As Filed With the Securities and Exchange Commission on June 24, 1998
Registration No. 333-43225
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 on
FORM S-4
to Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WESCO International, Inc.
(formerly known as CDW Holding Corporation)
(Exact name of Registrant as specified in its charter)
Delaware 5063 25-1723345
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
WESCO Distribution, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 5063 25-1723345
(State or other jurisdiction of Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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Commerce Court, Suite 700
Four Station Square
Pittsburgh, Pennsylvania 15219
(412) 454-2200
(Address, including zip Code, and telephone number, including area code, of
registrant"s principal executive offices)
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Jeffrey B. Kramp, Esq.
Commerce Court, Suite 700
Four Station Square
Pittsburgh, Pennsylvania 15219
(412) 454-2200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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With a copy to:
Vincent Pagano, Jr.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
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If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
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If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to be Registered Registered per Note Offering Price (1) Registration Fee
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9 1/8% Senior Subordinated
Notes Due 2008, Series B(2) $300,000,000 100% $300,000,000 $ 88,500
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11 1/8% Senior Discount
Notes Due 2008, Series B(3) $ 87,000,000 58.3% $ 50,754,000 $ 14,975
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Guarantees(4) .................. (5) (5) (5) (5)
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Total .......................... $387,000,000 -- $350,754,000 $103,475(6)
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.
(2) To be issued by WESCO Distribution, Inc. (the "Company") in exchange for
its outstanding 9 1/8% Senior Subordinated Notes Due 2008, Series A.
(3) To be issued by WESCO International, Inc. ("Holdings") in exchange for its
outstanding 11 1/8% Senior Discount Notes Due 2008, Series A. The "Amount
to be Registered" with respect to such notes represents the aggregate
principal amount at maturity of such notes. The 11 1/8% Senior Discount
Notes Due 2008, Series A were sold at a substantial discount from their
principal amount at maturity. The registration fee with respect to the
11 1/8% Senior Discount Notes Due 2008, Series B was calculated based on
the approximate accreted value thereof as of June 23, 1998 determined
pursuant to the provisions of the Indenture governing such notes.
(4) Guarantees by Holdings of the Company's 9 1/8% Senior Subordinated Notes
Due 2008, Series B to be issued in exchange for Holdings' outstanding
guarantees of the Company's 9 1/8% Senior Subordinated Notes Due 2008,
Series A.
(5) Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
separate registration fee is payable for the guarantees of Holdings, which
are guarantees of the Company's 9 1/8% Senior Subordinated Notes Due 2008,
Series B, which are being registered concurrently. (6) Of this amount,
$88,500 was paid previously. Accordingly, $14,960 is being paid herewith.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JUNE 24, 1998
PRELIMINARY PROSPECTUS
WESCO Distribution, Inc.
Offer to Exchange up to $300,000,000 of its
9 1/8% Senior Subordinated Notes Due 2008, Series B,
which have been registered under the Securities Act of 1933,
for any and all of its outstanding
9 1/8% Senior Subordinated Notes Due 2008, Series A
WESCO International, Inc.
Offer to Exchange up to $87,000,000 of its
11 1/8% Senior Discount Notes Due 2008, Series B,
which have been registered under the Securities Act of 1933,
for any and all of its outstanding
11 1/8% Senior Discount Notes Due 2008, Series A
THE EXCHANGE OFFERS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED.
WESCO Distribution, Inc. (the "Company") hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and the related Letter
of Transmittal (which together constitute the "Senior Subordinated Exchange
Offer"), to exchange an aggregate of up to $300,000,000 principal amount of
9 1/8% Senior Subordinated Notes Due 2008, Series B (the "Senior Subordinated
Exchange Notes"), of the Company for an equal principal amount of the issued
and outstanding 9 1/8% Senior Subordinated Notes Due 2008, Series A (the
"Senior Subordinated Old Notes" and, together with the Senior Subordinated
Exchange Notes, the "Senior Subordinated Notes"), of the Company.
WESCO International, Inc. ("Holdings") hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and the related Letter
of Transmittal (which together constitute the "Senior Discount Exchange
Offer"), to exchange an aggregate of up to $87,000,000 principal amount at
maturity of 11 1/8% Senior Discount Notes Due 2008, Series B (the "Senior
Discount Exchange Notes"), of Holdings for an equal principal amount of the
issued and outstanding 11 1/8% Senior Discount Notes Due 2008, Series A (the
"Senior Discount Old Notes" and, together with the Senior Discount Exchange
Notes, the "Senior Discount Notes"), of Holdings.
The Company and Holdings are herein sometimes collectively called the
"Issuers"; the Senior Subordinated Exchange Offer and the Senior Discount
Exchange Offer are herein sometimes collectively called the "Exchange Offers";
the Senior Subordinated Exchange Notes and the Senior Discount Exchange Notes
are herein sometimes collectively called the "Exchange Notes"; the Senior
Subordinated Old Notes and the Senior Discount Old Notes are herein sometimes
collectively called the "Old Notes"; and the Senior Subordinated Notes and the
Senior Discount Notes are herein sometimes collectively called the "Notes".
The Old Notes were issued in connection with the Recapitalization (as defined),
pursuant to which, among other things, (i) Holdings repurchased from certain of
its former holders of its common stock and stock options such stock and options
for $653.5 million and (ii) an investor group led by affiliates of The Cypress
Group L.L.C. ("Cypress") acquired approximately 88.7% of the outstanding common
stock of Holdings. See "The Recapitalization."
As of the date of this Prospectus, $300,000,000 aggregate principal amount of
the Senior Subordinated Old Notes and $87,000,000 aggregate principal amount at
maturity of the Senior Discount Old Notes are outstanding. The terms of the
Exchange Notes are identical in all material respects to the terms of the Old
Notes, except that the Exchange Notes have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and therefore will not bear
legends restricting their transfer and will not contain certain provisions
providing for liquidated damages under certain circumstances described in the
Registration Rights Agreements (as hereinafter defined), which provisions will
terminate as to all of the Notes upon the consummation of the Exchange Offers.
(continued on next page)
See "Risk Factors," beginning on page 21, for a discussion of certain factors
that should be considered by investors in connection with the Exchange Offers
and an investment in the Senior Subordinated Exchange Notes or the Senior
Discount Exchange Notes.
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THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
(continued from previous page)
Interest on the Senior Subordinated Exchange Notes will be payable
semi-annually on June 1 and December 1 of each year, commencing on December 1,
1998. The Senior Subordinated Exchange Notes will mature on June 1, 2008.
Except as described below, the Senior Subordinated Exchange Notes will not be
redeemable at the option of the Company prior to June 1, 2003. Thereafter, the
Senior Subordinated Exchange Notes will be redeemable at the option of the
Company, in whole or in part, at the redemption prices set forth herein,
together with accrued and unpaid interest and liquidated damages, if any, to
the date of redemption. In addition, at any time and from time to time prior to
June 1, 2001, the Company may, subject to certain requirements, redeem up to
35% of the original aggregate principal amount of the Senior Subordinated
Exchange Notes with the net cash proceeds of one or more Equity Offerings (as
defined), at a redemption price equal to 109.125% of the principal amount
thereof, together with accrued and unpaid interest and liquidated damages, if
any, to the date of redemption; provided that at least 65% of the original
aggregate principal amount of the Senior Subordinated Notes remains outstanding
immediately after each such redemption. The Senior Subordinated Exchange Notes
will not be subject to any sinking fund requirement. Upon the occurrence of a
Change of Control (as defined), (i) the Company will have the option, at any
time on or prior to June 1, 2003, to redeem the Senior Subordinated Exchange
Notes, in whole but not in part, at a redemption price equal to 100% of the
principal amount thereof, together with accrued and unpaid interest and
liquidated damages, if any, to the date of redemption plus the Applicable
Premium (as defined) and (ii) if the Senior Subordinated Exchange Notes are not
so redeemed or if such Change of Control occurs after June 1, 2003, each holder
of the Senior Subordinated Exchange Notes will have the right to require the
Company to make an offer to repurchase such holder's Senior Subordinated
Exchange Notes at a price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest and liquidated damages, if any, to
the date of repurchase. See "Description of the Senior Subordinated Exchange
Notes."
The Senior Discount Old Notes were issued at a discount to their aggregate
principal amount at maturity so as to generate gross proceeds to Holdings of
$50,478,270. The yield to maturity of the Senior Discount Notes is 11.175%
(computed on a semi-annual bond equivalent basis) calculated from June 5, 1998.
Cash interest will not accrue or be payable on the Senior Discount Exchange
Notes prior to June 1, 2003. Thereafter, cash interest on the Senior Discount
Exchange Notes will accrue at a rate of 11 1/8% per annum and will be payable
semi-annually on June 1 and December 1 of each year, commencing on December 1,
2003. The Senior Discount Exchange Notes will mature on June 1, 2008. Except as
described below, the Senior Discount Exchange Notes will not be redeemable at
the option of Holdings prior to June 1, 2003. On June 1, 2003 Holdings will be
required to redeem an amount equal to $354.96 per $1,000 principal amount at
maturity of each Senior Discount Note then outstanding ($30,881,520 in
aggregate principal amount at maturity of the Senior Discount Notes, assuming
all of the Senior Discount Notes remain outstanding on such date (the
"Mandatory Principal Redemption Amount")) on a pro rata basis at a redemption
price of 100% of the principal amount at maturity of the Senior Discount Notes
so redeemed. The Mandatory Principal Redemption Amount represents (i) the
excess of the aggregate Accreted Value (as defined) of all Senior Discount
Notes outstanding on June 1, 2003 over the aggregate issue price thereof less
(ii) an amount equal to one year's simple uncompounded interest on the
aggregate issue price of such Senior Discount Notes at a rate per annum equal
to the yield to maturity on the Senior Discount Notes. The Senior Discount
Exchange Notes will be redeemable at the option of Holdings, in whole or in
part, at any time after June 1, 2003, at the redemption prices set forth
herein, together with accrued and unpaid interest and liquidated damages, if
any, to the date of redemption. In addition, at any time prior to June 1, 2001,
Holdings may, subject to certain requirements, redeem, in whole but not in
part, the Senior Discount Notes with the net cash proceeds of one or more
Equity Offerings at a redemption price equal to 111.125% of the Accreted Value,
together with liquidated damages, if any, to the date of redemption. The Senior
Discount Exchange Notes will not be subject to any sinking fund requirement.
Upon the occurrence of a Change of Control, (i) Holdings will have the option,
at any time on or prior to June 1, 2003, to redeem the Senior Discount Exchange
Notes, in whole but not in part, at a redemption price equal to 100% of the
Accreted Value thereof, together with liquidated damages, if any, to the date
of redemption plus the Applicable Premium and (ii) if the Senior Discount
Exchange Notes are not so redeemed or if such Change of Control occurs after
June 1, 2003, each holder of the Senior Discount Exchange Notes will have the
right to require Holdings to make an offer to repurchase such holder's Senior
Discount Notes at a price equal to (a) 101% of the Accreted Value thereof,
together with liquidated damages, if any, to the date of repurchase if
repurchased on or before June 1, 2003, and (b) 101% of the principal amount at
maturity thereof, together with accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase if repurchased after June 1, 2003.
See "Description of the Senior Discount Exchange Notes."
The Exchange Notes will be general obligations of the relevant Issuer. The
Senior Subordinated Exchange Notes will be unsecured, will be subordinated in
right of payment to all existing and future Senior Indebtedness (as defined) of
the Company and will be effectively subordinated to all obligations of the
subsidiaries of the Company. The Senior Discount Exchange Notes will be senior
unsecured obligations of Holdings and will be effectively subordinated to all
obligations of the subsidiaries of Holdings (including the Company). The Senior
Subordinated Exchange Notes will be unconditionally guaranteed by Holdings (the
"Holdings Guarantee") on a senior subordinated basis. Because the Holdings
Guarantee will be subordinated in right of payment to all Senior Indebtedness
of Holdings and effectively subordinated to all indebtedness and other
liabilities of Holdings' subsidiaries, investors should not rely on the
Holdings Guarantee in evaluating an investment in the Senior Subordinated
Exchange
Notes. The Senior Discount Exchange Notes will not have the benefit of any
guarantees. The Senior Subordinated Exchange Notes will rank pari passu with
any existing and future Senior Subordinated Indebtedness (as defined) of the
Company and will rank senior to all Subordinated Obligations (as defined) of
the Company. The Senior Discount Exchange Notes will rank pari passu with any
existing and future Senior Indebtedness of Holdings and will rank senior to all
Subordinated Obligations of Holdings. The Indentures (as defined) permit the
Issuers to incur additional indebtedness, including up to $400.0 million of
Senior Indebtedness of the Company under the Credit Facilities (as defined),
subject to certain limitations. See "Description of the Senior Subordinated
Exchange Notes" and "Description of the Senior Discount Exchange Notes." As of
March 31, 1998, on a pro forma basis, (i) Holdings would have had no
outstanding Senior Indebtedness (other than the Senior Discount Notes and
guarantees under the Credit Facilities) or Secured Indebtedness (as defined);
(ii) the outstanding Senior Indebtedness of the Company would have been $193.2
million, of which $170.0 million would have been Secured Indebtedness
(exclusive of unused commitments under the Credit Facilities); (iii) the
Company would have had no outstanding Senior Subordinated Indebtedness (other
than the Senior Subordinated Notes) and no outstanding indebtedness that is
subordinate or junior in right of repayment to the Senior Subordinated Notes;
(iv) the Company's subsidiaries would have had no indebtedness, excluding
guarantees of $170.0 million of indebtedness under the Credit Facilities (but
would have had trade payables and other liabilities incurred in the ordinary
course of business); and (v) Holdings' subsidiaries would have had total
liabilities of $735.0 million, excluding $170.0 million of indebtedness and
guarantees under the Credit Facilities. See "Unaudited Pro Forma Financial
Information," "Risk Factors -- Subordination of the Senior Subordinated Notes
and Holdings Guarantee" and " -- Structural Subordination of the Senior
Discount Notes."
The Old Notes were issued and sold on June 5, 1998 in transactions (the
"Offerings") not registered under the Securities Act in reliance upon an
exemption from the registration requirements thereof. In general, the Old Notes
may not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The Exchange Notes are being offered hereby in order to satisfy
certain obligations of the Issuers contained in the Registration Rights
Agreements. Based on interpretations by the Staff of the Securities and
Exchange Commission (the "Commission") set forth in no-action letters issued to
third parties, the Issuers believe that the Exchange Notes issued pursuant to
the respective Exchange Offers in exchange for the respective series of Old
Notes may be offered for resale, resold or otherwise transferred by any holder
thereof (other than any such holder that is an "affiliate" of the Issuers of
such Exchange Notes within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business, such holder has
no arrangement with any person to participate in the distribution of such
Exchange Notes and neither such holder nor any such other person is engaging in
or intends to engage in a distribution of such Exchange Notes. However, the
Issuers have not sought, and do not intend to seek, their own no-action letter,
and there can be no assurance that the Staff of the Commission would make a
similar determination with respect to the Exchange Offers. Notwithstanding the
foregoing, each broker-dealer that receives Exchange Notes for its own account
pursuant to an Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letters of
Transmittal state that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of Exchange Notes received in exchange for such Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Issuers thereof). A broker-dealer may not participate in any of the
Exchange Offers with respect to Old Notes acquired other than as a result of
market-making activities or other trading activities. The Issuers have agreed
that, for a period of 180 days after the date of this Prospectus, they will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
The Old Notes are designated for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market. There is no established
trading market for the Exchange Notes. The Issuers currently do not intend to
list any of the Exchange Notes on any securities exchange or to seek approval
for quotation of the Exchange Notes through any automated quotation system.
Accordingly, there can be no assurance as to the development or liquidity of
any market for any of the Exchange Notes.
The respective Exchange Offers are not conditioned upon any minimum aggregate
principal amount of any series of Old Notes being tendered for exchange. The
date of acceptance and exchange of each series of Old Notes (each an "Exchange
Date") will be the fourth business day following the applicable Expiration Date
(as hereinafter defined). Old Notes tendered pursuant to an Exchange Offer may
be withdrawn at any time prior to the applicable Expiration Date. The Exchange
Offers will expire at 5:00 p.m., New York City time, on , 1998 (the
date of expiration of each Exchange Offer, as extended, being herein called an
"Expiration Date"). The Issuers do not currently intend to extend any of the
Expiration Dates.
The Issuers will not receive any proceeds from any of the Exchange Offers. The
Issuers will pay all of the expenses incident to the Exchange Offers.
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on
Form S-4 (together with all amendments, exhibits, schedules and supplements
thereto, the "Registration Statement") under the Securities Act with respect to
the Exchange Notes being offered hereby. This Prospectus, which forms a part of
the Registration Statement, does not contain all of the information set forth
in the Registration Statement. For further information with respect to the
Issuers and the Exchange Notes, reference is made to the Registration
Statement. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and, where such
contract or other document is an exhibit to the Registration Statement, each
such statement is qualified in all respects by the provisions in such exhibit,
to which reference is hereby made. The Issuers are not currently subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Upon completion of the Exchange Offers, the Issuers will
be subject to the information requirements of the Exchange Act and, in
accordance therewith, will file periodic reports and other information with the
Commission. The Registration Statement, such reports and other information can
be inspected and copied at the Public Reference Section of the Commission
located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C.
20549 and at regional public reference facilities maintained by the Commission
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material, including copies of all or any portion of the
Registration Statement, can be obtained from the Public Reference Section of
the Commission at prescribed rates. Such material may also be accessed
electronically by means of the Commission's home page on the Internet
(http://www.sec.gov). In addition, pursuant to the Indentures covering the
Notes, the Issuers have agreed that the Issuers shall file with the Commission
and provide to the Holders of the Notes the annual reports and the information,
documents and other reports otherwise required pursuant to Section 13 and 15(d)
of the Exchange Act.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
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CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A "SAFE
HARBOR" FOR CERTAIN FORWARD-LOOKING STATEMENTS. THE FACTORS DISCUSSED UNDER
"RISK FACTORS," AMONG OTHERS, COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM FORWARD-LOOKING STATEMENTS MADE IN THIS PROSPECTUS INCLUDING, WITHOUT
LIMITATION, IN "BUSINESS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," IN THE ISSUERS' PRESS RELEASES
AND IN ORAL STATEMENTS MADE BY AUTHORIZED OFFICERS OF THE ISSUERS. WHEN USED IN
THIS PROSPECTUS THE WORDS "ESTIMATE," "PROJECT," "ANTICIPATE," "EXPECT,"
"INTEND," "BELIEVE" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS, ALTHOUGH NOT ALL FORWARD-LOOKING STATEMENTS CONTAIN
SUCH WORDS. ALL OF THESE FORWARD-LOOKING STATEMENTS ARE BASED ON ESTIMATES AND
ASSUMPTIONS MADE BY MANAGEMENT OF THE ISSUERS, WHICH, ALTHOUGH BELIEVED TO BE
REASONABLE, ARE INHERENTLY UNCERTAIN. THEREFORE, UNDUE RELIANCE SHOULD NOT BE
PLACED UPON SUCH ESTIMATES AND STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY
OF SUCH STATEMENTS OR ESTIMATES WILL BE REALIZED AND ACTUAL RESULTS MAY DIFFER
FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. SEE "RISK FACTORS
- - - - -- FORWARD-LOOKING STATEMENTS."
i
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements and notes thereto appearing elsewhere in this Prospectus. Unless the
context otherwise requires, references to (i) "Holdings" refer to WESCO
International, Inc., a Delaware corporation; (ii) the "Company" or "WESCO"
refer to WESCO Distribution, Inc., a Delaware corporation, and its
subsidiaries; and (iii) "Westinghouse" refer to Westinghouse Electric
Corporation, now known as CBS Corporation. The only asset of Holdings is all of
the outstanding capital stock of the Company. Market and market share data for
the electrical wholesale industry are from Electrical Wholesaling magazine or
Distributor Information Services Corporation, unless otherwise indicated.
Except where specified, market share and market data are for the U.S.
electrical wholesale distribution industry. The Company believes such market
share data are inherently imprecise, but are generally indicative of its
relative market share. Unless otherwise indicated, information presented on a
pro forma basis gives effect to the Recapitalization and the Recent
Acquisitions (as defined).
The Company
Overview
WESCO is the second largest provider of products and related services in
the U.S. electrical wholesale distribution industry and believes that it is
also the second largest in North America. The Company operates over 325
branches and five regional distribution centers in 48 states and nine Canadian
provinces to serve virtually the entire U.S. and Canadian market. WESCO
provides a broad product offering consisting of over 210,000 products sourced
from over 6,000 suppliers to over 130,000 customers. WESCO complements this
broad product offering with a range of services and procurement solutions,
including integrated supply, whereby it manages all aspects of the customer's
supply processes, and electronic commerce, which enables procurement to be
automated for improved service at lower cost. WESCO's diversified customer base
includes a wide variety of industrial companies, contractors for industrial,
commercial and residential projects, utility companies, and commercial,
institutional and governmental customers. WESCO's national infrastructure,
extensive local geographic coverage and complementary service offerings have
allowed WESCO to specialize in developing combined product and service
solutions tailored to meet the specific needs of its individual customers.
WESCO is particularly well positioned to meet the complex procurement needs of
multi-site customers seeking total supply chain cost reduction through
preferred supplier alliances.
