECTS BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF). 33. This Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same document, and shall be effective as of the date first above written. 34. Borrower shall reimburse the Administrative Agent for the reasonable fees and expenses of counsel for the Administrative Agent in connection with this Amendment. -122- IN WITNESS WHEREOF, the Borrower, the Administrative Agent, the Syndication Agent, the Co-Agent and the Required Lenders have caused this Amendment to be executed as of the date first above written. Address for Notices: BORROWER: - ------------------- 20 N. Orange Avenue HUGHES SUPPLY, INC. Suite 200 Orlando, Florida 32801 Attention: J. Stephen Zepf By:___________________________________ J. Stephen Zepf Treasurer Attest:_______________________________ Ben Butterfield Secretary [SIGNATURE PAGE TO FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: SUNTRUST BANK, formerly known as - ------------------- SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, individually and as 200 S. Orange Avenue Administrative Agent MC 2064 Orlando, Florida 32801 By: ______________________________ Attn: Mr. William C. Barr William C. Barr, III Vice President Telecopy No. 407/237-4076 Payment Office: - -------------- 200 S. Orange Avenue MC 2064 Orlando, Florida 32801 - -------------------------------- Line of Credit Commitment: $13,750,000.00 Pro Rata Share of Line of Credit Commitment: 18.33% [SIGNATURE PAGE TO FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: - ----------------- BANK OF AMERICA, N.A., formerly known as NATIONSBANK, N.A., 100 SE 2nd Street, 14th Floor individually and as Syndication Miami, Florida 33131 Agent Attn: Mr. Richard Starke By:_______________________________ Telecopy No. Name: Title: Payment Office: - -------------- Bank of America, N.A. 101 N. Tryon Street Charlotte, North Carolina 28255 Attn: Ms. Deon Wright - ------------------------------- Line of Credit Commitment: $25,000,000.00 Pro Rata Share of Line of Credit Commitment: 33.34% [SIGNATURE PAGE TO FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: SOUTHTRUST BANK, formerly known - ----------------- as SouthTrust Bank, N.A., individually and as Co-Agent 420 North 20th Street Birmingham, AL 35203 Attn: Florida Corporate Banking (Orlando) By:______________________________ Name: Telecopy No. 727/898-5319 Title: Payment Office: - -------------- P.O. Box 830716 Birmingham, AL 35283-0716 Attn: Ms. Joanne Gundling (727/825-2733) Telecopy No. 727/898-5419 - -------------------------------- Line of Credit Commitment: $10,000,000.00 Pro Rata Share of Line of Credit Commitment: 13.33% [SIGNATURE PAGE TO FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: - ------------------- ABN AMRO BANK, N.V. 208 South LaSalle Street, Suite 1500 Chicago, Illinois 60604 Attn: Credit Administration By:______________________________ Telecopy No. 312/992-5111 Name: Title: and By:______________________________ One Ravinia Drive, Suite 1200 Name: Atlanta, Georgia 30346 Title: Attn: Mr. Pat Fischer Telecopy No. 770/399-7397 Payment Office: - -------------- 208 South LaSalle Street, Suite 1500 Chicago, Illinois 60604 Attn: Loan Administration - ------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% [SIGNATURE PAGE TO FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: PNC BANK, N.A. - ------------------- 249 5th Avenue Pittsburgh, Pennsylvania 15222 Attn: Mr. Doug King By:______________________________ Telecopy No. 412/762-6484 Name: Title: Payment Office: - -------------- Two PNC Plaza/ Liberty Avenue. Pittsburgh, Pennsylvania 15222 Attn: Ms. Anita Truchman - -------------------------------- Line of Credit Commitment: $6,250,000.00 Pro Rata Share of Line of Credit Commitment: 8.33% [SIGNATURE PAGE TO FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: WACHOVIA BANK, N.A. - ----------------- 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Mr. Bill McCamey By:_____________________________ Name: Title: Telecopy No. (404)332-5016 Payment Office: - -------------- 191 Peachtree Street, 29th Floor Atlanta, Georgia 30303 Attn: Ms. Sharon Westmoreland - -------------------------------- Line of Credit Commitment: $10,000,000.00 Pro Rata Share of Line of Credit Commitment: 13.33% [SIGNATURE PAGE TO FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT] Address for Notices: THE FIFTH THIRD BANK - ------------------ MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Mr. Daniel Klus By:_______________________________ Telecopy No. 513/579-5226 Name: Daniel Klus Title: Payment Office: - -------------- MD 109054 38 Fountain Square Plaza Cincinnati, Ohio 45263 Attn: Ms. Amy Buquo - -------------------------------- Line of Credit Commitment: $3,750,000.00 Pro Rata Share of Line of Credit Commitment: 5.00% [SIGNATURE PAGE TO FOURTH AMENDMENT TO LINE OF CREDIT AGREEMENT] EX-10.12 4 d25505_ex10-12.txt NOTE PURCHASE AGREEMENT - -------------------------------------------------------------------------------- HUGHES SUPPLY, INC. $19,000,000 8.27% Series A Senior Notes due November 30, 2003 $28,000,000 8.27% Series B Senior Notes due November 30, 2005 $103,000,000 8.42% Series C Senior Notes due November 30, 2007 NOTE PURCHASE AGREEMENT Dated December 21, 2000 - -------------------------------------------------------------------------------- TABLE OF CONTENTS 1. AUTHORIZATION OF NOTES....................................................1 2. SALE AND PURCHASE OF NOTES................................................1 3. CLOSING...................................................................2 4. CONDITIONS TO CLOSING.....................................................2 4.1 Representations and Warranties...................................2 4.2 Performance; No Default..........................................2 4.3 Compliance Certificates..........................................3 4.4 Opinions of Counsel..............................................3 4.5 Purchase Permitted by Applicable Law, etc........................3 4.6 Sale of Other Notes..............................................4 4.7 Payment of Special Counsel Fees..................................4 4.8 Private Placement Number.........................................4 4.9 Changes in Corporate Structure...................................4 4.10 Proceedings and Documents........................................4 4.11 Guarantees of Subsidiaries.......................................4 4.12 Copy of Bank Credit Agreements...................................5 4.13 Dismissal of Case/Affirmative Coverage Response..................5 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................5 5.1 Organization; Power and Authority................................5 5.2 Authorization, etc...............................................5 5.3 Disclosure.......................................................6 5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates.......................................................6 5.5 Financial Statements.............................................7 5.6 Compliance With Laws, Other Instruments, etc.....................7 5.7 Governmental Authorizations, etc.................................8 5.8 Litigation; Observance of Agreements, Statutes and Orders........8 5.9 Taxes............................................................8 5.10 Title to Property; Leases........................................9 5.11 Licenses, Permits, etc...........................................9 5.12 Compliance With ERISA............................................9 5.13 Private Offering by the Company.................................10 5.14 Use of Proceeds; Margin Regulations.............................10 5.15 Existing Debt; Future Liens.....................................11 5.16 Foreign Assets Control Regulations, etc.........................11 5.17 Status Under Certain Statutes...................................11 5.18 Environmental Matters...........................................12 5.19 Certain Matters.................................................12 6. REPRESENTATIONS OF THE PURCHASER.........................................13 6.1 Purchase for Investment.........................................13 6.2 Source of Funds.................................................13 7. INFORMATION AS TO COMPANY................................................15 7.1 Financial and Business Information..............................15 7.2 Officer's Certificate...........................................18 7.3 Inspection......................................................19 8. PREPAYMENT OF THE NOTES..................................................19 8.1(A) Series A Required Payments......................................19 8.1(B) Series B Required Prepayments...................................20 8.1(C) Series C Required Prepayments...................................20 8.2 Optional Prepayments With Make-Whole Amount.....................20 8.3 Allocation of Partial Prepayments...............................21 8.4 Maturity; Surrender, etc........................................21 8.5 Mandatory Offer to Prepay Upon Change of Control................21 8.6 Make-Whole Amount...............................................23 8.7 Purchase of Notes...............................................24 9. AFFIRMATIVE COVENANTS....................................................24 9.1 Compliance With Law.............................................25 9.2 Insurance.......................................................25 9.3 Maintenance of Properties.......................................25 9.4 Payment of Taxes and Claims.....................................25 ii 9.5 Corporate Existence, etc........................................26 9.6 Covenant To Secure Notes Equally................................26 9.7 Covenant Relating to Subsidiary Guarantees......................26 9.8 Ownership of Subsidiary Guarantors..............................27 10. NEGATIVE COVENANTS.......................................................27 10.1 Funded Debt.....................................................27 10.2 Current Debt....................................................27 10.3(A) Minimum Net Worth...............................................28 10.3(B) Adjusted Interest Coverage Ratio................................28 10.4 Restricted Payments.............................................28 10.5 Liens...........................................................28 10.6 Priority Debt...................................................30 10.7 Merger or Consolidation.........................................30 10.8 Sale of Assets..................................................31 10.9 Transactions With Related Party.................................35 10.10 Nature of Business..............................................35 10.11 Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries....................................................35 11. EVENTS OF DEFAULT........................................................36 12. REMEDIES ON DEFAULT, ETC.................................................38 12.1 Acceleration....................................................38 12.2 Other Remedies..................................................39 12.3 Rescission......................................................39 12.4 No Waivers or Election of Remedies, Expenses, etc...............40 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES............................40 13.1 Registration of Notes...........................................40 13.2 Transfer and Exchange of Notes..................................40 13.3 Replacement of Notes............................................41 14. PAYMENTS ON NOTES........................................................41 14.1 Place of Payment................................................41 14.2 Home Office Payment.............................................41 iii 15. EXPENSES, ETC............................................................42 15.1 Transaction Expenses............................................42 15.2 Survival........................................................42 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.............43 17. AMENDMENT AND WAIVER.....................................................43 17.1 Requirements....................................................43 17.2 Solicitation of Holders of Notes................................43 17.3 Binding Effect, etc.............................................44 17.4 Notes Held by Company, etc......................................44 18. NOTICES..................................................................44 19. REPRODUCTION OF DOCUMENTS................................................45 20. CONFIDENTIAL INFORMATION.................................................45 21. SUBSTITUTION OF PURCHASER................................................47 22. MISCELLANEOUS............................................................47 22.1 Successors and Assigns..........................................47 22.2 Payments Due on Non-Business Days...............................47 22.3 Severability....................................................47 22.4 Construction....................................................48 22.5 Counterparts....................................................48 22.6 Governing Law...................................................48 SCHEDULE A -- Information Relating to Purchasers SCHEDULE B -- Defined Terms SCHEDULE 4.9 -- Changes in Corporate Structure SCHEDULE 4.11 -- Material Subsidiaries Executing and Delivering Guarantees on Date of closing SCHEDULE 5.3 -- Disclosure Materials iv SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary Stock; Company's Affiliates; Company's Directors and Senior Officers SCHEDULE 5.5 -- Financial Statements SCHEDULE 5.8 -- Certain Litigation SCHEDULE 5.11 -- Patents, etc. SCHEDULE 5.14 -- Use of Proceeds SCHEDULE 5.15 -- Existing Debt SCHEDULE 10.5 -- Liens EXHIBIT 1 -- Form of Senior Note EXHIBIT 4.4(a) -- Matters To Be Covered by Opinion of General Counsel for the Company EXHIBIT 4.4(b) -- Matters To Be Covered by Opinion of Special Counsel to the Purchasers EXHIBIT 4.11(a) -- Form of Guarantee EXHIBIT 4.11(b) -- Form of Contribution Agreement v $19,000,000 8.27% Series A Senior Notes due November 30, 2003 $28,000,000 8.27% Series B Senior Notes due November 30, 2005 $103,000,000 8.42% Series C Senior Notes due November 30, 2007 December 21, 2000 TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A: Ladies and Gentlemen: Hughes Supply, Inc., a Florida corporation (the "Company"), agrees with you as follows: 1. AUTHORIZATION OF NOTES. The Company will authorize the issue and sale of (i) Nineteen Million Dollars ($19,000,000) aggregate principal amount of its 8.27% Senior Notes due November 30, 2003 (the "Series A Notes"), (ii) Twenty-Eight Million Dollars ($28,000,000) aggregate principal amount of its 8.27% Senior Notes due November 30, 2005 (the "Series B Notes"), and (iii) One Hundred-Three Million Dollars ($103,000,000) aggregate principal amount of its 8.42% Senior Notes due November 30, 2007 (the "Series C Notes"; the Series A Notes, the Series B Notes and the Series C Notes shall be collectively referred to herein as the "Notes" and each referred to herein as a "Note" and the term "Note" shall include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements (as hereinafter defined)). The Notes shall be substantially in the form set out in Exhibit 1, with such changes therefrom, if any, as may be approved by you and the Company. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. 2. SALE AND PURCHASE OF NOTES. Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, at the Closing provided for in Section 3, Notes of a given Series in the principal amounts specified opposite your respective names in Schedule A at the purchase price of 100% of the principal amount thereof. Contemporaneously with entering into this Agreement, the Company is entering into separate Note Purchase Agreements (the "Other Agreements") identical with this Agreement with each of the other purchasers named in Schedule A (the "Other Purchasers"), providing for the sale at such Closing to each of the Other Purchasers of Notes in the principal amount specified opposite its name in Schedule A. Your respective obligations hereunder and the obligations of the Other Purchasers under the Other Agreements are several and not joint obligations and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or non-performance by any Other Purchaser thereunder. 3. CLOSING. The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Alston & Bird LLP, 1201 West Peachtree Street, Atlanta, Georgia, at 9:00 a.m., Atlanta time, at a closing (the "Closing") on December 21, 2000, or on such other Business Day thereafter as may be agreed upon by the Company and you and the Other Purchasers. At the Closing the Company will deliver to you the Notes to be purchased by you in the form of a single Note for each series (or such greater number of Notes in denominations of at least $500,000 as you may request) dated the date of the Closing and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to Wachovia Bank, N.A., ABA Number 061000010, Account Number 13028327, Account Name "Hughes Supply, Inc.," Atlanta, Georgia, Reference: Private Placement Disbursement . If at the Closing the Company shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. 4. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions: 4.1 Representations and Warranties. The representations and warranties of the Company in this Agreement shall be correct when made and at the time of the Closing. 4.2 Performance; No Default. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14) no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any 2 Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Sections 10.1 through 10.10 hereof had such Sections applied since such date. 4.3 Compliance Certificates. (a) Officer's Certificate. The Company shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled. (b) Secretary's Certificates. The Company and each Subsidiary executing the Guarantee referenced in Section 4.11 shall have delivered to you a certificate from the Secretary or an Assistant Secretary certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of, in the case of the Company, the Notes and the Agreements and, in the case of such Subsidiaries, the Guarantee and Contribution Agreement referenced in Section 4.11. 4.4 Opinions of Counsel. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) from Benjamin P. Butterfield, General Counsel for the Company, covering the matters set forth in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request and (b) from Alston & Bird LLP, your special counsel in connection with such transactions, covering the matters set forth in Exhibit 4.4(b) and covering such other matters incident to such transactions as you may reasonably request. 4.5 Purchase Permitted by Applicable Law, etc. On the date of the Closing your purchase of Notes shall (i) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (ii) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (iii) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. 3 4.6 Sale of Other Notes. Contemporaneously with the Closing, the Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A. 4.7 Payment of Special Counsel Fees. Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the reasonable fees, charges and disbursements of your special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing. 4.8 Private Placement Number. A Private Placement number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each Series of Notes. 4.9 Changes in Corporate Structure. Except as specified in Schedule 4.9, the Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. 4.10 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. 4.11 Guarantees of Subsidiaries. Each of the Material Subsidiaries specified in Schedule 4.11 shall have executed and delivered a Guarantee in the form set forth in Exhibit 4.11(a) and the Company and each such Material Subsidiary shall have executed and delivered a Contribution Agreement in the form set forth in Exhibit 4.11(b). 4 4.12 Copy of Bank Credit Agreements. The Company shall have delivered to each Purchaser a copy of each existing Bank Credit Agreement, including all amendments thereto, certified as true and correct by a Senior Financial Officer. 4.13 Dismissal of Case/Affirmative Coverage Response The Company shall have delivered to counsel to the Purchasers a copy of the Order dated December 14, 2000 issued by the Superior Court of Washington for King County by which the Company is dismissed, with prejudice, from the Case referred to in Section 5.19 hereof. The Company shall have delivered to counsel to the Purchasers a copy of the affirmative coverage response of the CNA-affiliated insurance companies referred to in Section 5.19 hereof. 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you that: 5.1 Organization; Power and Authority. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Other Agreements and the Notes and to perform the provisions hereof and thereof. 5.2 Authorization, etc. This Agreement and the Other Agreements and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5 5.3 Disclosure. The Company, through its agent, Banc of America Securities LLC, has delivered to you and each Other Purchaser a copy of a Private Placement Memorandum, dated October 2000 (the "Memorandum"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since July 31, 2000January 28, 2000, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby. 5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company's Affiliates (other than Subsidiaries) and (iii) of the Company's directors and senior officers. (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4). All of the entities set forth in Schedule 5.4 are Consolidated. Schedule 4.11 sets forth all Material Subsidiaries of the Company as of the date hereof. (c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good 6 standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. The Guarantee and Contribution Agreement to be executed and delivered by each Material Subsidiary referenced in Section 4.11 have been duly authorized by all necessary corporate action on the part of each such Material Subsidiary and such Guarantee and Contribution Agreement will constitute a legal, valid and binding obligation of such Material Subsidiary enforceable against such Material Subsidiary except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (d) No Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary. 5.5 Financial Statements. The Company has delivered to each Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). 5.6 Compliance With Laws, Other Instruments, etc. The execution, delivery and performance by the Company of this Agreement and the Notes and by the Material Subsidiaries referenced in Section 4.11 of the Guarantee and Contribution Agreement referenced therein will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator 7 or Governmental Authority applicable to the Company or any Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. 5.7 Governmental Authorizations, etc. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes or of the Guarantee and the Contribution Agreement referenced in Section 4.11 by the Material Subsidiaries referenced therein. 5.8 Litigation; Observance of Agreements, Statutes and Orders. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.9 Taxes. The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of federal, state or other taxes for all fiscal periods are adequate. The federal income tax returns liabilities of the Company and its Subsidiaries have been audited by the Internal Revenue Service for certain fiscal years up to and including the fiscal year 8 ended 1996 and any resulting deficiencies, additional assessments, fines, penalties, interest or other charge have either been paid for or adequately reserved for in the financial statements. Other than certain ordinary course audits of state sales and income tax returns, neither the Company nor any Subsidiary is presently under, nor has any of them received notice of, any investigation or audit by any national, regional, provincial, local or other agency concerning any fiscal year or period ended prior to the date hereof. All taxes required to be withheld from employees of the Company and its Subsidiaries for income and social security taxes have been properly withheld. 5.10 Title to Property; Leases. The Company and its Subsidiaries have good and sufficient title to their respective owned properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. 5.11 Licenses, Permits, etc. Except as disclosed in Schedule 5.11, (a) the Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others; (b) to the best knowledge of the Company, no product of the Company infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (c) to the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries. 5.12 Compliance With ERISA. (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result 9 in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (c) The expected post-retirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material. (d) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(d) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you. 5.13 Private Offering by the Company. Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than you, the Other Purchasers and not more than 50 other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company, nor, to the best knowledge of the Company, anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act. 5.14 Use of Proceeds; Margin Regulations. The Company will apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within 10 the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 5% of the value of the Consolidated Assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 5% of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation U. 5.15 Existing Debt; Future Liens. (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Debt of the Company and its Subsidiaries as of November 30, 2000, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Debt of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Debt of the Company or such Subsidiary and no event or condition exists with respect to any Debt of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.5. 5.16 Foreign Assets Control Regulations, etc. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. 5.17 Status Under Certain Statutes. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as amended. 11 5.18 Environmental Matters. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing, (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. 5.19 Certain Matters. Pursuant to an Asset Purchase Agreement dated as of November 30, 1999 (the "Asset Purchase Agreement") by and between the Company and Western Utilities Supply Co. (the "Seller"), the Company purchased substantially all of the assets of the Seller on February 1, 2000. The asset purchase was negotiated at arm's length and the Company paid the Seller fair value for the assets purchased. The Asset Purchase Agreement sets forth substantially all material terms of the asset purchase and neither the Company nor any Subsidiary has any continuing obligation to purchase products or services from, or otherwise deal with, the Seller. Pursuant to Section 2(b) of the Asset Purchase Agreement, the Company assumed no liabilities (including any tort liabilities) of the Seller other than certain ledger accounts. Pursuant to Section 7(b)(iv) of the Asset Purchase Agreement, the Seller has agreed to indemnify the Company for all Losses (as defined in the Asset Purchase 12 Agreement) suffered or incurred by the Company by reason of, or in connection with, any claim or cause of action of any third party to the extent arising out of any action, inaction, event, condition, liability or obligation of the Seller occurring prior to the consummation of the acquisition including, but not limited to, any Loss arising out of a cause of action entitled Miller, et. ux. v. Hughes Supply, Inc., King County, Washington, Superior Court Case No. 00-2-20913-4SEA (the "Case") or any similar claim or cause of action; provided, however, that such indemnification obligation terminates on the first anniversary date of the closing. The Company further represents that neither the Company nor any of its Subsidiaries has, at any time, distributed or sold to, or manufactured, warehoused or otherwise dealt with any of the products or materials on behalf of, Persons engaged in the shipbuilding industry in the State of Washington or any other jurisdiction other than certain high-alloy and stainless steel products. The Seller's insurance companies, certain insurance company affiliates of CNA Financial Corporation, have issued an affirmative coverage response to the Seller indicating that coverage would be afforded to the Seller with respect to the Case within the limits and other terms of the applicable policies; provided, however, that the coverage would not extend to the Company as such Persons are not insureds under such policies. However, and in any event, pursuant to an Order issued by the Superior Court of Washington for King County dated December 21, 2000, the Company has been dismissed from the Case with prejudice. 6. REPRESENTATIONS OF THE PURCHASER. 6.1 Purchase for Investment. You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. 6.2 Source of Funds. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "Source") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (a) the Source is an "insurance company general account" as defined in Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (60 FR 35925, July 12, 1995) and in respect thereof you represent that there is no 13 "employee benefit plan" (as defined in Section 3(3) of ERISA and Section 4975(e)(1) of the Code, treating as a single plan all plans maintained by the same employer or employee organization or affiliate thereof) with respect to which the amount of the general account reserves and liabilities of all contracts held by or on behalf of such plan exceed ten percent (10%) of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the NAIC Annual Statement filed with your state of domicile and that such acquisition is eligible for and satisfies the other requirements of such exemption; or (b) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (c) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (c); or (d) the Source is a governmental plan; or (e) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (e); or (f) the Source is an insurance company separate account maintained solely in connection with fixed contractual obligations of the insurance company under which the amounts payable, or credited, to any employee benefit plan (or its related trust) and to any participant or beneficiary of such plan (including any 14 annuitant) are not affected in any manner by the investment performance of the separate account; or (g) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 6.2, the terms "employee benefit plan", "governmental plan", "party in interest" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 7. INFORMATION AS TO COMPANY. 7.1 Financial and Business Information. The Company shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements -- within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments; provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a) so long as such requirements of the Securities and Exchange Commission continue to require that Form 10-Q include the financial statements described in subparagraphs (i) and (ii) above; 15 (b) Annual Statements -- within 105 days after the end of each fiscal year of the Company, duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by: (A) an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances; (B) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit); provided, that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(b) so long as such requirements of the Securities and Exchange Commission continue to require that Form 10-K include the financial statements described in subparagraphs (i) and (ii) above. (c) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each 16 regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; (d) Notice of Default or Event of Default -- promptly, and in any event within five days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (e) ERISA Matters -- promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; or (iv) if at any time the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) 17 under all Plans, determined in accordance with Title IV of ERISA, shall exceed $1,000,000; (f) Notices From Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; (g) New Material Subsidiaries -- within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company in which a Material Subsidiary has been formed or acquired, or any other event resulting in the creation of a new Material Subsidiary, notice of the formation or acquisition of such Material Subsidiary or such occurrence, including a description of the assets of such entity, the activities in which it will be engaged, and such other information as an Institutional Investor may request; (h) Bank Credit Agreements -- promptly, and in any event within 30 days after the execution thereof, a copy of a Bank Credit Agreement entered into after the date hereof by the Company or any Subsidiary and of each amendment of, other modification to, or waiver granted under, a Bank Credit Agreement; (i) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes. 7.2 Officer's Certificate. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a certificate of a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Sections 10.1, 10.2, 10.3, 10.4, 10.5, 10.6 and 10.8 inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and 18 (b) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 7.3 Inspection. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default -- if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested. 8. PREPAYMENT OF THE NOTES. 8.1(A) Series A Required Payments. There shall be no required prepayment of Series A Notes. The Company shall repay the entire outstanding principal amount of all Series A Notes at par and without payment of the Make-Whole Amount or any premium in a single installment on November 30, 2003, together with all accrued but unpaid interest thereon. 19 8.1(B) Series B Required Prepayments. The Company shall prepay, and there shall become due and payable, $5,600,000 in aggregate principal amount of Series B Notes on November 30 of each year commencing on November 30, 2001 and ending on November 30, 2004, inclusive. The Company shall make a final payment of the remaining principal amount of the Series B Notes of $5,600,000 (or such amount as shall be the remaining principal amount of Series B Notes outstanding) on November 30, 2005. Each such payment shall be accompanied by all accrued but unpaid interest to date and each such payment of the Series B Notes pursuant to this Section 8.1(B) shall be at par and without payment of the Make-Whole Amount or any premium, provided that, upon any partial prepayment of Series B Notes pursuant to Section 8.2 or purchase of Series B Notes permitted by Section 8.7, the principal amount of each required prepayment of Series B Notes becoming due under this Section 8.1(B) on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of Series B Notes is reduced as a result of such prepayment or purchase. 8.1(C) Series C Required Prepayments The Company shall prepay, and there shall become due and payable, $20,600,000 in aggregate principal amount of Series C Notes on November 30 of each year commencing on November 30, 2003 and ending on November 30, 2006, inclusive. The Company shall make a final payment of the remaining principal amount of the Series C Notes of $20,600,000 (or such amount as shall be the remaining principal amount of Series C Notes outstanding) on November 30, 2007. Each such payment shall be accompanied by all accrued but unpaid interest to date and each such payment of the Series C Notes pursuant to this Section 8.1(C) shall be at par and without payment of the Make-Whole Amount or any premium, provided that, upon any partial prepayment of Series C Notes pursuant to Section 8.2 or purchase of Series C Notes permitted by Section 8.7, the principal amount of each required prepayment of Series C Notes becoming due under this Section 8.1(C) on and after the date of such prepayment or purchase shall be reduced in the same proportion as the aggregate unpaid principal amount of Series C Notes is reduced as a result of such prepayment or purchase. 8.2 Optional Prepayments With Make-Whole Amount. The Company may, at its option, upon notice as provided below, prepay the Notes in whole at any time, or from time to time in part in an amount not less than $5,000,000, at 100% of the principal amount so prepaid plus all accrued interest on the principal amount of Notes so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. Any such optional payment shall be on a Business Day and the Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the Business Day fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid on such date, 20 the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate via facsimile transmission of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. 8.3 Allocation of Partial Prepayments. In the case of any partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be allocated among all Notes of all Series then outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts of all Notes not theretofore called for prepayment. 8.4 Maturity; Surrender, etc. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 8.5 Mandatory Offer to Prepay upon Change of Control. (a) Notice and Offer. In the event of either: (i) a Change of Control, or (ii) the obtaining of knowledge of a Control Event by any officer of the Company (including, without limitation, via the receipt of notice of a Control Event from any holder of Notes), the Company will, within three Business Days of the occurrence of either of such events (or, in the case of any Change of Control, the consummation or finalization of which would involve any action of the Company, at least thirty days prior to such Change of Control), give written notice of such Change of Control or Control Event to each holder of outstanding Notes by registered mail and, simultaneously with the sending of such outstanding written notice, send a copy of such notice to each such holder via an 21 overnight courier of national reputation. Such written notice shall contain, and such written notice shall constitute, an irrevocable offer to prepay all, but not less than all, the Notes held by such holder on a date specified in such notice (the "Control Prepayment Date") that is not less than 30 days and not more than 60 days after the date of such notice. If the Control Prepayment Date shall not be specified in such notice, the Control Prepayment Date shall be the 30th day after the date of such holder's first receipt of such notice. If the Company shall not have received a written response to such notice from each holder of Notes within 10 days after the date of posting of such notice to such holder of Notes, then the Company shall immediately send a second written notice via an overnight courier of national reputation to each such holder of Notes who shall have not previously responded to the Company. In no event will the Company take any action to consummate or finalize a Change of Control unless contemporaneously with such action the Company prepays all Notes required to be prepaid in accordance with Section 8.5(b) hereof. (b) Acceptance and Payment. To accept such offered prepayment, a holder of Notes shall cause a notice of such acceptance to be delivered to the Company not later than 15 days after the date of receipt by such holder of the latest written offer of such prepayment (it being understood that the failure by a holder to respond to such written offer of prepayment within such period of 15 days shall be deemed to constitute a rejection of such offer). If so accepted, such offered prepayment shall be due and payable on the Control Prepayment Date. Such offered prepayment shall be made at one hundred percent (100%) of the principal amount of such Notes, together with interest on the Notes then being prepaid accrued to the Control Prepayment Date. The Company shall not be required to pay any Make-Whole Amount upon any prepayment of Notes pursuant to this Section 8.5. (c) Officer's Certificate. Each offer to prepay the Notes pursuant to this Section 8.5 shall be accompanied by a certificate, executed by a Senior Financial Officer of the Company and dated the date of such offer, specifying: (i) the Control Prepayment Date; (ii) the Section hereof under which such offer is made; (iii) the principal amount of each Note offered to be prepaid; (iv) the interest that would be due on each such Note offered to be prepaid, accrued to the Control Prepayment Date; (v) that the conditions of this Section 8.5 have been fulfilled; and (vi) in reasonable detail, the nature and date or proposed date of the Change of Control. 22 (d) Notice Concerning Status of Holders of Notes. Promptly after each Control Prepayment Date and the making of all prepayments contemplated on such Control Prepayment Date under this Section 8.5 (and, in any event, within thirty days thereafter), the Company shall deliver to each remaining holder of Notes a certificate signed by a Senior Financial Officer of the Company containing a list of the then current holders of Notes (together with their addresses) and setting forth as to each such holder the outstanding principal amount of Notes held by each such holder at such time. 8.6 Make-Whole Amount. The term "Make-Whole Amount" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "Called Principal" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "Discounted Value" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) based on the Reinvestment Yield with respect to such Called Principal. "Reinvestment Yield" means, with respect to the Called Principal of any Note, 0.50% plus the yield to maturity implied by (i) the yields reported (offer side), as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, as set forth on page "USD" of the Bloomberg Financial Markets Service (or, if not available, any other nationally recognized trading screen reporting on-line intraday trading in United States Treasury fixed interest rate securities) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. 23 Such implied yield in (i) and (ii) above will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the maturity closest to and less than the Remaining Average Life. "Remaining Average Life" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "Remaining Scheduled Payments" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1. "Settlement Date" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. 8.7 Purchase of Notes. The Company will not, and will not permit any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. 9. AFFIRMATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 24 9.1 Compliance With Law. The Company shall, and shall cause each of its Subsidiaries to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and shall obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.2 Insurance. The Company shall, and shall cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. 9.3 Maintenance of Properties. The Company shall, and shall cause each of its Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.4 Payment of Taxes and Claims. The Company shall, and shall cause each of its Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax 25 or assessment or claims if (i) the amount, applicability or validity thereof is contested bythe Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect. 9.5 Corporate Existence, etc. The Company shall at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.7 and 10.8, the Company shall at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence of any Subsidiary, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 9.6 Covenant To Secure Notes Equally The Company covenants that, if it or any Subsidiary shall create or assume any Lien upon any of its property or assets, whether now owned or hereafter acquired, other than Liens permitted by the provisions of Section 10.5 and 10.6 hereof (unless prior written consent to the creation or assumption thereof shall have been obtained pursuant to Section 17), the Company will make or cause to be made effective provision whereby the Notes will be secured by such Lien equally and ratably with any and all other Debt thereby secured so long as any such other Debt shall be so secured. This Section 9.6 shall not be deemed a consent to any Lien or Liens not otherwise permitted by Section 10.5 or Section 10.6. 9.7 Covenant Relating to Subsidiary Guarantees. Within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company after: (i) the formation or acquisition of any Material Subsidiary not listed on Schedule 4.11; (ii) the transfer of assets from the Company or any Subsidiary to another Subsidiary and as a result thereof the recipient of such assets becomes a Material Subsidiary; (iii) the occurrence of any other event creating a new Material Subsidiary; or (iv) the execution and delivery by a Subsidiary (a "Bank Guaranty Subsidiary") (whether or not a Material Subsidiary) of a guaranty of the indebtedness and obligations of the Company under a Bank Credit Agreement the Company shall cause to be executed and delivered a guarantee of the obligations of the Company hereunder and under the Notes from such Material Subsidiary or Bank Guaranty Subsidiary (as the case may be) in substantially the form of Exhibit 4.11(a) and a Contribution Agreement from such Material Subsidiary or Bank Guaranty Subsidiary (as the case may be) in substantially the form of Exhibit 4.11(b), together with an opinion of counsel of the General Counsel to 26 the Company covering the matters described in Section 5.4(c), and copies of any accompanying resolutions of the board of directors of such Material Subsidiary or Bank Guaranty Subsidiary (as the case may be), good standing certificates and the like, all in form and substance satisfactory to your special counsel. 9.8 Ownership of Subsidiary Guarantors. The Company shall maintain its percentage of ownership existing as of the date hereof of all Material Subsidiaries that execute the Guarantee referenced in Section 4.11, and shall not decrease its ownership percentage in each Material Subsidiary that executes a Guarantee pursuant to Section 9.7 after the date hereof, as such ownership exists at the time such Subsidiary so executes such Guarantee. 10. NEGATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 10.1 Funded Debt. The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to any Funded Debt unless, on the date the Company or such Subsidiary becomes liable with respect to such Debt and immediately after giving effect thereto and the concurrent retirement of any other Debt, (i) no Default or Event of Default exists and (ii) Consolidated Funded Debt outstanding at such time does not exceed 60% of Consolidated Total Capitalization at such time. For purposes of this Section 10.1, any Person becoming a Subsidiary after the date hereof shall be deemed, at the time it becomes a Subsidiary, to have incurred all of its then outstanding Debt, and any Person extending, renewing or refunding any Debt shall be deemed to have incurred such Debt at the time of such extension, renewal or refunding. Further, it is hereby understood that the restrictions against the incurrence of Funded Debt by Subsidiaries contained in this Section 10.1 shall be in addition to, and not in derogation of, the restrictions contained in Section 10.6 hereof. 10.2 Current Debt. Neither the Company nor any Subsidiary shall at any time have or suffer to exist Current Debt unless, during the preceding 365-day period, there shall be at least 45 consecutive days on each of which there shall have been no Consolidated Current Debt outstanding in excess of the amount of additional Funded Debt that the Company would have been permitted to incur on each such day under Section 10.1. 27 10.3(A) Minimum Net Worth The Company shall not permit Consolidated Net Worth to be less than $445,000,000 at any time. 10.3(B) Adjusted Interest Coverage Ratio The Company shall not permit, as at the end of each fiscal quarter of the Company, the Adjusted Interest Coverage Ratio to be less than 1.50 to 1.00. 10.4 Restricted Payments. The Company shall not: (i) pay or declare any cash dividend on account of or with respect to any Capital Stock or make any other cash distribution on account of or with respect to any class of its Capital Stock; or (ii) redeem, purchase or otherwise acquire, directly or indirectly, any shares of the Company's Capital Stock (all of the foregoing described in these subparagraphs (i) and (ii) hereof being herein called "Restricted Payments") unless (A) the aggregate amount of all Restricted Payments made since July 31, 2000 would not exceed the sum of (x) $40,000,000 plus (y) 60% of cumulative Consolidated Net Income since July 31, 2000 (less 100% of cumulative Consolidated Net Income incurred for such period if such Consolidated Net Income for such period is a loss) plus (z) the aggregate net cash proceeds of any issuance or sale of the Company's Capital Stock and (B) no Default or Event of Default shall have occurred and be continuing, or a Default or Event of Default would occur, as a result of such Restricted Payment. 10.5 Liens The Company shall not, and shall not permit any Subsidiary to, create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired except: (i) Liens existing on the Date of Closing and specified on Schedule 10.5; (ii) any Lien on tangible fixed assets acquired, constructed or improved by the Company after the date hereof to secure or provide for all or a portion of the purchase price of such assets or a portion of the indebtedness of such assets provided (A) any such Lien shall extend solely to the item or items of 28 such assets so acquired or constructed and, if required by the terms of the instrument originally creating such Lien, other assets which constitute an improvement to or is acquired for specific use in connection with such acquired or constructed assets or which is real property being improved by such acquired or constructed assets, (B) the principal amount of the Debt secured by any such Lien shall at no time exceed an amount equal to the lesser of (1) the cost to the Company or such Subsidiary of the assets so acquired or constructed and (2) the Fair Market Value of such assets at the time of such acquisition or construction and (C) any such Lien shall be created contemporaneously with, or within 180 days after, the acquisition or construction of such assets; (iii) Liens (A) for taxes (including ad valorem and property taxes) and assessments or governmental charges or levies not yet due or (B) for taxes due or (C) resulting from any judgment or award, and in the case of clause (B) and (C), are being actively contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained; (iv) landlord liens and statutory liens of carriers, warehousemen, mechanics, material men and other liens imposed by law, created in the ordinary course of business for amounts not yet due or which are being contested in good faith by appropriate proceedings or with respect to which adequate reserves are being maintained, and which were not incurred in connection with the borrowing of money; (v) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations; (vi) easements, rights-of-way, zoning and similar restrictions and other similar charges or encumbrances not materially interfering with the ordinary conduct of the business of the Company or any of its Subsidiaries; (vii) other Liens incidental to the conduct of its business or the ownership of its property and assets which were not incurred in connection with the borrowing of money, and which do not in the aggregate materially detract from the value of property or assets of the Company and its Subsidiaries taken as a whole or materially impair the use of such property or assets in the operation of the business of the Company or any of its Subsidiaries; (viii) Liens provided for in equipment leases that are not Capitalized Lease Obligations (including financing statements and undertakings to file financing statements); provided that they are limited to the equipment subject to such leases and the proceeds thereof; 29 (ix) leases, subleases, licenses and sublicenses granted to third parties not interfering in any material respect with the business of the Company or any of its Subsidiaries; (x) any lien renewing, extending, or refunding any Lien described in subparagraphs (i) through (ix) above, provided that the principal amount secured is not increased and that such lien is not extended to other property (other than pursuant to its original terms); (xi) Liens on property or assets of a Subsidiary of the Company to secure obligations of such Subsidiary to the Company or another Wholly-Owned Subsidiary; (xii) any right of set off or banker's lien (whether by common law, statute, contract or otherwise) in favor of any bank (other than Liens securing Debt); and (xiii) Liens of any Subsidiary that arose prior to the time that such Subsidiary became a Subsidiary of the Company, provided that (A) any such Lien was not incurred in anticipation of such acquisition, (B) the assets of such acquired Subsidiary subject to such Lien shall only be those assets subject to such Lien at the time of the closing of the acquisition of such Subsidiary and (C) the principal amount of Debt secured by such Lien shall not exceed the amount of Debt so secured by such Lien at the time of the closing of the acquisition of such Subsidiary; and (xiv) Liens securing Priority Debt described in clause (ii) of the definition of Priority Debt; provided, however, that after giving effect to the Debt secured by such Liens, Priority Debt shall not exceed 20% of Consolidated Net Worth at any time. 10.6 Priority Debt. The Company will not at any time permit Priority Debt to exceed 20% of Consolidated Net Worth. 10.7 Merger or Consolidation. The Company shall not, and shall not permit any Subsidiary to, merge, consolidate or exchange shares with any other Person, except that: (i) any Subsidiary may merge or consolidate with and into the Company or with a Subsidiary that is a Wholly-Owned Subsidiary or if not a Wholly-Owned Subsidiary in which the ownership interest of the Company is not 30 reduced or diluted in connection with or as a result of such merger or consolidation; and (ii) the Company may merge or consolidate with any other corporation so long as: (A) the surviving corporation shall be the Company or another corporation organized under the laws of the United States or a State thereof or the District of Columbia; (B) the surviving corporation (if not the Company) shall assume the obligations of the Company hereunder pursuant to an agreement reasonably acceptable to the Required Holders (C) immediately after giving effect to such merger or consolidation, no Default or Event of Default shall have occurred or exist; and (D) immediately after giving effect to such merger or consolidation, the Company (or the surviving corporation, if not the Company) could incur at least $1 of Funded Debt under Section 10.1; and (iii) the Company or any Subsidiary may acquire any other Person provided such acquisition does not otherwise result in an Event of Default hereunder. (iv) Any assumption agreement executed and delivered pursuant to subparagraph (B) hereof shall be accompanied by a favorable opinion of counsel to such surviving corporation stating that such assumption agreement has been duly authorized, executed and delivered by such surviving corporation, that the execution and delivery of such assumption agreement does not violate or contravene any agreement or instrument to which such surviving corporation is a party and covering the other matters described in Exhibit 4.4(a) hereto and such other matters as counsel to the Required Holders shall reasonably request, together with copies of accompanying board resolutions, good standing certificates and the like as counsel to the Required Holders shall reasonably request. 10.8 Sale of Assets. The Company will not, and will not permit any Subsidiary to, Dispose of any property or assets (other than marketable securities), except, so long as no Default or Event of Default shall exist and be continuing: (i) any Subsidiary (the "Transferor Subsidiary") may Dispose of its assets to the Company or another Subsidiary (the "Transferee Subsidiary") so long 31 as, in the case of a Disposition to another Subsidiary, the ownership interest of the Company in the Transferee Subsidiary is at least equal to, or greater than, the Company's ownership interest in the Transferor Subsidiary; (ii) the Company or any Subsidiary may Dispose of any equipment that it in its good faith opinion determines to be obsolete, worn out or no longer useful in its business, as determined in good faith by the Company; (iii) the Company or any Subsidiary may Dispose of inventory in the ordinary course of business; (iv) the Company or any Subsidiary may Dispose of any other of its assets so long as immediately after giving effect to such proposed Disposition; (A) the consideration for such assets represents the Fair Market Value of such assets at the time of such Disposition; (B) at least 85% of the consideration therefor received by the Company or such Subsidiary is in the form of cash; and (C) the cumulative net book value of all assets Disposed of by the Company and its Subsidiaries during any period of twelve consecutive calendar months does not exceed 15% of Consolidated Assets determined as of the most recently completed fiscal year; provided, however, that the Company or a Subsidiary may Dispose of assets in excess of 15% of Consolidated Assets during any consecutive twelve-month period if, within 180 days after the receipt by the Company or such Subsidiary of any Net Proceeds of any Disposition in excess of 15% of Consolidated Assets (such excess Net Proceeds referred to as "Excess Proceeds"), the Company applies such Excess Proceeds at its option: (x) to make a capital expenditure or acquire other long-term assets that are used or useful in a business or businesses conducted by the Company on the date of such application or otherwise permitted by Section 10.10 hereof; or (y) to consummate an Asset Sale Offer (as defined below) with respect to all Holders of Notes and all holders of other Debt that is pari passu with the Notes as contemplated in paragraph (3) below; or (z) a combination of (x) and (y). Pending final application of any Excess Proceeds as required above, the Company shall invest such Excess Proceeds in cash or cash equivalents. 32 For purposes of this Section 10.8: (1) "Disposition" means the sale, lease, transfer or other disposition of property but shall not include any public taking or condemnation, and "Dispose of" and "Disposed of" shall have a corresponding meaning to Disposition. The term "Disposition" shall not include an exchange of assets, provided that the assets involved in such exchange are similar in function in that after giving effect to such exchange there has not been (A) a Materially Adverse Effect upon the Company and its Subsidiaries taken as a whole, (B) any material deterioration of cash flow generation from or in connection with such assets, or (C) any material deterioration in the overall quality of plant, property and equipment of the Company and its Subsidiaries taken as a whole. An "exchange" shall be deemed to have occurred if each of the transactions involved shall have been consummated within a six-month period. (2) Calculation of Net Book Value. The net book value of any assets shall be determined as of the respective date of Disposition of those assets. (3) Asset Sale Offer. On the 180th day after a Disposition of assets giving rise to Excess Proceeds, or such earlier date, if any, as the Board of Directors of the Company or of such Subsidiary determines not to apply the Excess Proceeds relating to such Disposition exclusively as set forth in subparagraph (x) of Section 10.8(iv)(C) above (each, an "Asset Sale Offer Trigger Date"), such aggregate amount of Excess Proceeds which have not been applied on or before such Asset Sale Offer Trigger Date as set forth in subparagraph (x) of Section 10.8(iv)(C) above (each, an "Excess Proceeds Offer Amount") shall be applied by the Company or such Subsidiary to make an offer to purchase (the "Asset Sale Offer") on a date (the "Asset Sale Offer Payment Date") not less than 30 nor more than 45 days following the applicable Asset Sale Offer Trigger Date, from all Holders of Notes and all holders of other Debt that is pari passu with the Notes (the Notes and such other Debt referred to herein collectively as "Senior Debt") on a pro rata basis that amount of Senior Debt equal to the Excess Proceeds Offer Amount at a price equal to 100% of the principal amount of Senior Debt to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase; provided, however, that if at any time any non-cash consideration received by the Company or any Subsidiary of the Company, as the case may be, in connection with any Disposition is converted into or sold or otherwise disposed of for cash or cash equivalents (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute a Disposition hereunder and the Excess Proceeds thereof shall be applied in accordance with this Section 10.8. 33 Each Asset Sale Offer shall be mailed to the holders of Senior Debt within 10 days following the Asset Sale Offer Trigger Date. The notice shall be executed by a Senior Financial Officer and shall contain all instructions and materials necessary to enable such holders to elect that Senior Debt held by them may be purchased pursuant to the Asset Sale Offer and shall state the following terms: (A) that the Asset Sale Offer is being made pursuant to this Section 10.8 and that all Senior Debt tendered will be accepted for payment; (B) the purchase price (including the amount of accrued interest) and the Asset Sale Offer Payment Date (which shall be 20 Business Days from the date such notice is mailed, or such longer period as may be required by law); (C) that any Senior Debt not elected to be purchased will continue to accrue interest if interest is then accruing; (D) that, unless the Company defaults in making payment therefor, any Senior Debt accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Asset Sale Offer Payment Date; (E) that Holders may elect to have the Senior Debt held by them purchased pursuant to an Asset Sale Offer by delivering written notice of such election to the Company at the address specified in the Asset Sale Offer setting forth the name of the holder and the principal amount of Senior Debt that such holder elects to be so purchased and that holders must deliver such election notice within two Business Days prior to the Asset Sale Offer Payment Date (it being understood that the failure by a holder to respond to an Asset Sale Offer within such period shall be deemed to constitute a rejection of such Asset Sale Offer); and (F) that holders of Senior Debt will be entitled to withdraw their election if the Company receives, not later than the date two Business Days prior to the Asset Sale Offer Payment Date, a written notice setting forth the name of the holder, the principal amount of Senior Debt the holder thereof has elected to have purchased, and a statement that such holder is withdrawing its election to have such Senior Debt purchased. On the Asset Sale Offer Payment Date, the Company shall deliver to such holder via wire transfer in immediately available funds the amount of Senior Debt so elected to be repurchased, plus accrued but unpaid interest thereon, subject to adjustment as contemplated by subparagraph (A) above. 34 To the extent that the aggregate amount of Senior Debt elected to be repurchased pursuant to an Asset Sale Offer is less than the Excess Proceeds Offer Amount, the Company shall commence a second Asset Sale Offer to holders of Senior Debt that elected to have the Senior Debt held by them purchased pursuant to the first Asset Sale Offer but whose Senior Debt was not purchased in full by reason of the pro rata nature of such first Asset Sale Offer. Such second Asset Sale Offer shall be conducted on substantially the same terms as the first Asset Sale Offer. To the extent that Excess Proceeds are not used to purchase Senior Debt after conducting the second Asset Sale Offer, the Company may use any remaining Excess Proceeds for general corporate purposes. 10.9 Transactions With Related Party The Company shall not, and shall not permit any Subsidiary to, effect or permit to exist any transaction with any Affiliate by which any asset or services of the Company or a Subsidiary is transferred to such Affiliate, or enter into any other transaction with an Affiliate on terms less favorable to the Company or such Subsidiaries than would be reasonably expected in a similar transaction with an unrelated entity. 10.10 Nature of Business. Neither the Company nor any Subsidiary shall engage in any business, if as a result, when taken as a whole, the general nature of the business then engaged in by the Company and its Subsidiaries would be substantially changed from the nature of the business of the Company and its Subsidiaries on the date hereof. 10.11 Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company shall not, and shall not cause or permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary of the Company to: (i) pay dividends or make any other distributions on or in respect of its Capital Stock; (ii) make loans or advances or to pay or guarantee any Debt or other obligation owed to the Company or any other Subsidiary of the Company; or (iii) transfer any of its property or assets to the Company or any other Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of (1) applicable law; (2) this Agreement or a Bank Credit Agreement as in effect on the date hereof; (3) customary non-assignment provisions of any contract or any lease governing a leasehold interest of any Subsidiary of the Company; (4) any instrument governing Acquired Debt, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Subsidiary thereof, other than the Person (or the properties or assets of the Person) so acquired or any Subsidiary thereof; (5) purchase money obligations for property acquired that impose restrictions of the nature described in clause (4) above on the property so acquired; (6) an agreement governing Debt incurred to refinance or replace the Debt 35 issued, assumed or incurred pursuant to an agreement referred to in clause (2), (4) or (5) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such refinancing or replacement Debt are no less favorable to the Company in any material respect than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (2), (4) or (5); or (7) restrictions contained in any purchase or sale agreement relating to the purchase or sale of a Subsidiary, provided that such restriction does not extend to any assets other than those being acquired or sold. 11. EVENTS OF DEFAULT. An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing: (a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or (c) the Company defaults in the performance of or compliance with any term contained in Sections 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7, 10.8 or 10.9; or (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this paragraph (d) of Section 11); or (e) any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or (f) (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Debt that is outstanding in an aggregate principal amount of at least $5,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Subsidiary is in default in the performance of 36 or compliance with any term of any evidence of any Debt in an aggregate outstanding principal amount of at least $5,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Debt has become, or has been declared (or one or more Persons are entitled to declare such Debt to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Debt to convert such Debt into equity interests), (x) the Company or any Subsidiary has become obligated to purchase or repay Debt before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $5,000,000, or (y) one or more Persons have the right to require the Company or any Subsidiary so to purchase or repay such Debt; or (g) the Company or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Subsidiaries, or any such petition shall be filed against the Company or any of its Subsidiaries and such petition shall not be dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating in excess of $5,000,000 are rendered against one or more of the Company and its Subsidiaries and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or (j) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under 37 section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (iv) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, (v) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder, or (vi) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall at any time exceed $5,000,000; and any such event or events described in clauses (i) through (v) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect. As used in Section 11(j), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 12. REMEDIES ON DEFAULT, ETC. 12.1 Acceleration. (a) If an Event of Default with respect to the Company described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, any holder or holders of more than 51% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. 38 Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. 12.2 Other Remedies. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. 12.3 Rescission. At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 51% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 39 12.4 No Waivers or Election of Remedies, Expenses, etc. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all reasonable costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements and the fees and disbursements of any financial advisor retained by the holders of Notes after the occurrence of an Event of Default. 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 13.1 Registration of Notes. The Company shall keep at its principal executive office a register for the registration of Notes and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. 13.2 Transfer and Exchange of Notes. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any 40 stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $500,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $500,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Sections 6.1 and 6.2. Transfers hereunder shall only be made by the Company to the extent such transfers are permitted by applicable law. 13.3 Replacement of Notes. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at least $100,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, 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. 14. PAYMENTS ON NOTES. 14.1 Place of Payment. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in New York, New York, at the principal office of The Chase Manhattan Bank (or successor entity) in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. 14.2 Home Office Payment. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the 41 Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2. 15. EXPENSES, ETC. 15.1 Transaction Expenses. Whether or not the transactions contemplated hereby are consummated, the Company will pay all reasonable costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the reasonable costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder of any Note, and (b) the reasonable costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). 15.2 Survival. The obligations of the Company under Section 15.1 shall survive the payment or transfer permitted pursuant to Section 13.2 of any Note, the enforcement, 42 amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. 17. AMENDMENT AND WAIVER. 17.1 Requirements. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20. 17.2 Solicitation of Holders of Notes. (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of 43 outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes or any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. 17.3 Binding Effect, etc. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 17.4 Notes Held by Company, etc. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. 18. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) via fax if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing, 44 (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of J. Stephen Zepf, Treasurer and Chief Financial Officer of the Company, or at such other address as the Company shall have specified to the holder of each Note in writing. Notices under this Section 18 will be deemed given only when actually received. 19. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 20. CONFIDENTIAL INFORMATION. For the purposes of this Section 20, "Confidential Information" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary, (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available, or (e) is independently developed by you, your Affiliates or your professional advisors without the use of Confidential Information. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional 45 advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20. 46 21. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates or Subsidiaries (a "Permitted Purchaser") as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Permitted Purchaser, shall contain such Permitted Purchaser's agreement to be bound by this Agreement and shall contain a confirmation by such Permitted Purchaser of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Permitted Purchaser in lieu of you. In the event that such Permitted Purchaser is so substituted as a purchaser hereunder and such Permitted Purchaser thereafter transfers to you all of the Notes then held by such Permitted Purchaser, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Permitted Purchaser, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. 47 22. MISCELLANEOUS. 22.1 Successors and Assigns. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. 22.2 Payments Due on Non-Business Days. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 22.3 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 22.4 Construction. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. 22.5 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 47 22.6 Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. [Signatures on Following Pages] 48 [Hughes Supply Note Purchase Agreement dated December 21, 2000] If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company. Very truly yours, HUGHES SUPPLY, INC. By:_______________________________________ J. Stephen Zepf Treasurer and Chief Financial Officer The foregoing is hereby agreed to as of the date hereof: Purchasers of Series A Notes: PACIFIC LIFE INSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ By: _______________________ Name:__________________ Title:_________________ PACIFIC LIFE AND ANNUITY COMPANY By: _______________________ Name:__________________ Title:_________________ By: _______________________ Name:__________________ Title:_________________ 49 Purchasers of Series B Notes: GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ GE LIFE AND ANNUITY ASSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK By: _______________________ Name:__________________ Title:_________________ ALLSTATE LIFE INSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ By: _______________________ Name:__________________ Title:_________________ (Authorized Signatories) 50 AMERICAN UNITED LIFE INSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ PIONEER MUTUAL LIFE INSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ Purchasers of Series C Notes: CONNECTICUT GENERAL LIFE INSURANCE COMPANY By: CIGNA Investments, Inc. By: _______________________ Name:__________________ Title:_________________ LIFE INSURANCE COMPANY OF NORTH AMERICA By: CIGNA Investments, Inc. By: _______________________ Name:__________________ Title:_________________ JEFFERSON-PILOT LIFE INSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ 51 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: _______________________ Name:__________________ Title:_________________ SUNAMERICA LIFE INSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ AMERICAN GENERAL LIFE INSURANCE COMPANY and AMERICAN GENERAL ANNUITY INSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ NATIONWIDE LIFE INSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ NEW YORK LIFE INSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ 52 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By: New York Life Investment Management, LLC, its Investment Manager By: _______________________ Name:__________________ Title:_________________ THE CANADA LIFE ASSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ THE OHIO NATIONAL LIFE INSURANCE COMPANY By: _______________________ Name:__________________ Title:_________________ MODERN WOODMEN OF AMERICA By: _______________________ Name:__________________ Title:_________________ 53 SCHEDULE A TO NOTE PURCHASE AGREEMENT Information as to Purchasers - -------------------------------------------------------------------------------- PURCHASER NAME PACIFIC LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 95-1079000 - -------------------------------------------------------------------------------- Name in which to register Note(s) Mac & Co. - -------------------------------------------------------------------------------- Series Series A - -------------------------------------------------------------------------------- Note registration number R-1 - -------------------------------------------------------------------------------- Amount $9,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Federal Reserve Bank of Boston ABA# 0110-0123-4/BOS SAFE DEP DDA 125261 Attn: MBS Income CC: 1253 A/C Name: Pacific Life General Account PLCF1810132 Re: Security Description & PPN - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.27% Series A Senior Notes due November 30, 2003; CUSIP 44482 C# 8 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments Mellon Trust Attn: Pacific Life Accounting Team One Mellon Bank Center Room 0930 Pittsburgh, PA 15258-0001 AND Pacific Life Insurance Company Attn: Securities Administration-Cash Team 700 Newport Center Drive Newport Beach, CA 92660-6397 - -------------------------------------------------------------------------------- Address for all other communications Pacific Life Insurance Company and notices Attn: Securities Department 700 Newport Center Drive Newport Beach, CA 92660-6397 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME PACIFIC LIFE AND ANNUITY COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 95-3760914 - -------------------------------------------------------------------------------- Name in which to register Note(s) Mac & Co. - -------------------------------------------------------------------------------- Series Series A - -------------------------------------------------------------------------------- Note registration number R-2; R-3 - -------------------------------------------------------------------------------- Amount R-2 = $5,000,000.00 R-3 = $5.000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Federal Reserve Bank of Boston ABA# 0110-0123-4/BOS SAFE DEP DDA 12561 Attn: MBS Income CC: 1253 A/C Name: Pacific Life General Account PLCF1811612 Re: Security Description & PPN - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.27% Series A Senior Notes due November 30, 2003; CUSIP 44482 C# 8 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments Mellon Trust Attn: Pacific Life Accounting Team One Mellon Bank Center Room 0930 Pittsburgh, PA 15258-0001 AND Pacific Life Insurance Company Attn: Securities Administration-Cash Team 700 Newport Center Drive Newport Beach, CA 92660-6397 - -------------------------------------------------------------------------------- Address for all other communications Pacific Life Insurance Company and notices Attn: Securities Department 700 Newport Center Drive Newport Beach, CA 92660-6397 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 91-6027719 - -------------------------------------------------------------------------------- Name in which to register Note(s) SALKELD & CO. - -------------------------------------------------------------------------------- Series Series B - -------------------------------------------------------------------------------- Note registration number R-1 - -------------------------------------------------------------------------------- Amount $12,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Bankers Trust Company 14 Wall Street New York, NY 10005 SWIFT Code: BKTR US 33 ABA #021-001-033 Account Number 99-911-145 FCC #097833 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.27% Series B Senior Notes due November 30, 2005; CUSIP 444482 D* 1 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments GE Financial Assurance Account: General Electric Capital Assurance Company Two Union Square, 601 Union Street Seattle, WA 98101 Attn: Investment Accounting Tel.: (206) 516-2871 Fax: (206) 516-4740 - -------------------------------------------------------------------------------- Address for all other communications GE Financial Assurance and notices Account: General Electric Capital Assurance Company Two Union Square, 601 Union Street Seattle, WA 98101 Attn: Investment Dept., Private Placements Tel: (206) 516-4954 Fax: (206) 516-4863 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME GE LIFE AND ANNUITY ASSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 54---0283385 - -------------------------------------------------------------------------------- Name in which to register Note(s) SALKELD & CO. - -------------------------------------------------------------------------------- Series Series B - -------------------------------------------------------------------------------- Note registration number R-2 - -------------------------------------------------------------------------------- Amount $2,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Bankers Trust Company 14 Wall Street New York, NY 10005 SWIFT Code: BKTR US 33 ABA #021-001-033 Account Number 99-911-145 FCC #097828 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.27% Series B Senior Notes due November 30, 2005; CUSIP 444482 D* 1 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments GE Financial Assurance Account: General Electric Capital Assurance Company Two Union Square, 601 Union Street Seattle, WA 98101 Attn: Investment Accounting Tel.: (206) 516-2871 Fax: (206) 516-4740 - -------------------------------------------------------------------------------- Address for all other communications GE Financial Assurance and notices Account: General Electric Capital Assurance Company Two Union Square, 601 Union Street Seattle, WA 98101 Attn: Investment Dept., Private Placements Tel: (206) 516-4954 Fax: (206) 516-4863 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK - -------------------------------------------------------------------------------- Taxpayer Identification Number 22-2882416 - -------------------------------------------------------------------------------- Name in which to register Note(s) SALKELD & CO. - -------------------------------------------------------------------------------- Series Series B - -------------------------------------------------------------------------------- Note registration number R-3 - -------------------------------------------------------------------------------- Amount $2,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Bankers Trust Company 14 Wall Street New York, NY 10005 SWIFT Code: BKTR US 33 ABA #021-001-033 Account Number 99-911-145 FCC #097836 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.27% Series B Senior Notes due November 30, 2005; CUSIP 444482 D* 1 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments GE Financial Assurance Account: General Electric Capital Assurance Company Two Union Square, 601 Union Street Seattle, WA 98101 Attn: Investment Accounting Tel: (206) 516-2871 Fax: (206) 516-4740 - -------------------------------------------------------------------------------- Address for all other communications GE Financial Assurance and notices Account: General Electric Capital Assurance Company Two Union Square, 601 Union Street Seattle, WA 98101 Attn: Investment Dept., Private Placements Tel: (206) 516-4954 Fax: (206) 516-4863 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME ALLSTATE LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 36-2554642 - -------------------------------------------------------------------------------- Name in which to register Note(s) Allstate Life Insurance Company - -------------------------------------------------------------------------------- Series Series B - -------------------------------------------------------------------------------- Note registration number R-4 - -------------------------------------------------------------------------------- Amount $8,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Harris Trust and Savings Bank ABA #071000288 BNF Allstate Life Insurance Company Collection Account #168-117-0 ORG (Enter Issuer Name) OBI DPP - (Enter Private Placement No., if available Payment Due Date (MM/DD/YY) P_____ (Enter "P" and amount of principal being remitted; for example, P5000000.00) I_____ (Enter "I" and amount of interest being remitted; for example, I225000.00) - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.27% Series B Senior Notes due November 30, 2005; CUSIP 444482 D* 1 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments Allstate Insurance Company Investment Operations - Private Placements 3075 Sanders Road, Suite G4A Northbrook, IL 60062-7127 Telephone: (847) 402-2769 Fax: (847) 326-5040 - -------------------------------------------------------------------------------- Address for all other communications Allstate Insurance Company and notices Private Placements Department 3075 Sanders Road, Suite G3A Northbrook, IL 60062-7127 Telephone: (847) 402-8922 Fax: (847) 402-3092 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME AMERICAN UNITED LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 35-0145825 - -------------------------------------------------------------------------------- Name in which to register Note(s) American United Life Insurance Company - -------------------------------------------------------------------------------- Series Series B - -------------------------------------------------------------------------------- Note registration numbers R-5; R-6 - -------------------------------------------------------------------------------- Amount R-5 = $2,000,000.00 R-6 = $1,500,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Bank of New York Attn: P&I Department One Wall Street, 3rd Floor Window A New York, NY 10286 ABA #021000018, BNF:IOC566 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.27% Series B Senior Notes due November 30, 2005; CUSIP 444482 D* 1 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments American United Life Insurance Company Attn: Christopher D. Palke, Securities Department Post Office Box 368 Indianapolis, IN 46206-0368 - -------------------------------------------------------------------------------- Address for all other communications American United Life Insurance and notices Company Attn: Christopher D. Palke, Securities Department Post Office Box 368 Indianapolis, IN 46206-0368 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME PIONEER MUTUAL LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 45-0220640 - -------------------------------------------------------------------------------- Name in which to register Note(s) Pioneer Mutual Life Insurance Company - -------------------------------------------------------------------------------- Series Series B - -------------------------------------------------------------------------------- Note registration numbers R-7 - -------------------------------------------------------------------------------- Amount $500,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Bank of New York Attn: P&I Department One Wall Street, 3rd Floor Window A New York, NY 10286 ABA #021000018, BNF:IOC566 Pioneer Mutual, c/o American United Life - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.27% Series B Senior Notes due November 30, 2005; CUSIP 444482 D* 1 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments American United Life Insurance Company Attn: Christopher D. Palke, Securities Department Post Office Box 368 Indianapolis, IN 46206-0368 - -------------------------------------------------------------------------------- Address for all other communications American United Life Insurance and notices Company Attn: Christopher D. Palke, Securities Department Post Office Box 368 Indianapolis, IN 46206-0368 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME CONNECTICUT GENERAL LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 13-3574027 - -------------------------------------------------------------------------------- Name in which to register Notes CIG & Co. - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration numbers R-1 through R-5 - -------------------------------------------------------------------------------- Amount R-1 = $3,200,000.00 R-2 = $5,000,000.00 R-3 = $3,800,000.00 R-4 = $3,000,000.00 R-5 = $4,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Notes Method Immediately available funds, via federal funds wire transfer Account Information Chase NYC/CTR BNF=CIGNA Private Placements AC=9009001802 ABA#021000021 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 30, 2007 CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments CIG & Co. c/o CIGNA Investments, Inc. Attn: Securities Processing S-309 900 Cottage Grove Road Hartford, CT 06152-2309 CIG & Co. c/o CIGNA Investments, Inc. Attn: Private Securities -S307 Operations Group 900 Cottage Grove Road Hartford, CT 06152-2307 Fax: 860-726-7203 with a copy to: Chase Manhattan Bank Private Placement Servicing P.O. Box 1508 Bowling Green Station New York, NY 10081 Attn: CIGNA Private Placements Fax: 212-552-3107/1005 - -------------------------------------------------------------------------------- Address for all other communications CIG & Co., c/o CIGNA Investments, Inc. and notices Attention: Private Securities Division - S-307 900 Cottage Grove Road Hartford, CT 06152-2307 Fax: 860-726-7203 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME LIFE INSURANCE COMPANY OF NORTH AMERICA - -------------------------------------------------------------------------------- Taxpayer Identification Number 13-3574027 - -------------------------------------------------------------------------------- Name in which to register Note(s) CIG & Co. - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration number R-6 - -------------------------------------------------------------------------------- Amount $3,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Chase NYC/CTR BNF=CIGNA Private Placements AC=9009001802 ABA#021000021 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 30, 2007; CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments CIG & Co. c/o CIGNA Investments, Inc. Attn: Securities Processing S-309 900 Cottage Grove Road Hartford, CT 06152-2309 CIG & Co. c/o CIGNA Investments, Inc. Attn: Private Securities -S307 Operations Group 900 Cottage Grove Road Hartford, CT 06152-2307 Fax: 860-726-7203 with a copy to: Chase Manhattan Bank Private Placement Servicing P.O. Box 1508 Bowling Green Station New York, NY 10081 Attn: CIGNA Private Placements Fax: 212-552-3107/1005 - -------------------------------------------------------------------------------- Address for all other communications CIG & Co., c/o CIGNA Investments, Inc. and notices Attention: Private Securities- S-307 900 Cottage Grove Road Hartford, CT 06152-2307 Fax: 860-726-7203 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME JEFFERSON-PILOT LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 56-0359860 - -------------------------------------------------------------------------------- Name in which to register Note(s) Jefferson-Pilot Life Insurance Company - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration number R-7 - -------------------------------------------------------------------------------- Amount $17,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Jefferson-Pilot Life Insurance Company c/o The Bank of New York ABA#021 000 018 BNF: IOC566 Attn: P&I Department - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 30, 2007; CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments Jefferson-Pilot Life Insurance Company c/o The Bank of New York Attention: P&I Department P.O. Box 19266 Newark, NJ 07195 - -------------------------------------------------------------------------------- Address for all other communications Jefferson-Pilot Life Insurance and notices Company P.O. Box 21008 Greensboro, NC 27420 Attn: Securities Administration - 3630 Fax: 336-691-3717 For hand delivery: 100 North Greene Street (ZIP 27401) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA - -------------------------------------------------------------------------------- Taxpayer Identification Number 13-1624203 - -------------------------------------------------------------------------------- Name in which to register Note(s) Teachers Insurance and Annuity Association of America - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration number R-8 - -------------------------------------------------------------------------------- Amount $17,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Chase Manhattan Bank ABA #021-000-021 Account of Teachers Insurance and Annuity Association of America Account No. 900-9-000200 For further credit to the TIAA Account Number G07040 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 30, 2007; CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest; identify name of bank from which payment was sent] - -------------------------------------------------------------------------------- Address for notices related to payments Teachers Insurance and Annuity Association of America 730 Third Avenue New York, NY 10017-3206 Attn: Securities Accounting Division 212-916-6004 Phone 212-916-6955 Fax - -------------------------------------------------------------------------------- Address for all other communications Teachers Insurance and Annuity and notices Association of America 730 Third Avenue New York, NY 10017-3206 Attn: Securities Accounting Division 212-916-5695 Greg MacCordy 212-916-6329 Margie Ello-Satin 212-490-9000 (General Number) 212-916-6583 (Team Fax Number) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME SUNAMERICA LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 52-0502540 - -------------------------------------------------------------------------------- Name in which to register Note(s) OKGBD & Co. - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration number R-9 - -------------------------------------------------------------------------------- Amount $12,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Bankers Trust Company ABA #021-001-033 Account #99-911-145 For further credit to Account #099530 Ref: Hughes Supply - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 30, 2007; CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments SunAmerica Financial Attn: Investment Accounting - 36th Floor 1 SunAmerica Center Los Angeles, CA 90067-6022 310-772-6486 Phone 310-772-6596 Fax - -------------------------------------------------------------------------------- Address for all other communications SunAmerica Investments and notices c/o AIG Global Investment Corp. 175 Water Street - 25th Floor New York, NY 10038 Attn: Private Placements/G. Herman - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME NATIONWIDE LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 31-4156830 - -------------------------------------------------------------------------------- Name in which to register Note(s) Nationwide Life Insurance Company - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration number R-10 - -------------------------------------------------------------------------------- Amount $7,500,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information The Bank of New York ABA #021-000-108 BNF: IOC566 F/A/O Nationwide Life Insurance Company Attn: P & I Department - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 30, 2007; CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments Nationwide Life Insurance Company c/o The Bank of New York P.O. Box 19266 Attn: P & I Department Newark, NJ 07195 with a copy to: Nationwide Life Insurance Company Attn: Investment Accounting One Nationwide Plaza (1-32-05) Columbus, OH 43215-2220 - -------------------------------------------------------------------------------- Address for all other communications Nationwide Life Insurance Company and notices One Nationwide Plaza (1-33-07) Columbus, OH 43215-2220 Attn: Corporate Fixed-Income Securities - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 31-1000740 - -------------------------------------------------------------------------------- Name in which to register Note(s) Nationwide Life and Annuity Insurance Company - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration number R-11 - -------------------------------------------------------------------------------- Amount $2,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information The Bank of New York ABA #021-000-018 BNF: IOC566 F/A/O Nationwide Life and Annuity Insurance Company Attn: P & I Department - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 30, 2007; CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments Nationwide Life and Annuity Insurance Company c/o The Bank of New York P. O. Box 19266 Attn: P & I Department Newark, NJ 07195 with a copy to: Nationwide Life and Annuity Insurance Company Attn: Investment Accounting One Nationwide Plaza (1-32-05) Columbus, OH 43215-2220 - -------------------------------------------------------------------------------- Address for all other communications Nationwide Life and Annuity Insurance and notices Company One Nationwide Plaza (1-33-07) Columbus, OH 43215-2220 Attn: Corporate Fixed-Income Securities - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME THE CANADA LIFE ASSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 38-0397420 - -------------------------------------------------------------------------------- Name in which to register Note(s) J. Romeo & Co. - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration number R-12 - -------------------------------------------------------------------------------- Amount $9,500,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Chase Manhattan Bank ABA 021-000-021 A/C 900-9-000200 Trust Account No. G52708 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 30, 2007; CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments Chase Manhattan Bank North American Insurance 3 Chase MetroTech Centre, 6th Floor Brooklyn, NY 11245 Attn: Doll Balbadar with a copy to: The Canada Life Assurance Company 330 University Avenue, SP-12 Securities Accounting Toronto, ON M5G 1R8 - -------------------------------------------------------------------------------- Address for all other communications Canada Life Assurance Company and notices 330 University Avenue, SP-11 Toronto, ON M5G 1R8 Attn: Paul English, US Investments Division - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME NEW YORK LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 13-5582869 - -------------------------------------------------------------------------------- Name in which to register Note(s) New York Life Insurance Company - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration number R-13 - -------------------------------------------------------------------------------- Amount $2,500,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Chase Manhattan Bank New York, NY 10019 ABA #021-000-021 Credit: New York Life Insurance Company General Account No. 008-9-00687 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 30, 2007; CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments New York Life Insurance Company 51 Madison Avenue New York, NY 10010-1603 Attn: Treasury Department Securities Income Section Room 209 Fax: 212-447-4160 - -------------------------------------------------------------------------------- Address for all other communications New York Life Insurance Company and notices 51 Madison Avenue New York, NY 10010-1603 Attn: Investment Department Private Finance Group Room 206 Fax: 212-447-4122 with a copy of any notices regarding defaults or Events of Default under the operative documents to: Attn: Office of General Counsel Investment Section, Room 1107 Fax: 212-576-8340 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION - -------------------------------------------------------------------------------- Taxpayer Identification Number 13-3044743 - -------------------------------------------------------------------------------- Name in which to register Note(s) New York Life Insurance and Annuity Corporation - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration number R-14 - -------------------------------------------------------------------------------- Amount $5,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Chase Manhattan Bank New York, NY 10019 ABA #021-000-021 Credit: New York Life Insurance and Annuity Corporation General Account No. 323-8-47382 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 30, 2007; CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments New York Life Insurance and Annuity Corporation 51 Madison Avenue New York, NY 10010-1603 Attn: Treasury Department Securities Income Section Room 209 Fax: 212-447-4160 - -------------------------------------------------------------------------------- Address for all other communications New York Life Insurance Company and notices 51 Madison Avenue New York, NY 10010-1603 Attn: Investment Department Private Finance Group Room 206 Fax: 212-447-4122 with a copy of any notices regarding defaults or Events of Default under the operative documents to: Attn: Office of General Counsel Investment Section, Room 1107 Fax: 212-576-8340 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME THE OHIO NATIONAL LIFE INSURANCE COMPANY - -------------------------------------------------------------------------------- Taxpayer Identification Number 31-0397080 - -------------------------------------------------------------------------------- Name in which to register Note(s) The Ohio National Life Insurance Company - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration number R-15 - -------------------------------------------------------------------------------- Amount $4,500,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information Firstar Bank, N.A. ABA #042-000013 5th & Walnut Streets Cincinnati, OH 45202 For credit to The Ohio National Life Insurance Company: Account No. 910-275-7 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 3, 2007; CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments The Ohio National Life Insurance Company P.O. Box 237 Cincinnati, OH 45201 Attn: Investment Department - -------------------------------------------------------------------------------- Address for all other communications The Ohio National Life Insurance and notices Company One Financial Way Cincinnati, OH 45242 Attn: Investment Department Fax: 513-794-4506 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PURCHASER NAME MODERN WOODMEN OF AMERICA - -------------------------------------------------------------------------------- Taxpayer Identification Number 36-1493430 - -------------------------------------------------------------------------------- Name in which to register Note(s) Modern Woodmen of America - -------------------------------------------------------------------------------- Series Series C - -------------------------------------------------------------------------------- Note registration number R-16 - -------------------------------------------------------------------------------- Amount $4,000,000.00 - -------------------------------------------------------------------------------- Payment on account of Note(s) Method Immediately available funds, via federal funds wire transfer Account Information The Northern Trust Company 50 South LaSalle Street Chicago, IL 60675 ABA #071-000-152 Account Name: Modern Woodmen of America Account No. 84352 - -------------------------------------------------------------------------------- Accompanying Information Hughes Supply, Inc.; 8.42% Series C Senior Notes due November 30, 2007; CUSIP 444482 D@ 9 [insert due date and application as among principal, premium and interest] - -------------------------------------------------------------------------------- Address for notices related to payments Modern Woodmen of America Attn: Investment Accounting Department 1701 First Avenue Rock Island, IL 61201 - -------------------------------------------------------------------------------- Address for all other communications Modern Woodmen of America and notices Attn: Investment Department 1701 First Avenue Rock Island, IL 61201 - -------------------------------------------------------------------------------- SCHEDULE B TO NOTE PURCHASE AGREEMENT Defined Terms As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "Acquired Debt" shall mean, with respect to any specified Person: (i) Debt of any other Person existing at the time such other Person is merged with or into, or became a Subsidiary of, such specified Person, whether or not such Debt is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (ii) Debt secured by a Lien encumbering any asset acquired by such specified Person. "Adjusted Interest Coverage Ratio" shall mean, with respect to the Company and its Subsidiaries on a Consolidated basis, the ratio of: (i) Consolidated EBITDAR for the Four-Quarter Period ending on the date of computation thereof to (ii) the sum of: (a) Consolidated Interest Expense for such Four-Quarter Period plus (b) Consolidated Rental Expense for such Four-Quarter Period. "Affiliate" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "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 voting securities, by contract or otherwise. "Bank Credit Agreement" shall mean (i) that certain Line of Credit Agreement dated as of January 26, 1999 by and among the Company, the Lenders named therein and SunTrust Bank, Central Florida, National Association, as Administrative Agent, as amended and as the same may be further modified, amended, renewed, extended or supplemented from time to time, (ii) that certain Revolving Credit Agreement dated as of January 26, 1999 by and among the Company, the Lenders named therein and SunTrust Bank, Central Florida, national Association, as Administrative Agent, and as the same may be further modified, amended, renewed, extended or supplemented from time to time, (iii) any other committed revolving and/or term credit facility, note purchase agreement, indenture or other instrument or line of credit having a maturity of greater than one year and evidencing Funded Debt equal to or in excess of $25,000,000, and (iv) all replacements, extensions, substitutions, refinancings and refundings thereof. "Beneficial Owner" shall have the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as such term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. "Board of Directors" means the board of directors of the Company (or such other group of individuals designated to perform a similar function). "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed. "Capital Lease" means a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "Capital Stock" shall mean, with respect to any Person, the outstanding capital stock (including all common, preferred or other equity securities and any options or warrants to purchase capital stock or other securities exchangeable for or convertible into capital stock) of such Person. "Capitalized Lease Obligation" shall mean, with respect to any Person, any rental obligation which, under GAAP, is or will be required to be indebtedness (net of interest expense) in accordance with such principles. "Change of Control" means the occurrence of any of the following: (i) the sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act); (ii) the adoption of a plan relating to the liquidation or dissolution of the Company; (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) becomes the Beneficial Owner, directly or indirectly, of more than 30% of the Voting Stock of the Company, measured by voting power rather than number of shares; (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; or (v) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which a majority of the Voting Stock of the Company is converted into or exchanged for cash, securities or other property. "Closing" is defined in Section 3. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "Company" shall mean Hughes Supply, Inc., a Florida corporation, or any successor thereto that shall have become such in the manner prescribed in Section 10.7. "Confidential Information" is defined in Section 20. "Consolidated" shall mean the consolidated financial information of the Company and its Subsidiaries under generally accepted accounting principles. "Consolidated Assets" shall mean, at any time, the total assets of the Company and its Subsidiaries on a Consolidated basis under GAAP. "Consolidated Current Debt" shall mean, at any time, the amount of Current Debt of the Company and its Subsidiaries on a Consolidated basis under GAAP at such time. "Consolidated EBITR" shall mean, for any period, an amount equal to the sum of Consolidated Net Income for such period plus, to the extent deducted in determining Consolidated Net Income (i) provisions for taxes based on income for such period, (ii) Consolidated Interest Expense for such period, and (iii) Consolidated Rental Expense for such period. "Consolidated EBITDAR" shall mean, for any period, an amount equal to the sum of Consolidated EBITR for such period plus, to the extent deducted in determining Consolidated Net Income, depreciation and amortization expense of the Company and its Subsidiaries on a Consolidated basis (as determined in accordance with GAAP) for such period. "Consolidated Funded Debt" shall mean, at any time but without duplication, the amount of Funded Debt of the Company and its Subsidiaries on a Consolidated basis under GAAP at such time. "Consolidated Interest Expense" shall mean, for any period, total interest expense (including without limitation, interest expense attributable to capitalized leases in accordance with generally accepted accounting principles) of the Company and its Subsidiaries on a Consolidated basis under GAAP. "Consolidated Net Income" shall mean, for any period, the consolidated net income (or loss) of the Company and its Subsidiaries for such period (taken as a single accounting period) determined in conformity with GAAP, but excluding therefrom (to the extent otherwise included therein) (i) any extraordinary gains or losses, together with any related provision for taxes, realized upon any sale of assets outside the ordinary course of business, and (ii) undistributed net income of a Subsidiary to the extent that such distribution is prohibited by agreement, judgment or regulation; provided, however, that all earnings from acquisitions will accrue to the benefit of the Company in accordance with GAAP. "Consolidated Net Worth" shall mean, at any time, on a Consolidated basis, shareholders' equity of the Company and its Subsidiaries at such time determined in accordance with GAAP. "Consolidated Rental Expense" shall mean, for any period, total operating lease expense of the Company and its Subsidiaries on a Consolidated basis under GAAP. "Consolidated Total Capitalization" shall mean, at any time, the sum of Consolidated Net Worth and Consolidated Funded Debt. "Continuing Director" means, as of any date of determination, any member of the Board of Directors of the Company who: (i) was a member of such Board of Directors on the date hereof; or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Control Event" means the execution of any written agreement that, when fully performed by the parties thereto, would result in a Change of Control. "Current Debt" shall mean all Debt with an original maturity of one year or less. For the avoidance of doubt, Debt incurred under a Bank Credit Agreement shall not constitute "Current Debt". "Debt" shall mean, without duplication, with respect to any Person, as at any date of determination: (i) all indebtedness for borrowed money which such Person has directly or indirectly created, incurred or assumed (including, without limitation, all Capitalized Lease Obligations); (ii) all indebtedness, whether or not for borrowed money, secured by any Lien on any property or asset owned or held by such Person subject thereto, whether or not the indebtedness secured thereby shall have been assumed by such Person; (iii) any indebtedness, whether or not for borrowed money, with respect to which such Person has become directly or indirectly liable and which represents or has been incurred to finance the purchase price (or a portion thereof) of any property or services or business acquired by such Person, whether by purchase, consolidation, merger or otherwise other than any payables and accrued expenses in the ordinary course of business that are current liabilities under GAAP; and (iv) any indebtedness of any other Person of the character referred to in clauses (i), (ii), or (iii) of this definition with respect to which the Person whose Debt is being determined has become liable by way of a Guarantee; all as determined in accordance with GAAP; provided, however, Debt shall not include endorsement of negotiable instruments for collection in the ordinary course of business. "Default" shall mean an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "Default Rate" shall mean that rate of interest that is the greater of (i) 2% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes or (ii) 2% over the rate of interest publicly announced by The Chase Manhattan Bank as its "base" or "prime" rate. "Environmental Laws" shall mean any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA Affiliate" shall mean any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. "Event of Default" is defined in Section 11. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean, at any time, the sale value of property that would be realized in an arm's length sale at such time between an informed and willing buyer, and an informed and willing seller, under no compulsion to buy or sell, respectively. "Four-Quarter Period" shall mean the rolling, previous consecutive four fiscal-quarter period ending on the date of any computation of any ratio contained herein. "Funded Debt" shall mean (i) all Debt with an original maturity of greater than one year (including Debt incurred under a Bank Credit Agreement), including current maturities of such Debt, and all Debt which is renewable solely at the option of the Company or a Subsidiary, (ii) all Debt with an original maturity of less than one year, including commercial paper issued by the Company, if a direct or secondary source of repayment of such Debt is, or such Debt is credit enhanced by, a line of credit or other financial accommodation having a maturity of greater than one year and (iii) all other Debt that is now or hereafter characterized by the Company or any Subsidiary in its financial statements as "Funded Debt". "GAAP" shall mean generally accepted accounting principles as in effect from time to time in the United States of America. "Governmental Authority" shall mean (a) the government of (i) the United States of America or any State or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "Guarantee" shall mean, with respect to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any Debt, lease, dividend or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business) or discounted or sold with recourse by such Person, or in respect of which such Person is otherwise directly or indirectly liable, including, without limitation, any such obligation in effect guaranteed by such Person through any agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) in any such case if the purpose or intent of such agreement is to provide assurance that such obligation will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected against loss in respect thereof. The amount of any Guarantee shall be equal to the outstanding principal amount of the obligation guaranteed or such lesser amount to which the maximum exposure of the guarantor shall have been specifically limited. "Hazardous Material" shall mean any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). "Holder" shall mean, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1. "Institutional Investor" shall mean (a) any original purchaser of a Note, (b) any holder of a Note holding more than 5% of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "Lien" shall mean, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). "Make-Whole Amount" is defined in Section 8.6. "Material" shall mean material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of the Company and its Subsidiaries taken as a whole. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the validity or enforceability of this Agreement or the Notes. "Material Subsidiary" shall mean (i) each Subsidiary set forth on Schedule 4.11 and (ii) each other Subsidiary of the Company, now existing or hereinafter established or acquired, that has or acquires total assets in excess of $1,000,000 or that accounted for or produced more than 5% of the Consolidated EBITR of the Company on a Consolidated basis during any of the three most recently completed fiscal years of the Company. "Memorandum" is defined in Section 5.3. "Multiemployer Plan" shall mean any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "Net Proceeds" shall mean the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Disposition (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Disposition), net of the direct costs relating to such Disposition, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof, in each case after taking into account any available tax credits or deductions and any tax-sharing arrangements. "Notes" is defined in Section 1. "Officer's Certificate" shall mean a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "Other Agreements" is defined in Section 2. "Other Purchasers" is defined in Section 2. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "Person" shall mean an individual, corporation, company, limited liability company, voluntary association, partnership, limited liability partnership, trust, unincorporated organization or joint venture or a government or any agency, instrumentality or political subdivision thereof, and for the purpose of the definition of "ERISA Affiliate", a trade or business. "Plan" shall mean 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. "Preferred Stock" shall mean any class of Capital Stock of a corporation that is preferred over any other class of Capital Stock of such corporation as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such corporation. "Priority Debt" shall mean with respect to any Person, at any time, without duplication, the sum of: (i) Unsecured Debt of each Subsidiary (other than such Debt held by the Company or a Wholly-Owned Subsidiary thereof); (ii) Debt of the Company and any Subsidiary secured by any Lien unless such Lien is otherwise permitted by subparagraphs (i) through (xiii) of Section 10.5 (other than such Debt held by the Company or a Wholly-Owned Subsidiary thereof); and (iii) All Preferred Stock of Subsidiaries owned by a Person other than the Company or a Wholly-Owned Subsidiary thereof. "Property" or "Properties" shall mean, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "QPAM Exemption" shall mean Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "Required Holders" shall mean the holders of at least 51% in the principal amount of the Notes at the time outstanding. "Responsible Officer" shall mean any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this agreement. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. "Senior Financial Officer" shall mean the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. "Series A Notes," "Series B Notes" and "Series C Notes" shall have the meaning set forth in Section 1 and any reference to a particular "Series" shall be a reference to either the Series A Notes, Series B Notes or Series C Notes. "Subsidiary" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "Subsidiary Debt" shall mean all Debt of which the direct obligor is a subsidiary of the Company. "Voting Stock" of any Person as of any date shall mean the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Wholly-Owned Subsidiary" means, at any time, any Subsidiary one hundred percent (100%) of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-Owned Subsidiaries at such time. SCHEDULE 4.9 TO NOTE PURCHASE AGREEMENT Changes in Corporate Structure (i) Closed Acquisitions: - bestroute.com, LLC, a New York limited liability company - closed September 27, 2000 - Kingston Pipe Industries, Inc., a Rhode Island corporation - closed August 30, 2000 Does not include asset purchase acquisitions where the acquiring entity is an existing subsidiary of the Company (ii) Pending Acquisitions: None SCHEDULE 4.11 TO NOTE PURCHASE AGREEMENT Material Subsidiaries Executing and Delivering Guarantees on Date of Closing Each of the following is a Material Subsidiary of the Company: Atlantic Pump & Equipment Company of Miami, Inc., a Florida corp. Atlantic Pump & Equipment Company of West Palm Beach, Inc., a Florida corp. Bestroute.com, LLC, a New York limited liability company (99% owned subsidiary) Carolina Pump & Supply Corp., a Rhode Island corp. Cayesteel, Inc., a Georgia corp. (100% owned by WCC Merger Corporation) Chad Supply, Inc., a Florida corp. Coastal Wholesale, Inc., a Florida corp. Dominion Pipe Fabricators, Incorporated, a Virginia corp. Dominion Pipe & Supply Co., a Virginia corp. Douglas Leonhardt & Associates, a North Carolina corp. Elasco Agency Sales, Inc., an Illinois corp. Elec-Tel Supply Company, a Georgia corp. Electric Laboratories and Sales Corporation, a Delaware corp. FES Merger Corp., Inc., a Florida corp. Gayle Supply Company, an Alabama corp. Gilleland Concrete Products, Inc., a Georgia corp. HSI Acquisition Corporation, an Ohio corp. HSI Bestroute Investment, Inc., a Florida corp. HSI Fusion Services, Inc., a Florida corp. Hughes Supply Management Services, Inc., a Delaware corporation Hughes Water & Sewer Company, a West Virginia corp. H Venture Corporation, a Florida corp. Juno Industries, Inc., a Florida corp. Kamen Supply Company, Inc., a Kansas corp. Kingston Pipe Industries, Inc., a Rhode Island corp. Merex Corporation, a Texas corp. Metals Incorporated, an Oklahoma corp. Metals, Inc. - Gulf Coast Division, an Oklahoma corp. Mills & Lupton Supply Company, a Tennessee corp. Moore Electric Supply, Inc., a North Carolina corp. Mountain Country Supply, Inc., an Arizona corp. Olander & Brophy, Incorporated, a Pennsylvania corp. One Stop Supply, Inc., a Tennessee corp. Paine Supply of Jackson, Inc., a Mississippi corp. [Listing of Material Subsidiaries Continued on Next Page] [Continuation of Listing of Material Subsidiaries] Palm Pool Products, Inc., a Michigan corp. Panhandle Pipe & Supply Co., Inc., a West Virginia corp. Port City Electrical Supply, Inc., a Georgia corp. R & G Plumbing Supply, Inc., an Alabama corp. Reaction Supply Corporation, a California corp. Shrader Holding Company, Inc., an Arkansas corp. Southwest Stainless, L. P., a Delaware limited partnership Stainless Tubular Products, Inc., an Oklahoma corp. USCO Incorporated, a North Carolina corp. Union Merger Corporation, a North Carolina corp. U.S. Fusion Services, Inc., a Louisiana corp. Virginia Water & Waste Supply Company, Inc., a Virginia corp. WCC Merger Corporation, a Georgia corp. Wholesale Electric Supply Corporation, a New York corp. Z&L Acquisition Corp., a Delaware corp. SCHEDULE 5.3 TO NOTE PURCHASE AGREEMENT Disclosure Materials No Exceptions. SCHEDULE 5.4 TO NOTE PURCHASE AGREEMENT Subsidiaries of the Company and Ownership of Subsidiary Stock; Company's Affiliates; Company's Directors and Senior Officers (i) Subsidiaries of the Company Legal Entities SUBSIDIARIES: (updated as of April 23, 2001) Atlantic Pump & Equipment Company of Miami, Inc., a Florida corp. Atlantic Pump & Equipment Company of West Palm Beach, Inc., a Florida corp. Bestroute.com, LLC, a New York limited liability company (99%) owned) Carolina Pump & Supply Corp., a Rhode Island corp. Cayesteel, Inc., a Georgia corp. (100% owned by WCC Merger Corporation) CF Fluid Controls, Inc., a Texas corp. Chad Supply, Inc., a Florida corp. Coastal Wholesale, Inc., a Florida corp. Dominion Pipe Fabricators, Incorporated, a Virginia corp. Dominion Pipe & Supply Co., a Virginia corp. Douglas Leonhardt & Associates, a North Carolina corp. Elasco Agency Sales, Inc., an Illinois corp. Elec-Tel Supply Company, a Georgia corp. Electric Laboratories and Sales Corporation, a Delaware corp. FES Merger Corp., Inc., a Florida corp. Gayle Supply Company, an Alabama corp. Gilleland Concrete Products, Inc., a Georgia corp. HHH, Inc., a Delaware corp. HSI Acquisition Corporation, an Ohio corp. HSI Bestroute Investment, Inc., a Florida corp. HSI Corp., a Delaware corp. HSI Fusion Services, Inc., a Florida corp. Hughes Supply Foundation, Inc., a Florida not-for-profit corporation Hughes Supply Management Services, Inc., a Delaware corporation Hughes Water & Sewer Company, a West Virginia corp. H Venture Corporation, a Florida corp. Juno Industries, Inc., a Florida corp. Kamen Supply Company, Inc., a Kansas corp. [Listing of Subsidiaries Continued on Next Page] [Listing of Subsidiaries Continued] Kingston Pipe Industries, Inc., a Rhode Island corp. L&T of Delaware, Inc., a Delaware corp. Merex Corporation, a Texas corp. Merex de Mexico, S.A. De C.V., a Mexican corp. (75% owned) Merex Diesel Power, S.A. De C.V., a Mexican corp. (75% owned) Metals Incorporated, an Oklahoma corp. Metals, Inc. - Gulf Coast Division, an Oklahoma corp. Mills & Lupton Supply Company, a Tennessee corp. Moore Electric Supply, Inc., a North Carolina corp. Mountain Country Supply, Inc., an Arizona corp. Olander & Brophy, Incorporated, a Pennsylvania corp. One Stop Supply, Inc., a Tennessee corp. Paine Supply of Jackson, Inc., a Mississippi corp. Palm Pool Products, Inc., a Michigan corp. Panhandle Pipe & Supply Co., Inc., a West Virginia corp. Port City Electrical Supply, Inc., a Georgia corp. R & G Plumbing Supply, Inc., an Alabama corp. Reaction Supply Corporation, a California corp. Shrader Holding Company, Inc., an Arkansas corp. Southwest Stainless, L. P., a Delaware limited partnership Stainless Tubular Products, Inc., an Oklahoma corp. USCO Incorporated, a North Carolina corp. Union Merger Corporation, a North Carolina corp. U.S. Fusion Services, Inc., a Louisiana corp. Virginia Water & Waste Supply Company, Inc., a Virginia corp. WCC Merger Corporation, a Georgia corp. Wholesale Electric Supply Corporation, a New York corp. Z&L Acquisition Corp., a Delaware corp. Except as noted above, all Subsidiaries are Wholly-Owned Subsidiaries (ii) Affiliates of the Company: (a) No Person holds 10% or more of the Company's common stock as of the date of this Agreement. (b) Except for the Subsidiaries of the Company, there are no other Affiliates of the Company. (iii) Directors and Senior Officers of the Company: Directors: David H. Hughes Vincent S. Hughes A. Stewart Hall, Jr. John D. Baker II Robert N. Blackford H. Corbin Day William P. Kennedy Officers: David H. Hughes, Chairman of the Board and Chief Executive Officer A. Stewart Hall, Jr., President Vincent S. Hughes, Vice President Sidney J. Strickland, Vice President Gradie Winstead, Group President Jim Holland, Group President Skip Hughes, Group President Mike Stanwood, Group President Bob Machaby, Group President Tom Ward, Vice President - Chief Technology Officer Jack Clark, Vice President - Corporate Credit Manager Jim Plyler, Vice President Kenny Stephens, Vice President J. Stephen Zepf, Treasurer and Chief Financial Officer Benjamin P. Butterfield, Secretary Jay Clark, Assistant Secretary and Treasurer SCHEDULE 5.5 TO NOTE PURCHASE AGREEMENT Financial Statements (i) The Company's Annual Reports to Shareholders for the Fiscal Years 1996, 1997, 1998 and 1999. (ii) The Company's Annual Reports on Form 10-K for the fiscal years ended January 30, 1998 and January 29, 1999. (iii) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ending July 31, 2000. SCHEDULE 5.8 TO NOTE PURCHASE AGREEMENT Certain Litigation None. SCHEDULE 5.11 TO NOTE PURCHASE AGREEMENT Patents, Etc. No Exceptions. SCHEDULE 5.14 TO NOTE PURCHASE AGREEMENT Use of Proceeds The proceeds received by the Company shall be used for the repayment of existing indebtedness of the Company and its Subsidiaries and general corporate purposes. SCHEDULE 5.15 TO NOTE PURCHASE AGREEMENT Existing Debt; Unpermitted Liens (i) Existing Debt:
Maximum Current Principal Principal Amount Outstanding as of Amount November 30, 2000 7.96% Senior Notes due May 30, 2011 Metropolitan Life Insurance Company $40,000,000 $40,000,000 CM Life Insurance Company $1,000,000 $1,000,000 Massachusetts Mutual Life Insurance Company $23,000,000 $23,000,000 Massachusetts Mutual Life Insurance Company $6,000,000 $6,000,000 Massachusetts Mutual Life Insurance Company $3,000,000 $3,000,000 American General Life and Accident Insurance $3,000,000 $3,000,000 Company American General Life and Accident Insurance $7,000,000 $7,000,000 Company Independent Life and Accident Insurance Company $3,000,000 $3,000,000 The Variable Annuity Life Insurance Company $12,000,000 $12,000,000 7.19% Senior Notes Due May 30, 2012 Nationwide Mutual Insurance Co. SAOH $1,500,000 $1,500,000 Nationwide Mutual Insurance Co. $8,500,000 $8,500,000 Anchor National Life Insurance Company $5,000,000 $5,000,000 SunAmerican Life Insurance Company $10,000,000 $10,000,000 Hartford Life Insurance Company $7,000,000 $7,000,000 Hartford Life Insurance Company $8,000,000 $8,000,000 7.19% Senior Notes Due May 30, 2012 Allstate Life Insurance Company $20,000,000 $20,000,000 The Mutual Life Insurance Company of NY $20,000,000 $20,000,000 6.74% Senior Notes Due May 1, 2013 New York Life Insurance Company $22,500,000 $22,500,000 New York Life Insurance and Annuity Corporation $7,500,000 $7,500,000 Allstate Life Insurance Company $10,000,000 $10,000,000 Jefferson-Pilot Life Insurance Company $10,000,000 $10,000,000 Bank Revolving Credit Agreement First Union $45,833,333 $44,166,667 Bank of America $50,833,333 $48,984,849 SouthTrust bank $30,000,000 $28,909,091 SunTrust Bank $58,750,000 $56,613,636 PNC Bank $18,750,000 $18,068,182
ABN AMRO Bank $22,916,667 $22,083,333 The Fifth Third Bank $13,750,000 $13,250,000 Hibernia National Bank $11,250,000 $10,840,909 Wachovia Bank $22,916,667 $22,083,333 Bank Line of Credit Agreement First Union $12,500,000 $0.00 Bank of America $12,500,000 $0.00 Southtrust Bank $10,000,000 $0.00 SunTrust Bank $13,750,000 $0.00 PNC Bank $6,250,000 $0.00 ABN AMRO Bank $6,250,000 $0.00 The Fifth Third Bank $3,750,000 $0.00 Wachovia Bank $10,000,000 $0.00 Commercial Paper $75,000,000 $73,835,964 SunTrust Swing Line $10,000,000 $2,674,248 SunTrust Bank Guidance Line $15,000,000 $0.00 Bank of America Short Term Credit Agreement $10,000,000 $0.00
The Company has a $40,000,000 interest rate hedging agreement (the "Agreement") between First Union National Bank and Hughes Supply, Inc. effective August 27, 1997. The Agreement will mature on May 30, 2012, however First Union National Bank has the option to terminate the Agreement at six month intervals. The Company entered into an eighteen month, $1.00 purchase option, capital lease for a Kronos time management system on August 30, 1999. Monthly payments of $58,232 per month began September 1, 1999 with the final payment due on February 1, 2001. Remaining payments due as of November 30, 2000 totaled $174,696. - ------------------- (ii) Unpermitted Liens. None See also "Schedule 10.5 to Note Purchase Agreement - Liens." SCHEDULE 10.5 TO NOTE PURCHASE AGREEMENT Liens The Company entered into an eighteen month, $1.00 purchase option, capital lease for a Kronos time management system on August 30, 1999. Monthly payments of $58,232 per month began September 1, 1999 with the final payment due on February 1, 2001. Remaining payments due as of October 31, 2000 totaled $232,928. EXHIBIT 1 TO NOTE PURCHASE AGREEMENT Form of Senior Note HUGHES SUPPLY, INC. ____% SENIOR NOTE SERIES [A] [B] [C] DUE NOVEMBER 30, 200_ [Series A] [Series B] [Series C] No. [R-_____] $[_______] December 21, 2000 FOR VALUE RECEIVED, the undersigned, HUGHES SUPPLY, INC. (herein called the "Company"), a corporation organized and existing under the laws of the State of Florida, hereby promises to pay to [ ], or registered assigns, the principal sum of [ ] DOLLARS on November 30, 200[3] [5] [7], with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of [__%] per annum from the date hereof, payable semiannually, on the 30th day of May and November in each year, commencing with the May 30 next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) [____%] or (ii) 2% over the rate of interest publicly announced by The Chase Manhattan Bank (or successor entity) from time to time in New York, New York as its "base" or "prime" rate. Subject to Section 14.2 of each Note Purchase Agreement (as defined below), payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at The Chase Manhattan Bank, or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreements. This Note is one of the Series [A][B][C] Senior Notes (herein called the "Notes") issued pursuant to separate Note Purchase Agreements, dated as of December 21, 2000 (as from time to time amended, the "Note Purchase Agreements"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Sections 6.1 and 6.2 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. The Company will make required prepayments of principal on the dates and in the amounts specified in the Note Purchase Agreements. This Note is also subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. This Note is governed by and is to be construed in accordance with the terms of the Note Purchase Agreement, the terms of which are incorporated herein by reference. All capitalized terms not otherwise defined herein shall have the same meanings attributed to them as are set forth in the Note Purchase Agreement. HUGHES SUPPLY, INC. By:_____________________________________ J. Stephen Zepf Treasurer and Chief Financial Officer EXHIBIT 4.4(a) TO NOTE PURCHASE AGREEMENT Matters To Be Covered by Opinion of General Counsel for the Company 1. Each of the Company and its Subsidiaries being duly incorporated, validly existing and in good standing and having requisite corporate power and authority to, in the case of the Company, execute and deliver the Note Purchase Agreement and to execute, deliver and issue the Notes and, in the case of the Subsidiaries, the Subsidiary Guarantee Agreement and the Contribution Agreement (the Note Purchase Agreement, the Notes, the Subsidiary Guarantee Agreement and the Contribution Agreement collectively referred to as the "Operative Documents"), to issue and sell the Notes and to execute and deliver the documents. 2. Each of the Company and its Subsidiaries being duly qualified and in good standing as a foreign corporation in appropriate jurisdictions. 3. Due authorization and execution by the Company and the Subsidiaries of all Operative Documents and, if governed by the laws of the State of Florida, all such documents would be legal, valid, binding and enforceable. 4. Execution and delivery of all Operative Documents and issuance of Notes do not conflict with charter documents, laws or other agreements of the Company and its Subsidiaries. 5. All consents required to issue and sell the Notes and to execute and deliver all Operative Documents having been obtained. 6. No litigation questioning validity of Operative Documents. 7. No litigation against the Company or its Subsidiaries or in which the Company or any Subsidiary is a party that could, if adversely determined, reasonably be expected to have a Material Adverse Effect. 8. The Notes not requiring registration under the Securities Act of 1933, as amended; no need to qualify an indenture under the Trust Indenture Act of 1939, as amended. 9. No violation of Regulations T, U or X of the Federal Reserve Board. 10. Company not an "investment company", or a company "controlled" by an "investment company", under the Investment Company Act of 1940, as amended. 11. A Florida state court, or a federal court sitting in Florida, would, under Florida conflict of laws principles, recognize the choice of New York law to govern the operative documents. The opinion shall be subject to standard and customary qualification of counsel with respect to transactions of this nature. EXHIBIT 4.4(b) TO NOTE PURCHASE AGREEMENT Matters To Be Covered by Opinion of Special Counsel to the Purchasers 1. Existence and good standing of the Company and corporate authority of the Company to execute and deliver the Note Purchase Agreement and to issue the Notes. 2. Existence and good standing of the Guarantors and corporate authority of the Guarantors to execute and deliver the Subsidiary Guarantee Agreement and the Contribution Agreement (the Note Purchase Agreement, the Notes, the Subsidiary Guarantee Agreement and the Contribution Agreement collectively referred to as the "Operative Documents"). 3. The Operative Documents are in commercially acceptable legal form. 4. Due authorization and execution of all Operative Documents. 5. The Operative Documents constitute the legal, valid and binding obligations, enforceable against the Company and the Guarantors, as applicable, in accordance with their respective terms. 6. The Notes not requiring registration under the Securities Act of 1933, as amended; no need to qualify an indenture under the Trust Indenture Act of 1939, as amended. Opinions subject to standard and customary qualifications and exceptions. EXHIBIT 4.11(a) TO NOTE PURCHASE AGREEMENT Form of Guarantee SUBSIDIARY GUARANTEE AGREEMENT This SUBSIDIARY GUARANTEE AGREEMENT, dated as of December 21, 2000 (this "Guarantee"), made by the undersigned signatories hereto as Guarantors (each of the undersigned individually a "Guarantor" and collectively the "Guarantors"), in favor of PACIFIC LIFE INSURANCE COMPANY, PACIFIC LIFE AND ANNUITY COMPANY, GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY, GE LIFE AND ANNUITY ASSURANCE COMPANY, GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK, ALLSTATE LIFE INSURANCE COMPANY, AMERICAN UNITED LIFE INSURANCE COMPANY, PIONEER MUTUAL LIFE INSURANCE COMPANY, CONNECTICUT GENERAL LIFE INSURANCE COMPANY, LIFE INSURANCE COMPANY OF NORTH AMERICA, JEFFERSON-PILOT LIFE INSURANCE COMPANY, TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, SUNAMERICA LIFE INSURANCE COMPANY, NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY, NEW YORK LIFE INSURANCE COMPANY, NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION, THE CANADA LIFE ASSURANCE COMPANY, THE OHIO NATIONAL LIFE INSURANCE COMPANY and MODERN WOODMEN OF AMERICA, the foregoing, together with their successors and assigns, individually a "Guaranteed Party" and collectively the "Guaranteed Parties"); W I T N E S S E T H: WHEREAS, Hughes Supply, Inc., a corporation organized and existing under the laws of the State of Florida ("Hughes") and the Guaranteed Parties have entered into those certain identical (except for the names of the purchasers and the amounts of Notes, as defined below, to be purchased) Note Purchase Agreements dated as of December 21, 2000 (together the "Agreements" and separately each an "Agreement"), pursuant to which Hughes has issued to the Guaranteed Parties its 8.27% Series A Senior Notes due November 30, 2003, its 8.27% Series B Senior Notes due November 30, 2005, and its 8.42% Series C Senior Notes due November 30, 2007; WHEREAS, Hughes owns, directly or indirectly, all or a majority of the outstanding capital stock of each of the Guarantors; WHEREAS, Hughes and Guarantors share an identity of interest as members of a consolidated group of companies engaged in substantially similar businesses with Hughes providing certain centralized financial, accounting and management services to each of the Guarantors by virtue of intercompany advances and loans such that financial accommodations extended to Hughes shall inure to the direct and material benefit of Guarantors; and WHEREAS, consummation of the transactions pursuant to the Agreements will facilitate expansion and enhance the overall financial strength and stability of Hughes's entire corporate group, including the Guarantors; and WHEREAS, it is a condition precedent to the Guaranteed Parties' obligations to enter into the Agreements and to purchase the Notes thereunder that Guarantors execute and deliver this Guarantee, and Guarantors desire to execute and deliver this Guarantee to satisfy such condition precedent; NOW, THEREFORE, in consideration of the premises and in order to induce the Guaranteed Parties to enter into and perform their obligations under the Agreements, the Guarantors hereby jointly and severally agree as follows: SECTION 1. Guarantee. The Guarantors hereby, jointly and severally, irrevocably, absolutely and unconditionally guarantee the due and punctual payment of all principal of, premium, if any, and interest on, the Notes and all other obligations owing by Hughes to the Guaranteed Parties, or any of them, jointly or severally under the Agreements, the Notes and the other documents, instruments and agreements relating to the transactions contemplated by the Agreements, and all renewals, extensions, modifications and refinancings thereof, now or hereafter owing, whether for principal, interest, make-whole or yield maintenance premium or other fees, expenses or otherwise, and any and all reasonable out-of-pocket expenses (including reasonable attorneys' fees and expenses actually incurred) incurred by the Guaranteed Parties in enforcing any rights under this Guarantee (collectively, the "Guaranteed Obligations") including, without limitation, all interest which, but for the filing of a petition in bankruptcy with respect to Hughes, would accrue on any principal portion of the Guaranteed Obligations. Any and all payments by the Guarantors hereunder shall be made free and clear of and without deduction for any set-off, counterclaim, or withholding so that, in each case, each Guaranteed Party will receive, after giving effect to any withholding or other tax, assessment or charge of any kind or nature imposed by an governmental agency or authority, but excluding taxes imposed on overall net income of any Guaranteed Party ("Taxes"), the full amount that it would otherwise be entitled to receive with respect to the Guaranteed Obligations (but without duplication of amounts for Taxes already included in the Guaranteed Obligations). The Guarantors acknowledge and agree that this is a guarantee of payment when due, and not of collection, and that, subject to Section 13 hereof, this Guarantee may be enforced up to the full amount of the Guaranteed Obligations without proceeding against Hughes, against any security for the Guaranteed Obligations, against any other Guarantor or under any other guaranty covering any portion of the Guaranteed Obligations. SECTION 2. Guarantee Absolute. The Guarantors guarantee that the Guaranteed Obligations will be paid strictly in accordance with the terms of the documents, instruments and agreements evidencing any Guaranteed Obligations, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Guaranteed Party with respect thereto. The liability of each Guarantor under this Guarantee shall be absolute and unconditional in accordance with its terms and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation, the following (whether or not such Guarantor consents thereto or has notice thereof): (a) any change in the time, place or manner of payment of, or in any other term of, all or any of the Guaranteed Obligations, any waiver, indulgence, renewal, extension, amendment or modification of or addition, consent or supplement to or deletion from or any other action or inaction under or in respect of the Agreements, or any other documents, instruments or agreements relating to the Guaranteed Obligations or any other instrument or agreement referred to therein or any assignment or transfer of any thereof; (b) any lack of validity or enforceability of the Agreement or the Notes or any illegality or impossibility of performance of the Agreements or the Notes or any other document, instrument or agreement referred to therein or any assignment or transfer of any thereof; (c) any furnishing to the Guaranteed Parties of any additional security for the Guaranteed Obligations, or any sale, exchange, release or surrender of, or realization on, any security for the Guaranteed Obligations; (d) any settlement or compromise of any of the Guaranteed Obligations, any security therefor, or any liability of any other party with respect to the Guaranteed Obligations, or any subordination of the payment of the Guaranteed Obligations to the payment of any other liability of Hughes; (e) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to any Guarantor or Hughes, or any action taken with respect to this Guarantee by any trustee or receiver, or by any court, in any such proceeding; (f) any nonperfection of any security interest or lien on any collateral, or any amendment or waiver of or consent to departure from any guaranty or security, for all or any of the Guaranteed Obligations; (g) any application of sums paid by Hughes or any other Person with respect to the liabilities of Hughes to the Guaranteed Parties, regardless of what liabilities of Hughes remain unpaid; (h) any act or failure to act by any Guaranteed Party which may adversely affect a Guarantor's subrogation rights, if any, against Hughes to recover payments made under this Guarantee; and (i) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Guarantor. If claim is ever made upon any Guaranteed Party for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations, and any Guaranteed Party repays all or part of said amount by reason of (a) any judgment, decree or order of any court or administrative body having jurisdiction over the Guaranteed Party or any of its property, or (b) any settlement or compromise of any such claim effected by the Guaranteed Party with any such claimant (including Hughes or a trustee in bankruptcy for Hughes), then and in such event the Guarantors agree that any such judgment, decree, order, settlement or compromise shall be binding on it, notwithstanding any revocation hereof or the cancellation of the Agreements or the other documents, instruments and agreements evidencing any Guaranteed Obligations, and the Guarantors shall be and remain liable to the Guaranteed Party for the amounts so repaid or recovered to the same extent as if such amount had never originally been paid to the Guaranteed Party. The obligations of each Guarantor shall be joint and several and the release or discharge of the obligations of one Guarantor shall not modify, affect, release or discharge the obligations of the other Guarantors hereunder. SECTION 3. Waiver. The Guarantors hereby waive notice of acceptance of this Guarantee, notice of any liability to which it may apply, and further waive presentment, demand of payment, protest, notice of dishonor or nonpayment of any such liabilities, suit or taking of other action by the Guaranteed Parties against, and any other notice to, Hughes or any other party liable with respect to the Guaranteed Obligations (including the Guarantors or any other Person executing a guaranty of the obligations of Hughes). SECTION 4. Waiver of Subrogation. No Guarantor will exercise any rights against Hughes which it may acquire by way of subrogation or contribution, by any payment made hereunder or otherwise. Each Guarantor hereby expressly waives any claim, right or remedy which such Guarantor may now have or hereafter acquire against Hughes that arises hereunder and/or from the performance by any Guarantor hereunder, including, without limitation, any claim, right or remedy of the Guaranteed Parties against Hughes or any security which the Guaranteed Parties now have or hereafter acquire, whether or not such claim, right or remedy arises in equity, under contract, by statute, under color of law or otherwise. SECTION 5. Severability. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 6. Amendments, Etc. No amendment or waiver of any provision of this Guarantee nor consent to any departure by a Guarantor therefrom shall in any event be effective unless the same shall be in writing executed by the Guaranteed Parties. SECTION 7. Notices. All notices and other communications provided for hereunder shall be given in the manner specified in the Agreements (i) in the case of the Guaranteed Parties, at the address specified for the Guaranteed Parties in the Agreements, and (ii) in the case of the Guarantors, at the respective addresses specified for such Guarantors in this Guarantee. SECTION 8. No Waiver; Remedies. No failure on the part of the Guaranteed Parties to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other further notice or demand in any similar or other circumstances or constitute a waiver of the rights of the Guaranteed Parties to any other or further action in any circumstances without notice or demand. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 9. Right of Set-Off. In addition to and not in limitation of all rights of offset that the Guaranteed Parties may have under applicable law, the Guaranteed Parties shall, upon the occurrence of any Event of Default and whether or not the Guaranteed Parties have made any demand or the Guaranteed Obligations are matured, have the right to appropriate and apply to the payment of the Guaranteed Obligations, all indebtedness or property then or thereafter owing by the Guaranteed Parties to any Guarantor, whether or not related to this Guarantee or any transaction hereunder. The Guaranteed Parties shall promptly notify the relevant Guarantor of any offset hereunder. SECTION 10. Continuing Guarantee; Transfer of Obligations. This Guarantee is a continuing guaranty and shall (i) remain in full force and effect until payment in full of the Guaranteed Obligations and all other amounts payable under this Guarantee and the termination of the Agreements, (ii) be binding upon each Guarantor, its successors and assigns, and (iii) inure to the benefit of and be enforceable by the Guaranteed Parties. SECTION 11. Governing Law. THIS GUARANTEE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF). SECTION 12. Subordination of Hughes's Obligations to the Guarantors. As an independent covenant, each Guarantor hereby expressly covenants and agrees for the benefit of the Guaranteed Parties that all obligations and liabilities of Hughes to such Guarantor of whatsoever description including, without limitation, all intercompany receivables of such Guarantor from Hughes ("Junior Claims") shall be subordinate and junior in right of payment to all obligations of Hughes to the Guaranteed Parties under the terms of the Agreements and the other documents, instruments and agreements evidencing any Guaranteed Obligations ("Senior Claims"). If an Event of Default shall occur, then, unless and until such Event of Default shall have been cured, waived, or shall have ceased to exist, no direct or indirect payment (in cash, property, securities by setoff or otherwise) shall be made by Hughes to any Guarantor on account of or in any manner in respect of any Junior Claim except such payments and distributions the proceeds of which shall be applied to the payment of Senior Claims. In the event of a Proceeding (as hereinafter defined), all Senior Claims shall first be paid in full before any direct or indirect payment or distribution (in cash, property, securities by setoff or otherwise) shall be made to any Guarantor on account of or in any manner in respect of any Junior Claim except such payments and distributions the proceeds of which shall be applied to the payment of Senior Claims. For the purposes of the previous sentence, "Proceeding" means Hughes or any Guarantor shall commence a voluntary case concerning itself under the Bankruptcy Code of 1978, as amended (the "Bankruptcy Code"), or any other applicable bankruptcy laws; or any involuntary case is commenced against Hughes or any Guarantor; or a custodian (as defined in the Bankruptcy Code or any other applicable bankruptcy laws) is appointed for, or takes charge of, all or any substantial part of the property of Hughes or any Guarantor, or Hughes or any Guarantor commences any other proceedings under any reorganization arrangement, adjustment of debt, relief of debtor, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Hughes or any Guarantor, or any such proceeding is commenced against Hughes or any Guarantor, or Hughes or any Guarantor is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or Hughes or any Guarantor suffers any appointment of any custodian or the like for it or any substantial part of its property; or Hughes or any Guarantor makes a general assignment for the benefit of creditors; or Hughes or any Guarantor shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or Hughes or any Guarantor shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; or Hughes or any Guarantor shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate action shall be taken by Hughes or any Guarantor for the purpose of effecting any of the foregoing. In the event any direct or indirect payment or distribution is made to a Guarantor in contravention of this Section 12, such payment or distribution shall be deemed received in trust for the benefit of the Guaranteed Parties and shall be immediately paid over to the Guaranteed Parties for application against the Guaranteed Obligations in accordance with the terms of the Agreements. Each Guarantor agrees to execute such additional documents as the Guaranteed Parties may reasonably request to evidence the subordination provided for in this Section 12. SECTION 13. Savings Clause. (a) It is the intent of each Guarantor and the Guaranteed Parties that each Guarantor's maximum obligations hereunder shall be, but not in excess of: (i) in a case or proceeding commenced by or against such Guarantor under the Bankruptcy Code on or within one year from the date on which any of the Guaranteed Obligations are incurred, the maximum amount which would not otherwise cause the Guaranteed Obligations (or any other obligations of such Guarantor to the Guaranteed Parties) to be avoidable or unenforceable against such Guarantor under (A) Section 548 of the Bankruptcy Code or (B) any state fraudulent transfer or fraudulent conveyance act or statute applied in such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or (ii) in a case or proceeding commenced by or against such Guarantor under the Bankruptcy Code subsequent to one year from the date on which any of the Guaranteed Obligations are incurred, the maximum amount which would not otherwise cause the Guaranteed Obligations (or any other obligations of the Guarantor to the Guaranteed Parties) to be avoidable or unenforceable against such Guarantor under any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or (iii) in a case or proceeding commenced by or against such Guarantor under any law, statute or regulation other than the Bankruptcy Code (including, without limitation, any other bankruptcy, reorganization, arrangement, moratorium, readjustment of debt, dissolution, liquidation or similar debtor relief laws), the maximum amount which would not otherwise cause the Guaranteed Obligations (or any other obligations of such Guarantor to the Guaranteed Parties) to be avoidable or unenforceable against such Guarantor under such law, statute or regulation including, without limitation, any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding. (The substantive laws under which the possible avoidance or unenforceability of the Guaranteed Obligations (or any other obligations of such Guarantor to the Guaranteed Parties) shall be determined in any such case or proceeding shall hereinafter be referred to as the "Avoidance Provisions"). (b) To the end set forth in Section 13(a), but only to the extent that the Guaranteed Obligations would otherwise be subject to avoidance under the Avoidance Provisions if such Guarantor is not deemed to have received valuable consideration, fair value or reasonably equivalent value for the Guaranteed Obligations, or if the Guaranteed Obligations would render the Guarantor insolvent, or leave the Guarantor with an unreasonably small capital to conduct its business, or cause the Guarantor to have incurred debts (or to have intended to have incurred debts) beyond its ability to pay such debts as they mature, in each case as of the time any of the Guaranteed Obligations are deemed to have been incurred under the Avoidance Provisions and after giving effect to contribution as among Guarantors, the maximum Guaranteed obligations for which such Guarantor shall be liable hereunder shall be reduced to that amount which, after giving effect thereto, would not cause the Guaranteed Obligations (or any other obligations of such Guarantor to the Guaranteed Parties), as so reduced, to be subject to avoidance under the Avoidance Provisions. This Section 13(b) is intended solely to preserve the rights of the Guaranteed Parties hereunder to the maximum extent that would not cause the Guaranteed Obligations of any Guarantor to be subject to avoidance under the Avoidance Provisions, and neither such Guarantor nor any other Person shall have any right or claim under this Section 13 as against the Guaranteed Parties that would not otherwise be available to such Person under the Avoidance Provisions. SECTION 14. Information. Each of the Guarantors assumes all responsibility for being and keeping itself informed of Hughes' financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that none of the Guaranteed Parties will have any duty to advise any of the Guarantors of information known to it or any of them regarding such circumstances or risks. SECTION 15. Survival of Agreement. All agreements, representations and warranties made herein shall survive the execution and delivery of this Guarantee. SECTION 16. Counterparts. This Guarantee and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. SECTION 17. Additional Guarantors. Upon execution and delivery by any Material Subsidiary of Hughes of an instrument in the form of this Guarantee, such Material Subsidiary of Hughes shall become a Guarantor hereunder with the same force and effect as if originally named a Guarantor herein (each an "Additional Guarantor"). The execution and delivery of any such instrument shall not require the consent of any Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any Additional Guarantor as a party to this Guarantee. SECTION 18. Successors and Assigns. This Guarantee shall be binding upon the successors and assigns of the Guarantors. This Guarantee shall inure to the benefit of the successors and assigns of the Guaranteed Parties including any subsequent holder of any Notes. No Guarantor may assign its obligations hereunder to any other Person. SECTION 19. Defined Terms. All capitalized terms used herein and not otherwise defined herein shall have their respective defined meanings as set forth in the Agreements. IN WITNESS WHEREOF, each Guarantor and Hughes caused this Guarantee to be duly executed and delivered by their respective duly authorized officers as of the date first above written. THE GUARANTORS ATLANTIC PUMP & EQUIPMENT SUPPLY COMPANY OF MIAMI, INC. ATLANTIC PUMP & EQUIPMENT SUPPLY COMPANY OF WEST PALM BEACH, INC. BESTROUTE.COM, LLC (99% OWNED) CAROLINA PUMP & SUPPLY CORP. CAYESTEEL, INC. CHAD SUPPLY, INC. COASTAL WHOLESALE, INC. DOMINION PIPE & SUPPLY CO. DOMINION PIPE FABRICATORS, INCORPORATED DOUGLAS LEONHARDT & Associates, Inc. [Continuation of Guarantors on next page] [Continuation of Listing of Guarantors] ELASCO AGENCY SALES, INC. ELEC-TEL SUPPLY COMPANY ELECTRIC LABORATORIES AND SALES CORPORATION FES MERGER CORP., INC. GAYLE SUPPLY COMPANY, INC. GILLELAND CONCRETE PRODUCTS, INC. HSI ACQUISITION CORPORATION HSI BESTROUTE INVESTMENT, INC. HSI FUSION SERVICES, INC. HUGHES SUPPLY MANAGEMENT SERVICES HUGHES WATER & SEWER COMPANY H VENTURE CORP. JUNO INDUSTRIES, INC. KAMEN SUPPLY COMPANY, INC. KINGSTON PIPE INDUSTRIES, INC. MEREX CORPORATION METALS INCORPORATED METALS, INC. - GULF COAST DIVISION MILLS & LUPTON SUPPLY COMPANY MOORE ELECTRIC SUPPLY, INC. MOUNTAIN COUNTRY SUPPLY, INC. OLANDER & BROPHY, INCORPORATED ONE STOP SUPPLY, INC. PAINE SUPPLY OF JACKSON, INC. PALM POOL PRODUCTS, INC. PANHANDLE PIPE & SUPPLY CO., INC. PORT CITY ELECTRICAL SUPPLY, INC. R&G PLUMBING SUPPLY, INC. REACTION SUPPLY CORPORATION SHRADER HOLDING COMPANY, INC. STAINLESS TUBULAR PRODUCTS, INC. USCO INCORPORATED UNION MERGER CORPORATION U.S. FUSION SERVICES, INC. VIRGINIA WATER & WASTE SUPPLY COMPANY, INC. [Listing of Guarantors Continued on Next Page] [Continuation of Listing of Guarantors] WCC MERGER CORPORATION WHOLESALE ELECTRIC SUPPLY CORPORATION By: _________________________ Title: ______________________ SOUTHWEST STAINLESS, L.P. By: Z&L Acquisition Corp., as General Partner By: _________________________ Title: ______________________ Z&L ACQUISITION CORP., IN ITS INDIVIDUAL CAPACITY By: _________________________ Title: ______________________ Address for Notices for all Guarantors: [Insert Guarantor] c/o Hughes Supply, Inc. 20 North Orange Avenue Orlando, Florida 32801 Attention: General Counsel SECTION 12 OF THE FOREGOING GUARANTEE ACKNOWLEDGED AND AGREED TO: HUGHES SUPPLY, INC. By: __________________ Name: J. Stephen Zepf Title: Treasurer and Chief Financial Officer EXHIBIT 4.11(b) TO NOTE PURCHASE AGREEMENT Form of Contribution Agreement CONTRIBUTION AGREEMENT THIS CONTRIBUTION AGREEMENT, dated as of December 21, 2000 (this "Contribution Agreement"), by and among HUGHES SUPPLY, INC. ("Hughes"), a corporation organized and existing under the laws of the State of Florida and each of the undersigned signatories hereto as Guarantors (each of such undersigned referred to herein as a "Guarantor" and collectively the "Guarantors") for the purpose of establishing rights and obligations of contribution among the Guarantors in connection with the Guarantee Agreement (as such term is defined below). R E C I T A L S WHEREAS, Hughes Supply, Inc., a corporation organized and existing under the laws of the State of Florida ("Hughes"), and PACIFIC LIFE INSURANCE COMPANY, PACIFIC LIFE AND ANNUITY COMPANY, GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY, GE LIFE AND ANNUITY ASSURANCE COMPANY, GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK, ALLSTATE LIFE INSURANCE COMPANY, AMERICAN UNITED LIFE INSURANCE COMPANY, PIONEER MUTUAL LIFE INSURANCE COMPANY, CONNECTICUT GENERAL LIFE INSURANCE COMPANY, LIFE INSURANCE COMPANY OF NORTH AMERICA, JEFFERSON-PILOT LIFE INSURANCE COMPANY, TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, SUNAMERICA LIFE INSURANCE COMPANY, NATIONWIDE LIFE INSURANCE COMPANY, NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY, NEW YORK LIFE INSURANCE COMPANY, NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION, THE CANADA LIFE ASSURANCE COMPANY, THE OHIO NATIONAL LIFE INSURANCE COMPANY and MODERN WOODMEN OF AMERICA, the foregoing corporations, together with their successors and assigns, individually a "Guaranteed Party" and collectively the "Guaranteed Parties") have entered into those certain identical (except for the names of the purchasers and the amounts of Notes, as defined below, to be purchased) Note Purchase Agreements dated as of December 21, 2000 (together the "Agreements" and separately each an "Agreement"), pursuant to which Hughes has issued to the Guaranteed Parties its 8.27% Series A Senior Notes due November 30, 2003, its 8.27% Series B Senior Notes due November 30, 2005 and its 8.42% Series C Senior Notes due November 30, 2007; WHEREAS, the obligation of Guaranteed Parties to purchase the Notes under the Agreements is conditioned on, among other things, the provision of a Contribution Agreement in the form hereof; WHEREAS, the Guarantors have entered into the Subsidiary Guarantee Agreement dated as of even date herewith (the "Guarantee Agreement") pursuant to which such Guarantors have agreed to guarantee all the obligations of Hughes pursuant to the Agreements and all other Guaranteed Obligations; WHEREAS, as a result of transactions contemplated by the Agreements, Guarantors will benefit from the Guaranteed Obligations and in consideration thereof desire to enter into this Contribution Agreement to provide a fair and equitable arrangement to make contributions in the event payments are made under the Guarantee Agreement. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Hughes, each Guarantor hereby agrees as follows: SECTION 1. Indemnity and Subrogation. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 3), Hughes agrees that in the event a payment shall be made by any Guarantor under the Guarantee Agreement in respect of any Guaranteed Obligations, Hughes shall indemnify such Guarantor for the full amount of such payment. Each Guarantor has waived its rights to subrogation, pursuant to Section 4 of the Guarantee Agreement. SECTION 2. Contribution and Subrogation. Each Guarantor agrees (subject to Section 3) that in the event a payment shall be made by any Guarantor under the Guarantee Agreement or assets of any Guarantor shall be sold to satisfy a claim of any Guaranteed Party, and such Guarantor (the "Claiming Guarantor") shall not have been indemnified by Hughes as provided in Section 1, each other Guarantor (a "Contributing Guarantor") shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as the case may be, multiplied by a fraction, the numerator of which shall be the net worth of the Contributing Guarantor on the date hereof, and the denominator of which shall be the sum of the net worth of all the Guarantors on the date hereof. Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 2 shall be subrogated to the rights of such Claiming Guarantor under Section 1 to the extent of such payment. SECTION 3. Subordination. Notwithstanding any provision of this Agreement to the contrary, (i) all rights of the Guarantors under Sections 1 and 2 and all other rights of indemnity or contribution under applicable law or otherwise shall be fully subordinated to the indefeasible payment in full in cash of the Guaranteed Obligations, and (ii) no such rights shall be exercised until all of the Guaranteed Obligations shall have been irrevocably paid in full in cash and the Agreements shall have been irrevocably terminated. If any amount shall be paid to any Guarantor on account of such indemnity or contribution rights at any time when all of the Guaranteed Obligations shall not have been paid in full in cash, such amount shall be held in trust for the benefit of the Guaranteed Parties and shall forthwith be paid to the Guaranteed Parties to be credited and applied upon the Guaranteed Obligations in accordance with the terms of the Agreements. No failure on the part of Hughes or any Guarantor to make the payments required by Sections 1 and 2 (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of any Guarantor with respect to the Guarantee Agreement, and each Guarantor shall remain liable for the full amount of the obligations of such Guarantor under such Guarantee Agreement. SECTION 4. Allocation. If at any time there exists more than one Claiming Guarantor with respect to the Guarantee Agreement, then payment from other Guarantors pursuant to this Contribution Agreement shall be allocated among such Claiming Guarantors in proportion to the total amount of money paid for or on account of the Guaranteed Obligations by each such Claiming Guarantor pursuant to the Guarantee Agreement. SECTION 5. Preservation of Rights. This Contribution Agreement shall not limit or affect any right which any Guarantor may have against any other Person that is not a party hereto. SECTION 6. Subsidiary Payment. The amount of contribution payable under this Contribution Agreement by any Guarantor with respect to the Guarantee Agreement shall be reduced by the amount of any contribution paid hereunder by a Subsidiary of such Guarantor with respect to the Guarantee Agreement. SECTION 7. Asset Sale. If all of the stock of any Guarantor shall be sold or otherwise disposed of (including by merger or consolidation) in an asset sale not prohibited by the Agreements or otherwise consented to by the Guaranteed Parties under the Agreements, the agreements of such Guarantor hereunder shall automatically be discharged and released without any further action by such Guarantor and shall be assumed in full by the corporation which prior to such asset sale or consent owned the stock of such Guarantor, effective as of the time of such asset sale or consent. Hughes shall cause any such corporation which is not a Guarantor to become a party to this Contribution Agreement and the Guarantee Agreement unless otherwise agreed in writing by the Guaranteed Parties. SECTION 8. Equitable Allocation. If as a result of any reorganization, recapitalization or other corporate change in Hughes or any of its Subsidiaries, or as a result of any amendment, waiver or modification of the terms and conditions governing the Guarantee Agreement or any of the Guaranteed Obligations, or for any other reason, the contributions under this Contribution Agreement become inequitable, the parties hereto shall promptly modify and amend this Contribution Agreement to provide for an equitable allocation of contributions. All such modifications and amendments shall be in writing and signed by all parties hereto. SECTION 9. Asset of Party to Which Contribution and Indemnification Are Owing. The parties hereto acknowledge that the right to contribution and indemnification hereunder shall each constitute an asset in favor of the party to which such contribution or indemnification is owing. SECTION 10. Successors and Assigns; Amendments. This Contribution Agreement shall be binding upon each party hereto and its respective successors and assigns and shall inure to the benefit of the parties hereto and their respective successors and assigns. None of any Guarantor's rights or any interest therein under this Contribution Agreement may be assigned or transferred without the written consent of the Guaranteed Parties. In the event of any such transfer or assignment of rights by any Guarantor, the rights and privileges herein conferred upon that Guarantor shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This Contribution Agreement shall not be amended without the prior written consent of the Guaranteed Parties. SECTION 11. Termination. This Contribution Agreement, as it may be modified or amended from time to time, shall remain in effect, and shall not be terminated as to the Guarantee Agreement, until the Guarantee Agreement has been discharged or otherwise satisfied in accordance with its terms. SECTION 12. CHOICE OF LAW. THIS CONTRIBUTION AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. SECTION 13. Counterparts. This Contribution Agreement and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. SECTION 14. Additional Guarantors. Upon execution and delivery, after the date hereof, by a Material Subsidiary of Hughes of an instrument in the form of this Contribution Agreement, such Material Subsidiary of Hughes shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Contribution Agreement. SECTION 15. Severability. In case any provision in or obligation under this Contribution Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality or enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. SECTION 16. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic or telecopy communication) and mailed, telegraphed, telecopied or delivered, if to any Guarantor, addressed to it at the address set forth for such party in the Guarantee Agreement, and if to any other party, at the address set forth for such party in the Agreements. All such notices and other communications shall be given and deemed to have been received as provided by the terms of the Agreements. SECTION 17. Defined Terms. All capitalized terms used herein and not defined herein shall have their respective defined meanings as set forth or used in the Guarantee Agreement. IN WITNESS WHEREOF, Hughes and the Guarantors have duly executed this Contribution Agreement as of the day and year first above written. HUGHES SUPPLY, INC. By:________________________________________ Title:_______________________________ THE GUARANTORS: ATLANTIC PUMP & Equipment SUPPLY COMPANY OF MIAMI, INC. ATLANTIC PUMP & EQUIPMENT SUPPLY COMPANY OF WEST PALM BEACH, INC. BESTROUTE.COM, LLC (99% OWNED) CAROLINA PUMP & SUPPLY CORP. CAYESTEEL, INC. CHAD SUPPLY, INC. COASTAL WHOLESALE, INC. DOMINION PIPE & SUPPLY CO. DOMINION PIPE FABRICATORS, INCORPORATED DOUGLAS LEONHARDT & ASSOCIATES, INC. ELASCO AGENCY SALES, INC. ELEC-TEL SUPPLY COMPANY [Listing of Guarantors Continued on Next Page] [Continuation of Listing of Guarantors] ELECTRIC LABORATORIES AND SALES CORPORATION FES MERGER CORP., INC. GAYLE SUPPLY COMPANY, INC. GILLELAND CONCRETE PRODUCTS, INC. HSI ACQUISITION CORPORATION HSI BESTROUTE INVESTMENT, INC. HSI FUSION SERVICES, INC. HUGHES SUPPLY MANAGEMENT SERVICES HUGHES WATER & SEWER COMPANY H VENTURE CORP. JUNO INDUSTRIES, INC. KAMEN SUPPLY COMPANY, INC. KINGSTON PIPE INDUSTRIES, INC. MEREX CORPORATION METALS INCORPORATED METALS, INC. - GULF COAST DIVISION MILLS & LUPTON SUPPLY COMPANY MOORE ELECTRIC SUPPLY, INC. MOUNTAIN COUNTRY SUPPLY, INC. OLANDER & BROPHY, INCORPORATED ONE STOP SUPPLY, INC. PAINE SUPPLY OF JACKSON, INC. PALM POOL PRODUCTS, INC. PANHANDLE PIPE & SUPPLY CO., INC. PORT CITY ELECTRICAL SUPPLY, INC. R&G PLUMBING SUPPLY, INC. REACTION SUPPLY CORPORATION SHRADER HOLDING COMPANY, INC. STAINLESS STEEL TUBULAR PRODUCTS, INC. USCO INCORPORATED UNION MERGER CORPORATION U.S. FUSION SERVICES, INC. VIRGINIA WATER & WASTE SUPPLY COMPANY, INC. WCC MERGER CORPORATION [Listing of Guarantors Continued on Next Page] [Continuation of Listing of Guarantors] WHOLESALE ELECTRIC SUPPLY CORPORATION By: _____________________________ Title: __________________________ SOUTHWEST STAINLESS, L.P. By: Z&L Acquisition Corp., as General Partner By: _____________________________ Title: ______________________ Z&L ACQUISITION CORP., in its individual capacity By: _____________________________ Title: ______________________ Address for Notices for all Guarantors: [Insert Guarantor] c/o Hughes Supply, Inc. 20 North Orange Avenue Orlando, Florida 32801 Attention: General Counsel FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT THIS FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT dated as of January 19, 2001 by and among HUGHES SUPPLY, INC. (the "Company") and the Purchasers set forth on the signature pages below (each a "Purchaser" and collectively the "Purchasers"). WHEREAS, the Company and each Purchaser entered into a Note Purchase Agreement dated as of December 21, 2000 (each a "Note Purchase Agreement"; terms used herein and not defined herein have their respective meanings as set forth in the Note Purchase Agreement); WHEREAS, the Company and each Purchaser desires to amend the Note Purchase Agreement to which they are a party on the terms and conditions set forth herein; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, the parties hereto hereby agree as follows: Section 1. Specific Amendments to Note Purchase Agreement (a) Section 10.8(iv) of each Note Purchase Agreement is hereby amended by deleting subparagraph (B) thereof in its entirety. (b) Subparagraph (C) of Section 10.8(iv) of each Note Purchase Agreement is hereby amended by inserting the following immediately after the word "if," appearing therein: "(1) at least 85% of the consideration received by the Company or such Subsidiary in connection with Dispositions in excess of 15% of Consolidated Assets is in the form of cash and (2)". Section 2. Full Force and Effect. Except as modified hereby, each Note Purchase Agreement remains in full force and effect without modification. Section references in the Note Purchase Agreement shall remain the same notwithstanding the deletion of a subparagraph in its entirety. Upon the effectiveness of this First Amendment, all references to a Note Purchase Agreement shall be deemed to be references to each Note Purchase Agreement as amended by this First Amendment. Section 3. Effectiveness of Amendment. This First Amendment shall be effective upon the execution and delivery of this First Amendment by the Company and the Required Holders. Section 4. Fees and Expenses. Pursuant to Section 15.1 of each Note Purchase Agreement, the Company shall pay all fees and expenses of special counsel to the Purchasers in connection with the preparation, execution and delivery of this First Amendment. Section 5. Governing Law. This First Amendment shall be governed by, and construed in accordance with, the laws of the State of New York, excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. Section 6. Headings. Headings of sections are for the convenience of the parties and shall not be used to interpret or affect the meaning of any provision contained herein. Section 7. Counterparts. This First Amendment may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. Any signature hereto may be transmitted via facsimilie transmission and such signature shall have the same effect as original signature thereof. [Signatures on Following Pages] [Signature Page to First Amendment to Hughes Supply Note Purchase Agreement] IN WITNESS WHEREOF, this First Amendment is hereby duly executed and delivered by the parties hereto as of the date and year first written above. THE COMPANY: HUGHES SUPPLY, INC. By: ___________________________ Title: ________________________ Purchasers of Series A Notes: PACIFIC LIFE INSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ By: ___________________________ Name: _____________________ Title: ____________________ PACIFIC LIFE AND ANNUITY COMPANY By: ___________________________ Name: _____________________ Title: ____________________ By: ___________________________ Name: _____________________ Title: ____________________ Signatures Continued on Following Pages] [Signature Page to First Amendment to Hughes Supply Note Purchase Agreement] Purchasers of Series B Notes: GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ GE LIFE AND ANNUITY ASSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK By: ___________________________ Name: _____________________ Title: ____________________ ALLSTATE LIFE INSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ By: ___________________________ Name: _____________________ Title: ____________________ (Authorized Signatories) [Signatures Continued on Following Pages] [Signature Page to First Amendment to Hughes Supply Note Purchase Agreement] AMERICAN UNITED LIFE INSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ PIONEER MUTUAL LIFE INSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ Purchasers of Series C Notes: CONNECTICUT GENERAL LIFE INSURANCE COMPANY By: CIGNA Investments, Inc. By: ___________________________ Name: _____________________ Title: ____________________ LIFE INSURANCE COMPANY OF NORTH AMERICA By: CIGNA Investments, Inc. By: ___________________________ Name: _____________________ Title: ____________________ [Signatures Continued on Following Pages] [Signature Page to First Amendment to Hughes Supply Note Purchase Agreement] JEFFERSON-PILOT LIFE INSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA By: ___________________________ Name: _____________________ Title: ____________________ SUNAMERICA LIFE INSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ NATIONWIDE LIFE INSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ [Signatures Continued on Following Pages] [Signature Page to First Amendment to Hughes Supply Note Purchase Agreement] NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ NEW YORK LIFE INSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By: New York Life Investment Management, LLC, its Investment Manager By: ___________________________ Name: _____________________ Title: ____________________ THE CANADA LIFE ASSURANCE COMPANY, as beneficial owner By: ___________________________ Name: _____________________ Title: ____________________ [Signatures Continued on Following Pages] [Signature Page to First Amendment to Hughes Supply Note Purchase Agreement] THE OHIO NATIONAL LIFE INSURANCE COMPANY By: ___________________________ Name: _____________________ Title: ____________________ MODERN WOODMEN OF AMERICA By: ___________________________ Name: _____________________ Title: ____________________ EX-10.13 5 d25505_ex10-13.txt SEPARATION AND RELEASE AGREEMENT SEPARATION AND RELEASE AGREEMENT THIS SEPARATION AND RELEASE AGREEMENT (the "Agreement"), dated March 28, 2001, is made in Orlando, Orange County, Florida between Hughes Supply, Inc., a Florida corporation (the "Company"), and A. Stewart Hall, Jr., a resident of the State of Florida and a Director and executive officer of the Company ("Mr. Hall"). BACKGROUND INFORMATION A. Effective August 13, 1973, Mr. Hall was employed by the Company and currently serves as the Company's President and Chief Operating Officer, and serves as a member of the Company's Board of Directors. Mr. Hall does not have a written employment agreement with the Company. B. On September 30, 1986, the Company and Mr. Hall entered into a Supplemental Executive Retirement Plan Agreement which was amended and restated on August 28, 1996 (the "SERP"), a copy of which is attached as Exhibit "A" hereto. C. On August 20, 1997, March 15, 1999, and August 18, 1999, respectively, Mr. Hall was granted 10,000, 6,296, and 10,000 shares of restricted common stock of the Company (the "Restricted Stock") pursuant to Hughes Supply, Inc. 1997 Executive Stock Plan (the "1997 Stock Plan"). The Restricted Stock will not vest prior to Mr. Hall's termination of employment hereunder. D. Mr. Hall has been granted both incentive stock options ("ISO's") and non-qualified stock options ("NQSO's") pursuant to the 1988 Stock Option Plan, the 1997 Stock Plan and grant agreements executed by the Company and Mr. Hall. The grant date, expiration date, number of options, and exercise price of such options are as follows: Grant Expiration Number of Exercise Date Date Options Price ----- ---------- --------- -------- 05/28/91 Ten Years 38,874 $ 8.417 03/12/96 Ten Years 22,500 $18.667 11/21/97 Ten Years 2,900 $34.000 11/21/97 Ten Years 25,000 $34.000 05/16/00 Ten Years 5,000 $18.750 5/16/00 en Years 17,500 $18.750 E. Mr. Hall and the Company have previously entered into The Hughes Supply, Inc. Management Insurance Plan Agreement (the "Management Insurance Plan") in order to assist Mr. Hall in purchasing a permanent, cash value life insurance policy on the life of Mr. Hall. F. Mr. Hall desires to resign from the employment of the Company on the terms and conditions set forth below, and the Company desires to accept such resignation effective immediately, and to grant the additional consideration set forth below. G. Both the Company and Mr. Hall (collectively, the "Parties", individually, a "Party") have agreed to release each other from claims that arose prior to the execution of this Agreement. AGREEMENT The Parties acknowledge the accuracy of the foregoing Background Information and agree as follows: 1. Salary Continuation. The Company shall continue to pay Mr. Hall his regular base salary through and including January 31, 2003 (the "Salary Continuation Date"). Such compensation shall be subject to federal income tax and FICA withholding, but Mr. Hall shall not be eligible for any other benefits that normally are available to employees of the Company, except as otherwise provided herein. In the event of his death, such compensation shall continue to be payable to Mr. Hall's estate. As of the date of this Agreement Mr. Hall shall resign (i) as President and Chief Operating Officer of the Company, (ii) as a member of the Company's Board of Directors, (iii) as an officer or director of any affiliate or subsidiary of the Company, and (iv) from any trade association of which Mr. Hall is a member, officer or director and is in any way associated with the Company or any business conducted by the Company (including, without limitation, supplyforce.com). Following such resignation Mr. Hall shall no longer have the authority or duties associated with such positions. 2. Supplemental Executive Retirement Pay. In accordance with the formula set forth in Section 1 of the SERP, the Parties agree that Mr. Hall's SERP payment shall be $95,550 a year for 15 years, payable in equal monthly installments of $7,962.50, commencing February 1, 2003 (the "SERP Payments"). Such payments shall be subject to the terms and conditions of the SERP, including without limitation, Section 1(b) providing for a continuation of payments after the death of Mr. Hall and the termination of such SERP payments in the event of a breach of the "non-competition" provisions of Section 3 thereof. In consideration of the additional benefits payable or distributable to Mr. Hall set forth in this Agreement, Mr. Hall agrees that payment of the SERP benefits also will be subject to his compliance with the Non-competition and Confidentiality provisions set forth in Sections 9 and 10 below. 3. Health Insurance. From the date hereof through the Salary Continuation Date Mr. Hall and his spouse shall continue to be covered under the Company's group health plan (the "Health Plan") as an employee, the premiums of which shall be deducted from the amounts he is to receive under Section 1 of this Agreement. Effective February 1, 2003, Mr. Hall and his spouse shall be covered under the Health Plan as a "retiree" and his spouse ("Retiree Status"), at no cost to Mr. Hall or his spouse (other than any federal income tax cost associated with such coverage) until Mr. Hall's attainment of age 65; provided, however, that the Health Plan shall make no more than $250,000 in Retiree Status payments to or on behalf of Mr. Hall, and $100,000 in "Retiree Status" payments to or on behalf of his spouse, under the terms of the Health Plan. Upon the termination of the foregoing Retiree Status health coverage, the Company shall issue a COBRA health care continuation notice to Mr. Hall and his spouse, and they then shall have the right to elect COBRA health care continuation coverage, at their own cost, in accordance with the terms of the Health Plan and applicable federal law (i.e., COBRA). Notwithstanding anything to the contrary contained herein, and unless otherwise required by law, all health benefits available to Mr. Hall and his spouse under the Health Plan (or any other agreement with the Company) shall cease upon Mr. Hall becoming employed with a subsequent employer. 4. Company Automobile. Upon the revocation date enumerated at the end of this Agreement (the "Revocation Date"), the Company shall transfer to Mr. Hall as additional compensation, title to his Company vehicle, which is a 2001 Ford Expedition. Such transfer shall be included in Mr. Hall's compensation in accordance with the Internal Revenue Code and applicable Treasury Regulations. 2 5. Management Insurance Plan. On the Revocation Date, the Company shall deliver to Mr. Hall the General American Life Insurance Company policy that is the subject matter of the Management Insurance Plan (the "Policy"). Notwithstanding Sections 3 and 4 of the Management Insurance Plan, the Company shall continue to pay the annual premium on the Policy until the earlier of (i) the date Mr. Hall elects to terminate the Policy, (ii) the death of Mr. Hall, or (iii) the payment of fifteen (15) years of premium payment (including those payments made prior to the termination of Mr. Hall's employment with the Company). Consistent with Section 3 of the Management Insurance Plan, Mr. Hall shall continue to be responsible for the payment of the lesser of (a) the current, published term insurance rate of the insurer, or (b) the "P.S. 58" rate (both expressed as a rate per $1,000 of coverage), multiplied by 50. Such amount shall be withheld from any SERP Payment due Mr. Hall. 6. Restricted Stock. The Parties acknowledge that Mr. Hall has been awarded 10,000, 6,296, and 10,000 shares of Restricted Stock, on August 20, 1997, March 15, 1999, and August 18, 1999, respectively, pursuant to Section 8 of the 1997 Stock Plan. In accordance with Mr. Hall's resignation as descried in Section 1 of this Agreement, and accordance with the grant agreements executed in accordance with the grant agreements delivered to Mr. Hall under the 1997 Stock Plan, effective on the Revocation Date such Restricted Stock shall be cancelled and returned to the authorized but unissued capital stock of the Company. 7. Stock Options. The Parties agree that Item D of the Background Information above accurately reflects all ISO's and NQSO's that have been granted to Mr. Hall. Notwithstanding the vesting schedules set forth in the grant agreements for such ISO's and NQSO's, effective as of the Revocation Date, Mr. Hall shall be 100% vested in all such unexercised ISO's and NQSO's. Except with respect to the vesting for such options, all other terms and conditions of such options shall remain in effect, including, without limitation, the exercise prices, terms of the options, and the date(s) by which the options must be exercised or be forfeited. Mr. Hall shall be solely responsible for any income taxes, alternative minimum taxes, FICA or other federal, state or local taxes that may result from the exercise of such ISO's and/or NQSO's. 8. Loan of Money. The Company shall lend to Mr. Hall the principal sum of $978,000 pursuant to a promissory note attached hereto as Exhibit "B" (the "Note"). With respect to the amounts represented by the Note, of such amounts $100,000 will be attributed as additional consideration for the Non-Competition provisions of Section 9 of this Agreement. Provided Mr. Hall does not violate the terms of the SERP and Sections 9 and 10 below, one-third of the principal amount, plus all accrued interest on the Note, shall be forgiven on February 1, 2003, February 1, 2004 and February 1, 2005. The Company shall issue such form(s) in connection with such forgiveness as may be required by the Internal Revenue Service. Mr. Hall shall be solely responsible for any income, excise and social security taxes associated with such forgiveness, and shall indemnify and hold the company harmless from any costs, penalties, damages, taxes, payroll taxes, interest, losses and/or attorney's fees which the Company may incur in connection with such forgiveness. The Company may offset such costs, penalties, damages, taxes, payroll taxes, interest, losses and/or attorney's fees against future SERP payments made pursuant to Section 2 above. 9. Non-Competition. In consideration of Company's agreement to provide to Mr. Hall the benefits as outlined in this Agreement: (a) For a period of two (2) years following the Revocation Date (the "Noncompetition Period"), Mr. Hall specifically agrees that Mr. Hall shall not, either directly or indirectly, as a stockholder of any corporation or partner of any partnership or as an owner, investor, principal, officer, director or agent, or in any other manner, engage in any business (including any trade association which relates to any business 3 of the Company), within the continental United States (the "Geographic Area"), which competes in any manner with any business conducted by Company immediately prior to the Revocation Date. (b) Mr. Hall agrees not to directly or indirectly solicit any of the Company's employees to work for Mr. Hall or for any business which is competitive with any business conducted by the Company prior to the Revocation Date, within the Geographic Area and during the Noncompetition Period. (c) Mr. Hall specifically acknowledges that he has had access to Confidential Information (as hereinafter defined), including without limitation, prospective and existing customers or customer lists of the Company, including the most sensitive and confidential information concerning the operations of the Company. Mr. Hall covenants and agrees that during the Noncompetition Period and within the Geographic Area, except as otherwise approved in writing by the Company, Mr. Hall shall not, directly or indirectly, for himself, or through, on behalf of, or in conjunction with any person, persons, partnership, association, corporation, or entity, divert or attempt to divert or solicit any prospective or existing customer of Company to any competitor by direct or indirect inducement or otherwise, and shall not disclose any Confidential Information to any third party. (d) The periods of time during which Mr. Hall is prohibited from engaging in such business practices pursuant to Subsections 9(a), 9(b) and 9(c) shall be extended by any length of time during which Mr. Hall is in breach of any of such covenants. (e) The restrictive covenants contained within this Section 9 are essential elements of this Agreement, and that, but for the agreement of Mr. Hall to comply with such covenants, the Company would not have entered into this Agreement. (f) If any portion of the covenants set forth in this Section 9 are held by a court of competent jurisdiction to be unreasonable, arbitrary or against public policy, then such portion of such covenants shall be considered divisible both as to time and geographical area. The Company and Mr. Hall agree that, if any court of competent jurisdiction determines that the Noncompetition Period or the Geographic Area applicable to this Agreement is unreasonable, arbitrary and/or against public policy, then a lesser time period or geographical area which is determined to be reasonable, non-arbitrary and not against public policy may be enforced against Mr. Hall. (g) Mr. Hall does hereby represent and warrant to the Company and Hughes: (i) Mr. Hall has had access to and has become knowledgeable concerning, the trade secrets of Company; (ii) That this Section 9 is being executed by Mr. Hall to protect the legitimate business interests of Company, including, without limitation the trade secrets, valuable confidential information that otherwise does not qualify as trade secrets, and the substantial relationships that the Company has with existing or prospective customers; (iii) That the Noncompetition Period and the Geographic Area is appropriate and reasonable in all respects in light of the nature of the business of the Company and the legitimate need of the Company to protect its customer bases and branch locations; and (iv) That the execution and delivery of this Agreement, the performance by Mr. Hall of the covenants and agreements contained herein, and the enforcement by Company of the provisions contained herein, will cause no undue hardship on Mr. Hall. 4 (h) The Company and Mr. Hall agree that the foregoing covenants are appropriate and reasonable when considered in light of the nature and extent of the business conducted by the Company. 