Since WESCO's divestiture from Westinghouse in 1994 (the "Divestiture"),
management has realigned operations to achieve substantial growth in sales and
profitability. The current management team has: (i) substantially improved
operating margins; (ii) realigned WESCO's branch network to focus on key
customer markets; (iii) significantly expanded WESCO's National Accounts (as
defined) and other marketing programs; (iv) implemented a new incentive system
for branch managers and sales personnel; and (v) actively pursued industry
consolidation opportunities. As a result of management's actions and growth in
the industry generally, sales have increased from $1.6 billion in 1993 to $3.0
billion on a pro forma basis in the twelve months ended March 31, 1998, a
compound annual growth rate of 16.1%, and EBITDA has improved from a loss of
$1.4 million in 1993 to Adjusted EBITDA (as defined) of $113.8 million on a pro
forma basis in the twelve months ended March 31, 1998. Pursuant to the
Recapitalization, management retained approximately $97.7 million of equity in
Holdings and, together with new stock options expected to be granted in
connection with the Recapitalization, will hold or have the right to acquire
over 30% of the common equity of Holdings on a fully diluted basis. See "The
Recapitalization."
Industry Overview
The electrical wholesale distribution industry in the U.S. is large,
growing and highly fragmented. Industry sources estimate that total electrical
wholesale distributor sales were $67 billion in 1997, a 9.6% compound annual
growth rate since 1994. In 1996, the latest year for which data is available,
the four largest wholesale distributors, including WESCO, accounted for only
14% of estimated total industry sales. In that year, no single distributor
accounted for more than 5% of estimated industry sales, and
1
57% of such sales were generated by distributors with less than $21 million in
annual sales. In the U.S., electrical distribution is still in the early stages
of consolidation, unlike many other wholesale distribution industries which
have undergone substantial consolidation in the past two decades. Management
believes continued industry consolidation will be driven by customers who
increasingly expect distributors to provide a broader package of products and
services as these customers seek to outsource non-core functions and achieve
documented cost savings in purchasing, inventory and supply chain management.
Competitive Strengths
WESCO believes it is well positioned to both capitalize on the growing
customer demand for value-added services and procurement outsourcing and play a
leading role in the continued consolidation in the electrical products
distribution industry as a result of the following competitive advantages:
Market Leadership. WESCO believes it is the second largest electrical
wholesale distributor in North America, serving virtually the entire U.S. and
Canadian market. Management believes that WESCO is the industry's leading
wholesale supplier of electrical products in North America to several important
and growing markets, including: (i) customers with large, complex plant
maintenance operations requiring a national multi-site service solution for
their electrical distribution product needs; (ii) large contractors for major
industrial and commercial construction projects; (iii) the electric utility
industry; and (iv) manufacturers of factory-built homes, recreational vehicles
and other modular structures. These leadership positions provide WESCO with an
extensive base from which to continue to grow sales.
Established National and Local Distribution Infrastructure. WESCO's North
American distribution network consists of over 325 branches and five regional
distribution centers in 48 states and nine Canadian provinces. This established
network provides WESCO with a number of competitive advantages, including the
ability to: (i) offer multi-site agreements with the broad geographic scope
required by major customers who seek to coordinate their maintenance, repair
and operating ("MRO") supplies purchasing activity across multiple locations
("National Accounts"); (ii) enter into favorable preferred supplier agreements
which provide for improved payment terms, volume rebates, marketing programs
and geographic franchises; (iii) utilize a specialized and technical nationwide
sales force to meet specific customer demands for a broad range of products and
services across multiple geographic markets; and (iv) provide same-day
shipments. Management believes these competitive strengths allow it to more
effectively meet the service needs and expectations of both large national
customers who are increasingly demanding a single source supply capability and
local customers who require high service levels for their electrical product
procurement needs.
Broad Product Offering. WESCO provides its customers with a broad product
selection consisting of over 210,000 electrical, industrial and data
communications products sourced from over 6,000 suppliers. The Company's
products range from basic wire to advanced automation and control products.
Value Added Services. In partnership with its customers, WESCO combines
its product offerings with a wide range of supply management services to create
value for its customers. Examples of such services include: (i) outsourcing of
the entire MRO purchasing process; (ii) implementing inventory optimization
programs; (iii) participating in joint cost savings teams; (iv) assigning
Company employees as on-site support personnel; (v) recommending
energy-efficient product upgrades; (vi) offering safety and product training
for customer employees; and (vii) providing manufacturing process improvements
using automated solutions. This combination of products and value-added
services enhances WESCO's competitive position by allowing it to offer
comprehensive and documented cost-efficient solutions to a customer's specific
procurement needs.
Diverse Revenue Base. WESCO's diverse revenue base is derived from the
sale of its broad range of over 210,000 electrical, industrial and data
communications products to over 130,000 customers, including: (i) industrial
companies from numerous manufacturing and process industries and original
equipment manufacturers ("OEMs"); (ii) contractors for industrial, commercial
and residential projects; (iii) electrical utility customers; and (iv)
commercial, institutional and governmental customers. No customer accounted for
more than 1% of WESCO's total sales in 1997. WESCO's geographic diversity
2
encompasses sales in all 50 states in the U.S. and all 10 Canadian provinces.
This diversity of customers and products provides WESCO with a broad base from
which to grow sales and reduces exposure to any particular customer, industry
or regional economic cycle.
Proven and Committed Management Team. WESCO's management team has
successfully repositioned the Company following the Divestiture. The current
management team has: (i) substantially improved operating margins; (ii)
realigned WESCO's branch network to focus on key customer markets; (iii)
significantly expanded WESCO's National Accounts and other marketing programs;
(iv) implemented a new incentive system for branch managers and sales
personnel; and (v) actively pursued industry consolidation opportunities. Since
August 1995, WESCO's management has successfully completed 14 acquisitions
which currently account for estimated annualized sales of over $800 million. As
a result of management's actions as well as growth in the industry generally,
sales have increased from $1.6 billion in 1993 to $3.0 billion on a pro forma
basis in the twelve months ended March 31, 1998, a compound annual growth rate
of 16.1%, and EBITDA has improved from a loss of $1.4 million in 1993 to
Adjusted EBITDA of $113.8 million on a pro forma basis in the twelve months
ended March 31, 1998. Pursuant to the Recapitalization, approximately 200
managers continued to retain equity in Holdings representing an aggregate value
of approximately $97.7 million. In addition, certain managers will have the
opportunity to invest an aggregate of up to approximately $15 million in newly
issued common stock of Holdings. Holdings also plans to adopt a new stock
option plan in connection with the Recapitalization. As a result, management
will hold or have the right to acquire over 30% of the common equity of
Holdings on a fully diluted basis.
Business Strategy
Increase Large National Programs. WESCO has successfully established
National Accounts relationships with approximately 300 customers and believes
it can continue to expand revenue generated through its National Accounts
program by: (i) increasing the number of products and sites covered by its
existing National Accounts relationships; (ii) expanding MRO agreements to
include capital projects; and (iii) extending the program to new customers.
National Accounts provide WESCO with a recurring base of revenue through
strategic multi-year agreements. In addition, through its Major Projects Group,
the Company plans to intensify its focus on large construction projects, such
as new stadiums, industrial sites, wastewater treatment plants, airport
expansions, healthcare facilities and correctional facilities. The Company
intends to secure new National Accounts and Major Projects contracts through:
(i) aggressive national marketing of WESCO's demonstrated project management
capabilities; (ii) further development of relationships with leading
construction and engineering firms; and (iii) close coordination with National
Accounts customers on their major renovation and new construction projects.
Continue to Improve Operating Profit Margins and Cash Flow. WESCO has
successfully improved its operating profit margins over the past four years,
increasing Adjusted EBITDA to over $113.8 million on a pro forma basis for the
twelve months ended March 31, 1998 from a loss of $1.4 million in EBITDA in
1993. WESCO believes a successful business strategy must include the commitment
to continuous improvement in profitability and productivity. The Company is
emphasizing the widespread use of innovative and disciplined approaches to
managing its business processes, employee productivity, and working capital and
capital expenditure efficiency. These continuous improvement initiatives
include: (i) improving product pricing controls to maximize gross margin; (ii)
utilizing activity-based costing to more accurately measure and enhance
profitability by customer, supplier and other categories; (iii) enhancing the
coordination of purchasing and inventory management across its branch network
and regional distribution centers; (iv) improving information systems
processing capabilities in order to realize more efficient branch and
headquarters operations; and (v) leveraging the existing corporate
infrastructure by continuing to eliminate redundant back-office functions of
acquired companies.
Encourage Branch Level Entrepreneurship. A distributor's reputation is
often determined at the local branch level, where timely supply and customer
service are critical. Accordingly, WESCO grants its branch managers substantial
autonomy and responsibility to best respond to customer needs in local markets.
WESCO's branch managers are responsible for optimizing business activities in
their local markets, including managing the branch sales force, configuring
inventories, selecting potential customers for targeted marketing efforts and
developing local service options. WESCO's compensation
3
system for branch managers, a significant portion of which is incentive based,
strongly encourages sales and cash flow growth as well as efficient working
capital management at the branch level.
Gain Share in Key Local Markets. WESCO intends to increase its market
share in key geographic markets with a substantial base of potential customers
through a combination of new branch openings, increased sales and marketing
efforts and acquisitions. In addition, WESCO's marketing team, together with
local branch managers, are expanding the Company's program of detailed market
analysis and opportunity identification on a branch-by-branch and product line
basis. The Company has developed a detailed database of potential customers for
its individual markets which it will utilize to implement this strategy.
Furthermore, the Company intends to leverage its existing relationships with
preferred suppliers to increase sales of their products in local markets
through various initiatives, including sales promotions, cooperative marketing
efforts, direct participation by suppliers in National Accounts implementation,
dedicated sales forces and product exclusivity.
Expand Product and Service Offering. WESCO intends to build on its
demonstrated ability to introduce new products and services to meet customer
demands and capitalize on market opportunities. For example, the Company plans
to expand its presence in the fast-growing data communications market. In the
past two years, WESCO has significantly increased its focus on this market,
generating sales of $83 million in 1997, up from $52 million in 1995. By
utilizing a dedicated data communications sales team and leveraging its
existing sales force, the Company intends to expand sales to new and existing
customers, as well as broaden its offering into additional data communications
product lines. In addition, the Company plans to expand its integrated supply
programs with both new and existing accounts. Given the initial success of its
integrated supply initiatives and the rapid growth in the demand for such
services anticipated by the Company, WESCO believes it has a significant
opportunity to develop additional customer relationships by leveraging its
comprehensive service and supply expertise.
Pursue Consolidation Opportunities. WESCO utilizes a disciplined approach
toward acquisitions which includes established targets for cash return on
investment. Since August 1995, WESCO's management has successfully completed 14
acquisitions which currently account for estimated annualized sales of over
$800 million. WESCO intends to continue to pursue its consolidation strategy
and believes that the highly fragmented nature of the electrical distribution
industry will provide WESCO with a significant number of acquisition
opportunities. The Company evaluates potential acquisitions based on their
ability to: (i) accelerate expansion into key growth markets; (ii) add support
capabilities for important new customers; (iii) enhance sales of acquired
branches by immediately broadening the product and service mix; (iv) expand
local presence to better serve existing customers; (v) strengthen relationships
with manufacturers; and (vi) provide operating efficiencies by leveraging
WESCO's existing infrastructure.
History
The Company's business, formerly the Westinghouse Electric Supply Company
division (the "Predecessor") of Westinghouse, was established in 1922 for the
purpose of selling and distributing Westinghouse electrical products and
supplies. Since its founding, the Predecessor experienced a long history of
growth until the business reached a peak in 1989 with sales of $1.8 billion.
Beginning in 1990, the Predecessor's results of operations began to deteriorate
due in part to the implementation of a series of new programs that redirected
its business away from many of its core strategies. These developments were
compounded by the declining investment and focus from Westinghouse, which was
undergoing significant strategic changes at the time.
In 1994, the Predecessor's business was largely divested by Westinghouse,
which retained an interest in Holdings (currently representing approximately
16% of Holdings' fully diluted equity), and was acquired by Clayton, Dubilier &
Rice, a private investment firm (together with its affiliates, "CD&R"), and
management. In connection with the Divestiture, a new management team was
organized, led by Mr. Roy W. Haley as chief executive officer. This new
management team was comprised of new members as well as existing Company
personnel. Since the Divestiture, this management team has improved sales,
operating margins and EBITDA.
4
On March 27, 1998, Holdings, certain members of management, CD&R,
Westinghouse and certain other existing stockholders of Holdings entered into a
Recapitalization Agreement (as amended, the "Recapitalization Agreement") with
Cypress. See "The Recapitalization."
Recent Developments
On January 1, 1998, WESCO acquired the electrical distribution businesses
of Avon Electrical Supplies, Inc., and its affiliates ("Avon Electrical") and
Brown Wholesale Electric Company ("Brown Wholesale"). Avon Electrical,
operating two branch locations, is a leading distributor in the New York
metropolitan area. Brown Wholesale, with two branches in Arizona, is the leader
in the high-growth Phoenix market. Brown Wholesale also had seven other
branches which were closed or sold in California and Hawaii to improve
operating efficiency. Management estimates that these two acquisitions will add
approximately $150 million in annualized sales.
On May 8, 1998, WESCO acquired certain assets of, and assumed certain
liabilities of, Reily Electric Supply Inc. ("Reily"), a distributor
headquartered in New Orleans, Louisiana with seven branches in the Gulf Coast
region. The Reily acquisition provides the Company with several strategic
benefits, including: (i) strengthening its market position in the Gulf Coast
region; (ii) complementing an existing National Accounts customer relationship
in the petrochemical industry; and (iii) improving its position in the Houston
market, where Reily's strong market position will complement WESCO's existing
branch operations. Management estimates Reily will add annual sales of
approximately $140 million.
As a result of the acquisitions of Avon Electrical, Brown Wholesale and
Reily, the Company contemplates consolidating and/or closing 5 WESCO branches
by the end of 1998 which the Company expects will result in $3.6 million of
annual cost savings. The Company does not expect to incur any material expenses
or charges in connection therewith.
The foregoing acquisitions of Avon Electrical, Brown Wholesale and Reily,
together with the Company's acquisitions of Diversified Electric Supply
Company, Inc. and Maydwell & Hartzell, Inc. consummated in 1997, are
collectively referred to herein as the "Recent Acquisitions." For additional
information regarding the Company's business strategy and acquisition history,
see "Business -- Business Strategy" and "Business -- Acquisitions."
The Recapitalization
On June 5, 1998, pursuant to the Recapitalization Agreement: (i) Holdings
repurchased all of the common stock of Holdings (the "Common Stock") held by
CD&R, Westinghouse and all other non-management stockholders of Holdings and
cashed-out all of the stock options held by non-management optionholders and a
portion of the stock options held by certain members of management for an
aggregate consideration of $653.5 million (the "Equity Consideration"); (ii)
Holdings sold shares of Common Stock to an investor group led by Cypress which
includes, among others, Chase Capital Partners and Co-Investment Partners, L.P.
(the "Investor Group") for $318.1 million in the aggregate (the "Cash Equity
Contribution"); (iii) the Investor Group purchased shares of Common Stock from
certain members of management for $1.9 million in the aggregate; and (iv)
management continued to retain the remainder of their shares of Common Stock
and stock options with an implied aggregate value of approximately $97.7
million.
In addition to the proceeds of the Cash Equity Contribution, Holdings and
the Company funded the Equity Consideration, the repayment of approximately
$379.1 million of outstanding indebtedness of the Company and its subsidiaries
and the payment of transaction fees and expenses from: (i) the initial
borrowings of $170.0 million under the new credit facilities (the "Credit
Facilities") entered into by the Company as described under "Description of the
Credit Facilities;" (ii) the proceeds of $250.0 million from a sale of accounts
receivable pursuant to an off-balance sheet accounts receivable facility (the
"Receivables Facility") entered into by the Company as described under
"Description of the Receivables Facility;" and (iii) the proceeds of the
Offerings.
The foregoing transactions are collectively referred to herein as the
"Recapitalization." As a result of the Recapitalization, management owns
approximately 11.3% of the outstanding shares of Common
5
Stock (which, together with existing stock options and new stock options
expected to be granted in connection with the Recapitalization, will represent
over 30% of the common equity of Holdings on a fully diluted basis). In
addition, certain managers will have the opportunity to invest an aggregate of
up to approximately $15 million in newly issued Common Stock. The Investor
Group owns the remaining 88.7% of the outstanding shares of Common Stock, with
Cypress owning approximately 58% of the outstanding shares of Common Stock. See
"Security Ownership of Certain Beneficial Owners and Management."
Holdings expects to treat the Recapitalization as a recapitalization for
financial reporting purposes; accordingly, the historical basis of Holdings'
assets and liabilities will not be affected by the transaction.
The following table sets forth the cash sources and uses of funds of the
Issuers for the Recapitalization on a pro forma basis as of March 31, 1998:
(dollars in millions)
----------------------
Sources:
Credit Facilities:
Revolving Facility (1) ............................ $ --
Delayed Draw Term Facility (1) .................... --
Term Loans ........................................ 170.0
Receivables Facility ............................... 250.0
Senior Subordinated Old Notes ...................... 300.0
Senior Discount Old Notes .......................... 50.5
Cash Equity Contribution ........................... 318.1
---------
Total sources ................................... $ 1,088.6
=========
Uses:
Repayment of existing indebtedness (2) ............. $ 379.1
Equity Consideration ............................... 653.5
Estimated transaction fees and expenses (3)......... 54.8
Cash proceeds to the Company ....................... 1.2
---------
Total uses ...................................... $ 1,088.6
=========
- - - - ---------------------
(1) The Revolving Facility provides for U.S. and Canadian dollar borrowings of
up to U.S. $100.0 million, including $25.0 million for letters of credit.
No actual amounts were drawn on the Revolving Facility on the closing date
of the Offerings. The Delayed Draw Term Facility will provide for future
term loans of up to $100.0 million for permitted acquisitions.
(2) The actual amount of existing indebtedness repaid was approximately $388
million.
(3) Includes Initial Purchasers' discounts and offering discounts on the Senior
Subordinated Old Notes, fees related to the Credit Facilities and the
Receivables Facility, and other fees and expenses incurred in connection
with the Recapitalization.
The Sponsor
As a result of the Recapitalization, Holdings and the Company are
controlled by Cypress. Cypress manages a $1.05 billion private equity fund
which seeks to invest alongside proven and successful management teams to
achieve long-term capital appreciation. Since its founding, Cypress has made
investments in Cinemark USA, Inc., AMTROL Inc., Williams Scotsman, Inc.,
Genesis ElderCare Corp. and Frank's Nursery & Crafts, Inc. Prior to founding
Cypress, the Cypress professionals managed the 1989 merchant banking fund (the
"1989 Fund") of Lehman Brothers Inc. Selected investments of the 1989 Fund
included R.P. Scherer Corporation, Infinity Broadcasting Corporation, Lear
Corporation and Illinois Central Corporation.
6
The Senior Subordinated Exchange Offer
The Senior Subordinated
Exchange Offer..................... The Company is offering to exchange
pursuant to the Senior Subordinated
Exchange Offer up to $300,000,000
aggregate principal amount of its Senior
Subordinated Exchange Notes for a like
aggregate principal amount of its Senior
Subordinated Old Notes. The terms of the
Senior Subordinated Exchange Notes are
identical in all material respects
(including principal amount, interest rate
and maturity) to the terms of the Senior
Subordinated Old Notes for which they may
be exchanged pursuant to the Senior
Subordinated Exchange Offer, except that
the Senior Subordinated Exchange Notes are
freely transferrable by holders thereof
(other than as provided herein), and are
not subject to any covenant regarding
registration under the Securities Act. See
"The Senior Subordinated Exchange Offer."
No Minimum Condition............... The Senior Subordinated Exchange Offer
is not conditioned upon any minimum
aggregate principal amount of Senior
Subordinated Old Notes being tendered for
exchange.
Expiration Date; Withdrawal
of Tenders......................... The Senior Subordinated Exchange Offer
will expire at 5:00 p.m., New York City
time, on , 1998 (the "Senior
Subordinated Expiration Date"), unless the
Senior Subordinated Exchange Offer is
extended, in which case the term "Senior
Subordinated Expiration Date" means the
latest date and time to which the Senior
Subordinated Exchange Offer is extended.
The Company does not currently intend to
extend the Senior Subordinated Expiration
Date. Tenders may be withdrawn at any time
prior to 5:00 p.m., New York City time, on
the Senior Subordinated Expiration Date.
See "The Senior Subordinated Exchange
Offer -- Withdrawal Rights."
Exchange Date...................... The date of acceptance for exchange of
the Senior Subordinated Old Notes will be
the fourth business day following the
Senior Subordinated Expiration Date. Conditions to the Senior Subordinated
Exchange Offer..................... The Senior Subordinated Exchange Offer
is subject to certain customary
conditions, which may be waived by the
Company. The Company currently expects
that each of the conditions will be
satisfied and that no waivers will be
necessary. See "The Senior Subordinated
Exchange Offer -- Certain Conditions to
the Senior Subordinated Exchange Offer."
The Company reserves the right to
terminate or amend the Senior Subordinated
Exchange Offer at any time prior to the
Senior Subordinated Expiration Date upon
the occurrence of any such condition.