10. Confidentiality. In addition to such other obligations which Mr. Hall may have to the Company prior to the date of this Agreement, Mr. Hall agrees that for the period beginning with the Revocation Date and continuing until December 31, 2016 (which is the period the Company is obligated to make SERP Payments pursuant to Section 2 above), he will not, directly or indirectly use for his own benefit, or disclose to or use for the benefit of any other person or entity, any Confidential Information of the Company. For purposes of this Agreement, "Confidential Information" shall include, without limitation, confidential or proprietary information of customers of the Company, vendor information (including without limitation, any rebate programs) and the Company's proprietary information, marketing techniques, methods and/or costs of manufacturing, vendor lists, customer lists, administrative procedures, financial information, computer programs, personnel information, business plans (strategic or otherwise) and other similar business information. In the event any such Confidential Information is in tangible form and in the possession of Mr. Hall at his termination of employment, he agrees to immediately return such Confidential Information to the Company. In the event of a breach of the foregoing confidentiality provision, in addition to the remedies provided in the SERP, the Company no longer shall be obligated to make any payment or provide any benefit provided herein, any unexercised ISO's and NQSO's shall be forfeited, and no further loan amounts shall be forgiven pursuant to Section 8 above (and the Company may demand the immediate repayment of any amounts outstanding under the Note). 11. Remedies. (a) Mr. Hall acknowledges that any violation of Sections 9 or 10 of this Agreement will result in irreparable injury to the Company for which there is no adequate remedy at law. Accordingly, if Mr. Hall commits a breach, or threatens to commit a breach of any of the provisions of this Agreement (including Sections 9 or 10 of this Agreement), the Company shall be entitled to all available legal and equitable remedies, including without limitation, temporary and permanent injunctive relief and to the extent permitted by law, the Company shall not be required to post a surety bond in connection therewith. The Company also shall be entitled to money damages for any loss suffered or to be suffered as a consequence of Mr. Hall's breach of this Agreement. (b) The Company and Mr. Hall further agree that in the event Mr. Hall violates the provisions contained in Sections 9 or 10 of this Agreement, and the Company brings an action against Mr. Hall to enforce such provisions, payment of any compensation or other sums hereunder and the providing of all benefits, may be suspended, without penalty to the Company, pending the outcome of such litigation. If a court of competent jurisdiction determines that Mr. Hall has breached the provisions of Section 9 or 10 of this Agreement, Mr. Hall's right to such then unpaid portion of any compensation due him hereunder shall cease. However, if a court of competent jurisdiction determines that Mr. Hall has not breached the provisions of either Section 9 or 10 of this Agreement, Mr. Hall shall receive any unpaid portion of such consideration and such other benefits and payments as Mr. Hall shall have otherwise been entitled. 5 12. Release of All Claims. (a) Mr. Hall (on his own behalf and on behalf of his heirs, personal representatives, and any other person who may be entitled to make a claim on his behalf or through him) hereby releases the Company, its employees, officers, directors, agents, representatives and shareholders from all claims which are related to his employment with the Company or the separation of that employment, including without limitation those arising under Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991 (42 U.S.C. ss.ss.200e-200e-17), the Age Discrimination in Employment Act of 1967, as amended, the Employee Retirement Income Security Act of 1974 (29 U.S.C. ss.ss.1161-1168), the Consolidated Omnibus Budget Reconciliation Act of 1985, the Florida Civil Rights Act (chapter 760, Fla. Stat.) and any other federal, state or local statute, rule or regulation dealing with employment or discrimination on any basis, including without limitation that of age, sex, race, national origin, religion, marital status or disability. Mr. Hall agrees that this release includes claims or lawsuits based on theories of contract (oral, written or implied), tort (including negligence), statute, regulation, law, ordinance or rule (federal, state or local) or any other common law or equitable basis of action, whether based on common law or otherwise, which relate to his employment with the Company or separation of employment from the Company. Mr. Hall further agrees that this release covers and includes all acts and omissions of the Company and its directors, officers, employees, principals, shareholders, agents, and representatives from all actions or omissions mentioned above in this Section. (b) The Company releases Mr. Hall from all claims relating to acts or omissions of Mr. Hall while employed by the Company as an officer or Director of the Company provided such acts were not illegal and were in the best interests of the Company, were in accordance with Company policy and were actions which otherwise would have afforded him the protection of the business judgment rule. (c) Mr. Hall represents that he does not presently have on file, and has not made in any forum, any complaints, charges, or claims (whether civil, administrative, or criminal) against the Company. Mr. Hall agrees that if, after signing this Agreement, he thereafter commences, joins in, or in any manner seeks relief through any suit arising out of, based upon, or relating to any of the claims released hereunder, or asserts in any manner against the Company any of the claims released hereunder, Mr. Hall shall pay to the Company or the employee, officer, director, agent, representative, or shareholder, or their successor in interest, in addition to any other damages caused by him, all attorneys' fees incurred by any of them in defending or in otherwise responding to such suit or claim. 13. After-Discovered Claims. The Parties acknowledge that they are aware that they may hereafter discover claims now unknown or unsuspected, or facts in addition to, or different from, those that they now believe or know to be true, with respect to the matters released herein. Nevertheless, it is the intention of the Parties, through this Agreement, to fully, finally, and forever settle and generally release all such matters and claims as are described in Section 12 above. In furtherance of such intention, the general release herein shall be and remain in effect as a full and complete release of all claims described in Section 12 above notwithstanding the discovery or existence of any additional claims or facts. 14. Review Period. Mr. Hall understands and agrees that this Agreement specifically refers to rights or claims that he may have under the Age Discrimination in Employment Act of 1967, as amended, and that Mr. Hall is not waiving any rights or claims that arise after the Revocation Date. Mr. Hall further acknowledges that he has received additional money for signing this Agreement, in addition to anything of value to which he is already entitled and that he has been given at least 21 days within which to consider this Agreement. He also understands that he may voluntarily accept this Agreement at any time during the 21-day period. Mr. Hall also acknowledges that he has been advised to 6 discuss this termination and release with an attorney of his own choice prior to signing the Agreement. Mr. Hall further understands and agrees that for a period of at least seven (7) days following his signing of this Agreement, that he may revoke and cancel this Agreement, and the Agreement shall not become effective or enforceable until this seven (7) day revocation period has expired. If Mr. Hall should chose to revoke and cancel this Agreement, he must do so in writing and the revocation and cancellation must be received in hand by the Company within the seven (7) day revocation period. By signing this Agreement, Mr. Hall fully understands, recognizes and agrees that he is knowingly and voluntarily waiving any rights he has under the Age Discrimination in Employment Act of 1967, as amended. 15. Voluntary Acceptance. Having read and understood Section 14 above, Mr. Hall hereby voluntarily accepts this Agreement, subject only to the above described seven (7) day right of revocation. 16. All Other Agreements Void. Except for the terms of the SERP, Management Insurance Agreement, 1997 Stock Plan, and all ISO and NQSO grant agreements, as modified by this Agreement, seven (7) days after the execution of the Agreement, all agreements, written or oral, between the Parties, shall be void, and all terms thereof shall be void and unenforceable. The rights and remedies of the Parties shall be limited to those provided herein. This Agreement supersedes any prior agreements of the Parties. 17. Assignability and Parties in Interest. The Company may assign any of its rights or delegate any of its obligations hereunder to a purchaser of the business of the Company or wholly owned subsidiary of the Company without the prior written consent of Mr. Hall. In all other instances, no party may assign any of its rights or delegate any of its obligations hereunder without the prior written consent of the other party. This Agreement binds, inures to the benefit of and is enforceable by the respective successors and permitted assigns of the parties and it does not confer any rights on any other persons or entities. 18. Applicable Laws and Venue. This Agreement shall be governed exclusively by the laws of the United States and the State of Florida. Venue shall be exclusively in the state or federal trial courts located in Orange County, Florida. 19. Attorneys Fees. In the event any party hereto institutes litigation to enforce its rights or remedies under this Agreement, the party prevailing in such litigation shall be entitled to receive an award from the non-prevailing party of the prevailing party's reasonable attorneys' fees and costs incurred in connection with such litigation. The foregoing shall include reasonable attorneys' fees and costs (including paralegals' fees) incurred at trial, on any appeal and in any proceeding in bankruptcy. 20. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together constitute but one and the same agreement. 7 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COMPANY: Hughes Supply, Inc. Attest: By: ------------------------------- --------------------------------- Benjamin P. Butterfield, Secretary David H. Hughes, Chairman and CEO Witness: MR. HALL: - -------------------------------------- ------------------------------------ Benjamin P. Butterfield A. Stewart Hall, Jr. Revocation Date is April 4, 2001. 8 EX-13.1 6 d25505_ex13-1.txt EXHIBIT 13.1 Financial Review Selected Financial Data ................................................... 18 Management's Discussion and Analysis of Financial Condition and Results of Operations ............................. 20 Consolidated Statements of Income ......................................... 26 Consolidated Balance Sheets ............................................... 27 Consolidated Statements of Shareholders' Equity ........................... 28 Consolidated Statements of Cash Flows ..................................... 29 Notes to Consolidated Financial Statements ................................ 30 Report of Independent Certified Public Accountants .............................................. 40 Management's Responsibility for Financial Statements ...................................................... 40 17 Hughes Supply, Inc. SELECTED FINANCIAL DATA (in thousands, except per share data and ratios)
Fiscal Years Ended(1)(2) ------------------------------------------------------------- 2001 2000 1999 1998 - --------------------------------------------------------------------------------------------------------- STATEMENTS OF INCOME: Net sales ............................ $3,310,163 $2,994,877 $2,536,265 $1,945,446 Cost of sales ........................ $2,566,706 $2,320,604 $1,977,266 $1,519,323 Gross margin ......................... 22.5% 22.5% 22.0% 21.9% - --------------------------------------------------------------------------------------------------------- Selling, general and administrative expenses .......................... $ 579,826 $ 508,644 $ 416,642 $ 318,923 Percentage of net sales ............ 17.5% 17.0% 16.4% 16.4% Depreciation and amortization ........ $ 32,312 $ 29,629 $ 23,269 $ 18,727 Provision for doubtful accounts ...... $ 10,273 $ 3,608 $ 1,882 $ 1,229 Operating income(3) .................. $ 105,489 $ 132,392 $ 117,206 $ 87,244 Operating margin ..................... 3.2% 4.4% 4.6% 4.5% - --------------------------------------------------------------------------------------------------------- Interest and other income(4) ......... $ 18,476 $ 9,015 $ 6,886 $ 5,837 Interest expense ..................... $ 43,288 $ 31,805 $ 25,415 $ 19,257 - --------------------------------------------------------------------------------------------------------- Income before income taxes ........... $ 80,677 $ 109,602 $ 98,677 $ 73,824 Percentage of net sales ............ 2.4% 3.7% 3.9% 3.8% Income taxes (benefits) .............. $ 34,162 $ 43,731 $ 37,234 $ 26,254 Net income ........................... $ 46,515 $ 65,871 $ 61,443 $ 47,570 Percentage of net sales ............ 1.4% 2.2% 2.4% 2.4% - --------------------------------------------------------------------------------------------------------- Earnings per share: Basic .............................. $ 2.00 $ 2.82 $ 2.57 $ 2.37 Diluted ............................ $ 1.97 $ 2.80 $ 2.55 $ 2.33 - --------------------------------------------------------------------------------------------------------- Average shares outstanding: Basic .............................. 23,238 23,398 23,889 20,108 Diluted ............................ 23,584 23,547 24,138 20,432 - --------------------------------------------------------------------------------------------------------- BALANCE SHEETS: Working capital ...................... $ 679,130 $ 657,500 $ 567,435 $ 486,106 Total assets ......................... $1,400,277 $1,369,014 $1,123,513 $ 965,742 Long-term debt ....................... $ 516,168 $ 535,000 $ 402,203 $ 343,197 Shareholders' equity ................. $ 570,035 $ 522,444 $ 483,956 $ 421,769 - --------------------------------------------------------------------------------------------------------- Current ratio ........................ 3.3 to 1 3.2 to 1 3.5 to 1 3.5 to 1 Long-term debt-to-capital ............ .48 to 1 .51 to 1 .45 to 1 .45 to 1 Leverage (total assets/shareholders' equity) ............................ 2.46 2.62 2.32 2.29 - --------------------------------------------------------------------------------------------------------- OTHER: Cash dividends per share ............. $ .34 $ .34 $ .33 $ .31 Shareholders' equity per share ....... $ 24.12 $ 22.16 $ 20.01 $ 18.00 Return on average assets ............. 3.4% 5.3% 5.9% 5.8% Return on average shareholders' equity 8.5% 13.1% 13.6% 13.2% Capital expenditures ................. $ 23,871 $ 30,740 $ 26,921 $ 28,185 =========================================================================================================
(1) The Company's fiscal year ends on the last Friday in January. (2) All data adjusted for poolings of interests and the three-for-two stock split declared in fiscal 1998. (3) Fiscal 2001 includes the charge of $15,557 for the impairment of long-lived assets. (4) Fiscal 2001 includes the gain of $11,000 for the sale of the Company's pool and spa business. 18
Fiscal Years Ended(1)(2) ---------------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 1992 1991 - ----------------------------------------------------------------------------------------------------------------------------------- STATEMENTS OF INCOME: Net sales .............................. $1,619,362 $1,326,978 $1,065,549 $880,977 $724,466 $ 690,311 $752,951 Cost of sales .......................... $1,276,481 $1,052,120 $ 848,698 $704,907 $583,513 $ 557,380 $608,322 Gross margin ........................... 21.2% 20.7% 20.4% 20.0% 19.5% 19.3% 19.2% - ----------------------------------------------------------------------------------------------------------------------------------- Selling, general and administrative expenses .......................... $ 261,355 $ 218,093 $ 172,828 $145,913 $119,732 $ 116,317 $117,649 Percentage of net sales .............. 16.1% 16.4% 16.2% 16.6% 16.5% 16.8% 15.6% Depreciation and amortization .......... $ 15,566 $ 11,859 $ 10,131 $ 8,657 $ 7,382 $ 7,987 $ 9,929 Provision for doubtful accounts ........ $ 1,023 $ 2,203 $ 1,501 $ 2,448 $ 2,028 $ 3,247 $ 3,119 Operating income(3) .................... $ 64,937 $ 42,703 $ 32,391 $ 19,052 $ 11,811 $ 5,380 $ 13,932 Operating margin ....................... 4.0% 3.2% 3.0% 2.2% 1.6% .8% 1.9% - ----------------------------------------------------------------------------------------------------------------------------------- Interest and other income(4) ........... $ 6,241 $ 5,111 $ 3,206 $ 3,677 $ 4,072 $ 2,696 $ 4,732 Interest expense ....................... $ 14,842 $ 10,440 $ 6,813 $ 6,456 $ 6,087 $ 7,702 $ 9,850 - ----------------------------------------------------------------------------------------------------------------------------------- Income before income taxes ............. $ 56,336 $ 37,374 $ 28,784 $ 16,273 $ 9,796 $ 374 $ 8,814 Percentage of net sales .............. 3.5% 2.8% 2.7% 1.8% 1.4% .1% 1.2% Income taxes (benefits) ................ $ 19,282 $ 11,728 $ 7,984 $ 4,710 $ 1,734 $ (1,359) $ 2,058 Net income ............................. $ 37,054 $ 25,646 $ 20,800 $ 11,563 $ 8,062 $ 1,733 $ 6,756 Percentage of net sales .............. 2.3% 1.9% 2.0% 1.3% 1.1% .3% .9% - ----------------------------------------------------------------------------------------------------------------------------------- Earnings per share: Basic ................................ $ 2.13 $ 1.78 $ 1.54 $ .97 $ .68 $ .15 $ .58 Diluted .............................. $ 2.09 $ 1.75 $ 1.50 $ .92 $ .68 $ .15 $ .58 - ----------------------------------------------------------------------------------------------------------------------------------- Average shares outstanding: Basic ................................ 17,384 14,418 13,504 11,900 11,899 11,899 11,746 Diluted .............................. 17,719 14,647 13,992 13,675 11,917 11,899 11,746 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCE SHEETS: Working capital ........................ $ 350,975 $ 235,113 $ 212,573 $171,702 $148,919 $ 134,961 $143,011 Total assets ........................... $ 684,056 $ 474,574 $ 418,717 $330,526 $294,510 $ 276,439 $273,216 Long-term debt ......................... $ 228,351 $ 139,165 $ 127,166 $121,292 $103,870 $ 89,921 $ 99,261 Shareholders' equity ................... $ 299,233 $ 188,926 $ 165,427 $116,918 $106,597 $ 99,649 $102,094 - ----------------------------------------------------------------------------------------------------------------------------------- Current ratio .......................... 3.3 to 1 2.6 to 1 2.7 to 1 2.9 to 1 2.8 to 1 2.6 to 1 3.0 to 1 Long-term debt-to-capital .............. .43 to 1 .42 to 1 .43 to 1 .51 to 1 .49 to 1 .47 to 1 .49 to 1 Leverage (total assets/shareholders' equity) .............................. 2.29 2.51 2.53 2.83 2.76 2.77 2.68 - ----------------------------------------------------------------------------------------------------------------------------------- OTHER: Cash dividends per share ............... $ .25 $ .20 $ .15 $ .11 $ .08 $ .16 $ .24 Shareholders' equity per share ......... $ 15.29 $ 12.64 $ 11.40 $ 9.43 $ 8.71 $ 8.14 $ 8.64 Return on average assets ............... 6.4% 5.7% 5.6% 3.7% 2.8% .6% 2.4% Return on average shareholders' equity ............................... 15.2% 14.5% 14.7% 10.3% 7.8% 1.7% 6.5% Capital expenditures ................... $ 16,898 $ 14,713 $ 15,824 $ 9,997 $ 10,335 $ 6,073 $ 8,877 ===================================================================================================================================
19 Hughes Supply, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of certain significant factors which have affected the financial condition of Hughes Supply, Inc. and its subsidiaries (the "Company") as of January 26, 2001, and the results of operations for fiscal 2001 compared with fiscal 2000, and of fiscal 2000 compared with fiscal 1999. This information should be read in conjunction with the Company's consolidated financial information provided on pages 26 to 39 of this Annual Report. Forward-Looking Statements Certain statements set forth in this report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by such sections. When used in this report, the words "believe," "anticipate," "estimate," "expect," "may," "will," "should," "plan," "intend," "potential," "predict," "forecast" and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. The Company's actual results may differ significantly from the results discussed in such forward-looking statements. When appropriate, certain factors that could cause results to differ materially from those projected in the forward-looking statements are enumerated. Overview The Company is a diversified wholesale distributor of construction and industrial materials, equipment, and supplies to commercial construction, residential construction, industrial, and public infrastructure markets in North America. Operating in 34 states and Mexico, the Company distributes over 240,000 products through its 442 wholesale branches. Effective February 1, 2000, the Company's operations were reorganized into strategic business units ("SBUs"), which are built around five broad product categories. These SBUs represent the Company's reportable segments and include Electrical & Electric Utility; Plumbing & HVAC; Industrial Pipe, Valves & Fittings ("Industrial PVF"); Building Materials/Pool & Spa/Maintenance Supplies; and Water & Sewer. This is the basis management uses for making operating decisions and assessing performance. In fiscal 2001, the Company experienced continued operating losses in its e-commerce ventures and international operations. As a result of these losses and based on an analysis of future profitability and anticipated customer demand for these operations, the Company recorded an impairment charge totaling $15.6 million relating to the write-down of long-lived assets. This charge included the write-off of goodwill and other assets totaling $12.9 million related to the Company's e-commerce investments, including bestroute.com ("bestroute") and supplyFORCE.com, and a charge totaling $2.7 million primarily related to the write-off of goodwill in the Company's international operations. In January 2001, the Company completed the sale of the assets of its pool and spa business for $48.0 million. The Company received cash proceeds of $23.0 million with the remaining $25.0 million of the consideration in the form of a short-term note receivable. The Company recorded a pre-tax gain of $11.0 million and an after-tax gain of $6.7 million or $.28 per share on a diluted basis. Material Changes in Results of Operations Net Sales In fiscal 2001, the Company generated consolidated net sales of $3.3 billion, an 11% increase over fiscal 2000 net sales of $3.0 billion. Approximately $156.6 million of the increase was attributable to same-store sales growth with the remainder of the increase attributable to acquired and newly-opened wholesale branches. Same-store sales increased 5% in fiscal 2001 and 7% in fiscal 2000. The 5% same-store sales increase was primarily attributable to increased infrastructure spending by municipalities in the Water & Sewer SBU; favorable commodity pricing in stainless steel and nickel alloy products; and increased market penetration in the Building Materials/ Pool & Spa/Maintenance Supplies SBU. The drop in same-store sales growth from 7% in fiscal 2000 to 5% in fiscal 2001 was primarily due to the impact of lower commodity prices on plumbing products, aggressive price competition in some of the Company's major markets and inclement weather, particularly in the fourth quarter of fiscal 2001. Fiscal 2000 net sales increased $458.6 million or 18% over fiscal 1999 net sales of $2.5 billion. Approximately $162.8 million of the increase was attributable to same-store sales growth with the remainder of the increase attributable to acquired and newly-opened wholesale branches. On a basis comparable to the prior year, same-store sales increased 6% in fiscal 1999 and 7% in fiscal 2000. The 7% same-store sales increase in fiscal 2000 was attributable to continued overall strength of the construction market, increases in pool and spa product sales due to increased market penetration, and growth in electric utility product sales due to the anticipated deregulation within their industry. 20 Net sales by SBU for fiscal 2001, 2000 and 1999 are presented below (dollars in thousands):
Building Materials/ Electrical & Pool & Spa/ Corporate/ Electric Plumbing Industrial Maintenance Water & Eliminations Utility & HVAC PVF Supplies Sewer & Other Total - ------------------------------------------------------------------------------------------------------------------------------------ 2001 ................ $606,268 $1,007,318 $315,315 $448,363 $932,870 $29 $3,310,163 2000 ................ 576,739 956,553 299,590 424,138 737,857 -- 2,994,877 1999 ................ 519,408 857,385 291,870 325,136 542,466 -- 2,536,265 ====================================================================================================================================
Electrical & Electric Utility In fiscal 2001, net sales were $606.3 million, a $29.6 million or 5% increase from fiscal 2000 net sales of $576.7 million. Fiscal 2000 net sales increased $57.3 million or 11% over fiscal 1999 net sales. The net sales increases for both years were primarily attributable to newly acquired or opened branches and a same-store sales increase of $22.1 million or 4% in fiscal 2001 and $35.5 million or 8% in fiscal 2000. The 4% same-store sales increase in fiscal 2001 was primarily due to an increase in commercial construction activity. The 8% same-store sales increase in fiscal 2000 was due to growth in electric utility product sales resulting from increased spending by utility companies due to the anticipated deregulation within their industry. Plumbing & HVAC In fiscal 2001, net sales were $1.0 billion, a $50.8 million or 5% increase from fiscal 2000 net sales of $956.6 million. Fiscal 2000 net sales increased $99.2 million or 12% over fiscal 1999 net sales. The net sales increases for both years were primarily attributable to newly acquired or opened branches and a same-store sales increase of $36.7 million or 4% in fiscal 2001 and $19.2 million or 2% in fiscal 2000. The growth in same-store sales in both years was below Company averages as a result of aggressive price competition in certain geographic areas as well as lower commodity prices on certain products. Industrial PVF In fiscal 2001, net sales were $315.3 million, a $15.7 million or 5% increase from fiscal 2000 net sales of $299.6 million. Fiscal 2000 net sales increased $7.7 million or 3% over fiscal 1999 net sales. The same-store sales increase of 5% in fiscal 2001 was the result of commodity price increases in stainless steel and nickel alloy products. Building Materials/Pool & Spa/Maintenance Supplies In fiscal 2001, net sales were $448.4 million, a $24.3 million or 6% increase from fiscal 2000 net sales of $424.1 million. Fiscal 2000 net sales increased $99.0 million or 30% over fiscal 1999 net sales. The net sales increase for both years was primarily attributable to newly acquired or opened branches and a same-store sales increase of $12.7 million or 3% in fiscal 2001 and $47.2 million or 15% in fiscal 2000. The 3% same-store sales increase in fiscal 2001 was primarily due to improved market penetration in pool and spa products, demand for construction rental materials, and expansion of appliance product lines in the maintenance supply branches. The 15% same-store sales increase in fiscal 2000 was due to growth in pool and spa product sales due to increased market penetration. Water & Sewer In fiscal 2001, net sales were $932.9 million, a $195.0 million or 26% increase from fiscal 2000 net sales of $737.9 million. Fiscal 2000 net sales increased $195.4 million or 36% over fiscal 1999 net sales. The net sales increases for both years were primarily attributable to newly acquired or opened branches and a same-store sales increase of $69.5 million or 10% in fiscal 2001 and $54.6 million or 10% in fiscal 2000. These same-store sales increases were primarily due to improved market penetration, increased spending on infrastructure projects by municipalities, and a general increase in overall activity through all water and sewer markets. 21 Hughes Supply, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Gross Profit and Gross Margin Gross margins were 22.5% in both fiscal 2001 and 2000 compared to 22.0% in fiscal 1999. The improvement in gross margin from fiscal 1999 resulted from several factors, including the Company's overall expansion of higher-margin products due primarily to its acquisition program, efficiencies created with central distribution centers, and enhanced purchasing power. Enhanced purchasing power was attributable to increased volume and concentration of supply sources as part of the Company's preferred vendor program.The favorable impact of stainless steel and nickel alloy commodity price increases in fiscal 2001 were offset by competitive market pressures in certain other product groups. This resulted in fiscal 2001 gross margin being at the same level as fiscal 2000. Gross profit and gross margin by SBU in fiscal 2001, 2000 and 1999 were as follows (dollars in thousands):
Gross Profit Gross Margin ------------------------------------------------------------------- 2001 2000 1999 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Electrical & Electric Utility ............................... $ 117,263 $105,492 $ 93,658 19.3% 18.3% 18.0% Plumbing & HVAC ............................................. 226,736 233,449 204,056 22.5% 24.4% 23.8% Industrial PVF .............................................. 82,463 69,668 68,258 26.2% 23.3% 23.4% Building Materials/Pool & Spa/Maintenance Supplies .......... 127,538 111,544 83,316 28.4% 26.3% 25.6% Water & Sewer ............................................... 190,384 154,120 109,711 20.4% 20.9% 20.2% Corporate/Eliminations & Other .............................. (927) -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Total ....................................................... $ 743,457 $674,273 $558,999 22.5% 22.5% 22.0% ===================================================================================================================================
Electrical & Electric Utility Gross margin increased approximately 100 and 30 basis points in fiscal 2001 and 2000, respectively. The primary cause of the increased margins was a shift in sales mix to higher margin products, with the remainder being attributable to enhanced purchasing power. This enhanced purchasing power was due to increased volume and concentration of supply sources as part of the Company's preferred vendor program. Plumbing & HVAC Gross margin decreased approximately 190 basis points in fiscal 2001 as a result of the impact of lower commodity prices on plumbing products. There was also an erosion of margins as the Company sought to protect market share in certain geographic areas from aggressive price competition. Fiscal 2000 margins increased from 23.8% to 24.4% or approximately 60 basis points as a result of an overall expansion of higher gross margin products, efficiencies created with central distribution centers and enhanced purchasing power. Industrial PVF In fiscal 2001, gross profit increased $12.8 million and gross margin increased approximately 290 basis points. Gross profit and gross margin within this SBU are closely tied to the pricing of certain commodity based products, primarily stainless steel and nickel alloys. The continued increases in the price of these commodity items improved the Company's gross margin for these products in the first half of fiscal 2001. Prices for these products started to decline in the second half of the year, thereby causing a reduction in gross margins in the third and fourth quarter of fiscal 2001. The Company anticipates commodity prices, and therefore gross margins within this segment, to continue decreasing during fiscal year 2002. Building Materials/Pool & Spa/Maintenance Supplies Gross margin increased approximately 210 and 70 basis points in fiscal 2001 and 2000, respectively. The increases were primarily due to a shift in sales mix resulting from equipment rentals and increased emphasis on the replacement market which tends to yield higher gross margins. The remainder of the increase was largely due to improved purchasing power. Water & Sewer Gross margin decreased approximately 50 basis points in fiscal 2001. This decrease was principally attributable to a general increase in large direct shipment orders which generate lower gross margins. The increase of 70 basis points in fiscal 2000 was primarily due to the Company's acquisition program and enhanced purchasing power. Operating Expenses Operating expenses in fiscal 2001 were $638.0 million (19% of net sales), an 18% increase over fiscal 2000 operating expenses of $541.9 million (18% of net sales). Included in operating expenses in fiscal 2001 is the $15.6 million charge related to the impairment of certain 22 long-lived assets as set forth in the overview. Additionally, operating expenses were impacted by a higher than anticipated provision for doubtful accounts which traditionally increases during economic slowdowns. The remaining increase was primarily due to higher personnel costs associated with same-store sales growth, increased transportation costs brought about by same-store sales growth, increased fuel costs, and increased information technology ("IT") spending as the Company continues its program of upgrading IT systems. The Company believes its investment in these initiatives will provide a platform for future growth and enable it to realize more administrative synergies from past and future acquisitions. Similarly, the $100.1 million increase in fiscal 2000 compared to fiscal 1999, which had operating expenses of $441.8 million (17% of net sales), was primarily attributable to newly opened or acquired branches. The remainder of the increase was primarily due to higher personnel and transportation costs associated with same-store sales growth, and expenses related to the Company's IT initiatives. Non-Operating Income (Expenses) Interest and other income was $7.5 million, $9.0 million, and $6.9 million in fiscal 2001, 2000 and 1999, respectively. The $1.5 million decrease in fiscal 2001 was primarily due to losses totaling $4.4 million from the Company's equity investment in bestroute, partially offset by increased income from the Company's other equity investments and the collection of service charge income on delinquent accounts receivable. The $2.1 million increase in fiscal 2000 was primarily attributable to increased service charge income. Interest expense in fiscal 2001, 2000 and 1999 was $43.3 million, $31.8 million and $25.4 million, respectively. The increases were primarily the result of higher borrowing levels, coupled with increased interest rates. The higher borrowing levels were primarily due to the Company's (i) higher working capital investments resulting from accelerated sales growth, (ii) expansion through business acquisitions, which has been partially funded by debt financing, and (iii) share repurchases. Non-operating income (expenses) in fiscal 2001 includes an $11.0 million pre-tax gain relating to the sale of the Company's pool and spa business as set forth in the overview. Income Taxes The effective tax rates in fiscal 2001, 2000 and 1999 were 42.3%, 39.9% and 37.7%, respectively. The increases in the effective tax rates were due to increases in non-deductible goodwill and other non-deductible costs. Prior to the merger with Winn-Lange Electric, Inc. ("Winn-Lange") on June 30, 1998, this entity was a Subchapter S corporation and, therefore, not subject to corporate income tax. Winn-Lange's Subchapter S corporation status terminated upon the merger with the Company. The Company's effective tax rate for fiscal 1999 would have been approximately 38.3%, assuming Winn-Lange was a tax paying entity. Net Income Net income in fiscal 2001 decreased to $46.5 million from $65.9 million in fiscal 2000. Diluted earnings per share decreased to $1.97 in fiscal 2001 compared to $2.80 in fiscal 2000. Net income and diluted earnings per share in fiscal 1999 were $61.4 million and $2.55, respectively. The factors impacting net income and diluted earnings per share have been enumerated above. Financial Condition Liquidity and Capital Resources Working capital increased to $679.1 million as of January 26, 2001, compared with $657.5 million as of January 28, 2000 and $567.4 million as of January 29, 1999. The current ratio was 3.3 to 1 as of January 26, 2001, 3.2 to 1 as of January 28, 2000 and 3.5 to 1 as of January 29, 1999. The fiscal 2001 increase in working capital was principally driven by higher cash levels and higher accounts and other receivables, which were partially offset by reduced inventories. Cash on hand increased primarily as a result of the sale of the Company's pool and spa business in January 2001, which generated cash proceeds of approximately $23.0 million. Additionally, in connection with this sale, the Company received a short-term note receivable totaling $25.0 million. The higher level of accounts receivable reflects sales increases over prior year end and slower collection activity resulting from the economic slowdown which started in the second half of fiscal 2001. During fiscal 2001, the Company reduced inventory levels to be more in line with current market demand. 23 Hughes Supply, Inc. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) The fiscal 2000 increase in working capital was also attributable to increased accounts receivable as a result of increased sales volume and higher inventory levels, partially offset by increases in accounts payable and accrued liabilities. Net cash provided by operations was $66.1 million, $33.4 million and $31.6 million in fiscal 2001, 2000 and 1999, respectively. In fiscal 2001, net cash provided by operations of $66.1 million was primarily the result of the Company's reduced inventory levels and increases in accrued liabilities, partially offset by increases in accounts receivable, resulting from higher sales volumes. Net cash provided by operations of $33.4 million in fiscal 2000 was primarily the result of an increase in accounts payable and accrued liabilities resulting from the Company's working capital management efforts. Investing Activities Capital expenditures were $23.9 million, $30.7 million and $26.9 million in fiscal 2001, 2000 and 1999, respectively. Of these expenditures, approximately $8.3 million, $14.0 million and $10.0 million, respectively, were for new warehouse facilities to support the Company's growth and approximately $3.2 million, $5.0 million and $7.0 million, respectively, were related to IT outlays. Capital expenditures, excluding amounts for business acquisitions, are expected to be approximately $20.0 million in fiscal 2002. Proceeds from the sale of property and equipment were $1.8 million, $4.9 million and $6.6 million in fiscal 2001, 2000 and 1999, respectively. The decreases in both years were attributable to the sale and subsequent lease-back of certain computer hardware, which generated proceeds of approximately $2.5 million in fiscal 2000 and $5.4 million in fiscal 1999. Cash payments for business acquisitions totaled $34.1 million, $88.9 million and $40.4 million in fiscal years 2001, 2000 and 1999, respectively. These outlays represent three, seven and eight wholesale distributors acquired and accounted for using the purchase method of accounting in fiscal 2001, 2000 and 1999, respectively. The increase in cash paid for acquisitions in fiscal 2000 as compared to fiscal 1999 was the result of all of the Company's fiscal 2000 acquisitions being financed completely with cash consideration. In fiscal 1999, the Company used $18.0 million of its common stock as additional consideration for acquisitions. In fiscal 2001 and 2000, the Company invested $6.3 million and $3.8 million, respectively, into two e-commerce ventures, including bestroute. Financing Activities Principal reductions on long-term debt were $2.5 million, $14.7 million and $24.1 million in fiscal 2001, 2000 and 1999, respectively. These amounts were primarily attributable to the repayment of debt assumed as a result of certain business acquisitions. Dividend payments totaled $8.1 million, $8.0 million and $8.8 million during fiscal 2001, 2000 and 1999, respectively. In fiscal 1999, these payments included cash dividends of pooled companies totaling $1.2 million. On December 13, 2000, the Company executed an amendment to its $75.0 million line of credit agreement, which extended the maturity date from January 19, 2001 to July 17, 2001.There were no amounts outstanding under this agreement at January 26, 2001 and January 28, 2000. On December 21, 2000, the Company issued $150.0 million of senior notes in a private placement. Of the total $150.0 million of senior notes, $103.0 million bear interest at 8.42% and are payable in five annual principal payments beginning November 30, 2003. The remaining $19.0 million and $28.0 million of senior notes bear interest at 8.27% and are payable in one annual principal payment on November 30, 2003 and five annual principal payments beginning November 30, 2001, respectively. Proceeds from the sale of the senior notes were used to reduce indebtedness under the Company's revolving line of credit agreement. As of January 26, 2001, the Company had approximately $22.4 million of cash and $221.9 million of unused borrowing capacity (subject to borrowing limitations, under long-term debt covenants) to fund ongoing operating requirements and anticipated capital expenditures. The Company believes it has sufficient borrowing capacity and cash on hand to take advantage of growth and business acquisition opportunities and to fund share repurchases in the near term. The Company expects to continue to finance future expansion on a project-by-project basis through additional borrowing or the issuance of common stock. On March 15, 1999, the Board of Directors authorized the Company to repurchase up to 2.5 million of its outstanding shares. During fiscal 2000 the Company repurchased 921,100 shares for a total cost of $21.2 million at an average purchase price of $23.05. No shares were repurchased in fiscal 2001. 24 Quantitative and Qualitative Disclosure About Market Risk The Company is aware of the potentially unfavorable effects inflationary pressures may create through higher asset replacement costs and related depreciation, higher interest rates and higher material costs. In addition, the Company's operating performance is affected by price fluctuations in stainless steel, nickel alloy, copper, aluminum, plastic, lumber and other commodities. The Company seeks to minimize the effects of inflation and changing prices through economies of purchasing and inventory management resulting in cost reductions and productivity improvements as well as price increases to maintain reasonable profit margins. At January 26, 2001, the Company had approximately $153.1 million of outstanding variable-rate debt. Based upon an assumed 10% increase or decrease in interest rates from their January 26, 2001 levels, the market risk with respect to the Company's variable-rate debt would not be material. The Company manages its interest rate risk by maintaining a combination of fixed-rate and variable-rate debt. Management believes that inflation (which has been moderate over the past few years) did not significantly affect the Company's operating results or markets in fiscal 2001, 2000 or 1999. As discussed above, however, the Company's results of operations in fiscal 2001 were both favorably and negatively impacted by increases and decreases in the pricing of certain commodity-based products. Fiscal 2000 and 1999 were negatively impacted by declines in prices of such commodity-based products. Such commodity price fluctuations have from time to time created cyclicality in the financial performance of the Company and could continue to do so in the future. Recent Accounting Pronouncements Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133"), was issued in June 1998 and is effective for the Company beginning January 27, 2001. FAS 133 was amended in June 2000 by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Hedging Activities ("FAS 138"). Both FAS 133 and FAS 138 require that an entity measure all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The adoption of these standards did not have a material impact on the Company's consolidated financial statements. In December 1999, the Securities and Exchange Commission (the "SEC") issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB 101"), which provided guidance related to revenue recognition based on interpretations and practices followed by the SEC. SAB 101 was effective for the Company beginning in the fourth quarter of fiscal 2001. The Company is in compliance with the provisions of SAB 101, and adoption of its provisions did not have an impact on the consolidated financial statements. In September 2000, the Emerging Issues Task Force issued EITF 00-10, Accounting for Shipping and Handling Fees and Costs ("EITF 00-10"). EITF 00-10 requires shipping and handling fees billed to customers to be classified as revenue and shipping and handling costs to be either classified as cost of sales or disclosed in the notes to the consolidated financial statements. The Company includes shipping and handling fees billed to customers in net sales. The Company adopted EITF 00-10 in the fourth quarter of fiscal 2001 and has properly disclosed in the notes to the consolidated financial statements the shipping and handling costs which are included in selling, general and administrative expenses. 25 Hughes Supply, Inc. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data)
Fiscal Years Ended ----------------------------------------------- January 26, January 28, January 29, 2001 2000 1999 - -------------------------------------------------------------------------------------------- Net Sales ............................. $ 3,310,163 $ 2,994,877 $ 2,536,265 Cost of Sales ......................... 2,566,706 2,320,604 1,977,266 - -------------------------------------------------------------------------------------------- Gross Profit .......................... 743,457 674,273 558,999 Operating Expenses: Selling, general and administrative . 579,826 508,644 416,642 Depreciation and amortization ....... 32,312 29,629 23,269 Provision for doubtful accounts ..... 10,273 3,608 1,882 Impairment of long-lived assets ..... 15,557 -- -- - -------------------------------------------------------------------------------------------- Total operating expenses .......... 637,968 541,881 441,793 Operating Income ...................... 105,489 132,392 117,206 Non-Operating Income (Expenses): Gain on sale of pool and spa business 11,000 -- -- Interest and other income ........... 7,476 9,015 6,886 Interest expense .................... (43,288) (31,805) (25,415) - -------------------------------------------------------------------------------------------- (24,812) (22,790) (18,529) - -------------------------------------------------------------------------------------------- Income Before Income Taxes ............ 80,677 109,602 98,677 Income Taxes .......................... 34,162 43,731 37,234 - -------------------------------------------------------------------------------------------- Net Income ............................ $ 46,515 $ 65,871 $ 61,443 ============================================================================================ Earnings Per Share: Basic ............................... $ 2.00 $ 2.82 $ 2.57 ============================================================================================ Diluted ............................. $ 1.97 $ 2.80 $ 2.55 ============================================================================================ Average Shares Outstanding: Basic ............................... 23,238 23,398 23,889 ============================================================================================ Diluted ............................. 23,584 23,547 24,138 ============================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 26 Hughes Supply, Inc. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data)
January 26, January 28, 2001 2000 - ------------------------------------------------------------------------------------------------------ Assets Current Assets: Cash and cash equivalents ....................................... $ 22,449 $ 10,000 Accounts receivable, less allowance for doubtful accounts of $6,106 and $2,777 .......................................... 431,998 398,244 Inventories ..................................................... 441,789 495,491 Deferred income taxes ........................................... 18,524 10,081 Other current assets ............................................ 66,131 43,962 - ------------------------------------------------------------------------------------------------------ Total current assets .......................................... 980,891 957,778 Property and Equipment, Net ....................................... 152,079 144,945 Excess of Cost Over Net Assets Acquired ........................... 249,826 243,367 Other Assets ...................................................... 17,481 22,924 - ------------------------------------------------------------------------------------------------------ $ 1,400,277 $ 1,369,014 ====================================================================================================== Liabilities and Shareholders' Equity Current Liabilities: Current portion of long-term debt ............................... $ 15,274 $ 803 Accounts payable ................................................ 215,353 239,810 Accrued compensation and benefits ............................... 32,762 29,590 Other current liabilities ....................................... 38,372 30,075 - ------------------------------------------------------------------------------------------------------ Total current liabilities ..................................... 301,761 300,278 Long-Term Debt .................................................... 516,168 535,000 Deferred Income Taxes ............................................. 6,704 6,027 Other Noncurrent Liabilities ...................................... 5,609 5,265 - ------------------------------------------------------------------------------------------------------ Total liabilities ............................................. 830,242 846,570 - ------------------------------------------------------------------------------------------------------ Commitments and Contingencies (Note 8) Shareholders' Equity: Preferred stock, no par value; 10,000,000 shares authorized; none issued; preferences, limitations and relative rights to be established by the Board of Directors ......................... -- -- Common stock, par value $1 per share; 100,000,000 shares authorized; 24,211,485 and 24,249,281 shares issued ........... 24,211 24,249 Capital in excess of par value .................................. 228,103 221,284 Retained earnings ............................................... 337,149 300,144 Treasury stock, 576,783 and 668,950 shares, at cost ............. (13,307) (15,434) Unearned compensation related to outstanding restricted stock ... (6,121) (7,799) - ------------------------------------------------------------------------------------------------------ Total shareholders' equity .................................... 570,035 522,444 $ 1,400,277 $ 1,369,014 ======================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 27 Hughes Supply, Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands, except share and per share data)
Common Capital in Unearned Shares Common Excess of Retained Treasury Compen- Outstanding Stock Par Value Earnings Stock sation Total - ------------------------------------------------------------------------------------------------------------------------------------ Balance at January 30, 1998 ............... 23,437,039 $ 23,437 $ 202,210 $ 197,364 $ -- $(1,242) $ 421,769 Net income .............................. -- -- -- 61,443 -- -- 61,443 Cash dividends--$.33 per share .......... -- -- -- (7,866) -- -- (7,866) Pooled companies ...................... -- -- -- (1,222) -- -- (1,222) Shares issued under stock option and bonus plans ....................... 107,980 108 1,282 -- -- -- 1,390 Purchase and retirement of common shares ......................... (19,439) (19) (193) (389) -- -- (601) Issuance of restricted stock ............ 52,500 52 1,615 -- -- (1,667) -- Amortization of unearned restricted stock ...................... -- -- -- -- -- 393 393 Capitalization of undistributed earnings of Subchapter S corporation ........... -- -- 7,697 (7,697) -- -- -- Other acquisitions ...................... 605,754 606 6,947 1,097 -- -- 8,650 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at January 29, 1999 ............... 24,183,834 $ 24,184 $ 219,558 $ 242,730 $ -- $(2,516) $ 483,956 Net income .............................. -- -- -- 65,871 -- -- 65,871 Cash dividends--$.34 per share .......... -- -- -- (7,990) -- -- (7,990) Purchase of treasury stock .............. (921,100) -- -- -- (21,229) -- (21,229) Shares issued under stock option and bonus plans ....................... 64,700 29 472 (378) 811 -- 934 Purchase and retirement of common shares ...................... (6,624) (7) (57) (89) -- -- (153) Issuance of restricted stock, net of cancellations .................. 259,521 43 1,311 -- 4,984 (6,338) -- Amortization of unearned restricted stock ...................... -- -- -- -- -- 1,055 1,055 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at January 28, 2000 ............... 23,580,331 $ 24,249 $ 221,284 $ 300,144 $(15,434) $(7,799) $ 522,444 Net income .............................. -- -- -- 46,515 -- -- 46,515 Cash dividends--$.34 per share .......... -- -- -- (8,088) -- -- (8,088) Shares issued under stock option and bonus plans ....................... 92,167 -- -- (425) 2,127 -- 1,702 Purchase and retirement of common shares ......................... (31,796) (32) (319) (1,002) -- -- (1,353) Issuance of restricted stock, net of cancellations ..................... (6,000) (6) (135) 5 -- 136 -- Amortization of unearned restricted stock ...................... -- -- -- -- -- 1,542 1,542 Consideration for bestroute.com acquisition ............. -- -- 7,273 -- -- -- 7,273 - ----------------------------------------------------------------------------------------------------------------------------------- Balance at January 26, 2001 ............... 23,634,702 $ 24,211 $ 228,103 $ 337,149 $(13,307) $(6,121) $ 570,035 ===================================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 28 Hughes Supply, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Fiscal Years Ended ----------------------------------------- January 26, January 28, January 29, 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------------ Cash Flows from Operating Activities: Net income ........................................................................ $ 46,515 $ 65,871 $ 61,443 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................................................. 32,312 29,629 23,269 Provision for doubtful accounts ............................................... 10,273 3,608 1,882 Impairment of long-lived assets ............................................... 15,557 -- -- Gain on sale of pool and spa business ......................................... (11,000) -- -- Deferred income taxes ......................................................... (7,766) 564 7,763 Other ......................................................................... 4,207 (262) (671) Changes in assets and liabilities, net of businesses acquired or sold: Accounts receivable ........................................................... (44,672) (33,961) (25,497) Inventories ................................................................... 34,567 (67,594) (29,493) Other current assets .......................................................... 1,992 (10,376) (7,718) Other assets .................................................................. (7,776) (4,006) (5,692) Accounts payable .............................................................. (22,322) 45,812 11,472 Accrued compensation and benefits ............................................. 4,433 4,046 2,278 Other current liabilities ..................................................... 9,484 (50) (8,166) Other noncurrent liabilities .................................................. 344 168 697 - ----------------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities ................................... 66,148 33,449 31,567 Cash Flows from Investing Activities: Capital expenditures .............................................................. (23,871) (30,740) (26,921) Business acquisitions, net of cash ................................................ (34,086) (88,905) (40,378) Investments in affiliated entities ................................................ (5,757) (3,750) -- Proceeds from sale of property and equipment ...................................... 1,772 4,892 6,630 Proceeds from sale of pool and spa business ....................................... 22,972 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities ....................................... (38,970) (118,503) (60,669) - ----------------------------------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Proceeds from issuance of long-term debt .......................................... 150,000 -- 50,000 Net (payments) borrowings under short-term debt arrangements ...................... (153,900) 132,797 10,232 Principal payments on debt of acquired entities ................................... (2,476) (14,724) (24,084) Purchase of treasury shares ....................................................... -- (21,229) -- Dividends paid .................................................................... (8,083) (8,042) (8,832) Other ............................................................................. (270) 242 (408) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by financing activities ......................... (14,729) 89,044 26,908 - ----------------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents ................................ 12,449 3,990 (2,194) Cash and Cash Equivalents, Beginning of Year ........................................ 10,000 6,010 8,204 - ----------------------------------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents, End of Year .............................................. $ 22,449 $ 10,000 $ 6,010 ===================================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 29 Hughes Supply, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) Note 1--Description of Business and Summary of Significant Accounting Policies Organization Hughes Supply, Inc. and its subsidiaries (the "Company") is a diversified wholesale distributor of construction and industrial materials, equipment, and supplies to commercial construction, residential construction, industrial, and public infrastructure markets in North America. The Company distributes over 240,000 products, representing five major product categories, through 442 wholesale branches located in 34 states and Mexico. The Company's principal customers are electrical, plumbing and mechanical contractors, electric utility customers, property management companies, municipalities and industrial companies. Industrial companies include companies in the petrochemical, food and beverage, pulp and mining, pharmaceutical and marine industries. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Investments in 50% or less owned affiliates over which the Company has the ability to exercise significant influence are accounted for using the equity method. All significant intercompany balances and transactions have been eliminated. Results of operations of companies acquired and accounted for using the purchase method of accounting are included from their respective dates of acquisition. Fiscal Year The Company's fiscal year ends on the last Friday in January. Fiscal 2001, 2000 and 1999 each consisted of 52 weeks. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Inventories Inventories are carried at the lower of cost or market. The cost of substantially all inventories is determined by the average cost method. Property and Equipment Property and equipment are recorded at cost and depreciated by the straight-line method based on the following estimated useful lives: - -------------------------------------------------------------------------------- Buildings and improvements ....................................... 5-40 years Transportation equipment ......................................... 2- 7 years Furniture, fixtures and equipment ................................ 2-12 years Maintenance and repair costs are charged to expense as incurred and renewals and improvements that extend the useful lives of assets are capitalized. Gains or losses are reflected in income upon disposition. Depreciation of property and equipment totaled $19,326, $18,309 and $15,750 in fiscal 2001, 2000 and 1999, respectively. Excess of Cost Over Net Assets Acquired The excess of cost over the fair value of net assets acquired ("goodwill") is amortized on a straight-line basis over 15 to 40 years. At January 26, 2001 and January 28, 2000, goodwill totaled $249,826 and $243,367, respectively, net of accumulated amortization of $31,821 and $24,477, respectively. Amortization of goodwill totaled $9,295, $7,797 and $5,614 in fiscal 2001, 2000 and 1999, respectively. Other Assets The Company capitalizes certain internal software development costs, which are being amortized on a straight-line basis over the estimated useful lives of the software, not to exceed five years. At January 26, 2001 and January 28, 2000, capitalized internal software development costs totaled $8,680 and $11,465, respectively, net of accumulated amortization of $7,709 and $5,186, respectively. Amortization totaled $3,550, $3,385 and $1,680 in fiscal 2001, 2000 and 1999, respectively. Impairment of Long-Lived Assets The Company periodically evaluates the net realizable value of long-lived assets, including goodwill, other intangible assets and property and equipment, relying on a number of factors, including operating results, business plans, economic projections and anticipated future cash flows. An impairment in the carrying value of an asset is recorded when the undiscounted, expected future operating cash flows derived from the asset are less than its carrying value. Deferred Employee Benefits The present value of amounts estimated to be payable under unfunded supplemental retirement agreements with certain officers is being accrued over the remaining years of active employment of the officers and is included in other noncurrent liabilities. Fair Value of Financial Instruments The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values because of the short maturity of these instruments. The fair value of the Company's long-term debt is estimated based on quoted market prices for the same or similar issues or on current rates offered to the Company for debt of the same remaining maturities. Revenue Recognition The Company recognizes revenues from product sales when title to the goods is passed to the customer. 30 Concentration of Credit Risk The majority of the Company's sales are credit sales which are made primarily to customers whose ability to pay is dependent upon the economic strength of the construction industry in the areas where they operate. Concentration of credit risk with respect to trade accounts receivable is limited, however, due to the large number of customers comprising the Company's customer base and the fact that no one customer comprises more than 1% of annual net sales. The Company performs ongoing credit evaluations of its customers and in certain situations obtains collateral sufficient to protect its credit position. The Company maintains reserves for potential credit losses. Advertising Advertising costs are charged to expense as incurred. Advertising expenses totaled $6,482, $6,471 and $5,533 in fiscal 2001, 2000 and 1999, respectively. Shipping and Handling Fees and Costs In September 2000, the Emerging Issues Task Force issued EITF 00-10, Accounting for Shipping and Handling Fees and Costs ("EITF 00-10"). EITF 00-10 requires shipping and handling fees billed to customers to be classified as revenue and shipping and handling costs to be either classified as cost of sales or disclosed in the notes to the consolidated financial statements. The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound freight are included in cost of sales. Shipping and handling costs associated with outbound freight are included in selling, general and administrative expenses and totaled $24,445, $18,857 and $15,359 in fiscal 2001, 2000 and 1999, respectively. Income Taxes Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. An assessment is made as to whether or not a valuation allowance is required to offset deferred tax assets. Stock-Based Compensation The Company measures compensation expense for employee and director stock options as the aggregate difference between the market and exercise prices of the options on the date that both the number of shares the grantee is entitled to receive and the purchase price are known. Compensation expense associated with restricted stock grants is equal to the market value of the shares on the date of grant and is recorded pro rata over the required holding period. Pro forma information relating to the fair value of stock-based compensation is presented in Note 7 to the consolidated financial statements. Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding. Diluted earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding, adjusted for dilutive potential common shares. The weighted-average number of shares used in calculating basic earnings per share were 23,238,000, 23,398,000 and 23,889,000 in fiscal 2001, 2000 and 1999, respectively. In calculating diluted earnings per share, these amounts were adjusted to include 346,000, 149,000 and 249,000 of dilutive potential common shares in fiscal 2001, 2000 and 1999, respectively. The Company's dilutive potential common shares consist of employee and director stock options, restricted stock and stock rights issued in connection with the bestroute.com ("bestroute") acquisition in fiscal 2001. Options to purchase 1,166,490 shares of common stock at an average exercise price of approximately $23.77 were not included in the computation of diluted earnings per share for fiscal 2001 because their effect would be anti-dilutive. Comprehensive Income The Company does not have any significant components of comprehensive income. Reclassifications Certain prior year amounts in the consolidated financial statements have been reclassified to conform to current year presentation. These reclassifications had no impact on previously reported results of operations. Estimates The preparation of financial statements in conformity with generally accepted accounting principles necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 31 Hughes Supply, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except share and per share data) Note 2--Business Combinations and Divestiture In fiscal 2000, the Company invested $1,750 in bestroute, an e-commerce company founded in 1999 to provide hard to find inventory items to wholesale distributors and end users via the internet. During fiscal 2001, the Company was required to fund an additional $6,250 to bestroute as certain operating thresholds were met. In September 2000, the Company acquired the remaining 51% interest of bestroute in a transaction where the other members of bestroute received 723,183 stock rights of the Company. Under the terms of the agreement, the stock rights were exercisable by the holders on or after February 1, 2001 and granted the holders the right to convert their bestroute holdings into the Company's common stock. The agreement also provided a call provision under which the Company had the ability to call the stock rights in exchange for shares of the Company's common stock. The exercise of a portion of the stock rights issued was contingent upon bestroute meeting its operating plan and demonstrating continued viability as a business. In the fourth quarter of fiscal 2001, bestroute was not able to meet its operating plan and incurred operating losses of $2,136. These losses were attributed to bestroute's inability to gain market acceptance and generate revenues sufficient to cover its operating costs. As a result of these continued losses and viability concerns, the Company discontinued bestroute's operations and on March 2, 2001, the Company and the holders of the stock rights entered an agreement to cancel 347,541 of the stock rights and redeem the remaining rights for $7,273 in cash. During fiscal 2001, 2000 and 1999, the Company acquired several other wholesale distributors of materials to the construction and industrial markets that were accounted for as purchases or immaterial poolings. These acquisitions, individually and in the aggregate, did not have a material effect on the consolidated financial statements. Results of operations of these companies from their respective dates of acquisition have been included in the consolidated financial statements. The assets acquired and liabilities assumed for acquisitions recorded using the purchase method of accounting are summarized below: Fiscal Years Ended ---------------------------------------- 2001 2000 1999 - -------------------------------------------------------------------------------- Fair value of: Assets acquired ................ $ 58,182 $ 125,536 $ 77,707 Liabilities assumed ............ (12,466) (37,510) (32,048) - ------------------------------------------------------------------------------- Purchase price ................... $ 45,716 $ 88,026 $ 45,659 =============================================================================== Consideration in fiscal 2001 and 1999 included 723,183 stock rights and 207,829 shares of common stock, with fair values of $7,273 and $5,438, respectively. There was no stock consideration issued during fiscal 2000. In January 2001, the Company completed the sale of the assets of its pool and spa business for $47,972 subject to working capital adjustments. The Company received cash proceeds of $22,972 with the remaining $25,000 of the consideration in the form of a short-term note receivable. The note receivable bears interest at a fixed rate of 7.0% and matures on November 1, 2001. The Company recorded a pre-tax gain of $11,000 in connection with the sale. The pool and spa business was engaged in the wholesale distribution of swimming pool and spa equipment and supplies. Net sales and income before income taxes for the pool and spa business were approximately $144,000 and $8,800, respectively, in fiscal 2001. Note 3--Impairment of Long-Lived Assets In fiscal 2001, the Company experienced continued operating losses in its e-commerce ventures and international operations. As a result of these losses and based on an analysis of future profitability and anticipated customer demand for these businesses, the Company recorded an impairment charge totaling $15,557 relating to the write-down of long-lived assets. This charge included the write-off of goodwill and other assets totaling $12,924 related to the Company's e-commerce investments, and a charge totaling $2,633 primarily related to the write-off of goodwill in the Company's international operations. Note 4--Property and Equipment Property and equipment consist of the following: 2001 2000 - -------------------------------------------------------------------------------- Land ......................................... $ 34,784 $ 28,771 Buildings and improvements ................... 119,044 110,308 Transportation equipment ..................... 31,446 33,205 Furniture, fixtures and equipment ............ 69,991 64,613 - ------------------------------------------------------------------------------- 255,265 236,897 Less accumulated depreciation ................ (103,186) (91,952) - ------------------------------------------------------------------------------- $ 152,079 $ 144,945 =============================================================================== 32 Note 5--Long-Term Debt Long-term debt consists of the following: 2001 2000 - -------------------------------------------------------------------------------- 8.27% senior notes, due 2003 ..................... $ 19,000 $ -- 8.27% senior notes, due 2005 ..................... 28,000 -- 8.42% senior notes, due 2007 ..................... 103,000 -- 7.96% senior notes, due 2011 ..................... 98,000 98,000 7.14% senior notes, due 2012 ..................... 40,000 40,000 7.19% senior notes, due 2012 ..................... 40,000 40,000 6.74% senior notes, due 2013 ..................... 50,000 50,000 Unsecured bank notes under $275,000 revolving credit agreement, payable January 25, 2004, fluctuating interest (6.4% to 7.2% at January 26, 2001) ............. 79,000 232,959 Short-term instruments classified as long-term debt ................... 74,101 74,041 Other notes payable .............................. 341 803 - ------------------------------------------------------------------------------- 531,442 535,803 Less current portion ............................ (15,274) (803) - ------------------------------------------------------------------------------- $ 516,168 $ 535,000 =============================================================================== On March 1, 1999, the Company entered into two short-term lines of credit with an aggregate borrowing capacity of $25,000. These lines of credit were amended during fiscal 2001 to extend the maturity dates to June 30, 2001. There were no amounts outstanding under these lines of credit at January 26, 2001 and January 28, 2000. On September 29, 1999, the Company's revolving credit agreement and line of credit agreement (the "credit agreement") were amended to increase borrowing capacity to $350,000 (subject to borrowing limitations under the credit agreement)--$275,000 under its revolving credit agreement as long-term debt due January 25, 2004 and $75,000 under its line of credit agreement, as amended, which matures on July 17, 2001. Under the credit agreement, interest is payable at market rates plus applicable margins. Facility fees of .25% and .225% are paid on the total of the revolving credit agreement and line of credit agreement, respectively. On December 21, 2000, the Company issued $150,000 of senior notes in a private placement. Of the total $150,000 of senior notes, $103,000 bears interest at 8.42% and are payable in five annual principal payments beginning November 30, 2003. The remaining $19,000 and $28,000 of senior notes bear interest at 8.27% and are payable in one annual principal payment on November 30, 2003 and five annual principal payments beginning November 30, 2001, respectively. Proceeds from the sale of the senior notes were used to reduce indebtedness under the Company's credit agreement. The Company has a commercial paper program backed by its line of credit agreement. The weighted-average interest rate on outstanding commercial paper borrowings of $74,101 and $74,041 as of January 26, 2001 and January 28, 2000 was 6.7% and 6.6%, respectively. The Company has the ability and intent to refinance short-term borrowings on a long-term basis. Accordingly, all of the commercial paper borrowings at January 26, 2001 and January 28, 2000 have been classified as long-term debt. The Company's debt agreements contain covenants that require the Company, among other things, to maintain certain financial ratios and minimum net worth levels. The covenants also restrict the Company's activities regarding investments, liens, borrowing and leasing, and payment of dividends other than stock. Under the dividend covenant, approximately $138,515 was available at January 26, 2001 for payment of dividends. Cash paid for interest during fiscal 2001, 2000 and 1999 was $44,429, $29,636 and $23,972, respectively. Maturities of long-term debt for each of the five years subsequent to January 26, 2001 and in the aggregate are as follows: Fiscal Years Ending - -------------------------------------------------------------------------------- 2002 .................................................. $ 15,274 2003 .................................................. 37,743 2004 .................................................. 197,205 2005 .................................................. 44,105 2006 .................................................. 44,105 Thereafter ............................................ 193,010 - -------------------------------------------------------------------------------- $531,442 ================================================================================ The fair values of long-term debt approximated $539,287 and $524,002 and the related carrying values were $531,442 and $535,803 at January 26, 2001 and January 28, 2000, respectively. 33 Hughes Supply, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except share and per share data) Note 6--Income Taxes The consolidated provision for income taxes consists of the following: Fiscal Years Ended - -------------------------------------------------------------------------------- 2001 2000 1999 - -------------------------------------------------------------------------------- Currently payable: Federal ....................... $ 37,515 $36,763 $25,119 State ......................... 4,315 5,553 2,778 - -------------------------------------------------------------------------------- 41,830 42,316 27,897 Deferred: Federal ....................... (7,007) 1,241 7,864 State ......................... (661) 174 1,473 - -------------------------------------------------------------------------------- (7,668) 1,415 9,337 - -------------------------------------------------------------------------------- $ 34,162 $43,731 $37,234 ================================================================================ The following is a reconciliation of tax computed at the statutory federal rate to income tax expense in the consolidated statements of income: Fiscal Years Ended ----------------------------------------------------------- 2001 2000 1999 - -------------------------------------------------------------------------------- Amount % Amount % Amount % - -------------------------------------------------------------------------------- Tax computed at statutory federal rate ... $28,237 35.0% $ 38,361 35.0% $ 34,537 35.0% Effect of: State and local income tax, net of federal income tax benefit ...... 2,377 2.9 3,722 3.4 2,763 2.8 Nondeductible expenses ..... 3,548 4.4 2,740 2.5 1,085 1.1 Other, net ..... -- -- (1,092) (1.0) (1,151) (1.2) - ------------------------------------------------------------------------------- $34,162 42.3% $ 43,731 39.9% $ 37,234 37.7% =============================================================================== The Company merged with Winn-Lange Electric, Inc. ("Winn-Lange") on June 30, 1998. Prior to its merger with the Company, Winn-Lange was a Subchapter S corporation and, therefore, not subject to corporate income taxes. The components of deferred tax assets and liabilities at January 26, 2001 and January 28, 2000 are as follows: 2001 2000 - -------------------------------------------------------------------------------- Deferred tax assets: Allowance for doubtful accounts .............. $ 2,339 $ 1,064 Inventories .................................. 5,144 2,537 Accrued vacation ............................. 2,230 2,646 State net operating losses ................... 1,166 -- Deferred compensation ........................ 2,939 2,054 Other accrued liabilities .................... 7,549 3,325 Other ........................................ 4,764 662 - -------------------------------------------------------------------------------- Gross deferred tax assets ...................... 26,131 12,288 Valuation allowance .......................... (698) -- - -------------------------------------------------------------------------------- Total deferred tax assets .................. 25,433 12,288 Deferred tax liabilities: Capitalized internal software development costs .......................... 3,717 3,401 Installment sale ............................. 3,466 -- Goodwill and intangible assets ............... 5,559 3,590 Property and equipment ....................... 871 1,243 - -------------------------------------------------------------------------------- Total deferred tax liabilities ............. 13,613 8,234 Net deferred tax assets ........................ $ 11,820 $ 4,054 ================================================================================ At January 26, 2001, the Company had state net operating loss carryforwards of $1,166. Of the total net operating loss carryforwards, $698 expire in 2016, with the remainder expiring between 2006 and 2021. A valuation allowance has been provided on certain of the state net operating losses at January 26, 2001 as full realization of these assets is not considered more likely than not. Cash paid for income taxes during fiscal 2001, 2000 and 1999 was $36,601, $49,079 and $33,862, respectively. Note 7--Employee Benefit Plans Profit Sharing and Employee Stock Ownership Plans 34 The Company has a 401(k) profit sharing plan which provides benefits for substantially all employees of the Company who meet minimum age and length of service requirements. In fiscal 1999, employee contributions of not less than 2% to not more than 3% of each eligible employee's compensation were matched (in cash or stock) 50% by the Company. The maximum percentage of each eligible employee's contribution to be matched by the Company was increased from 3% to 4% on August 1, 1999 and from 4% to 5% on February 1, 2000. The plan also calls for an additional increase in the maximum matching percentage from 5% to 6% on February 1,2001. Additional annual contributions may be made at the discretion of the Board of Directors. The Company had an employee stock ownership plan, which covered substantially all employees of the Company who met minimum age and length of service requirements. The plan was terminated by the Company effective December 31, 1998. At January 28, 2000, the plan owned approximately 236,000 shares of the Company's common stock, all of which were allocated to participants. As of January 26, 2001, the Company had distributed each participant's final account balance in cash or stock. Amounts charged to expense for these and other similar plans totaled $4,294, $2,883 and $1,946 in fiscal 2001, 2000 and 1999, respectively. Bonus Plans The Company has bonus plans, based on profitability formulas, which provide incentive compensation for key officers and employees. Amounts charged to expense for bonuses to executive officers totaled $1,410, $1,914 and $1,576 in fiscal 2001, 2000 and 1999, respectively. Stock Plans The Company's two active stock plans include the 1997 Executive Stock Plan (the "1997 Stock Plan") and the Directors' Stock Option Plan. These stock plans authorize the granting of both incentive and non-incentive stock options for an aggregate of 2,052,500 shares of common stock, including 1,750,000 shares to key employees and 302,500 shares to directors. Under these plans, options are granted at prices not less than the market value on the date of grant, and the maximum term of an option may not exceed ten years. Prices for incentive stock options granted to employees who own 10% or more of the Company's stock are at least 110% of market value at date of grant. Options may be granted from time to time to December 2006 with respect to the 1997 Stock Plan or May 2003 with respect to the Directors' Stock Option Plan. An option becomes exercisable at such times and in such installments as set forth by the Compensation Committee or by the Directors' Stock Option Plan. Under the 1997 Stock Plan, the Company can grant up to 875,000 shares of the authorized options as restricted stock to certain key employees. These shares are subject to certain transfer restrictions, and vesting may be dependent upon continued employment, the satisfaction of performance objectives, or both. There were no restricted stock grants made to employees during fiscal 2001. During fiscal 2000 and 1999, the Company granted certain employees 261,921 and 52,500 shares of restricted stock, with market values at the date of grant of $6,415 and $1,667, respectively. In fiscal 2001 and 2000, the Company also cancelled 6,000 and 2,400, respectively, of the restricted shares granted, with market values at the date of grant of $141 and $77, respectively, according to the provisions of the grant. The market value of the restricted stock at the date of grant was recorded as unearned compensation, a component of shareholders' equity, and is being charged to expense over the respective vesting periods. In fiscal 2001, 2000 and 1999, this expense amounted to $1,542, $1,055 and $393, respectively. The 1997 Stock Plan also permits the granting of stock appreciation rights ("SARs") to holders of options. Such rights permit the optionee to surrender an exercisable option, in whole or in part, on any date that the fair market value of the Company's common stock exceeds the option price for the stock and receive payment in common stock or, if the Board of Directors approves, in cash or any combination of cash and common stock. Such payment would be equal to the excess of the fair market value of the shares under the surrendered option over the option price for such shares. The change in value of SARs would be reflected in income based upon the market value of the stock. No SARs have been granted or issued through January 26, 2001. A summary of activity under the Company's stock options plans since January 30, 1998 is as follows: Shares Weighted- Subject Average To Option Option Price - -------------------------------------------------------------------------------- Under option, January 30, 1998 (455,897 shares exercisable) ................ 819,397 $19.74 Granted ................................... 48,000 34.19 Exercised ................................. (98,587) 10.99 Cancelled ................................. (12,800) 34.06 - -------------------------------------------------------------------------------- Under option, January 29, 1999 (435,810 shares exercisable) ................ 756,010 21.55 Granted ................................... 40,500 24.93 Exercised ................................. (51,900) 11.89 Cancelled ................................. (11,463) 28.24 - -------------------------------------------------------------------------------- Under option, January 28, 2000 (426,947 shares exercisable) ................ 733,147 22.32 Granted ................................... 502,000 18.75 Exercised ................................. (83,420) 8.62 Cancelled ................................. (27,838) 24.72 - -------------------------------------------------------------------------------- Under option, January 26, 2001 (1,098,789 shares exercisable) .............. 1,123,889 $21.21 ================================================================================ 35 Hughes Supply, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except share and per share data) There were 742,589 shares available for the granting of options at January 26, 2001. The following table summarizes information about stock options outstanding at January 26, 2001: Weighted- Average Options Remaining Weighted- Range of Outstanding at Contractual Average Exercise Prices January 26, 2001 Life Exercise Price - -------------------------------------------------------------------------------- $8.42............ 74,399 < 1 Year $ 8.42 12.83-18.75..... 719,776 8 Years 18.12 21.63-28.75..... 66,639 8 Years 25.60 33.00-35.63..... 263,075 7 Years 34.19 If the fair value of options granted had been used to record compensation expense, pro forma net income would have been $43,163, $64,770 and $60,307 in fiscal 2001, 2000 and 1999, respectively. Diluted earnings per share would have been $1.83, $2.75 and $2.50 in fiscal 2001, 2000 and 1999, respectively. The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yields of 1.3% for fiscal 2001, 2000 and 1999; expected volatility of 36%, 35% and 33% for fiscal 2001, 2000 and 1999, respectively; risk-free interest rates of 6.69%, 6.65% and 4.77% for fiscal 2001, 2000 and 1999, respectively; and expected lives of 8 years for fiscal 2001, 2000 and 1999. The weighted-average fair value of options granted during the year was $8.77, $11.48 and $13.81 in fiscal 2001, 2000 and 1999, respectively. The pro forma calculations do not include the effects of options granted prior to fiscal 1996. Accordingly, the impact is not necessarily indicative of the effects on reported net income in future years. Supplemental Executive Retirement Plan The Company has entered into agreements with certain key executive officers providing for supplemental payments, generally for periods up to 15 years, upon retirement, disability or death. The obligations are not funded separately from the Company's general assets. Amounts charged to expense under the agreements totaled $663, $543 and $537 in fiscal 2001, 2000 and 1999, respectively. At January 26, 2001 and January 28, 2000, the liability under the plan, which is reflected in other noncurrent liabilities totaled $4,110 and $3,478, respectively. Note 8--Commitments and Contingencies Lease Commitments The Company occupies certain properties and operates certain equipment and vehicles under leases that expire at various dates through the year 2011. Rent expense under these leases amounted to $51,073, $42,792 and $33,062 in fiscal 2001, 2000 and 1999, respectively. Aggregate minimum annual rental payments, under non-cancelable operating leases, as of January 26, 2001 are as follows: Fiscal Years Ending - -------------------------------------------------------------------------------- 2002 .................................................. $ 39,607 2003 .................................................. 32,785 2004 .................................................. 22,864 2005 .................................................. 18,320 2006 .................................................. 10,535 Thereafter ............................................ 11,489 - -------------------------------------------------------------------------------- $135,600 ================================================================================ Legal Matters The Company is involved in various legal proceedings arising in the normal course of its business. In the opinion of management, none of the proceedings are material in relation to the Company's consolidated operations, cash flows or financial position. 36 Note 9--Capital Stock Treasury Stock On March 15, 1999, the Company's Board of Directors authorized the Company to repurchase up to 2,500,000 shares of its outstanding common stock to be used for general corporate purposes. In fiscal 2000, the Company repurchased 921,100 shares for a total cost of $21,229 at an average price of $23.05 per share. No shares were repurchased in fiscal 2001. During fiscal 2001 and 2000, the Company issued 92,167 and 36,150 shares, respectively, of treasury stock for bonus plans and stock options exercised. In fiscal 2000, the Company issued 216,000 shares of treasury stock for restricted stock grants. Preferred Stock The Company's Board of Directors established Series A Junior Participating Preferred Stock ("Series A Stock") consisting of 75,000 shares. Each share of Series A Stock will be entitled to 1,000 votes on all matters submitted to a vote of shareholders. Series A Stock is not redeemable or convertible into any other security. Each share of Series A Stock shall have a minimum cumulative preferential quarterly dividend rate equal to the greater of $1.00 per share or 1,000 times the aggregate per share amount of the dividend declared on common stock in the related quarter. In the event of liquidation, shares of Series A Stock will be entitled to the greater of $1,000 per share plus any accrued and unpaid dividends or 1,000 times the payment to be made per share of common stock. No shares of Series A Stock are presently outstanding, and no shares are expected to be issued except in connection with the shareholder rights plan referred to below. The Company has a shareholder rights plan. Under the plan, the Company distributed to shareholders a dividend of one right per share of the Company's common stock. When exercisable, each right will permit the holder to purchase from the Company one one-thousandth of a share (a "unit") of Series A Stock at a purchase price of $200 per unit. The rights generally become exercisable if a person or group acquires 15% or more of the Company's common stock or commences a tender offer that could result in such person or group owning 15% or more of the Company's common stock. If certain subsequent events occur after the rights first become exercisable, the rights may become exercisable for the purchase of shares of common stock of the Company, or of an acquiring company, having a value equal to two times the exercise price of the right. In general, the rights may be redeemed by the Company at $.01 per right at any time prior to the later of (i) ten days after 20% or more of the Company's stock is acquired by a person or group and (ii) the first date of a public announcement that a person or group has acquired 15% or more of the Company's stock. The rights expire on June 2, 2008 unless terminated earlier in accordance with the rights plan. Note 10--Segment Information Effective February 1, 2000, the Company's operations were reorganized on a product group basis into five stand-alone strategic business units ("SBUs"): Electrical & Electric Utility; Plumbing & HVAC; Industrial Pipe, Valves & Fittings ("Industrial PVF"); Building Materials/Pool & Spa/Maintenance Supplies; and Water & Sewer. This is the basis management uses for making operating decisions and assessing performance. Segment information has been presented on a basis consistent with how business activities are reported internally to management. The accounting policies of the segments are the same as those described in Note 1. Income before income tax amounts include certain corporate expense allocations for employee benefits, interest expense, corporate capital charges, and property and casualty insurance. These allocations are based on consumption or at a standard rate determined by management. In connection with the Company's reorganization at the beginning of fiscal 2001, certain administrative groups and assets were realigned on a SBU basis. Various functions previously performed on a centralized basis are now performed at the SBU level. Additionally, the Company changed its method of allocating certain costs (interest expense, rent expense, corporate capital charges, and depreciation and amortization) to the SBUs, which has also impacted the comparability of prior year information. Accordingly, comparative financial information has only been presented for net sales and gross profit, which were not impacted by the allocation method changes. The Corporate/Eliminations & Other category includes corporate level operating expenses not allocated to the Company's operating segments along with intercompany eliminations and revenues and expenses for bestroute. 37 Hughes Supply, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands, except share and per share data) The following table presents net sales and other financial information by SBU for fiscal 2001. When comparable, information for fiscal 2000 and 1999 has also been presented.
Building Materials/ Electrical & Pool & Spa/ Corporate/ Electric Plumbing Industrial Maintenance Water & Eliminations Utility & HVAC PVF Supplies Sewer & Other Total - ------------------------------------------------------------------------------------------------------------------------------------ Net sales 2001 ........................................... $606,268 $1,007,318 $315,315 $448,363 $932,870 $ 29 $3,310,163 2000 ........................................... 576,739 956,553 299,590 424,138 737,857 -- 2,994,877 1999 ........................................... 519,408 857,385 291,870 325,136 542,466 -- 2,536,265 ==================================================================================================================================== Gross profit 2001 ........................................... 117,263 226,736 82,463 127,538 190,384 (927) 743,457 2000 ........................................... 105,492 233,449 69,668 111,544 154,120 -- 674,273 1999 ........................................... 93,658 204,056 68,258 83,316 109,711 -- 558,999 ==================================================================================================================================== Depreciation and amortization 2001 ........................................... 2,445 7,556 2,906 3,914 7,691 7,800 32,312 ==================================================================================================================================== Impairment of long-lived assets 2001 ........................................... -- 2,217 -- -- 416 12,924 15,557 ==================================================================================================================================== Gain on sale of pool and spa business 2001 ........................................... -- -- -- 11,000 -- -- 11,000 ==================================================================================================================================== Interest and other income 2001 ........................................... 1,357 3,489 355 2,093 3,727 (3,545) 7,476 ==================================================================================================================================== Interest expense 2001 ........................................... 2,926 9,891 10,170 5,678 14,623 -- 43,288 ==================================================================================================================================== Income (loss) before income taxes 2001 ........................................... $ 26,268 $ 189 $ 19,139 $ 26,442 $ 39,731 $(31,092) $ 80,677 ====================================================================================================================================
The following table includes the Company's investment in accounts receivable, less allowance for doubtful accounts, and inventories, for each SBU at January 26, 2001 and January 28, 2000:
2001 2000 - ------------------------------------------------------------------------------------------------------------------------------- Accounts Segment Accounts Segment Receivable Inventories Assets Receivable Inventories Assets - ------------------------------------------------------------------------------------------------------------------------------- Electrical & Electric Utility................ $ 83,163 $ 59,170 $ 142,333 $ 67,544 $ 53,617 $ 121,161 Plumbing & HVAC.............................. 125,359 146,007 271,366 115,357 171,448 286,805 Industrial PVF............................... 42,734 111,355 154,089 42,303 118,455 160,758 Building Materials/Pool & Spa /Maintenance Supplies(1) ................. 37,159 39,307 76,466 43,506 62,245 105,751 Water & Sewer................................ 147,465 82,729 230,194 132,282 89,726 222,008 Corporate/Eliminations & Other............... (3,882) 3,221 (661) (2,748) -- (2,748) - ------------------------------------------------------------------------------------------------------------------------------- Total $431,998 $441,789 873,787 $398,244 $495,491 893,735 ====================================================================== =================== Cash and Cash Equivalents.................... 22,449 10,000 Deferred Income Taxes........................ 18,524 10,081 Other Current Assets......................... 66,131 43,962 Property and Equipment, Net.................. 152,079 144,945 Excess of Cost Over Net Assets Acquired...... 249,826 243,367 Other Assets................................. 17,481 22,924 - ------------------------------------------------------------------------------------------------------------------------------- Total Assets................................. $1,400,277 $1,369,014 ===============================================================================================================================
(1) Assets of the pool and spa business, which was sold in January 2001, were principally included in the Building Materials/Pool & Spa/Maintenance Supplies SBU at January 28, 2000. 38 Note 11--Quarterly Financial Information (Unaudited) The following is a summary of the unaudited results of operations for each quarter in the years ended January 26, 2001 and January 28, 2000:
First Second Third Fourth Full Year - ------------------------------------------------------------------------------------------------------------------------------------ Fiscal 2001 Net sales ........................................ $831,171 $874,056 $863,283 $741,653 $3,310,163 Gross profit ..................................... $184,885 $198,232 $196,290 $164,050 $ 743,457 Net income (loss) ................................ $ 14,428 $ 22,347 $ 18,842 $ (9,102) $ 46,515 Earnings (loss) per share: Basic .......................................... $ .62 $ .96 $ .80 $ (.39) $ 2.00 Diluted ........................................ $ .62 $ .96 $ .80 $ (.39) $ 1.97 Average shares outstanding (in thousands): Basic .......................................... 23,223 23,236 23,511 23,258 23,238 Diluted ........................................ 23,229 23,333 23,617 23,258 23,584 Market price per share: High ........................................... $ 18.75 $ 20.56 $ 21.30 $ 18.75 $ 21.30 Low ............................................ $ 15.13 $ 15.00 $ 16.18 $ 14.41 $ 14.41 Dividends per share .............................. $ .085 $ .085 $ .085 $ .085 $ .34 ==================================================================================================================================== Fiscal 2000 Net sales ........................................ $711,296 $774,888 $786,379 $722,314 $2,994,877 Gross profit ..................................... $156,358 $176,173 $178,648 $163,094 $ 674,273 Net income ....................................... $ 13,355 $ 20,905 $ 20,243 $ 11,368 $ 65,871 Earnings per share: Basic .......................................... $ .56 $ .90 $ .87 $ .49 $ 2.82 Diluted ........................................ $ .55 $ .88 $ .87 $ .49 $ 2.80 Average shares outstanding (in thousands): Basic .......................................... 23,863 23,300 23,214 23,215 23,398 Diluted ........................................ 24,240 23,686 23,349 23,338 23,547 Market price per share: High ........................................... $ 26.25 $ 29.94 $ 28.50 $ 24.13 $ 29.94 Low ............................................ $ 17.94 $ 22.94 $ 20.75 $ 18.06 $ 17.94 Dividends per share .............................. $ .085 $ .085 $ .085 $ .085 $ .34 ====================================================================================================================================
During the fourth quarter of fiscal 2001, the Company recorded a charge totaling $15,557 for the impairment of long-lived assets, principally related to the discontinued operations of bestroute and another e-commerce venture and the write-off of goodwill for its international operations. Due to an economic slowdown which affected the Company's primary markets during late fiscal 2001, the Company determined that an increase in the provision for doubtful accounts was necessary. During the fourth quarter of fiscal 2001, the Company recorded a charge of $5,116 to reflect the estimated bad debts at January 26, 2001. Partially offsetting these charges is a gain of $11,000 recorded on the sale of the Company's pool and spa business in January 2001. 39 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of Hughes Supply, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Hughes Supply, Inc. and its subsidiaries at January 26, 2001 and January 28, 2000, and the results of their operations and their cash flows for each of the three years in the period ended January 26, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Orlando, Florida March 23, 2001 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The consolidated financial statements and related information included in this Annual Report were prepared in conformity with generally accepted accounting principles. Management is responsible for the integrity of the financial statements and for the related information. Management has included in the Company's consolidated financial statements amounts that are based on estimates and judgements which it believes are reasonable under the circumstances. The responsibility of the Company's independent accountants is to express an opinion on the fairness of the consolidated financial statements. Their opinion is based on an audit conducted in accordance with generally accepted auditing standards as further described in their report. The Audit Committee of the Board of Directors is composed of three non-management directors. The Committee meets periodically with financial management, internal auditors and the independent accountants to review internal accounting control, auditing and financial reporting matters. 40 CORPORATE AND SHAREHOLDER INFORMATION DIRECTORS David H. Hughes Chairman of the Board John D. Baker II President and Chief Executive Officer, Florida Rock Industries, Inc. Robert N. Blackford Attorney, Holland & Knight LLP H. Corbin Day Chairman, Jemison Investment Co., Inc. Vincent S. Hughes William P. Kennedy Chief Executive Officer, Nephron Pharmaceuticals Corporation EXECUTIVE OFFICERS AND MANAGEMENT David H. Hughes Chairman of the Board and Chief Executive Officer Thomas Morgan President and Chief Operating Officer Benjamin P. Butterfield Secretary and General Counsel John R. Clark Vice President of Credit Jacquel K. Clark Assistant Secretary and Assistant Treasurer Jasper L. Holland, Jr. Group President Clyde E. Hughes III Group President Vincent S. Hughes Vice President Robert A. Machaby Group President James C. Plyler, Jr. Regional Manager Michael L. Stanwood Group President Kenneth H. Stephens Regional Manager Sidney J. Strickland, Jr. Vice President of Administration Thomas M. Ward II Vice President of Information Technology Gradie E. Winstead, Jr. Group President J. Stephen Zepf Treasurer and Chief Financial Officer TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company 40 Wall Street New York, New York 10005 ANNUAL MEETING Tuesday, May 15, 2001, at 10:00 a.m., local time Hughes Supply, Inc. 20 North Orange Avenue Suite 200 Orlando, Florida 32801 INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP Orlando, Florida CORPORATE HEADQUARTERS Hughes Supply, Inc. 20 North Orange Avenue Orlando, Florida 32801 Telephone: 407-841-4755 The shares of Hughes Supply, Inc. common stock are traded on the New York Stock Exchange under the symbol "HUG." The approximate number of shareholders of record as of March 23, 2001 was 1,084. A COPY OF THE HUGHES SUPPLY, INC. ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE MADE AVAILABLE WITHOUT CHARGE, UPON WRITTEN REQUEST. REQUESTS SHOULD BE DIRECTED TO: J. Stephen Zepf Treasurer and Chief Financial Officer Hughes Supply, Inc. Post Office Box 2273 Orlando, Florida 32802 EX-21.1 7 d25505_ex21-1.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 Subsidiaries of the Registrant Set forth below is a listing, by name and jurisdiction of incorporation, of each corporation which is, as of the date of this Report, a subsidiary of the Registrant. Unless otherwise indicated, each such corporation is a 100% owned subsidiary of the Registrant. 1) Allstate Pool Business, L.P., a Delaware limited partnership. 2) Allstate Pool Supplies, Inc., a Delaware corporation. 3) Atlantic Pump & Equipment Company of Miami, Inc., a Florida corporation. 4) Atlantic Pump & Equipment Company of West Palm Beach, Inc., a Florida corporation. 5) Carolina Pump & Supply Corp., a Rhode Island corporation. 6) Cayesteel, Inc., a Georgia corporation, a 100% owned subsidiary of WCC Merger Corporation. 7) CF Fluid Controls, Inc., a Texas corporation. 8) Chad Supply, Inc., a Florida corporation. 9) Coastal Wholesale, Inc., a Florida corporation. 10) Dominion Pipe & Supply Co., a Virginia corporation. 11) Dominion Pipe Fabricators, Incorporated, a Virginia corporation. 12) Douglas Leonhardt & Associates, Inc., a North Carolina corporation. 13) ELASCO Agency Sales, Inc., an Illinois corporation. 14) Elec-Tel Supply Company, a Georgia corporation. 15) Electric Laboratories and Sales Corporation, a Delaware corporation. 16) FES Merger Corp., Inc., a Florida corporation. 17) Gayle Supply Company, Inc., an Alabama corporation. 18) Gilleland Concrete Products, Inc., a Georgia corporation. 19) H Venture Corp., a Florida corporation. 20) HHH, Inc., a Delaware corporation. 21) HSI Acquisition Corporation, an Ohio corporation. 22) HSI bestroute Investment, Inc., a Florida corporation. 23) HSI Corp., a Delaware corporation. 24) HSI Fusion Services, Inc., a Florida corporation. 25) Hughes Supply Foundation, Inc., a Florida not-for-profit corporation. 26) Hughes Supply FSC, Inc., a Barbados corporation. 27) Hughes Supply Management Services, Inc., a Delaware corporation. 28) Hughes Water & Sewer Company, a West Virginia corporation. 29) JuNo Industries, Inc., a Florida corporation. 30) Kamen Supply Company, Inc., a Kansas corporation. 31) Kingston Pipe Industries, Inc., a Rhode Island corporation. 32) L & T of Delaware, Inc., a Delaware corporation. 33) Merex Corporation, a Texas corporation. 34) Merex De Mexico, Sociedad Anonima De Capital Variable, a Mexico corporation, 75% owned. 35) Merex Diesel Power, Sociedad Anonima De Capital Variable, a Mexico corporation, 75% owned. 36) Metals Incorporated, an Oklahoma corporation. 37) Metals, Inc. - Gulf Coast Division, an Oklahoma corporation. 38) Mills & Lupton Supply Company, a Tennessee corporation. 39) Moore Electric Supply, Inc., a North Carolina corporation. 40) Mountain Country Supply, Inc., an Arizona corporation. 41) Olander & Brophy, Incorporated, a Pennsylvania corporation. 42) One Stop Supply, Inc., a Tennessee corporation. 43) Paine Supply of Jackson, Inc., a Mississippi corporation. 44) Palm Pool Products, Inc., a Michigan corporation. 45) Panhandle Pipe & Supply Co., Inc., a West Virginia corporation. 46) Port City Electrical Supply, Inc., a Georgia corporation. 47) R & G Plumbing Supply, Inc., an Alabama corporation. 48) Reaction Supply Corporation, a California corporation. 49) Shrader Holding Company, Inc., an Arkansas corporation. 50) Southwest Stainless, L.P., a Delaware limited partnership. 51) Stainless Tubular Products, Inc., an Oklahoma corporation. 52) Union Merger Corporation, a North Carolina corporation. 53) USCO Incorporated, a North Carolina corporation. 54) U.S. Fusion Services, Inc., a Louisiana corporation. 55) Virginia Water & Waste Supply Company, Inc., a Virginia corporation. 56) WCC Merger Corporation, a Georgia corporation. 57) Wholesale Electric Supply Corporation, a New York corporation. 58) World-Wide Travel Network, Inc., a Florida corporation. 59) Z&L Acquisition Corp., a Delaware corporation. EX-23.1 8 d25505_ex23-1.txt CONSENT OF INDEPENDENT CPA'S Consent of Independent Certified Public Accountants We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 2-78323, 33-9082, 33-26468, 33-33701, 333-19007, 333-27935, 333-35059, 333-57977, 333-57979, 333-40666, 333-40664 and 333-40658) and in the Prospectus constituting part of the Registration Statement on Form S-3 (Nos. 333-65825 and 333-80249) of Hughes Supply, Inc. of our report dated March 23, 2001, appearing on page 40 of the Annual Report to Shareholders which is incorporated in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Orlando, Florida April 20, 2001 EX-99.1 9 d22505_ex99-1.txt LOCATION OF FACILITIES As of March 31, 2001, the Company operated 447 branches in 34 states and Mexico. The following table presents the number of the Company's branches by strategic business unit:
Building Materials/ Electrical & Industrial Pool & Spa/ Electric Plumbing Pipe, Valves Maintenance Water & State/Country Utility & HVAC & Fittings Supplies Sewer Total - ------------------------------------------------------------------------------------------------------------------------------------ Alaska 1 1 Alabama 2 9 1 2 5 19 Arkansas 2 2 Arizona 11 1 6 18 California 1 6 7 Colorado 5 5 Delaware 1 1 Florida 23 36 25 14 98 Georgia 13 18 3 10 7 51 Illinois 4 1 5 Indiana 2 4 6 Kansas 3 3 Kentucky 3 1 1 5 Louisiana 1 4 1 6 Maryland 3 5 8 Michigan 1 1 Missouri 2 2 4 Mississippi 10 1 11 Montana 2 2 Mexico 2 2 North Carolina 3 15 1 4 12 35 New Jersey 1 1 Nevada 1 1 New York 1 1 Ohio 1 8 3 8 20 Oklahoma 2 2 Pennsylvania 3 3 Rhode Island 1 1 South Carolina 5 11 4 5 25 Tennessee 1 6 1 3 6 17 Texas 3 29 15 2 13 62 Utah 1 1 Virginia 4 1 3 5 13 Washington 1 5 6 West Virginia 4 4 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- Total 57 179 35 59 117 447 =================================================================================================================================
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