Procedures for Tendering Senior
Subordinated Old Notes............. Each holder wishing to accept the Senior
Subordinated Exchange Offer must complete,
sign and date the Letter of Transmittal,
or a facsimile thereof, in accordance with
the instructions contained herein and
therein,
7
and mail or otherwise deliver the Letter
of Transmittal, or such facsimile,
together with the Senior Subordinated Old
Notes and any other required
documentation to the Senior Subordinated
Exchange Agent at the address set forth
therein. See "The Senior Subordinated
Exchange Offer -- Procedures for
Tendering Senior Subordinated Old Notes"
and "Plan of Distribution."
Use of Proceeds.................... There will be no proceeds to the Company
from the exchange of Senior Subordinated
Notes pursuant to the Senior Subordinated
Exchange Offer.
Federal Income Tax Consequences.... The exchange of Notes pursuant to the
Senior Subordinated Exchange Offer will
not be a taxable event for federal income
tax purposes. See "Certain United States
Federal Income Tax Consequences."
Special Procedures for
Beneficial Owners.................. Any beneficial owner whose Senior
Subordinated Old Notes are registered in
the name of a broker, dealer, commercial
bank, trust company or other nominee and
who wishes to tender should contact such
registered holder promptly and instruct
such registered holder to tender on such
beneficial owner's behalf. If such
beneficial owner wishes to tender on such
beneficial owner's own behalf, such
beneficial owner must, prior to completing
and executing the Letter of Transmittal
and delivering the Senior Subordinated Old
Notes, either make appropriate
arrangements to register ownership of the
Senior Subordinated Old Notes in such
beneficial owner's name or obtain a
properly completed bond power from the
registered holder. The transfer of
registered ownership may take considerable
time. See "The Senior Subordinated
Exchange Offer -- Procedures for Tendering
Senior Subordinated Old Notes."
Guaranteed Delivery Procedures..... Holders of Senior Subordinated Old Notes
who wish to tender their Senior
Subordinated Old Notes and whose Senior
Subordinated Old Notes are not immediately
available or who cannot deliver their
Senior Subordinated Old Notes, the Letter
of Transmittal or any other documents
required by the Letter of Transmittal to
the Senior Subordinated Exchange Agent
prior to the Expiration Date must tender
their Senior Subordinated Old Notes
according to the guaranteed delivery
procedures set forth in "The Senior
Subordinated Exchange Offer -- Procedures
for Tendering Senior Subordinated Old
Notes."
Acceptance of Senior Subordinated Old
Notes and Delivery of Senior
Subordinated Exchange Notes........ The Company will accept for exchange any
and all Senior Subordinated Old Notes
which are properly tendered in the Senior
Subordinated Exchange Offer prior to 5:00
p.m., New York City time, on the Senior
Subordinated Expiration Date. The Senior
Subordinated Exchange Notes issued
pursuant to the Senior Subordinated
Exchange Offer will be delivered promptly
following the Senior Subordinated
Expiration Date. See "The Senior
Subordinated Exchange Offer --
8
Acceptance of Senior Subordinated Old
Notes for Exchange; Delivery of Senior
Subordinated Exchange Notes."
Effect on Holders of Senior Subordinated
Old Notes.......................... As a result of the making of, and upon
acceptance for exchange of all validly
tendered Senior Subordinated Old Notes
pursuant to the terms of the Senior
Subordinated Exchange Offer, the Company
will have fulfilled a covenant contained
in the Exchange and Registration Rights
Agreement (the "Senior Subordinated
Registration Rights Agreement") dated as
of June 5, 1998 among the Company,
Holdings, Chase Securities Inc. and Lehman
Brothers Inc. (the "Initial Purchasers"),
and, accordingly, there will be no
liquidated damages payable pursuant to the
terms of the Senior Subordinated
Registration Rights Agreement, and the
holders of the Senior Subordinated Old
Notes will have no further registration or
other rights under the Senior Subordinated
Registration Rights Agreement. Holders of
the Senior Subordinated Old Notes who do
not tender their Senior Subordinated Old
Notes in the Senior Subordinated Exchange
Offer will continue to hold such Senior
Subordinated Old Notes and will be
entitled to all the rights and limitations
applicable thereto under the Indenture
dated as of June 5, 1998 (the "Senior
Subordinated Notes Indenture") among the
Company, Holdings and Bank One, N.A., as
Trustee, relating to the Senior
Subordinated Old Notes and the Senior
Subordinated Exchange Notes, except for
any such rights under the Senior
Subordinated Registration Rights Agreement
that by their terms terminate or cease to
have further effectiveness as a result of
the making of, and the acceptance for
exchange of all validly tendered Senior
Subordinated Old Notes pursuant to, the
Senior Subordinated Exchange Offer.
Consequence of Failure
to Exchange........................ Holders of Senior Subordinated Old Notes
who do not exchange their Senior
Subordinated Old Notes for Senior
Subordinated Exchange Notes pursuant to
the Senior Subordinated Exchange Offer
will continue to be subject to the
restrictions on transfer of such Senior
Subordinated Old Notes provided for in the
Senior Subordinated Old Notes and in the
Senior Subordinated Notes Indenture and as
set forth in the legend on the Senior
Subordinated Old Notes. In general, the
Senior Subordinated Old Notes may not be
offered or sold, unless registered under
the Securities Act, except pursuant to an
exemption from, or in a transaction not
subject to, the Securities Act and
applicable state securities laws. The
Company does not currently anticipate that
it will register the Senior Subordinated
Old Notes under the Securities Act. To the
extent that Senior Subordinated Old Notes
are tendered and accepted in the Senior
Subordinated Exchange Offer, the trading
market for untendered Senior Subordinated
Old Notes could be adversely affected.
9
Senior Subordinated
Exchange Agent..................... Bank One, N.A. is serving as exchange
agent (the "Senior Subordinated Exchange
Agent") in connection with the Senior
Subordinated Exchange Offer. See "The
Senior Subordinated Exchange Offer --
Senior Subordinated Exchange Agent."
Senior Subordinated Exchange Notes
Issuer............................. WESCO Distribution, Inc.
Securities Offered................. $300,000,000 aggregate principal amount
of 9 1/8% Senior Subordinated Notes due
2008, Series B (the "Senior Subordinated
Exchange Notes").
Maturity........................... June 1, 2008.
Interest Payment Dates............. Interest on the Senior Subordinated
Exchange Notes will accrue from June 5,
1998 (the "Senior Subordinated Notes Issue
Date") and be payable in cash semi-
annually in arrears on each June 1 and
December 1, commencing December 1, 1998.
Optional Redemption................ Except as described below, the Senior
Subordinated Exchange Notes will not be
redeemable at the option of the Company
prior to June 1, 2003. Thereafter, the
Senior Subordinated Exchange Notes will be
redeemable at the option of the Company,
in whole or in part, at the redemption
prices set forth herein, together with
accrued and unpaid interest and liquidated
damages, if any, to the date of
redemption. In addition, at any time and
from time to time prior to June 1, 2001,
the Company may, subject to certain
requirements, redeem up to 35% of the
original aggregate principal amount of the
Senior Subordinated Notes (calculated
giving effect to any issuance of
Additional Senior Subordinated Notes (as
defined)) with the net cash proceeds of
one or more Equity Offerings by (i) the
Company or (ii) Holdings to the extent the
net cash proceeds thereof are (a)
contributed to the Company as a capital
contribution to the common equity of the
Company or (b) used to purchase capital
stock of the Company (in either case,
other than Disqualified Stock (as
defined)), at a redemption price equal to
109.125% of the principal amount thereof,
together with accrued and unpaid interest
and liquidated damages, if any, to the
date of redemption; provided that at least
65% of the original aggregate principal
amount of the Senior Subordinated Notes
(calculated giving effect to any issuance
of Additional Senior Subordinated Notes)
remains outstanding immediately after each
such redemption. See "Description of the
Senior Subordinated Exchange Notes --
Optional Redemption."
Change of Control.................. Upon the occurrence of a Change of
Control, (i) the Company will have the
option, at any time on or prior to June 1,
2003, to redeem the Senior Subordinated
Exchange Notes, in whole but not in part,
at a redemption price equal to 100% of the
principal amount thereof, together with
accrued and unpaid interest and liquidated
damages, if any, to the date of redemption
plus the Applicable Premium and (ii) if
the Senior Subordinated Exchange Notes are
not so redeemed or if such Change of
Control occurs after June 1, 2003,
10
each holder of the Senior Subordinated
Exchange Notes will have the right to
require the Company to make an offer to
repurchase such holder's Senior
Subordinated Exchange Notes at a price
equal to 101% of the principal amount
thereof, together with accrued and unpaid
interest and liquidated damages, if any,
to the date of repurchase. See
"Description of the Senior Subordinated
Exchange Notes -- Change of Control."
Guarantees......................... The Senior Subordinated Exchange Notes
will be unconditionally guaranteed by
Holdings on a senior subordinated basis.
The Holdings Guarantee will be
subordinated in right of payment to all
existing and future Senior Indebtedness of
Holdings, including the guarantees of
Senior Indebtedness by Holdings under the
Credit Facilities ($220.5 million on a pro
forma basis as of March 31, 1998), and
effectively subordinated to all
indebtedness and other liabilities
(including but not limited to trade
payables) of Holdings' subsidiaries
($735.0 million on a pro forma basis as of
March 31, 1998, excluding $170.0 million
of indebtedness and guarantees under the
Credit Facilities). Investors should not
rely on the Holdings Guarantee in
evaluating an investment in the Senior
Subordinated Exchange Notes. See "Risk
Factors -- Subordination of the Senior
Subordinated Notes and Holdings
Guarantee."
Ranking............................ The Senior Subordinated Exchange Notes
will be unsecured, will be subordinated in
right of payment to all existing and
future Senior Indebtedness of the Company
and will be effectively subordinated to
all obligations of the subsidiaries of the
Company. The Senior Subordinated Exchange
Notes will rank pari passu with any
existing and future Senior Subordinated
Indebtedness of the Company and will rank
senior to all Subordinated Obligations of
the Company. The Senior Subordinated Notes
Indenture permits the Company to incur
additional indebtedness, including up to
$400.0 million of Senior Indebtedness
under the Credit Facilities, subject to
certain limitations. As of March 31, 1998,
on a pro forma basis, (i) the outstanding
Senior Indebtedness of the Company would
have been $193.2 million, of which $170.0
million would have been Secured
Indebtedness (exclusive of unused
commitments under the Credit Facilities);
(ii) the Company would have had no
outstanding Senior Subordinated
Indebtedness (other than the Senior
Subordinated Notes) and no outstanding
indebtedness that is subordinate or junior
in right of repayment to the Senior
Subordinated Notes; and (iii) the
Company's subsidiaries would have had no
indebtedness, excluding guarantees of
$170.0 million of indebtedness under the
Credit Facilities (but would have had
trade payables and other liabilities
incurred in the ordinary course of
business). See "Unaudited Pro Forma
Financial Information," "Risk Factors --
Subordination of the Senior Subordinated
Notes and Holdings Guarantee" and
"Description of the Senior Subordinated
Exchange Notes -- Ranking."
11
Certain Covenants.................. The Senior Subordinated Notes Indenture
contains covenants that will, subject to
certain exceptions, limit, among other
things, the ability of the Company and/or
its Restricted Subsidiaries to: (i) pay
dividends or make certain other restricted
payments or investments; (ii) incur
additional indebtedness and issue
disqualified stock and preferred stock;
(iii) create liens on assets; (iv) merge,
consolidate, or sell all or substantially
all of their assets; (v) enter into
certain transactions with affiliates; (vi)
create restrictions on dividends or other
payments by Restricted Subsidiaries to the
Company; and (vii) incur indebtedness
senior to the Senior Subordinated Notes
but junior to Senior Indebtedness. See
"Description of the Senior Subordinated
Exchange Notes."
Absence of a Public Market......... The Senior Subordinated Exchange Notes
are new securities and there is currently
no established market for the Senior
Subordinated Exchange Notes. Accordingly,
there can be no assurance as to the
development or liquidity of any market for
the Senior Subordinated Exchange Notes.
The Initial Purchasers have advised the
Company that they currently intend to make
a market in the Senior Subordinated
Exchange Notes. However, they are not
obligated to do so, and any market making
with respect to the Senior Subordinated
Exchange Notes may be discontinued without
notice. The Company does not intend to
apply for listing of the Senior
Subordinated Exchange Notes on any
national securities exchange or for their
quotation on an automated dealer quotation
system.
The Senior Discount Exchange Offer
The Senior Discount
Exchange Offer..................... Holdings is offering to exchange pursuant
to the Senior Discount Exchange Offer up
to $87,000,000 aggregate principal amount
of its Senior Discount Exchange Notes for
a like aggregate principal amount of its
Senior Discount Old Notes. The terms of
its Senior Discount Exchange Notes are
identical in all material respects
(including principal amount, interest rate
and maturity) to the terms of the Senior
Discount Old Notes for which they may be
exchanged pursuant to the Senior Discount
Exchange Offer, except that the Senior
Discount Exchange Notes are freely
transferrable by holders thereof (other
than as provided herein), and are not
subject to any covenant regarding
registration under the Securities Act. See
"The Senior Discount Exchange Offer."
No Minimum Condition............... The Senior Discount Exchange Offer is
not conditioned upon any minimum aggregate
principal amount of Senior Discount Old
Notes being tendered for exchange.
Expiration Date;
Withdrawal of Tenders.............. The Senior Discount Exchange Offer will
expire at 5:00 p.m., New York City time,
on , 1998, unless the Senior
Discount Exchange Offer is extended, in
which case the term "Senior Discount
Expiration Date" means the latest date and
time to which the
12
Senior Discount Exchange Offer is
extended. Holdings does not currently
intend to extend the Senior Discount
Expiration Date. Tenders may be withdrawn
at any time prior to 5:00 p.m., New York
City time, on the Senior Discount
Expiration Date. See "The Senior Discount
Exchange Offer -- Withdrawal Rights."
Exchange Date...................... The date of acceptance for exchange of
the Senior Discount Old Notes will be the
fourth business day following the Senior
Discount Expiration Date.
Conditions to the Senior Discount
Exchange Offer..................... The Senior Discount Exchange Offer is
subject to certain customary conditions,
which may be waived by Holdings. Holdings
currently expects that each of the
conditions will be satisfied and that no
waivers will be necessary. See "The Senior
Discount Exchange Offer -- Certain
Conditions to the Senior Discount Exchange
Offer." Holdings reserves the right to
terminate or amend the Senior Discount
Exchange Offer at any time prior to the
Senior Discount Expiration Date upon the
occurrence of any such condition.
Procedures for Tendering Senior Discount
Old Notes.......................... Each holder wishing to accept the Senior
Discount Exchange Offer must complete,
sign and date the Letter of Transmittal,
or a facsimile thereof, in accordance with
the instructions contained herein and
therein, and mail or otherwise deliver the
Letter of Transmittal, or such facsimile,
together with the Senior Discount Old
Notes and any other required documentation
to the Senior Discount Exchange Agent at
the address set forth therein. See "The
Senior Discount Exchange Offer --
Procedures for Tendering Senior Discount
Old Notes" and "Plan of Distribution."
Use of Proceeds.................... There will be no proceeds to Holdings
from the exchange of Notes pursuant to the
Senior Discount Exchange Offer.
Federal Income Tax Consequences.... The exchange of Notes pursuant to the
Senior Discount Exchange Offer will not be
a taxable event for federal income tax
purposes. See "Certain United States
Federal Income Tax Consequences."
Special Procedures for
Beneficial Owners.................. Any beneficial owner whose Senior Discount
Old Notes are registered in the name of a
broker, dealer, commercial bank, trust
company or other nominee and who wishes to
tender should contact such registered
holder promptly and instruct such
registered holder to tender on such
beneficial owner's behalf. If such
beneficial owner wishes to tender on such
beneficial owner's own behalf, such
beneficial owner must, prior to completing
and executing the Letter of Transmittal
and delivering the Senior Discount Old
Notes, either make appropriate
arrangements to register ownership of the
Senior Discount Old Notes in such
beneficial owner's name or obtain a
properly completed bond power from the
registered holder. The transfer of
registered ownership may take considerable
time. See "The Senior Discount Exchange
Offer -- Procedures for Tendering Senior
Discount Old Notes."
13
Guaranteed Delivery Procedures..... Holders of Senior Discount Old Notes who
wish to tender their Senior Discount Old
Notes and whose Senior Discount Old Notes
are not immediately available or who
cannot deliver their Senior Discount Old
Notes, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Senior Discount
Exchange Agent prior to the Expiration
Date must tender their Senior Discount Old
Notes according to the guaranteed delivery
procedures set forth in "The Senior
Discount Exchange Offer -- Procedures for
Tendering Senior Discount Old Notes."
Acceptance of Senior Discount Old Notes
and Delivery of Senior Discount
Exchange Notes..................... Holdings will accept for exchange any
and all Senior Discount Old Notes which
are properly tendered in the Senior
Discount Exchange Offer prior to 5:00
p.m., New York City time, on the Senior
Discount Expiration Date. The Senior
Discount Exchange Notes issued pursuant to
the Senior Discount Exchange Offer will be
delivered promptly following the Senior
Discount Expiration Date. See "The Senior
Discount Exchange Offer -- Acceptance of
Senior Discount Old Notes for Exchange;
Delivery of Senior Discount Exchange Note"
Effect on Holders of Senior Discount Old
Notes.............................. As a result of the making of, and upon
acceptance for exchange of all validly
tendered Senior Discount Old Notes
pursuant to the terms of this Senior
Discount Exchange Offer, Holdings will
have fulfilled a covenant contained in the
Exchange and Registration Rights Agreement
(the "Senior Discount Registration Rights
Agreement"; together with the Senior
Subordinated Registration Rights
Agreement, the "Registration Rights
Agreements") dated as of June 5, 1998
among Holdings and the Initial Purchasers,
and, accordingly, there will be no
liquidated damages payable pursuant to the
terms of the Senior Discount Registration
Rights Agreement, and the holders of the
Senior Discount Old Notes will have no
further registration or other rights under
the Senior Discount Registration Rights
Agreement. Holders of the Senior Discount
Old Notes who do not tender their Senior
Discount Old Notes in the Senior Discount
Exchange Offer will continue to hold such
Senior Discount Old Notes and will be
entitled to all the rights and limitations
applicable thereto under the Indenture
dated as of June 5, 1998 (the "Senior
Discount Notes Indenture") between
Holdings and Bank One, N.A., as Trustee,
relating to the Senior Discount Old Notes
and the Senior Discount Exchange Notes,
except for any such rights under the
Senior Discount Registration Rights
Agreement that by their terms terminate or
cease to have further effectiveness as a
result of the making of, and the
acceptance for exchange of all validly
tendered Senior Discount Old Notes
pursuant to, the Senior Discount Exchange
Offer.
Consequence of Failure
to Exchange........................ Holders of Senior Discount Old Notes who
do not exchange their Senior Discount Old
Notes for Senior
14
Discount Exchange Notes pursuant to the
Senior Discount Exchange Offer will
continue to be subject to the
restrictions on transfer of such Senior
Discount Old Notes provided for in the
Senior Discount Old Notes and in the
Senior Discount Notes Indenture and as
set forth in the legend on the Senior
Discount Old Notes. In general, the
Senior Discount Old Notes may not be
offered or sold, unless registered under
the Securities Act, except pursuant to an
exemption from, or in a transaction not
subject to, the Securities Act and
applicable state securities laws.
Holdings does not currently anticipate
that it will register the Senior Discount
Old Notes under the Securities Act. To
the extent that Senior Discount Old Notes
are tendered and accepted in the Senior
Discount Exchange Offer, the trading
market for untendered Senior Discount Old
Notes could be adversely affected.
Senior Discount Exchange Agent..... Bank One, N.A. is serving as exchange
agent (the "Senior Discount Exchange
Agent") in connection with the Senior
Discount Exchange Offer. See "The Senior
Discount Exchange Offer -- Senior Discount
Exchange Agent."
Senior Discount Exchange Notes
Issuer............................. WESCO International, Inc.
Securities Offered................. $87,000,000 aggregate principal amount
at maturity of 11 1/8% Senior Discount
Notes due 2008, Series B (the "Senior
Discount Exchange Notes") having an
Accreted Value at , 1998 equal to
approximately % of the principal amount
of maturity thereof.
Maturity........................... June 1, 2008.
Interest Payment Dates............. Cash interest will not accrue or be
payable on the Senior Discount Exchange
Notes prior to June 1, 2003. Thereafter,
cash interest on the Senior Discount
Exchange Notes will accrue at a rate of
11 1/8% per annum and will be payable
semi-annually in arrears on June 1 and
December 1 of each year, commencing on
December 1, 2003.
Original Issue Discount............ For U.S. federal income tax purposes,
the Senior Discount Exchange Notes will be
treated as having been issued with
"original issue discount" equal to the
difference between the sum of all cash
payments (whether denominated as principal
or interest) to be made on the Senior
Discount Notes and the issue price of the
Senior Discount Notes. Each holder of a
Senior Discount Exchange Note must include
as gross income for U.S. federal income
tax purposes a portion of such original
issue discount for each day during each
taxable year in which a Senior Discount
Exchange Note is held even though no cash
interest payments will be received prior
to December 1, 2003. See "Certain United
States Federal Income Tax Consequences --
Payments of Interest on Senior Discount
Notes."
15
Mandatory Principal Redemption..... On June 1, 2003, Holdings will be
required to redeem an amount equal to
$354.96 per $1,000 principal amount at
maturity of each Senior Discount Exchange
Note then outstanding ($30,881,520 in
aggregate principal amount at maturity of
the Senior Discount Notes, assuming all of
the Senior Discount Notes remain
outstanding on such date (the "Mandatory
Principal Redemption Amount")) on a pro
rata basis at a redemption price of 100%
of the principal amount at maturity of the
Senior Discount Exchange Notes so
redeemed. The Mandatory Principal
Redemption Amount represents (i) the
excess of the aggregate Accreted Value of
all Senior Discount Notes outstanding on
June 1, 2003 over the aggregate issue
price thereof less (ii) an amount equal to
one year's simple uncompounded interest on
the aggregate issue price of such Senior
Discount Notes at a rate per annum equal
to the yield to maturity on the Senior
Discount Notes.
Optional Redemption................ Except as described below, the Senior
Discount Exchange Notes will not be
redeemable at the option of Holdings prior
to June 1, 2003. Thereafter, the Senior
Discount Exchange Notes will be redeemable
at the option of Holdings, in whole or in
part, at the redemption prices set forth
herein, together with accrued and unpaid
interest and liquidated damages, if any,
to the date of redemption. In addition, at
any time prior to June 1, 2001, Holdings
may, subject to certain requirements,
redeem, in whole but not in part, the
Senior Discount Notes with the net cash
proceeds of one or more Equity Offerings
at a redemption price equal to 111.125% of
the Accreted Value, together with
liquidated damages, if any, to the date of
redemption. See "Description of the Senior
Discount Exchange Notes -- Optional
Redemption."
Change of Control.................. Upon the occurence of a Change of
Control, (i) Holdings will have the
option, at any time on or prior to June 1,
2003, to redeem the Senior Discount
Exchange Notes, in whole but not in part,
at a redemption price equal to 100% of the
Accreted Value thereof, together with
liquidated damages, if any, to the date of
redemption plus the Applicable Premium and
(ii) if the Senior Discount Exchange Notes
are not so redeemed or if such Change of
Control occurs after June 1, 2003, each
holder of the Senior Discount Exchange
Notes will have the right to require
Holdings to make an offer to repurchase
such holder's Senior Discount Exchange
Notes at a price equal to (a) 101% of the
Accreted Value thereof, together with
liquidated damages, if any, to the date of
redemption if repurchased on or before
June 1, 2003, and (b) 101% of the
principal amount at maturity thereof,
together with accrued and unpaid interest
and liquidated damages, if any, to the
date of repurchase, if repurchased after
June 1, 2003. See "Description of the
Senior Discount Exchange Notes -- Change
of Control."
Guarantees......................... None.
16
Ranking............................ The Senior Discount Exchange Notes will
be senior unsecured obligations of
Holdings and will be effectively
subordinated to all obligations of the
subsidiaries of Holdings (including the
Company). The Senior Discount Exchange
Notes will rank pari passu with any
existing and future Senior Indebtedness of
Holdings and will rank senior to all
Subordinated Obligations of Holdings.
Holdings is a holding company with no
operations of its own and whose only asset
is the capital stock of the Company (all
of which will be pledged to secure the
Credit Facilities). As a result of the
holding company structure, the Senior
Discount Exchange Notes will effectively
rank junior in right of payment to all
creditors of the Company and its
subsidiaries, including the lenders under
the Credit Facilities, holders of the
Senior Subordinated Notes and trade
creditors. The Senior Discount Notes
Indenture permits Holdings to incur
additional indebtedness, including up to
$400.0 million of Senior Indebtedness
under the Credit Facilities, subject to
certain limitations. As of March 31, 1998,
on a pro forma basis, (i) Holdings would
have had no outstanding Senior
Indebtedness (other than the Senior
Discount Notes and guarantees under the
Credit Facilities) or Secured Indebtedness
and (ii) Holdings' subsidiaries would have
had total liabilities of $735.0 million,
excluding $170.0 million of indebtedness
and guarantees under the Credit
Facilities. See "Description of the Senior
Discount Exchange Notes."
Certain Covenants.................. The Senior Discount Notes Indenture
contains covenants that will, subject to
certain exceptions, limit, among other
things, the ability of Holdings and/or its
Restricted Subsidiaries to: (i) pay
dividends or make certain other restricted
payments or investments; (ii) incur
additional indebtedness and issue
disqualified stock and preferred stock;
(iii) create liens on assets; (iv) merge,
consolidate, or sell all or substantially
all of their assets; (v) enter into
certain transactions with affiliates; and
(vi) create restrictions on dividends or
other payments by Restricted Subsidiaries
to Holdings. See "Description of the
Senior Discount Exchange Notes."
Absence of a Public Market......... The Senior Discount Exchange Notes are
new securities and there is currently no
established market for the Senior Discount
Exchange Notes. Accordingly, there can be
no assurance as to the development or
liquidity of any market for the Senior
Discount Exchange Notes. The Initial
Purchasers have advised Holdings that they
currently intend to make a market in the
Senior Discount Exchange Notes. However,
they are not obligated to do so, and any
market making with respect to the Senior
Discount Exchange Notes may be
discontinued without notice. Holdings does
not intend to apply for listing of the
Senior Discount Exchange Notes on any
national securities exchange or for their
quotation on an automated dealer quotation
system.
17
Risk Factors
Prospective investors in the Exchange Notes should carefully consider the
risk factors set forth under the caption "Risk Factors" and the other
information included in this Prospectus. See "Risk Factors."
----------------
The principal executive offices of the Issuers are located at Commerce
Court, Suite 700, Four Station Square, Pittsburgh, Pennsylvania 15219. The
Issuers' telephone number is (412) 454-2200.
18
Summary Historical and Pro Forma Financial and Other Data
The following table sets forth summary historical consolidated financial
data of Holdings (i) as of and for the years ended December 31, 1995, 1996 and
1997, which have been derived from Holdings' financial statements included
elsewhere herein which have been audited by Coopers & Lybrand L.L.P. and (ii)
as of and for the three months ended March 31, 1997 and 1998 (unaudited) which
have been derived from Holdings' unaudited interim consolidated financial
statements and include, in the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the results of operations and financial position for and as of
the end of such periods. Results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year or for
any future period.
The following table also presents certain summary unaudited pro forma
financial and other data of Holdings and the Company as of and for the twelve
months ended March 31, 1998, which have been derived from the Unaudited Pro
Forma Financial Information and the notes thereto included elsewhere in this
Offering Memorandum. The summary unaudited pro forma income statement data and
other financial data give effect to the Recapitalization and the Recent
Acquisitions as if they had occurred as of January 1, 1997. The summary
unaudited pro forma balance sheet data give effect to the Recapitalization and
the Reily acquisition as if they had occurred as of March 31, 1998. The summary
unaudited pro forma and other financial data are provided for informational
purposes only and do not purport to be indicative of the results that would
have actually been obtained had the Recapitalization and the Recent
Acquisitions been completed on the dates indicated or that may be expected to
occur in the future.
Holdings has as its only asset all of the outstanding capital stock of the
Company; accordingly, the historical financial data presented herein are
identical to those of WESCO. The summary historical and pro forma financial and
other data should be read in conjunction with, and is qualified in its entirety
by, the historical consolidated financial statements of Holdings and the notes
thereto, "Selected Historical Consolidated Financial and Other Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Financial Information," "The
Recapitalization" and "Summary -- Recent Developments" contained elsewhere in
this Prospectus.
19
Summary Historical and Pro Forma Financial and Other Data
Holdings
-----------------------------------------------------------------
(unaudited)
Year Ended Three Months Ended
December 31, March 31,
----------------------------------------- -----------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
(dollars in millions)
Income Statement Data:
Sales, net .............................................. $ 1,857.0 $ 2,274.6 $ 2,594.8 $ 576.7 $ 693.4
Gross profit (exclusive of depreciation and
amortization) .......................................... 321.0 405.0 463.9 104.4 126.7
Selling, general and administrative expenses ............ 258.0 326.0 372.5 86.7 103.5
Depreciation and amortization ........................... 7.3 10.8 11.3 2.8 3.0
---------- ---------- ---------- -------- --------
Income from operations .................................. 55.7 68.2 80.1 14.9 20.2
Interest expense, net ................................... 15.8 17.4 20.1 4.8 6.2
Other expense(1) ........................................ -- -- -- -- --
---------- ---------- ---------- -------- --------
Income before income taxes .............................. 39.9 50.8 60.0 10.1 14.0
Provision for income taxes .............................. 14.8 18.3 23.8 4.0 5.5
---------- ---------- ---------- -------- --------
Income before extraordinary charge, net of taxes ........ 25.1 32.5 36.2 6.1 8.5
Extraordinary charge, net of applicable taxes (2) ....... 8.1 -- -- -- --
---------- ---------- ---------- -------- --------
Net income .............................................. $ 17.0 $ 32.5 $ 36.2 $ 6.1 $ 8.5
========== ========== ========== ======== ========
Other Financial Data:
EBITDA(3) ............................................... $ 63.0 $ 79.0 $ 91.4 $ 17.7 $ 23.2
Adjusted EBITDA (4) .....................................
Capital expenditures .................................... 6.5 9.4 12.4 1.4 3.7
Ratio of Adjusted EBITDA to interest expense (5) ........
Ratio of total debt to Adjusted EBITDA ..................
Balance Sheet Data:
Adjusted working capital (6) ............................ $ 222.5 $ 291.6 $ 338.8 $ 315.9 $ 375.4
Total assets ............................................ 581.3 773.5 870.9 802.6 962.0
Total long-term debt (7) ................................ 172.0 260.6 294.3 295.7 350.5
Redeemable common stock (8) ............................. 7.7 8.9 9.0 9.0 11.4
Stockholders' equity .................................... 116.4 148.7 184.5 154.7 193.1
Pro Forma
(unaudited)
Twelve Months
Ended
March 31, 1998
----------------------------
Holdings Company
------------- -------------
Income Statement Data:
Sales, net .............................................. $ 2,965.3 $ 2,965.3
Gross profit (exclusive of depreciation and
amortization) .......................................... 537.0 537.0
Selling, general and administrative expenses ............ 427.4 427.4
Depreciation and amortization ........................... 13.5 13.5
----------- -----------
Income from operations .................................. 96.1 96.1
Interest expense, net ................................... 53.7 47.9
Other expense(1) ........................................ 15.4 15.4
----------- -----------
Income before income taxes .............................. 27.0 32.8
Provision for income taxes .............................. 10.8 13.1
----------- -----------
Income before extraordinary charge, net of taxes ........ 16.2 19.7
Extraordinary charge, net of applicable taxes (2) ....... -- --
----------- -----------
Net income .............................................. $ 16.2 $ 19.7
=========== ===========
Other Financial Data:
EBITDA(3) ............................................... $ 109.6 $ 109.6
Adjusted EBITDA (4) ..................................... 113.8 113.8
Capital expenditures ....................................
Ratio of Adjusted EBITDA to interest expense (5) ........ 2.3 x 2.7 x
Ratio of total debt to Adjusted EBITDA .................. 4.8 x 4.3 x
Balance Sheet Data:
Adjusted working capital (6) ............................ $ 142.5 $ 142.5
Total assets ............................................ 801.4 801.4
Total long-term debt (7) ................................ 539.1 488.6
Redeemable common stock (8) ............................. 11.4 11.4
Stockholders' equity .................................... ( 165.5) ( 115.0)
- - - - ---------------------
(1) Costs relating to sale of accounts receivable pursuant to the Receivables
Facility.
(2) Represents a charge, net of taxes, relating to the write-off of unamortized
debt issuance costs associated with the early termination of debt.
(3) EBITDA represents income from operations plus depreciation and
amortization. EBITDA is presented because management understands that such
information is considered by certain investors to be an additional basis
for evaluating the Issuers' ability to pay interest and repay debt. EBITDA
should not be considered an alternative to measures of operating
performance as determined in accordance with generally accepted accounting
principles or as a measure of the Issuers' operating results and cash
flows or as a measure of the Issuers' liquidity. Since EBITDA is not
calculated identically by all companies, the presentation herein may not
be comparable to other similarly titled measures of other companies.
(4) For the twelve months ended March 31, 1998, Adjusted EBITDA represents
EBITDA after (i) giving effect to $3.6 million of annual cost savings
expected to be realized by the end of 1998 as a result of the
consolidation and/or closure of five WESCO branches following the
acquisitions of Avon Electrical, Brown Wholesale and Reily and (ii)
eliminating $0.6 million in one-time costs incurred in connection with a
planned initial equity public offering (the plans for which were terminated
upon the execution of the Recapitalization Agreement).
(5) For the purposes of this calculation, interest expense of Holdings includes
cash interest expense of $42.3 million, the accretion of interest expense
on the Senior Discount Notes of $5.8 million and the accretion of interest
expense on assumed debt of $1.8 million. Interest expense of the Company
includes cash interest of $42.3 million and excludes accretion of interest
expense on assumed debt of $1.8 million.
(6) Defined as trade accounts receivable plus inventories less accounts
payable.
(7) Excludes $250.0 million of proceeds from the sale of accounts receivable
pursuant to the Receivables Facility.
(8) Represents redeemable common stock as described in Note 9 to the
consolidated financial statements. Under certain conditions, the holders
thereof have the right to require Holdings to repurchase all of the
redeemable shares and the exercisable portion of the options. These
repurchase rights terminate upon consummation of an initial equity public
offering. See "Certain Relationships and Related Transactions --
Management Stockholders."
20
RISK FACTORS
Holders of Old Notes should consider carefully, in addition to the other
information contained in this Prospectus, the following factors before deciding
to tender Old Notes in the Exchange Offers. The risk factors set forth below
are generally applicable to the Old Notes as well as the Exchange Notes.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for Exchange
Notes pursuant to the applicable Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Notes as set forth in the legend
thereon. In general, Old Notes may not be offered or sold unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws. The respective Issuers do not currently
intend to register the Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission, the Issuers believe that
Exchange Notes issued pursuant to the applicable Exchange Offer in exchange for
Old Notes may be offered for resale, resold or otherwise transferred by Holders
thereof (other than any such Holder which is an "affiliate" of the Issuers
thereof within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Old Notes were acquired in the ordinary
course of such Holders' business and such Holders have no arrangement with any
person to participate in the distribution of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." To the extent that Old Notes are tendered
and accepted in the applicable Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes will be adversely affected.
Substantial Leverage and Debt Service
Each Issuer is significantly leveraged as a result of the
Recapitalization. See "The Recapitalization" and "Capitalization." As of March
31, 1998, on a pro forma basis, Holdings and the Company would have had
approximately $539.1 million and $488.6 million, respectively, of consolidated
long-term indebtedness and a common stockholders' deficit of approximately
$165.5 million and $115.0 million, respectively. See "Capitalization" and
"Unaudited Pro Forma Financial Information." Each Issuer and its respective
subsidiaries may incur additional indebtedness (including certain Senior
Indebtedness) in the future, subject to certain limitations contained in the
instruments governing its indebtedness. Accordingly, each Issuer will have
significant debt service obligations.
Each Issuer's debt service obligations will have important consequences to
the holders of the applicable Notes, including the following: (i) a substantial
portion of cash flow from operations will be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the funds
available to such Issuer for operations, future business opportunities and
other purposes and increasing such Issuer's vulnerability to adverse general
economic and industry conditions; (ii) such Issuer's ability to obtain
additional financing in the future may be limited; (iii) certain of such
Issuer's indebtedness (including, but not limited to, the amounts borrowed
under the Credit Facilities) will be at variable rates of interest, which will
make such Issuer vulnerable to increases in interest rates; (iv) all of the
indebtedness incurred in connection with the Credit Facilities will become due
prior to the time the principal payment on the Notes will become due; (v) such
Issuer will be substantially more leveraged than certain of its competitors,
which might place such Issuer at a competitive disadvantage;
(vi) such Issuer may be hindered in its ability to adjust rapidly to changing
market conditions; and (vii) the Mandatory Principal Reduction Amount with
respect to the Senior Discount Notes will become due and payable on June 1,
2003.
Each Issuer's ability to make scheduled payments of the principal of, or
to pay interest on, or to refinance its indebtedness (including the applicable
Notes) and to make scheduled payments under its operating leases or to fund
planned capital expenditures or finance acquisitions will depend on its future
performance, which to a certain extent is subject to economic, financial,
competitive and other factors
21
beyond its control. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." There
can be no assurance that the Company's business will continue to generate
sufficient cash flow from operations in the future to service the Issuers'
debt, make necessary capital expenditures or meet other cash needs. If unable
to do so, each Issuer may be required to refinance all or a portion of its
existing debt, including the applicable Notes, to sell assets or to obtain
additional financing. There can be no assurance that any such refinancing or
that any such sale of assets or additional financing would be possible on terms
reasonably favorable to the Issuers.
Restrictive Debt Covenants
The Credit Facilities and the Indentures contain numerous financial and
operating covenants that will limit the discretion of the Issuers' management
with respect to certain business matters. These covenants place significant
restrictions on, among other things, the ability of the Issuers to incur
additional indebtedness, to pay dividends and other distributions, to repay
Subordinated Obligations, to enter into sale and leaseback transactions, to
create liens or other encumbrances, to make certain payments and investments,
to engage in certain transactions with affiliates, to sell or otherwise dispose
of assets and to merge or consolidate with other entities and will otherwise
restrict corporate activities. See "Description of the Credit Facilities,"
"Description of the Senior Subordinated Exchange Notes -- Certain Covenants"
and "Description of the Senior Discount Exchange Notes -- Certain Covenants."
The Credit Facilities also require the Issuers to meet certain financial ratios
and tests. The ability of the Issuers to comply with these and other provisions
of the Credit Facilities and the Indentures may be affected by changes in
economic or business conditions or other events beyond the Issuers' control. A
failure to comply with the obligations contained in the Credit Facilities or
the Indentures could result in an event of default under either the Credit
Facilities or the Indentures which could result in acceleration of the related
debt and the acceleration of debt under other instruments evidencing
indebtedness that may contain cross-acceleration or cross-default provisions.
If the indebtedness under the Credit Facilities were to be accelerated, there
can be no assurance that the assets of the Company would be sufficient to repay
in full such indebtedness and the other indebtedness of the Issuers, including
the Notes.
Subordination of the Senior Subordinated Notes and Holdings Guarantee
The Company's obligations under the Senior Subordinated Notes are
subordinate and junior in right of payment to all existing and future Senior
Indebtedness of the Company. As of March 31, 1998, on a pro forma basis, the
aggregate amount of the Company's outstanding Senior Indebtedness would have
been approximately $170.0 million (excluding unused commitments). Although the
Senior Subordinated Notes Indenture contains limitations on the amount of
additional indebtedness which the Company and its subsidiaries may incur, under
certain circumstances the amount of such indebtedness could be substantial and
such indebtedness could be Senior Indebtedness. By reason of such
subordination, in the event of an insolvency, liquidation, or other
reorganization of the Company, the lenders under the Credit Facilities and
other creditors who are holders of Senior Indebtedness of the Company must be
paid in full before the holders of the Senior Subordinated Notes may be paid.
Accordingly, there may be insufficient assets remaining after payment of prior
claims to pay amounts due on the Senior Subordinated Notes. In addition, under
certain circumstances, no payments may be made with respect to the Senior
Subordinated Notes if a default exists with respect to Senior Indebtedness of
the Company. See "Description of the Senior Subordinated Exchange Notes" and
"Description of the Credit Facilities."
In addition, the Senior Subordinated Notes are effectively subordinated to
all liabilities of the Company's subsidiaries, including trade payables and the
guarantees by such subsidiaries of the Company's obligations under the Credit
Facilities. The Senior Subordinated Notes are not guaranteed by any of the
Company's subsidiaries. As of March 31, 1998, on a pro forma basis, the
Company's subsidiaries would have had no indebtedness (excluding guarantees of
the Company's obligations under the Credit Facilities), but would have had
trade payables and other liabilities incurred in the ordinary course of
business. The right of the Company to receive assets of any of its subsidiaries
upon liquidation or
22
reorganization of such subsidiary will be subordinated to the claims of that
subsidiary's creditors (including trade creditors), except to the extent the
Company itself is recognized as a creditor of such subsidiary. See "Description
of the Senior Subordinated Exchange Notes -- Ranking."
The Senior Subordinated Notes are guaranteed by Holdings on a senior
subordinated basis. The Holdings Guarantee is subordinated to all existing and
future Senior Indebtedness of Holdings ($220.5 million on a pro forma basis as
of March 31, 1998), including the guarantees of Senior Indebtedness issued by
Holdings under the Credit Facilities, and effectively subordinated to all
indebtedness and other liabilities (including trade payables) of Holdings'
subsidiaries ($905.0 million on a pro forma basis as of March 31, 1998).
Investors should not rely on the Holdings Guarantee in evaluating an investment
in the Senior Subordinated Notes.
Structural Subordination of the Senior Discount Notes
Holdings is a holding company whose only material asset is the capital
stock of the Company. The Senior Discount Notes are an obligation of Holdings
and the holders of the Senior Discount Notes have no recourse to the Company or
its assets, including any subsidiaries of the Company. The Senior Discount
Notes are not guaranteed by any of Holdings' subsidiaries. It is not
anticipated that Holdings will have any business (other than in connection with
its ownership of the capital stock of the Company and the performance of its
obligations with respect to the Senior Discount Notes and the Credit
Facilities) and will depend on distributions from the Company to meet its debt
service obligations, including, without limitation, interest and principal
obligations with respect to the Senior Discount Notes. Because of the
substantial leverage of the Company, and the dependence of Holdings upon the
operating performance of the Company to generate distributions to Holdings,
there can be no assurance that Holdings will have adequate funds to fulfill its
obligations in respect of the Senior Discount Notes when due. In addition, the
Credit Facilities, the Senior Subordinated Notes Indenture and applicable
federal and state law impose restrictions on the payment of dividends and the
making of loans by the Company to Holdings. As a result of the foregoing,
Holdings may be unable to gain access to the cash flow or assets of the Company
in amounts sufficient to pay the Mandatory Principal Redemption Amount when due
on June 1, 2003, cash interest on the Senior Discount Notes on and after
December 1, 2003, the date on which cash interest thereon first becomes
payable, and Accreted Value or principal of the Senior Discount Notes when due
or upon a Change of Control or upon the occurrence of any other event requiring
the repayment of Accreted Value or principal.
Encumbrances on Assets to Secure Credit Facilities
The Issuers' obligations under the Credit Facilities are secured by a
first priority pledge of and security interest in substantially all of the
assets of Holdings and its subsidiaries. If either Issuer becomes insolvent or
is liquidated, or if payment under any of the Credit Facilities or any other
Secured Indebtedness is accelerated, the lenders under the Credit Facilities or
such other Secured Indebtedness will be entitled to exercise the remedies
available to a secured lender under applicable law (in addition to any remedies
that may be available under the instruments pertaining to the Credit Facilities
or such other Secured Indebtedness). Neither the Senior Subordinated Notes nor
the Senior Discount Notes are secured. Accordingly, holders of such Secured
Indebtedness will have a prior claim with respect to the assets securing such
indebtedness. See "Description of the Credit Facilities," "Description of the
Senior Subordinated Exchange Notes" and "Description of the Senior Discount
Exchange Notes."
Change of Control
Upon the occurence of a Change of Control, (i) each Issuer will have the
option, at any time on or prior to June 1, 2003 to redeem such Issuer's Notes,
in whole but not in part, at a redemption price equal to (a) 100% of the
principal amount thereof, together with accrued and unpaid interest and
liquidated damages, if any, to the date of redemption plus the Applicable
Premium in the case of the Senior Subordinated Notes and (b) 100% of the
Accreted Value thereof, together with liquidated damages, if any, to the date
of redemption plus the Applicable Premium in the case of the Senior Discount
Notes and (ii) if an Issuer does not redeem its Notes pursuant to clause (i)
above, or such Change in Control occurs after June 1, 2003, each holder of a
Note will have the right to require the Issuer thereof to make
23
an offer to repurchase such holder's Note (a) at a price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest and
liquidated damages, if any, to the date of repurchase in the case of a Senior
Subordinated Note and (b) at a price equal to (x) 101% of the Accreted Value
thereof, together with liquidated damages, if any, to the date of repurchase if
repurchased on or before June 1, 2003, and (y) 101% of the principal amount at
maturity thereof, together with accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase if repurchased after June 1, 2003,
in the case of a Senior Discount Note. The Credit Facilities prohibit the
Issuers from repurchasing any Notes, except in certain circumstances. The
Credit Facilities also provide that certain change of control events with
respect to the Issuers constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Indebtedness to which either
or both the Issuers becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when either
Issuer is prohibited from purchasing such Issuer's Notes, such Issuer could
seek the consent of its lenders to purchase the Notes or could attempt to
refinance the borrowings that contain such prohibition. If such Issuer does not
obtain such a consent or refinance such borrowings, such Issuer would remain
prohibited from purchasing the Notes. In such case, such Issuer's failure to
purchase tendered Notes would constitute a default under the one or both of the
Indentures and the Credit Facilities, which, in turn, could result in amounts
outstanding under the Credit Facilities being declared due and payable. Any
such declaration could have adverse consequences to the Issuers and the holders
of the Notes. In the event of a Change of Control, there can be no assurance
that the Issuers would have sufficient assets to satisfy all of its obligations
under the Credit Facilities and the Notes. The provisions relating to a Change
of Control included in the Indentures may increase the difficulty of a
potential acquiror obtaining control of the Issuers. See "Description of the
Senior Subordinated Exchange Notes -- Change of Control" and "Description of
the Senior Discount Exchange Notes -- Change of Control."
General Economic Conditions
The electrical wholesale distribution industry is affected by changes in
economic conditions, including national, regional and local slowdowns in
construction and industrial activity, which are outside the control of the
Company. The Company's operating results may also be adversely affected by
increases in interest rates that may lead to a decline in economic activity,
particularly in the construction market, while simultaneously resulting in
higher interest payments under the Credit Facilities. In addition, during
periods of economic slowdowns WESCO's credit losses could increase
significantly. There can be no assurance that economic slowdowns, adverse
economic conditions or cyclical trends in certain customer markets will not
have a material adverse effect on the Company's operating results and financial
condition.
Competition
The electrical wholesale distribution industry is highly competitive.
WESCO competes directly with national and regional broad-based distributors,
niche distributors carrying only specialized products, and small, local
distributors with one or a few locations. Another source of competition in the
wholesale channel is buying groups formed by smaller distributors to increase
purchasing power and provide some cooperative marketing capability. Outside the
wholesale channel, manufacturers employ, and may increase the use of, direct
sales representatives. In addition, some manufacturers with sufficient size,
geographic scope and financial and marketing resources may be in a position to
offer customers National Accounts services. Finally, the development of
alternative distribution channels, such as Internet-based catalogs,
do-it-yourself ("DIY") retail outlets or a shift to direct sales and service by
manufacturers, could have a material adverse effect on the wholesale
distribution market and, as a result, the Company's performance.
Some of WESCO's existing competitors have, and new market entrants may
have, greater financial and marketing resources than WESCO. To the extent
existing or future competitors seek to gain or retain market share by reducing
prices, WESCO may be required to lower its prices, thereby adversely affecting
financial results. Existing or future competitors also may seek to compete with
WESCO for acquisitions, which could have the effect of increasing the price and
reducing the number of suitable
24
acquisitions, and may also compete with WESCO for start-up locations, thereby
limiting the number of attractive locations for expansion. In addition, it is
possible that competitive pressures resulting from the industry trend toward
consolidation could affect growth and profit margins. See "Business --
Competition."
Growth Strategy
A principal component of WESCO's strategy is to continue to expand through
additional acquisitions that complement WESCO's operations in new or existing
markets. Acquisitions by WESCO will involve risks, including the successful
integration and management of acquired operations and personnel. The
integration of acquired businesses may also lead to the loss of key employees
of the acquired companies and diversion of management attention from ongoing
business concerns. There can be no assurance that WESCO will be able to
identify and acquire appropriate businesses on satisfactory terms or that
future acquisitions will not have a material adverse effect on the Company's
operating results, particularly during periods in which the operations of
acquired businesses are being integrated into WESCO's operations. WESCO is also
building its international presence. Significant expansion into international
markets could involve risks relating to operating in foreign countries,
including those relating to currency exchange rates, new and different legal,
tax, accounting and regulatory requirements. See "Summary -- Recent
Developments," "Business -- Business Strategy," " -- Acquisitions" and " --
International."
In order to implement its strategy, WESCO is likely to require additional
funding. Future acquisitions could be financed by incurring additional
indebtedness, including increased borrowings under the Credit Facilities.
WESCO's ability to obtain financing may be constrained by, among other things,
its high degree of leverage following the Recapitalization. There can be no
assurance that adequate funding will be available, or if available will be, on
terms satisfactory to WESCO. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources," "Business -- Acquisitions," "Description of the Credit Facilities,"
"Description of the Senior Subordinated Exchange Notes" and "Description of the
Senior Discount Exchange Notes."
Dependence on Key Personnel
WESCO is dependent upon the skills, experience and efforts of its Chief
Executive Officer and other executive officers. Loss of the services of the
Chief Executive Officer or one or more of the other executive officers could
have a material adverse effect on WESCO's business and development. WESCO has
no written employment contracts with any of its executive officers other than
its Chief Executive Officer and its Executive Vice President, Industry Affairs.
In connection with the Recapitalization, WESCO also intends to enter into a
two-year employment agreement with David F. McAnally, its Chief Operating
Officer, Chief Financial Officer and Treasurer. See "Management -- Employment
Agreements."
WESCO's continued growth depends in part on its continuing ability to
attract and retain qualified managers, sales persons and other key employees
and on its executive officers' ability to manage growth successfully. No
assurance can be given that WESCO will be able to attract and retain such
employees.
Product Supply
Consistent with industry practice, most of WESCO's agreements with
suppliers (including both distribution agreements and preferred supplier
agreements) are terminable by either party on no more than 60 days notice.
WESCO's ten largest suppliers in 1997 accounted for approximately 45% of
WESCO's purchases for the period. The largest supplier was Eaton Corporation,
through its Cutler-Hammer division, successor to the Distribution and Control
Business Unit of Westinghouse, accounting for approximately 18% of WESCO's
purchases. The loss of, or a substantial decrease in the availability of,
products from any of these suppliers, or the loss of key preferred supplier
agreements, could have a material adverse effect on WESCO's business. In
addition, supply interruptions could arise from shortages of raw materials,
labor disputes or weather conditions affecting products or shipments, or other
reasons beyond WESCO's control. An interruption of operations at any of WESCO's
five distribution centers could have a material adverse effect on the
operations of branches served by the affected distribution
25
center. Furthermore, there can be no assurance that particular products, or
product lines, will be available to WESCO, or available in quantities
sufficient to meet customer demand. Such limited product access could put WESCO
at a competitive disadvantage. See "Business -- Suppliers and Purchasing" and
"Business -- Distribution Network."
Dependence on Information Systems; Year 2000 Issue
The Company believes that its computer systems are an integral part of its
business and growth strategies. WESCO depends on its information systems to
process orders, manage inventory and accounts receivable collections, purchase
products, ship products among its branches on a timely basis, maintain
cost-effective operations and provide superior service to its customers.
Although the Company believes that it has the appropriate disaster recovery
plans in place, there can be no assurance that a serious disruption in the
operation of its information systems will not occur. Any such disruption could
have a material adverse effect on the Company's business and results of
operations. See "Business -- Management Information Systems."
WESCO is in the process of modifying, upgrading or replacing its computer
software applications and systems to accommodate the "Year 2000" changes
required for correct recording of dates for the year 2000 and beyond. WESCO
does not expect that the cost of its Year 2000 compliance program will be
material to its financial condition or results of operations. WESCO believes
that it will be able to achieve compliance by the beginning of 1999, and does
not currently anticipate any material disruption in its operations. WESCO has
very limited information concerning the compliance status of its suppliers and
customers. In the event that WESCO or any of WESCO's significant suppliers do
not successfully achieve Year 2000 compliance, WESCO's business or operations
could be adversely affected.
Environmental Risks
The Company's facilities and operations are subject to federal, state and
local laws and regulations relating to environmental protection ("Environmental
Laws") and human health and safety. Certain of these laws and regulations may
impose strict, joint and several liability on certain persons for the cost of
investigation or remediation of contaminated properties, meaning that a person
(including the Company) could be liable for more than its pro rata share of
such costs regardless of fault. These persons may include present or future
owners and operators of properties, and persons that arranged for the disposal
of hazardous substances. In addition, the disposal of certain products
distributed by WESCO, such as ballasts, fluorescent lighting and batteries,
must comply with Environmental Laws. In connection with its acquisition
program, WESCO acquires new branch locations, including owned and leased real
property which may carry with it certain liabilities under Environmental Laws.
It is WESCO's practice to conduct due diligence investigations in connection
with such acquisitions, including environmental assessments, and, where
appropriate, to provide for contractual indemnities. However, no assurance can
be given that the Company will not become subject to liabilities for
environmental matters, including with respect to conditions at its properties,
that such liabilities will not be material or that, where negotiated,
contractual indemnities will be sufficient to cover such liabilities.
Fraudulent Transfer Considerations
A significant portion of the net proceeds of the Senior Subordinated Old
Notes was paid as a dividend to Holdings and used to repurchase outstanding
Common Stock pursuant to the Recapitalization.
The incurrence of indebtedness by either of the Issuers, such as the
Notes, may be subject to review under federal bankruptcy law or relevant state
fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or
on behalf of unpaid creditors of such Issuer. Under these laws, if, in a
bankruptcy or reorganization case or a lawsuit by or on behalf of unpaid
creditors of such Issuer, a court were to find that, at the time such Issuer
incurred indebtedness, including indebtedness under the applicable Notes, (i)
such Issuer incurred such indebtedness with the intent of hindering, delaying
or defrauding current or future creditors or (ii) (a) such Issuer received less
than reasonably equivalent value or fair consideration for incurring such
indebtedness and (b) such Issuer (1) was insolvent or was rendered insolvent by
reason of any of the transactions, (2) was engaged, or about to engage, in a
business or transaction for which its assets remaining with such Issuer
constituted unreasonably small
26
capital to carry on its business, (3) intended to incur, or believed that it
would incur, debts beyond its ability to pay as such debts matured (as all of
the foregoing terms are defined in or interpreted under the relevant fraudulent
transfer or conveyance statutes) or (4) was a defendant in an action for money
damages, or had a judgment for money damages docketed against it (if, in either
case, after final judgment, the judgment is unsatisfied), then such court could
avoid or subordinate the amounts owing under the applicable Notes to presently
existing and future indebtedness of such Issuer and take other actions
detrimental to the holders of the applicable Notes.
The measure of insolvency for purposes of the foregoing considerations
will vary depending upon the law of the jurisdiction that is being applied in
any such proceeding. Generally, however, an Issuer would be considered
insolvent if, at the time it incurred the indebtedness, either: (i) the sum of
its debts (including contingent liabilities) is greater than its assets, at a
fair valuation, or (ii) the present fair saleable value of its assets is less
than the amount required to pay the probable liability on its total existing
debts and liabilities (including contingent liabilities) as they become
absolute and matured. There can be no assurance as to what standards a court
would use to determine whether such Issuer was solvent at the relevant time, or
whether, whatever standard was used, the applicable Notes would not be avoided
or further subordinated on another of the grounds set forth above. In rendering
their opinions in connection with the initial financing of the
Recapitalization, counsel for the Issuers and counsel for the Initial
Purchasers will not express any opinion as to the applicability of federal or
state fraudulent transfer and conveyance laws.
Each Issuer believes that at the time the indebtedness constituting the
Notes was incurred initially by the Issuers, such Issuer: (i) was (a) neither
insolvent nor rendered insolvent thereby, (b) in possession of sufficient
capital to run its businesses effectively and (c) incurring debts within its
ability to pay as the same mature or become due and (ii) had sufficient assets
to satisfy any probable money judgment against it in any pending action. In
reaching the foregoing conclusions, the Issuers have relied upon their analyses
of internal cash flow projections and estimated values of assets and
liabilities of the Company. There can be no assurance, however, that a court
passing on such questions would reach the same conclusions.
Original Issue Discount Consequences of Senior Discount Notes
The Senior Discount Notes were issued at a substantial discount from their
principal amount at maturity. Although cash interest will not accrue on the
Senior Discount Notes prior to June 1, 2003 and there will be no periodic
payments of cash interest on the Senior Discount Notes prior to December 1,
2003, original issue discount (the difference between the stated redemption
price at maturity and the issue price of the Senior Discount Notes) will accrue
from the issue date of the Senior Discount Notes. Consequently, holders of
Senior Discount Notes generally will be required to include amounts in gross
income for U.S. federal income tax purposes in advance of their receipt of the
cash payments to which the income is attributable. Such amounts in the aggregate
will be equal to the difference between the stated redemption price at maturity
(inclusive of stated interest on the Senior Discount Notes) and the issue price
of the Senior Discount Notes. See "Certain United States Federal Income Tax
Consequences."
In the event a bankruptcy case is commenced by or against Holdings under
the United States Bankruptcy Code, the claim of a holder of Senior Discount
Notes may be limited to an amount equal to the sum of (i) the initial offering
price and (ii) that portion of the original issue discount which is not deemed
to constitute "unmatured interest" for purposes of the Bankruptcy Code. Any
original issue discount that was not amortized as of the date of any such
bankruptcy filing would constitute "unmatured interest." To the extent that the
Bankruptcy Code differs from the Internal Revenue Code in determining the method
of amortization of original issue discount, a holder of Senior Discount Notes
may realize taxable gain or loss on payment of such holder's claim in
bankruptcy.
Control by Cypress Affiliates
Approximately 58% of the issued and outstanding shares of Common Stock is
held by Cypress and its affiliates. Accordingly, Cypress and its affiliates
control Holdings and have the power to elect all
27
of its directors, appoint new management and approve any action requiring the
approval of its stockholders, including adopting amendments to its certificate
of incorporation and approving mergers or sales of substantially all of its
assets. There can be no assurance that the interests of Cypress and its
affiliates will not conflict with the interests of the holders of the Notes.
See "Management," "Security Ownership of Certain Beneficial Ownership and
Management" and "Certain Relationships and Related Transactions."
Lack of Public Market for the Notes; Restrictions on Transferability
The Exchange Notes are being offered to the holders of the Old Notes. The
Old Notes were offered and sold in June 1998 to a small number of institutional
investors in reliance upon an exemption from registration under the Securities
Act and applicable state securities laws. Therefore, although the Old Notes are
eligible for trading in the PORTAL market of the National Association of
Securities Dealers, Inc., the Old Notes may be transferred or resold only in a
transaction registered under or exempt from the Securities Act and applicable
state securities laws.
The Exchange Notes generally will be permitted to be resold or otherwise
transferred by each holder without the requirement of further registration.
Each series of Exchange Notes, however, constitutes a new issue of securities
with no established trading market. The Exchange Offers will not be conditioned
upon any minimum or maximum aggregate principal amount of Notes being tendered
for exchange. The Issuers do not intend to apply for a listing of any series of
the Exchange Notes on a securities exchange or an automated quotation system,
and there can be no assurance as to the liquidity of markets that may develop
for the Exchange Notes, the ability of the holders of the Exchange Notes to
sell their Exchange Notes or the price at which such holders would be able to
sell their Exchange Notes. If markets for the Exchange Notes were to exist, the
Exchange Notes could trade at prices that may be lower than the initial market
values thereof depending on many factors. The liquidity of, and trading market
for, the Exchange Notes may be adversely affected by movements of interest
rates, the performance of the Company and general declines in the market for
similar securities. Such a decline may adversely affect such liquidity and
trading market independent of the financial performance of, and prospects for,
the Company. The Initial Purchasers are not obligated to make a market in any
of the Notes, and any market making with respect to the Notes may be
discontinued at any time without notice. In addition, such market making
activity may be limited during the pendency of the Exchange Offers or the
effectiveness of a shelf registration statement in lieu thereof. See "Transfer
Restrictions" and "Plan of Distribution."
In the case of non-exchanging holders of Old Notes, no assurance can be
given as to the liquidity of any trading market for the Old Notes following the
Exchange Offers.
Forward-Looking Statements
This Prospectus contains certain forward-looking statements regarding the
business of the Issuers. When used in this Offering Memorandum, the words
"anticipates," "plans," "believes," "estimates," "intends," "expects,"
"projects" and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain such words.
Such statements, including, but not limited to, the Issuers' statements
regarding their business strategy, growth strategy, growth trends in the
industry and various markets, acquisitions, international expansion,
productivity and profitability enhancement, new product and service
introductions and liquidity and capital resources are based on management's
beliefs, as well as on assumptions made by, and information currently available
to, management, and involve various risks and uncertainties, certain of which
are beyond the Issuers' control. The Issuers' actual results could differ
materially from those expressed in any forward-looking statement made by or on
behalf of the Issuers. In light of these risks and uncertainties there can be
no assurance that the forward-looking information will in fact prove to be
accurate. Factors that might cause actual results to differ from such
forward-looking statements include, but are not limited to, those discussed in
"Risk Factors." The Issuers have undertaken no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
28
THE RECAPITALIZATION
On June 5, 1998, pursuant to the Recapitalization Agreement: (i) Holdings
(x) repurchased all of the Common Stock held by CD&R, Westinghouse and all
other non-management stockholders of Holdings for $595.2 million in the
aggregate, (y) cashed-out all of the stock options held by non-management
optionholders for $57.5 million in the aggregate and (z) cashed-out a portion
of the stock options held by certain members of management for $0.9 million in
the aggregate (the aggregate funds necessary to effect such purchase of shares
and cash-out of options is herein referred to as the "Equity Consideration");
(ii) Holdings sold shares of Common Stock to the Investor Group for $318.1
million in the aggregate (the "Cash Equity Contribution"); (iii) the Investor
Group purchased shares of Common Stock from certain members of management for
$1.9 million in the aggregate; and (iv) management continued to retain the
remainder of their shares of Common Stock and stock options with an implied
aggregate value of approximately $97.7 million. The Recapitalization valued
each share of Common Stock at $621.08.
In addition to the proceeds of the Cash Equity Contribution, Holdings and
the Company funded the Equity Consideration, the repayment of approximately
$379.1 million of outstanding indebtedness of the Company and its subsidiaries
and the payment of transaction fees and expenses from: (i) the initial
borrowings of $170.0 million under the Credit Facilities; (ii) the proceeds of
$250.0 million from a sale of accounts receivable pursuant to the Receivables
Facility; and (iii) the proceeds of the Old Notes.
The foregoing transactions are collectively referred to herein as the
"Recapitalization." As a result of the Recapitalization, management owns
approximately 11.3% of the outstanding shares of Common Stock (which, together
with existing stock options and new stock options expected to be granted in
connection with the Recapitalization, will represent over 30% of the common
equity of Holdings on a fully diluted basis). The Investor Group owns the
remaining 88.7% of the outstanding shares of Common Stock, with Cypress owning
approximately 58% of the outstanding shares of Common Stock. See "Security
Ownership of Certain Beneficial Owners and Management."
The representations and warranties relating to the Company's business made
by Holdings in the Recapitalization Agreement do not survive the closing of the
Recapitalization. In connection with the Recapitalization, the Investor Group
succeeded to the rights of CD&R and Westinghouse under the Registration and
Participation Agreement (as defined). See "Certain Relationships and Related
Transactions."
Holdings expects to treat the Recapitalization as a recapitalization for
financial reporting purposes; accordingly, the historical basis of Holdings'
assets and liabilities will not be affected by the transaction.
29
The following table sets forth the cash sources and uses of funds of the
Issuers for the Recapitalization on a pro forma basis as of March 31, 1998:
(dollars in millions)
----------------------
Sources:
Credit Facilities
Revolving Facility(1) ............................ $ --
Delayed Draw Term Facility(1) .................... --
Term Loans ....................................... 170.0
Receivables Facility ............................... 250.0
Senior Subordinated Old Notes ...................... 300.0
Senior Discount Old Notes .......................... 50.5
Cash Equity Contribution ........................... 318.1
---------
Total sources ................................... $ 1,088.6
=========
Uses:
Repayment of existing indebtedness(2) .............. $ 379.1
Equity Consideration ............................... 653.5
Estimated transaction fees and expenses(3) ......... 54.8
Cash proceeds to the Company ....................... 1.2
---------
Total uses ...................................... $ 1,088.6
=========
- - - - ---------------------
(1) The Revolving Facility provides for U.S. and Canadian dollar borrowings of
up to U.S. $100.0 million, including $25.0 million for letters of credit.
No actual amounts were drawn on the Revolving Facility on the closing date
of the Offerings. The Delayed Draw Term Facility will provide for future
term loans of up to $100.0 million for permitted acquisitions.
(2) The actual amount of existing indebtedness repaid was approximately $388
million.
(3) Includes Initial Purchasers' discounts and offering discounts on the Senior
Subordinated Old Notes, fees related to the Credit Facilities and the
Receivables Facility, and other fees and expenses incurred in connection
with the Recapitalization.
30
USE OF PROCEEDS
There will be no proceeds to the Issuers from the exchange of Notes
pursuant to the Exchange Offers. The proceeds of the Offerings were used to
fund a portion of the Recapitalization, including the payment of the Equity
Consideration, the repayment of certain outstanding existing indebtedness of
the Company and its subsidiaries and the payment of fees and expenses related
to the Recapitalization. For a further discussion of the sources and uses
related to the Recapitalization, see "The Recapitalization."
CAPITALIZATION
The following table sets forth the capitalization of Holdings and the
Company as of March 31, 1998 on a pro forma basis. This table should be read in
conjunction with "Use of Proceeds," "Unaudited Pro Forma Financial
Information," "Selected Historical Consolidated Financial and Other Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Holdings' consolidated financial statements and the notes
thereto included elsewhere in this Prospectus.
March 31, 1998
------------------------
Pro Forma Pro Forma
Holdings Company
----------- ----------
(dollars in millions)
Cash and cash equivalents ................ $ 19.6 $ 19.6
======== ========
Total Debt(1):
Existing Indebtedness(2) ............... $ 23.2 $ 23.2
Credit Facilities:
Revolving Facility(3) ................. -- --
Delayed Draw Term Facility(3) ......... -- --
Term Loans ............................ 170.0 170.0
Senior Subordinated Old Notes .......... 300.0 300.0
Senior Discount Old Notes .............. 50.5 --
-------- --------
Total debt ............................ 543.7 493.2
Redeemable Common Stock .................. 11.4 11.4
Stockholders' Equity (Deficit): .......... (165.5) (115.0)
-------- --------
Total capitalization .................. $ 389.6 $ 389.6
======== ========
- - - - ---------------------
(1) Excludes $250.0 million of proceeds from the sale of accounts receivable
through the Receivables Facility entered into in connection with the
Recapitalization. See "Description of the Receivables Facility."
(2) Includes $4.6 million of current indebtedness.
(3) The Revolving Facility provides for U.S. and Canadian borrowings of up to
U.S. $100.0 million, including $25.0 million for letters of credit. No
amounts were drawn on the Revolving Facility on the closing date of the
Offerings. The Delayed Draw Term Facility will provide for future term
loans of up to $100.0 million for permitted acquisitions.
31
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information of Holdings and
the Company has been prepared to give effect to the Recapitalization and the
Recent Acquisitions. Holdings expects to treat the Recapitalization as a
recapitalization for financial reporting purposes; accordingly, the historical
basis of Holdings' assets and liabilities will not be affected by the
transaction. For a discussion of the Recapitalization, see "The
Recapitalization."
The pro forma adjustments presented are based upon available information
and include certain assumptions and adjustments that Holdings believes are
reasonable under the circumstances. These adjustments are directly attributable
to the transactions referenced above and are expected to have a continuing
impact on Holdings' and the Company's business, results of operations and
financial condition. The historical condensed consolidated statement of income
of Holdings and the Company for the three months ended March 31, 1998 and the
historical condensed consolidated balance sheet of Holdings and the Company as
of March 31, 1998 were derived from the unaudited consolidated financial
statements of Holdings included elsewhere herein. The historical condensed
consolidated statement of income of Holdings and the Company for the year ended
December 31, 1997 was derived from the audited consolidated financial
statements of Holdings included elsewhere herein. Holdings has as its only
asset all of the outstanding capital stock of the Company; accordingly, the
historical financial information of Holdings presented herein is identical to
those of WESCO.
The unaudited pro forma condensed consolidated statement of income of
Holdings and the Company for the year ended December 31, 1997 and for the
twelve months ended March 31, 1998 give effect to: (i) the Recapitalization as
if it had occurred on January 1, 1997 and (ii) the acquisitions of Diversified
Electric Supply Company, Inc. ("DESCO") (for the year ended December 31, 1997
only), Maydwell & Hartzell, Inc. ("M & H"), Avon Electrical, Brown Wholesale
and Reily, all of which occurred during 1997 and 1998, as if they had occurred
on January 1, 1997. The historical financial data for the acquired companies
was derived from their respective unaudited financial statements. The unaudited
pro forma condensed consolidated statement of income of Holdings and the
Company for the three months ended March 31, 1998 gives effect to the
Recapitalization and the acquisition of Reily as if they had occurred on
January 1, 1997. The unaudited pro forma condensed consolidated balance sheet
of Holdings and the Company as of March 31, 1998 give effect to the
Recapitalization and the acquisition of Reily as if they were consummated on
March 31, 1998. None of the acquisitions described above met the individual or
aggregate criteria outlined by the Commission's Significant Subsidiary Test.
The Recent Acquisitions were accounted for using the purchase method of
accounting pursuant to which the total purchase price of the Recent
Acquisitions were allocated to the tangible and intangible assets acquired and
liabilities assumed based on their estimated fair values. The purchase price
allocations for Reily and Avon Electrical are preliminary. Final allocations
will be made based upon valuations and other studies that have not been
completed, but are not expected to differ significantly from those presented
herein.
The unaudited pro forma financial information should be read in
conjunction with the historical consolidated financial statements of Holdings
and the notes thereto, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "The Recapitalization" and "The Summary
- - - - -- Recent Developments" included elsewhere in this Prospectus.
The unaudited pro forma financial information and related notes are
provided for informational purposes only and do not necessarily reflect: (i)
the results of operations or financial condition of Holdings or the Company
that would have actually resulted had the events referred to above or in the
notes to the unaudited pro forma financial information been consummated as of
the dates indicated and are not intended to project Holdings' or the Company's
financial condition or results of operations for any future period or (ii) the
effect of certain non-recurring income statement charges expected to result
from the Recapitalization, including compensation charges of approximately
$11.0 million associated with one-time bonuses paid to certain members of
management, compensation charges of approximately $6.3 million associated with
the cash settlement relating to certain stock options, compensation charges of
approximately $4.1 million associated with the acceleration of vesting of one
recently hired executive's stock options issued at a discount, estimated
non-capitalized transaction fees and expenses amounting to $25.1 million and a
charge of approximately $0.5 million related to the write-off of existing
deferred financing costs.
32
WESCO INTERNATIONAL, INC.
AND
WESCO DISTRIBUTION, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of March 31, 1998
(dollars in thousands)
WESCO Reily Reily
International,Inc. Historical Pro Forma
Historical Reclassified(A) Adjustments
-------------------- ----------------- ----------------
ASSETS
Cash and cash
equivalents ........... $ 18,405 $ 315 $ (315)(B)
Trade accounts
receivable and
other accounts
receivable ............ 393,368 22,066
Other accounts
receivable ............ 16,400 -- --
Inventories ............ 317,934 7,959 2,861 (C)
Other current
assets ................ 20,262 195 (195)(B)
-------- ------- ----------
Total current
assets ............... 766,369 30,535 2,351
Property, buildings
and equipment,
net ................... 100,482 3,604 (2,000)(B)
396 (C)
Goodwill, net of
accumulated
amortization .......... 80,031 -- 27,020 (C)
Other assets ........... 15,166 2,546 (2,546)(B)
Total assets .......... $962,048 $36,685 $ 25,221
======== ======= ==========
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Accounts payable........ $335,943 $12,755 $ --
Accrued payroll
and benefit
costs ................. 15,565 320 --
Restructuring
reserve ............... 5,913 -- --
Other current
liabilities ........... 26,404 9,690 (8,059)(B)
-------- ------- ----------
Total current
liabilities .......... 383,825 22,765 (8,059)
Long term debt ......... 350,544 5,347 41,853 (C)
Other noncurrent
liabilities ........... 6,020 -- --
Deferred income
taxes ................. 17,118 203 (203)(B)
-------- ------- ----------
Total liabilities ..... 757,507 28,315 33,591
Redeemable
common stock .......... 11,416 -- --
Stockholders'
equity ................ 193,125 8,370 (8,370)(B)
-------- ------- ----------
Total liabilities
and
stockholders'
equity ............... $962,048 $36,685 $ 25,221
======== ======= ==========
WESCO WESCO
Recapitalization International, Inc. Distribution, Inc.
Adjustments Pro Forma Adjustments Pro Forma
-------------------- --------------------- ------------------ -------------------
ASSETS
Cash and cash
equivalents ........... $ 1,211(D) $ 19,616 $ -- $ 19,616
Trade accounts
receivable and
other accounts
receivable ............ (253,000)(E) 162,434 -- 162,434
Other accounts
receivable ............ -- 16,400 -- 16,400
Inventories ............ -- 328,754 -- 328,754
Other current
assets ................ -- 20,262 -- 20,262
------------ ----------- ----------- -----------
Total current
assets ............... (251,789) 547,466 -- 547,466
Property, buildings
and equipment,
net ................... -- 102,482 -- 102,482
Goodwill, net of
accumulated
amortization .......... -- 107,051 -- 107,051
Other assets ........... 29,205 (F) 44,371 -- 44,371
Total assets .......... $ (222,584) $ 801,370 -- $ 801,370
============ =========== =========== ===========
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Accounts payable........ $ -- $ 348,698 $ -- $ 348,698
Accrued payroll
and benefit
costs ................. 9,600 (G) 25,485 -- 25,485
Restructuring
reserve ............... -- 5,913 -- 5,913
Other current
liabilities ........... (14,890) (K) 13,145 -- 13,145
------------ ----------- ----------- -----------
Total current
liabilities .......... (5,290) 393,241 -- 393,241
Long term debt ......... 141,378 (H) 539,122 (50,478)(J) 488,644
Other noncurrent
liabilities ........... -- 6,020 -- 6,020
Deferred income
taxes ................. -- 17,118 -- 17,118
------------ ----------- ----------- -----------
Total liabilities ..... 136,088 955,501 (50,478) 905,023
Redeemable
common stock .......... -- 11,416 -- 11,416
Stockholders'
equity ................ (358,672)(I) (165,547) 50,478 (J) (115,069)
------------ ----------- ----------- -----------
Total liabilities
and
stockholders'
equity ............... $ (222,584) $ 801,370 $ -- $ 801,370
============ =========== =========== ===========
See Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
33
WESCO INTERNATIONAL, INC.
AND
WESCO DISTRIBUTION, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
as of March 31, 1998
(A) Certain reclassifications have been made to the Reily historical financial
statements to conform to the presentation to be used by Holdings upon
completion of the acquisition.
(B) Reflects the elimination of certain assets and liabilities not acquired and
the elimination of historical stockholders' equity in connection with the
Reily acquisition as follows:
Cash ........................................... $ 315
Other current assets ........................... 195
Property, buildings and equipment, net ......... 2,000
Other assets ................................... 2,546
Other current liabilities ...................... 8,059
Deferred income taxes .......................... 203
Stockholders' equity ........................... 8,370
(C) The acquisition of Reily for approximately $47,200 is to be accounted for
as a purchase business combination. The acquisition resulted in
approximately $41,853 of new indebtedness resulting from $42,600 borrowed
under the Company's credit agreement and $4,600 of seller notes, net of
repayment of existing debt of $5,347 paid at closing. No assumptions were
made regarding restructuring costs or recurring benefits from synergies
associated with the consummation of the acquisition. For the purpose of
these pro forma condensed consolidated financial statements, the purchase
price allocation is as follows:
Purchase price ........................................... $ 47,200
Book value of assets acquired, net of liabilities assumed (16,923)
---------
Increase in basis ........................................ $ 30,277
=========
Allocation of increase in basis:
Increase in inventory value and conversion from LIFO ............. $ 2,861
Increase in value of property and equipment ...................... 396
Increase in goodwill ............................................. 27,020
---------
$ 30,277
=========
(D) Reflects adjustments relating to cash and cash equivalents in connection
with the Recapitalization as follows:
Cash provided by the Senior Subordinated Notes ................ $ 300,000
Cash provided by the Senior Discount Notes .................... 50,478
Cash provided by the Credit Facilities ........................ 170,000
Cash provided by the sale of certain accounts receivable in
connection with the Receivables Facility less loss on
sale .................................................................. 250,000
Cash Equity Contribution (512,186 shares at $621.08 per
share) ................................................................ 318,108
Cash used to repay existing indebtedness ...................... (379,100)
Cash used for estimated transaction fees and expenses ......... (54,775)
Cash used for Equity Consideration (958,282 shares and
111,996 options) ...................................................... (653,500)
----------
$ 1,211
==========
(E) In connection with the Receivables Facility, the Company and certain
subsidiaries will: (i) sell or transfer all of their eligible accounts
receivable to the SPC (as defined), which is wholly-owned by the Company;
(ii) receive $250,000 in cash for the sale of such accounts receivable,
and a note from, and an equity interest in, the SPC; (iii) record an
estimated loss of $3,000 on the sale of such receivables; and (iv) the SPC
will retain a residual interest in the receivables of $162,434.
34
(F) Reflects capitalized portion of the estimated $54,775 of expenses incurred
in connection with the Recapitalization. An estimated $29,675,
representing deferred issuance costs of the Offerings, the Credit
Facilities and the Receivables Facility, will be capitalized and amortized
over the lives of the respective debt issuances, net of the write-off of
existing deferred financing costs of $470.
(G) Reflects non-recurring adjustments of $9,600 ($5,855 net of tax) relating
to compensation charges in connection with the Recapitalization as
follows:
Payment of one-time bonuses, net of
tax benefit of $2,145............................... $3,355
Acceleration of vesting of stock options for
one executive, net of tax benefit of $1,600......... 2,500
------
$5,855
======
(H) Reflects adjustments relating to long-term debt in connection with the
Recapitalization as follows:
Issuance of the Senior Subordinated Notes .............. $ 300,000
Issuance of the Senior Discount Notes .................. 50,478
Borrowings under the Credit Facilities ................. 170,000
Repayment of existing outstanding indebtedness ......... (379,100)
----------
$ 141,378
==========
(I) Reflects adjustments relating to stockholders' equity in connection with
the Recapitalization as follows:
Cash Equity Contribution ................................. $ 318,108
Equity Consideration ..................................... (653,500)
Non-capitalized portion of estimated transaction fees and
expenses, net of tax benefit of $9,790............................ (15,310)
Non-recurring compensation adjustments, net of tax benefit
of $3,745......................................................... (5,855)
Write-off of existing deferred financing costs, net of tax
benefit of $185................................................... (285)
Loss on sale of certain receivables related to the
Receivables Facility, net of tax benefit of $1,170................ (1,830)
----------
$ (358,672)
==========
(J) Reflects the elimination of the Senior Discount Notes issued by Holdings.
(K) Reflects the tax benefit of non-recurring adjustments for compensation of
$3,745 and transaction expenses of $11,145.
35
WESCO INTERNATIONAL, INC.
AND
WESCO DISTRIBUTION, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Three Months Ended March 31, 1998
(dollars in thousands)
WESCO Reily
International, Inc. Historical Acquisition
Historical Reclassified(A) Adjustments(A)
--------------------- ----------------- ------------------
Sales, net ............. $693,448 $32,977 $ (1,706)(B)
Cost of goods sold
(exclusive of
depreciation and
amortization) ......... 566,754 27,134 (1,936)(B)
-------- ------- ---------
Gross profit .......... 126,694 5,843 230
Selling, general and
administrative
expenses .............. 103,564 4,899 (225)(C)
(482)(B)
Depreciation and
amortization .......... 2,956 86 227 (D)
(36)(B)
---------
Income from
operations ........... 20,174 858 746
Interest expense,
net ................... 6,202 320 644 (E)
Other expense .......... -- -- --
-------- ------- ---------
Income before
income taxes ......... 13,972 538 102
Provision for income
taxes ................. 5,449 213 40 (F)
-------- ------- ---------
Net income ............. $ 8,523 $ 325 $ 62
======== ======= =========
EBITDA (M) ............. $ 23,130 $ 944 $ 937
======== ======= =========
WESCO WESCO
Recapitalization International, Inc. Distribution, Inc.
Adjustments Pro Forma Adjustments Pro Forma
------------------ --------------------- ----------------- -------------------
Sales, net ............. $ -- $724,719 $ -- $724,719
Cost of goods sold
(exclusive of
depreciation and
amortization) ......... -- 591,952 -- 591,952
---------- -------- ---------- --------
Gross profit .......... 132,767 -- 132,767
Selling, general and
administrative
expenses .............. (100)(G) 107,656 -- 107,656
Depreciation and
amortization .......... -- 3,233 -- 3,233
Income from
operations ........... 100 21,878 -- 21,878
Interest expense,
net ................... 6,243(H) 13,409 (1,443)(J) 11,966
Other expense .......... 3,859 (I) 3,859 -- 3,859
---------- -------- ---------- --------
Income before
income taxes ......... (10,002) 4,610 (1,443) 6,053
Provision for income
taxes ................. (3,901)(F) 1,801 562 (F) 2,363
---------- -------- ---------- --------
Net income ............. $ (6,101) $ 2,809 $ 881 $ 3,690
========== ======== ========== ========
EBITDA (M) ............. $ 100 $ 25,111 $ -- $ 25,111
========== ======== ========== ========
For the Year Ended December 31, 1997
(dollars in thousands)
WESCO
International, Inc. Acquisition
Historical Adjustments(A)
--------------------- ------------------
Sales, net ....................... $2,594,819 $ 304,576(K)
Cost of goods sold (exclusive
of depreciation and
amortization) ................... 2,130,900 242,238 (K)
---------- ----------
Gross profit .................... 463,919 62,338
Selling, general and adminis-
trative expenses ................ 372,532 44,583 (K)
Depreciation and amortization .... 11,331 2,239 (K)
---------- ----------
Income from operations .......... 80,056 15,516
Interest expense, net ............ 20,109 9,034 (K)
Other expense .................... -- --
---------- ----------
Income before income taxes....... 59,947 6,482
Provision for income taxes ....... 23,710 2,528 (F)
---------- ----------
Net income ....................... $ 36,237 $ 3,954
========== ==========
EBITDA (M) ....................... $ 91,387 $ 17,755
========== ==========
WESCO WESCO
Recapitalization International, Inc. Distribution, Inc.
Adjustments Pro Forma Adjustments Pro Forma
------------------ --------------------- ----------------- -------------------
Sales, net ....................... $ -- $2,899,395 $ -- $2,899,395
Cost of goods sold (exclusive
of depreciation and
amortization) ................... -- 2,373,138 -- 2,373,138
----------- ---------- ---------- ----------
Gross profit .................... -- 526,257 -- 526,257
Selling, general and adminis-
trative expenses ................ (400)(G) 416,715 -- 416,715
Depreciation and amortization .... -- 13,570 -- 13,570
----------- ---------- ---------- ----------
Income from operations .......... 400 95,972 -- 95,972
Interest expense, net ............ 24,548 (H) 53,691 (5,772)(J) 47,919
Other expense .................... 15,438 (I) 15,438 -- 15,438
----------- ---------- ---------- ----------
Income before income taxes....... (39,586) 26,843 5,772 32,615
Provision for income taxes ....... (15,439)(F) 10,799 2,251 (F) 13,050
----------- ---------- ---------- ----------
Net income ....................... $ (24,147) $ 16,044 $ 3,521 $ 19,565
=========== ========== ========== ==========
EBITDA (M) ....................... $ 400 $ 109,542 $ -- $ 109,542
=========== ========== ========== ==========
See Notes to Unaudited Pro Forma Condensed Consolidated Income Statements.
36
WESCO INTERNATIONAL, INC.
AND
WESCO DISTRIBUTION, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Twelve Months Ended March 31, 1998
(dollars in thousands)
WESCO Brown
International, Inc. Acquisition Wholesale
Historical Adjustments(A) Adjustments(B)
--------------------- ------------------ ----------------
Sales, net ............. $2,711,491 $ 255,538(L) $(1,706)
Cost of goods sold
(exclusive of
depreciation and
amortization) ......... 2,225,218 205,062 (L) (1,936)
---------- ---------- -------
Gross profit .......... 486,273 50,476 230
Selling, general and
administrative
expenses .............. 389,417 38,806 (L) (482)
Depreciation and
amortization .......... 11,516 2,021 (L) (36)
---------- ---------- -------
Income from
operations ........... 85,340 9,649 748
Interest expense,
net ................... 21,513 7,227 (L) (1)
Other expense .......... -- -- --
---------- ---------- --------
Income before
income taxes ......... 63,827 2,422 749
Provision for
income taxes .......... 25,152 945 (F) 297 (F)
---------- ---------- --------
Net income ............. $ 38,675 $ 1,477 $ 452
========== ========== ========
EBITDA (M) ............. $ 96,856 $ 11,670 $ 712
========== ========== ========
WESCO WESCO
Recapitalization International, Inc. Distribution, Inc.
Adjustments Pro Forma Adjustments Pro Forma
-------------------- --------------------- ----------------- -------------------
Sales, net ............. $ -- $2,965,323 $ -- $2,965,323
Cost of goods sold
(exclusive of
depreciation and
amortization) ......... -- 2,428,344 -- 2,428,344
---------- ---------- ---------- ----------
Gross profit .......... -- 536,979 -- 536,979
Selling, general and
administrative
expenses .............. (400) (G) 427,341 -- 427,341
Depreciation and
amortization .......... -- 13,501 -- 13,501
---------- ---------- ---------- ----------
Income from
operations ........... 400 96,137 96,137
Interest expense,
net ................... 24,951 (H) 53,690 (5,772)(J) 47,918
Other expense .......... 15,438 (I) 15,438 -- 15,438
---------- ---------- ---------- ----------
Income before
income taxes ......... (39,989) 27,009 (5,772) 32,781
Provision for
income taxes .......... (15,596)(F) 10,798 2,251(F) 13,049
---------- ---------- ---------- ----------
Net income ............. $ (24,393) $ 16,211 $ 3,521 $ 19,732
========== ========== ========== ==========
EBITDA (M) ............. $ 400 $ 109,638 -- $ 109,638
========== ========== ========== ==========
See Notes to Unaudited Pro Forma Condensed Consolidated Income Statement.
37
WESCO INTERNATIONAL, INC.
AND
WESCO DISTRIBUTION, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(A) Certain reclassifications have been made to the acquired company's
historical financial statements to conform to the presentation used by
Holdings upon completion of the relevant Recent Acquisitions. (B) Reflects
adjustments for the sales and related operating costs related to the
closure of certain branches that were acquired in connection with the
acquisition of Brown Wholesale. The financial results of the closed
branches have been eliminated as they will not be part of continuing
operations. (C) Reflects the elimination of non-recurring compensation based
on employment agreements with certain members of management at Reily
entered into in connection with the closing of the acquisition. (D) Reflects
the amortization of goodwill on the Reily acquisition over an assumed
period of 25 years amounting to $270, net of depreciation and amortization
related to Reily buildings and leasehold improvements not purchased
amounting to $43.
(E) Reflects incremental interest expense related to $47,200 in borrowings for
the Reily acquisition at an assumed current rate of 8.175%.
(F) Reflects the income tax effects of the pro forma adjustments at an assumed
rate of 39%.
(G) Reflects the elimination of non-recurring advisory, management consulting
and monitoring fees paid to CD&R during the periods presented which
amounted to $400 per annum.
(H) Reflects the incremental interest expense relating to the Offerings and the
Credit Facilities assuming interest rates of 9.125% for the Senior
Subordinated Notes, 11.125% for the Senior Discount Notes, 8.05% for the
Tranche A Term Loan and 8.3% for the Tranche B Term Loan, as well as the
incremental amortization expense resulting from the capitalization of
estimated transaction fees and expenses of $29,675 related to the
Offerings and the Credit Facilities. The amortization of debt issuance
costs were $957 for the three months ended March 31, 1998 and $3,829 for
the year ended December 31, 1997 and for the twelve months ended March 31,
1998. Assuming a 0.125% change in the interest rates, interest expense on
the Credit Facilities would change by $53 for the three months ended March
31, 1998 and $213 for the year ended December 31, 1997 and for the twelve
months ended March 31, 1998.
(I) Reflects the costs related to the sale of certain accounts receivable in
connection with the Receivables Facility at an assumed discount rate of
6.175%.
(J) Reflects the elimination of interest expense related to the issuance of the
Senior Discount Notes at an assumed interest rate of 11.125%.
38
(K) Reflects the acquisitions of DESCO (acquired March 31, 1997), M & H
(acquired April 30, 1997), Avon Electrical (acquired January 1, 1998),
Brown Wholesale (acquired January 1, 1998) and Reily (acquired May 8,
1998) as if the transactions had been consummated on January 1, 1997. The
Recent Acquisitions have been accounted for as purchase business
combinations. No assumptions were made regarding restructuring costs or
recurring benefits from synergies associated with the consummation of the
acquisitions. For the purpose of these unaudited pro forma condensed
consolidated financial statements, the aggregate purchase price of the
Recent Acquisitions was approximately $120,600, resulting in goodwill of
$47,641. None of the acquisitions described above met the individual or
aggregate criteria outlined by the Commission's Significant Subsidiary
test.
Brown Wholesale's fiscal year end is September 30, 1997. For the purposes
of these unaudited pro forma financial statements, Brown Wholesale's first
quarter ended December 31, 1997 and 1996 have been added and deducted
without adjustment to arrive at the year ended December 31, 1997. The
historical financial results for DESCO and M & H are for periods prior to
the acquisition date. The historical financial results for Avon Electrical,
Brown Wholesale and Reily are for the year ended December 31, 1997.
Avon
DESCO M & H Electrical
Historical Historical Historical
Year Ended December 31, 1997 ------------ ------------ ------------
Sales, net ............................. $6,231 $13,581 $84,500
Cost of goods sold (exclusive of
depreciation and amortization) ........ 5,139 12,104 61,328
------ ------- -------
Gross profit ........................ 1,092 1,477 23,172
Selling, general and adminis-
trative expenses ...................... 842 1,377 17,074
Depreciation and amortization .......... 58 -- 94
Income from operations .............. 192 100 6,004
Interest expense, net .................. (12) 90 1,226
Income before income taxes .......... 204 10 4,778
Provision for income taxes ............. 80 4 1,863
------ ------- -------
Net income ............................. $ 124 $ 6 $ 2,915
====== ======= =======
Brown Acquisitions
Wholesale Reily Pro Forma Acquisition
Historical Historical Adjustments Adjustments
Year Ended December 31, 1997 ------------ ------------ --------------------- ------------
Sales, net ............................. $87,917 $136,232 $ (23,885) (i) $304,576
Cost of goods sold (exclusive of
depreciation and amortization) ........ 70,250 111,882 (18,465) (i) 242,238
------- -------- ---------- --------
Gross profit ........................ 17,667 24,350 (5,420) 62,338
Selling, general and adminis-
trative expenses ...................... 16,432 20,067 (3,433) (ii) 44,583
(7,776) (i)
Depreciation and amortization .......... 393 358 1,559 (iii) 2,239
(223) (i)
----------
Income from operations .............. 842 3,925 4,453 15,516
Interest expense, net .................. 9 740 6,979 (iv) 9,034
2 (i)
----------
Income before income taxes .......... 833 3,185 (2,528) 6,482
Provision for income taxes ............. 325 1,242 (986) (v) 2,528
------- -------- ---------- --------
Net income ............................. $ 508 $ 1,943 $ (1,542) $ 3,954
======= ======== ========== ========
(i) Reflects adjustments for the sales and related operating costs related to
the closure of certain branches that were acquired in connection with
the acquisition of Brown Wholesale. The financial results of the closed
branches have been eliminated as they will not be part of continuing
operations.
(ii) Reflects the elimination of non-recurring compensation based on
employment agreements entered into in connection with the closing of the
relevant acquisitions with certain members of acquired company
management amounting to $5,000 for the year ended December 31, 1997, net
of compensation adjustment increases related to one of the acquisitions,
amounting to $1,567 for the year ended December 31, 1997.
(iii) Represents the amortization of goodwill over an assumed period of 25
years amounting to $1,732 for the year ended December 31, 1997, net of
depreciation and amortization related to Reily buildings and leasehold
improvements not purchased amounting to $173.
(iv) Represents incremental interest expense related to $118,900 in aggregate
borrowings for the Recent Acquisitions at rates ranging from 8.0% to
9.0%.
(v) Reflects the income tax effects of the pro forma adjustments at an
assumed rate of 39%.
39
(L) Reflects the acquisitions of M & H (acquired April 30, 1997), Avon
Electrical (acquired January 1, 1998), Brown Wholesale (acquired January
1, 1998) and Reily (acquired May 8, 1998) as if the transactions had been
consummated on January 1, 1997. The Recent Acquisitions have been
accounted for as purchase business combinations. No assumptions were made
regarding restructuring costs or recurring benefits from synergies
associated with the consummation of the acquisitions. For the purpose of
these pro forma condensed consolidated financial statements, the aggregate
purchase price of the Recent Acquisitions (other than DESCO) was
approximately $111,000, resulting in goodwill of approximately $42,800.
Brown Wholesale's fiscal year end is September 30, 1997. For the purposes
of these unaudited pro forma financial statements, Brown Wholesale's first
quarter ended December 31, 1997 and 1996 have been added and deducted
without adjustment to arrive at the year ended December 31, 1997. The
historical financial results for M & H are for period April 1, 1997 to
April 30, 1997. The historical financial results for Avon Electrical and
Brown Wholesale are for the nine months ended December 31, 1997, and the
historical financial results for Reily are for the year ended March 31,
1998.
Avon Brown
M & H Electrical Wholesale
Historical Historical Historical
Twelve Months Ended March 31, 1998 ------------ ------------ ------------
Sales, net ........................................... $3,230 $67,960 $66,097
Cost of goods sold (exclusive of depreciation
and amortization) ................................... 2,841 51,725 52,686
------ ------- -------
Gross profit ........................................ 389 16,235 13,411
Selling, general and administrative expenses ......... 423 14,734 12,227
Depreciation and amortization ........................ -- 77 393
Income from operations .............................. (34) 1,424 791
Interest expense, net ................................ 22 997 30
Income before income taxes .......................... (56) 427 761
Provision for income taxes ........................... (22) 167 297
------ ------- -------
Net income ........................................... $ (34) $ 260 $ 464
====== ======= =======
Acquisitions
Reily Pro Forma Acquisition
Historical Adjustments Adjustments
Twelve Months Ended March 31, 1998 ------------ --------------------- ------------
Sales, net ........................................... $136,439 $ (18,188) (i) $255,538
Cost of goods sold (exclusive of depreciation
and amortization) ................................... 111,742 (13,932) (i) 205,062
-------- ---------- --------
Gross profit ........................................ 24,697 (4,256) 50,476
Selling, general and administrative expenses ......... 20,503 (3,075) (ii) 38,806
(6,006) (i)
Depreciation and amortization ........................ 365 1,353 (iii) 2,021
(167) (i)
----------
Income from operations .............................. 3,829 3,639 9,649
Interest expense, net ................................ 805 5,371 (iv) 7,227
2 (v)
----------
Income before income taxes .......................... 3,024 (1,734) 2,422
Provision for income taxes ........................... 1,179 (676) (v) 945
-------- ---------- --------
Net income ........................................... $ 1,845 $ (1,058) $ 1,477
======== ========== ========
(i) Reflects adjustments for the sales and related operating costs related to
the closure of certain branches that were acquired in connection with
the acquisition of Brown Wholesale. The financial statement results of
the closed branches has been eliminated as they will not be part of
continuing operations.
(ii) Represents the elimination of non-recurring compensation based on
employment agreements entered into in connection with the closing of
the relevant acquisitions with certain members of acquired company
management amounting to $4,250 for the twelve months ended March 31,
1998, net of compensation adjustment increases related to one of the
acquisitions, amounting to $1,175 for the twelve months ended March 31,
1998.
(iii) Represents the amortization of goodwill over an assumed period of 25
years amounting to $1,526 for the twelve months ended March 31, 1998,
net of depreciation and amortization related to Reily buildings and
leasehold improvements not purchased amounting to $173.
(iv) Represents incremental interest expense related to $109,300 in aggregate
borrowings for the Recent Acquisitions (other than DESCO) at rates
ranging from 8.0% to 9.0%.
(v) Reflects the income tax effects of the pro forma adjustments at an
assumed rate of 39%.
40
(M) EBITDA represents income from operations plus depreciation and
amortization. EBITDA is presented because management understands that such
information is considered by certain investors to be an additional basis
for evaluating the Issuers' ability to pay interest and repay debt. EBITDA
should not be considered as an alternative to measures of operating
performance as determined in accordance with generally accepted accounting
principles or as a measure of the Issuers' operating results and cash
flows or as a measure of the Issuers' liquidity. Because EBITDA is not
calculated identically by all companies, the presentation herein may not
be comparable to other similarly titled measures of other companies.
For purposes of calculating the ratio of earnings to fixed charges, "earnings"
represents income from operations before income taxes and extraordinary charges
plus fixed charges. "Fixed charges" consist of interest expense, amortization
of deferred financing cost and the component of rental expense that management
believes is representative of the interest component of rental expense. The pro
forma ratio of earnings to fixed charges for Holdings was 1.3x for the three
months ended March 31, 1998 and 1.4x for the year ended December 31, 1997 and
for the twelve months ended March 31, 1998.
41
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth (i) selected historical consolidated
financial data of the Predecessor as of and for the year ended December 31,
1993 and as of and for the two months ended February 28, 1994, (ii) selected
historical consolidated financial data of Holdings as of and for the ten months
ended December 31, 1994 and as of and for the years ended December 31, 1995,
1996 and 1997, which have been derived from audited financial statements and
(iii) selected historical consolidated financial data of Holdings as of and for
the three months ended March 31, 1997 and 1998 (unaudited). The selected
historical consolidated financial data of the Predecessor have been derived
from the Predecessor's financial statements, which have been audited by the
Predecessor's accountants. The Commission, in Staff Accounting Bulletin Number
55 (SAB 55), requires that historical financial statements of a subsidiary,
division or lesser business component of another entity include certain
expenses incurred by the parent on its behalf. These expenses include officer
and employee salaries; rent; depreciation; advertising; accounting and legal
services; other selling, general and administrative expenses; and other such
expenses. The financial statements of the Predecessor include such adjustments,
estimates or allocations as the management of Westinghouse believed necessary
to reflect these expenses. Because of such items, certain aspects of the
consolidated results of operations for periods prior to the period beginning
February 28, 1994 are not comparable with those for subsequent periods.
The selected historical consolidated financial data of Holdings as of and
for the years ended December 31, 1995, 1996 and 1997 have been derived from
Holdings' consolidated financial statements, which have been audited by Coopers
& Lybrand L.L.P. The selected historical consolidated financial data of
Holdings' as of and for the three months ended March 31, 1997 and 1998
(unaudited) have been derived from unaudited interim consolidated financial
statements of Holdings and include, in the opinion of management, all
adjustments (consisting only of normal recurring accruals) necessary for a fair
presentation of the results of operations and financial position for and as of
the end of such periods. Results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year or for
any future period. The adjusted combined selected data for 1994 combines the
audited results of operations of the Predecessor for the two months ended
February 28, 1994 and of Holdings for the ten months ended December 31, 1994.
The adjusted combined selected data for the year ended December 31, 1994 does
not purport to represent what Holdings' consolidated results of operations
would have been if the Divestiture had actually occurred on January 1, 1994.
Holdings has as its only asset all of the outstanding capital stock of the
Company; accordingly, the historical financial data presented herein are
identical to those of WESCO. The selected financial data should be read in
conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements of Holdings and the accompanying notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
42
Selected Historical Consolidated Financial Data
(dollars in millions)
The Predecessor Holdings
----------------------------- --------------
Adjusted
Two Ten Combined
Year Months Months Year
Ended Ended Ended Ended
December 31, February 28, December 31, December 31,
1993 1994 1994 1994
-------------- -------------- -------------- -------------
Income Statement Data:
Sales, net ........................ $ 1,570.8 $ 237.3 $ 1,398.5 $ 1,635.8
Gross profit (exclusive of
depreciation and
amortization) .................... 238.1 32.5 230.0 262.5
Selling, general
and administrative
expenses ......................... 241.2 34.9 197.7 232.6
Depreciation and
amortization ..................... 7.9 1.2 7.5 8.7
--------- ------- --------- ---------
Income (loss) from
operations ....................... ( 11.0) ( 3.6) 24.8 21.2
Other income and
expense, net ..................... 1.7 -- -- --
Interest expense, net (1) ......... 14.2 2.4 17.6 20.0
--------- ------- --------- ---------
Income (loss) before
income taxes ..................... ( 23.5) ( 6.0) 7.2 1.2
Provision (benefit) for
income taxes (2) ................. ( 9.7) ( 1.9) 3.6 1.7
--------- ------- --------- ---------
Income (loss) before
cumulative effect and
extraordinary charge,
net of taxes ..................... ( 13.8) ( 4.1) 3.6 ( 0.5)
Cumulative effect of
change in accounting,
net of taxes (3) ................. 1.6 -- -- --
Extraordinary charge, net
of applicable taxes (4) .......... -- -- -- --
--------- ------- --------- ---------
Net income (loss) ................. $ (15.4) $ (4.1) $ 3.6 $ (0.5)
========= ======== ========= =========
Cash Flow Data:
Net cash provided by
(used for) operating
activities ....................... $ 13.2 $ (11.5) $ 63.7
Net cash provided by
(used for) investing
activities ....................... ( 3.9) 0.1 ( 256.6)
Net cash provided by
(used for) financing
activities ....................... ( 9.4) 11.9 197.5
Other Financial Data:
EBITDA (5) ........................ ( 1.4) ( 2.4) 32.3
Capital expenditures .............. 4.0 0.5 1.7
Ratio of earnings to fixed
charges (6) ...................... -- -- 1.3 x
Balance Sheet Data:
Adjusted working capital (7) $ 224.8 $ 228.7 $ 196.5
Total assets ...................... 521.0 504.5 533.7
Total long-term debt .............. -- -- 180.6
Redeemable common
stock(8) ......................... -- -- 5.5
Stockholders' equity .............. -- -- 99.5
Holdings
-----------------------------------------------------------------
(unaudited)
Year Ended Three Months
December 31 Ended March 31,
----------------------------------------- -----------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
Income Statement Data:
Sales, net ........................ $ 1,857.0 $ 2,274.6 $ 2,594.8 $ 576.7 $ 693.4
Gross profit (exclusive of
depreciation and
amortization) .................... 321.0 405.0 463.9 104.4 126.7
Selling, general
and administrative
expenses ......................... 258.0 326.0 372.5 86.7 103.5
Depreciation and
amortization ..................... 7.3 10.8 11.3 2.8 3.0
--------- --------- --------- ------- -------
Income (loss) from
operations ....................... 55.7 68.2 80.1 14.9 20.2
Other income and
expense, net ..................... -- -- -- -- --
Interest expense, net (1) ......... 15.8 17.4 20.1 4.8 6.2
--------- --------- --------- ------- -------
Income (loss) before
income taxes ..................... 39.9 50.8 60.0 10.1 14.0
Provision (benefit) for
income taxes (2) ................. 14.8 18.3 23.8 4.0 5.5
--------- --------- --------- ------- -------
Income (loss) before
cumulative effect and
extraordinary charge,
net of taxes ..................... 25.1 32.5 36.2 6.1 8.5
Cumulative effect of
change in accounting,
net of taxes (3) ................. -- -- -- -- --
Extraordinary charge, net
of applicable taxes (4) .......... 8.1 -- -- -- --
--------- --------- --------- ------- -------
Net income (loss) ................. $ 17.0 $ 32.5 $ 36.2 $ 6.1 $ 8.5
========= ========= ========= ======= =======
Cash Flow Data:
Net cash provided by
(used for) operating
activities ....................... $ 25.7 $ 15.2 $ (11.1) $ (32.5) $ 13.2
Net cash provided by
(used for) investing
activities ....................... ( 12.0) ( 111.0) ( 22.4) ( 10.7) ( 47.6)
Net cash provided by
(used for) financing
activities ....................... ( 9.8) 87.2 41.1 44.0 45.2
Other Financial Data:
EBITDA (5) ........................ 63.0 79.0 91.4 17.7 23.2
Capital expenditures .............. 6.5 9.4 12.4 1.4 3.7
Ratio of earnings to fixed
charges (6) ...................... 2.9 x 3.1 x 3.1 x 2.7 x 2.8 x
Balance Sheet Data:
Adjusted working capital (7) $ 222.5 $ 291.6 $ 338.8 $ 315.9 $ 375.4
Total assets ...................... 581.3 773.5 870.9 802.6 962.0
Total long-term debt .............. 172.0 260.6 294.3 295.7 350.5
Redeemable common
stock(8) ......................... 7.7 8.9 9.0 9.0 11.4
Stockholders' equity .............. 116.4 148.7 184.5 154.7 193.1
43
(1) The Predecessor received a charge from Westinghouse in the form of interest
expense for the portion of Westinghouse investment that, for internal
reporting purposes, represented debt. For the year ended December 31, 1993
and the two months ended February 28, 1994, approximately 40% of the
average Westinghouse investment was considered to be debt for internal
reporting purposes. The effective annual interest rates for all periods
was approximately 10%. This method of reporting interest expense for
internal reporting purposes is not necessarily indicative of interest
expense that would have been incurred had the Predecessor operated as a
separate stand-alone entity.
(2) The Predecessor's results of domestic operations were included in the
consolidated U.S. federal income tax return of Westinghouse. The
Predecessor's results of operations in Puerto Rico and certain operations
in Canada were also included with other operations of Westinghouse in the
tax returns in those jurisdictions. For operations that did not pay their
own income tax, Westinghouse internally allocated income tax expense at
the statutory rate after adjustment for state income taxes and several
other items. The income tax expense and other tax-related information in
the Predecessor's consolidated financial statements were calculated as if
the Predecessor had not been eligible to be included in the consolidated
tax returns of Westinghouse
(i.e., on a "stand-alone" basis). The calculation of tax provisions and
deferred taxes necessarily required certain assumptions, allocations and
estimates that the Predecessor's management believed were reasonable to
accurately reflect the tax reporting for the Predecessor as if a stand-alone
taxpayer.
(3) Represents a charge, net of deferred taxes, for the cumulative effect of a
change in accounting for postemployment benefits at January 1, 1993.
(4) Represents a charge, net of taxes, relating to the write-off of unamortized
debt issuance and other costs associated with the early termination of
debt.
(5) EBITDA represents income from operations plus depreciation and
amortization. EBITDA is presented because management understands that such
information is considered by certain investors to be an additional basis
for evaluating the Issuers' ability to pay interest and repay debt. EBITDA
should not be considered an alternative to measures of operating
performance as determined in accordance with generally accepted accounting
principles or as a measure of the Issuers' operating results and cash
flows or as a measure of the Issuers' liquidity. Since EBITDA is not
calculated identically by all companies, the presentation herein may not
be comparable to other similarly titled measures of other companies.
(6) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" represents income before income taxes and extraordinary charges
plus fixed charges. "Fixed charges" consist of interest expense,
amortization of deferred financing cost and the component of rental
expense that management believes is representative of the interest
component of rental expense. For the year ended December 31, 1993 and for
the two months ended February 28, 1994, earnings were insufficient to
cover fixed charges in the amount of $23.5 million and $6.0 million,
respectively.
(7) Defined as trade accounts receivable plus inventories less accounts
payable.
(8) Represents redeemable common stock as described in Note 9 to the
consolidated financial statements. Under certain conditions, the holders
thereof have the right to require Holdings to repurchase all of the
redeemable shares and the exercisable portion of the options. These
repurchase rights terminate upon consummation of an initial equity public
offering. See "Certain Relationships and Related Transactions --
Management Stockholders."
44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
WESCO believes it is the second largest electrical wholesale distributor
in North America, with over 325 branches located in 48 states and nine Canadian
provinces. The Company sells over 210,000 products, sourced from over 6,000
suppliers, to more than 130,000 customers. WESCO complements its product
offerings with a range of services and procurement solutions. Growth in revenue
is dependent upon several factors, including industry trends, general economic
conditions and the ability of the Company to grow market share and consummate
acquisitions. From 1993 to 1997 the Company's sales rose from $1.6 billion to
$2.6 billion, a 13.4% compound annual rate. This strong rate of growth has been
achieved in part through the Company's acquisition program, which accounted for
approximately half of this sales increase. The remaining sales increase was due
to new sales initiatives established by the Company's management team,
including a focus on National Accounts, Major Projects, increasing market
share, and expanding the Company's product offerings, as well as strong
industry growth generally.
The Company's sales can be categorized as stock sales, direct shipments or
special orders. Stock sales are filled directly from branch inventory and over
the past three years represented 40% to 50% of total sales. Direct ship orders
are shipped to the customer by the manufacturer since generally they involve
large orders or products that are too bulky to be easily handled and over the
past three years represented 35% to 45% of total sales. Special orders are for
products that are not ordinarily stocked in branch inventories and are ordered
from the manufacturer pursuant to a customer's request. Special orders
represent the remainder of total sales. Gross profit margins on stock and
special order sales are approximately 50% higher than those on direct ship
sales. Although direct ship gross margins are lower, operating profits are
comparable since the selling and inventory handling costs associated with
direct shipments are lower.
The Company pays its sales force commissions based on a standard percent
of billing margin dollars. Since stock and special order sales are typically at
higher gross profit margins than direct ship sales, the commissions paid are
also higher as a percent of sales.
Since the Divesture, the Company has experienced a significant improvement
in its income from operations, which has more than doubled from 1.3% of sales
in 1994 to 3.1% of sales in 1997. This margin improvement has resulted
primarily from: (i) better leveraging of the Company's existing infrastructure
due to growth in sales; (ii) focusing on higher margin products and services
such as National Accounts; and (iii) acquisitions of companies with average
operating margins in excess of that for WESCO's existing business.
At March 31, 1998, the Company's adjusted working capital was $375.4
million, composed of $393.4 million in accounts receivable and $317.9 million
in inventory, offset by $335.9 million in accounts payable. The Company is
implementing a number of initiatives designed to improve its working capital
performance, primarily in the area of inventory management. Such initiatives
include: (i) coordinating purchasing and inventory investment activities among
groups of branches or "districts;" (ii) upgrading the automated stock
replenishment programs used to supply branches from the distribution centers;
(iii) negotiating improved inventory return and consignment arrangements with
important suppliers; (iv) increasing the use of preferred suppliers; and (v)
shortening and stabilizing lead times between order and delivery from
suppliers.
The Company has historically financed its acquisitions, new branch
openings, working capital needs and capital expenditures through internally
generated cash flow and borrowings under its credit facilities. During the
initial phase of an acquisition or new branch opening, the Company typically
incurs expenses related to installing or converting information systems,
training employees and other initial operating activities. In some
acquisitions, the Company may incur expenses in connection with the closure of
any of its own redundant branches. Historically, the costs associated with
opening new branches, and closing branches in connection with certain
acquisitions, have not been material. The Company has accounted for its
acquisitions under the purchase method of accounting.
45
Results of Operations
The following table sets forth the percentage relationship to net sales of
certain items in the Company's Statement of Income for the periods presented:
Three Months Ended March
Year Ended December 31, 31,
--------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- -----------
Sales, net ........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit (exclusive of depreciation and
amortization) ...................................... 17.3 17.8 17.9 18.1 18.3
Selling, general and administrative expenses ......... 13.9 14.3 14.3 15.0 14.9
Depreciation and amortization ........................ 0.4 0.5 0.5 0.5 0.5
----- ----- ----- ----- -----
Income from operations ............................... 3.0 3.0 3.1 2.6 2.9
Interest expense ..................................... 0.9 0.8 0.8 0.8 0.9
----- ----- ----- ----- -----
Income before income taxes ........................... 2.1 2.2 2.3 1.8 2.0
Income taxes ......................................... 0.8 0.8 0.9 0.7 0.8
----- ----- ----- ----- -----
Income before extraordinary charge ................... 1.3 1.4 1.4 1.1 1.2
Extraordinary charge, net of taxes ................... 0.4 -- -- -- --
----- ----- ----- ----- -----
Net income ........................................... 0.9% 1.4% 1.4% 1.1% 1.2%
===== ===== ===== ===== =====
Three Months Ended March 31, 1998
Compared to Three Months Ended March 31, 1997
Net Sales. Sales for the three months ended March 31, 1998 were $693.4
million, compared with $576.7 million for the three months ended March 31,
1997. This represented an increase of $116.7 million, or 20.2%. Sales of
comparable branches (those open throughout both periods) rose 9.4% with
branches in the U.S. and Canada increasing 9.5% and 8.9%, respectively. The
remainder of the sales increase was primarily attributable to sales from
companies acquired since March 1997. Stock sales, direct shipments and special
order sales all experienced similar increases, rising 19.6%, 22.8% and 15.1%
respectively. In the U.S., sales to utility customers continued to grow at a
higher rate than those to other customers.
Gross Profit (exclusive of depreciation and amortization). Gross profit
for the three months ended March 31, 1998 was $126.7 million, compared with
$104.4 million for the comparable period in 1997. The increase of $22.3
million, or 21.4%, was due to the increased sales discussed above as well as an
increase in the gross profit margin as a percentage of sales, which increased
to 18.3% in the first quarter of 1998 from 18.1% in the first quarter of 1997.
The increase in the gross margin was primarily attributable to a number of
product pricing initiatives and training programs designed to improve gross
profit as well as certain newly acquired companies whose gross profit margins
were higher than that of the Company.
Selling General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased $16.8 million, or 19.4%, to $103.5
million in the first quarter of 1998 from $86.7 million in the first quarter of
1997. Approximately two-thirds of this increase was associated with an increase
in certain expenses that are variable in nature and increase when sales
increase. These expenses included sales commissions, transportation and
supplies. The remainder of the increase was primarily due to expenses
associated with companies acquired since March 1997. As a percent of sales,
SG&A expenses decreased to 14.9% in the first quarter of 1998 from 15.0% in the
first quarter of 1997.
Interest Expense. Interest expense increased $1.4 million in the first
quarter of 1998 to $6.2 million, from $4.8 million in the first quarter of
1997. This increase is primarily due to the increased level of borrowings
outstanding as a result of increased debt levels associated with the
acquisition of four companies since March 1997.
Income Taxes and Net Income. The effective tax rate was 39.0% in the first
quarter of 1998 compared to 39.7% for the first quarter of 1997. Net income in
the first quarter of 1998 increased to $8.5 million from $6.1 million in the
first quarter of 1997. This increase was due to the higher sales and gross
profit, partially offset by the increase in SG&A discussed above.
46
1997 Compared to 1996
Net Sales. Sales for the year ended December 31, 1997 were $2,594.8
million, compared with $2,274.6 million for the year ended December 31, 1996.
This represented an increase of $320.2 million, or 14.1%. Sales of comparable
branches rose 7.0%, with branches in the U.S. and Canada increasing 7.1% and
5.9%, respectively, in each case without giving effect to a one-time
international construction project described below. Within the U.S., the
branches with a high volume of sales to utility customers experienced a
somewhat higher level of comparable branch sales. In addition to growth in
sales of comparable branches, the remaining sales increase resulted primarily
from the nine companies acquired since the beginning of 1996. Sales of product
from stock rose 21%, as compared to the prior period, increasing the mix of
stock sales three percentage points to 48% of total sales. This was a result of
several ongoing initiatives designed to increase stock sales, such as the
continued emphasis on growing National Accounts sales, and, to a lesser extent,
the impact of acquired company sales, which have tended to have a higher mix of
stock sales. Direct ship sales rose 4% over the prior period. This sales
increase was below that experienced by the Company in other areas and was
primarily due to the slower growth in the non-residential construction market
for commercial and industrial projects, which constitutes the majority of
direct ship sales.
Gross Profit (exclusive of depreciation and amortization). Gross profit
for the year ended December 31, 1997 was $463.9 million, compared with $405.0
million for 1996. The increase of $58.9 million, or 14.5%, was primarily due to
the higher sales volume in 1997 from both acquisitions and comparable branch
operations. Gross profit as a percentage of sales increased to 17.9% in 1997
from 17.8% in 1996. In 1996, approximately $9.3 million of gross profit was
recorded in connection with a one-time international construction project with
a gross profit margin that was higher than the Company's usual margins on large
construction projects due to service requirements and risk considerations
associated with the order. Without this international order, the Company's
gross profit margin would have been 17.6% in 1996, compared to 17.9% for 1997.
The increase in the gross profit margin was primarily due to the increase in
the mix of higher margin stock sales, including sales associated with acquired
companies.
Selling, General and Administrative Expenses. SG&A expenses for the year
ended December 31, 1997 were $372.5 million, compared with $326.0 million in
1996. This increase of $46.5 million, or 14.3%, was primarily due to expenses
associated with the companies acquired in 1997 and 1996. SG&A expenses as a
percentage of sales remained unchanged at 14.3%. Acquisitions with higher SG&A
expense rates were offset by cost containment in the Company's core business,
as well as cost reductions in the acquired companies.
Interest Expense. Interest expense increased by $2.7 million primarily due
to the higher levels of borrowings outstanding associated with the acquisitions
made since the beginning of 1996, partially offset by lower interest rates
during 1997.
Income Taxes and Net Income. The effective tax rate was 39.6% for the year
ended December 31, 1997 compared to 36.1% for the same period in 1996. The
increase in the effective tax rate was primarily due to the reduction of a
valuation allowance for deferred tax assets in 1995 and 1996, which had the
effect of reducing the income tax rate during those periods. The Company began
its operations as a stand-alone entity in early 1994 with no history of
generating taxable income. Accordingly, a valuation allowance was established
for the net deferred tax assets that were generated during 1994. In 1995 and
1996, as the Company subsequently demonstrated an ability to utilize such
deferred tax assets, the valuation allowance was reduced and had the effect of
reducing the effective tax rate for both 1995 and 1996. Since the valuation
allowance was reduced to zero during 1996, there was no similar effect on the
1997 tax rate. Net income in 1997 increased $3.7 million, or 11.4%, to $36.2
million from $32.5 million in 1996, primarily as a result of the increase in
gross profit, partially offset by the increase in operating expenses and a
higher effective tax rate.
1996 Compared to 1995
Net Sales. Sales for the year ended December 31, 1996 were $2,274.6
million, an increase of $417.6 million, or 22.5%, from $1,857.0 million for the
year ended December 31, 1995. Approximately 74% of the sales increase was
attributable to the seven acquisitions made during 1996 as well as the
47
full-year effect of the two acquisitions made in the second half of 1995. The
balance of the sales increase was due to the continued growth in the base of
the existing business, with no significant differences in the growth rates of
the various markets. Comparable branch sales increased 3.8% during the period,
with branches in the U.S. increasing at a 5.1% rate and Canada declining at a
3.0% rate, in each case without giving effect to a one-time international
construction project discussed above, reflecting a decline in the Canadian
market overall, particularly for the construction project business.
Gross Profit (exclusive of depreciation and amortization). Gross profit
for 1996 of $405.0 million increased 26.2%, or $84.0 million, over the $321.0
million recorded in 1995. The increase in gross profit was primarily due to the
increase in sales discussed above. As a percent of sales, gross profit
increased to 17.8% in 1996 from 17.3% in 1995. The one-time international
construction project discussed above increased the gross profit margin by 0.2%.
Without this project, the Company's gross profit margin would have been 17.6%
in 1996. The remainder of this increase in the gross profit margin was
attributable to the higher mix of stock sales in the acquired companies, which
sales typically have higher gross margins.
Selling, General and Administrative Expenses. SG&A expenses increased
$68.0 million, or 26.4%, to $326.0 million in 1996 from $258.0 million in 1995.
This increase was primarily due to the expenses associated with the
acquisitions discussed above. As a percent of sales, SG&A expenses increased to
14.3% in 1996 from 13.9%. This increase was primarily due to the higher expense
rate of the acquired companies, typically associated with their higher stock
sales mix.
Interest Expense. Interest expense increased $1.6 million in 1996 to $17.4
million from $15.8 million in 1995 primarily due to the increased level of
borrowings outstanding as a result of the nine companies acquired in 1995 and
1996, partially offset by lower interest rates during 1996.
Income Taxes and Income Before Extraordinary Charge. The effective tax
rate was 36.1% for 1996, compared to 37.0% for 1995. Income before
extraordinary charge increased $7.4 million, or 29.5%, to $32.5 million in 1996
from $25.1 million in 1995. This increase was due to the higher sales and gross
profit partially offset by the higher selling, general and administrative
expenses discussed above.
Extraordinary Charge. During 1996, the Company refinanced its revolving
credit facilities and, as a result, wrote off $8.1 million, representing
unamortized debt issuance costs net of applicable taxes.
Liquidity and Capital Resources
Historical. The Company's liquidity needs arise from seasonal working
capital requirements, capital expenditures, interest and principal payment
obligations and acquisitions. The Company has historically met its liquidity
and capital investment needs with internally generated funds and borrowings
under its existing credit facilities.
For the year ended December 31, 1997, cash used for operating activities
was $11.1 million compared to cash provided by operating activities of $15.2
million for the year ended December 31, 1996. The cash used for operating
activities was primarily due to the $54.6 million increase in certain
components of net working capital offset by the $36.2 million in net income.
The $32.6 million increase in receivables was primarily due to the increased
level of sales. The $31.7 million increase in inventories was due, in part, to
the increased sales and to the increase in the mix of stock sales. In addition,
the Company increased its inventory investment in its five regional
distribution centers by $13.8 million during 1997, primarily in connection with
the addition of certain supplier lines historically purchased directly by the
branches. This initial increase will be offset as the Company reduces its
existing investment in those supplier lines at the branch locations.
Net cash used in investing activities was $22.4 million for the year ended
December 31, 1997, compared to $111.0 million for the year ended December 31,
1996. The primary reason for the cash used in investing activities for the
periods presented was acquisitions. The Company used $13.9 million and $103.9
million for acquisitions in the periods ended December 31, 1997 and 1996,
respectively. The decrease was due to a reduction in the size and number of
acquisitions completed in 1997 versus 1996.
48
The Company's capital expenditures, excluding acquisitions, for the year
ended December 31, 1997 were $12.4 million as compared to $9.4 million for the
year ended December 31, 1996. Such capital expenditures were primarily for
branch and distribution center facility improvements, forklifts and delivery
vehicles and computer equipment and software. The increase in such expenditures
reflects the necessary investments in fixed assets to position the Company for
its growth plans.
Cash provided by financing activities decreased $46.1 million to $41.1
million for the year ended December 31, 1997 compared to $87.2 million for the
year ended December 31, 1996. The decrease was due to borrowings as a result of
fewer completed acquisitions.
For the three months ended March 31, 1998 cash provided by operating
activities was $13.2 million compared to cash used for operating activities of
$32.5 million for the three months ended March 31, 1997. The primary reason for
the difference was attributable to a $6.3 million decrease in inventories,
excluding the effect of acquisitions, in the first quarter of 1998 compared to
a $24.9 million increase in inventories in the first quarter of 1997. The
decrease in inventories was attributable to several inventory programs
initiated by the Company in the second half of 1997. The increase in the first
quarter of 1997 was due primarily to the addition of certain suppliers lines
historically purchased directly by the branches. The remainder of the
difference in cash provided by operations was due to a change in the timing of
federal and state income tax payments.
Net cash used in investing activities was $47.6 million for the three
months ended March 31, 1998 compared to $10.7 million for the three months
ended March 31, 1997. The primary reason for cash used in investing activities
during the periods presented was acquisitions. The Company used $44.0 million
and $9.6 million for acquisitions in the periods ended March 31, 1998 and 1997,
respectively. The increase was due to an increase in the size and number of
acquisitions completed in 1998 versus 1997.
The Company's capital expenditures, excluding acquisitions, for the three
months ended March 31, 1998 were $3.7 million as compared to $1.4 million for
the three months ended March 31, 1997. Such capital expenditures were primarily
for branch and distribution center facility improvements, forklifts and
delivery vehicles and computer equipment and software. The increase in such
expenditures reflects the necessary investments in fixed assets to position the
Company for its growth plans. Capital expenditures for fiscal 1998 are expected
to total approximately $15 million.
Cash provided by financing activities increased $1.2 million to $45.2
million for the three months ended March 31, 1998 compared to $44.0 million for
the three months ended March 31, 1997. The increase was due to borrowings as a
result of more completed acquisitions and the issuance of common stock.
Following the Recapitalization. As a result of the Recapitalization,
Holdings and the Company have significant amounts of debt, with the interest
payments on the Notes and interest and principal repayments under the Credit
Facilities representing significant obligations of Holdings and the Company.
The Senior Subordinated Notes require semi-annual interest payments and the
Credit Facilities require quarterly payments of principal and interest
commencing approximately six months after the closing date (the "Closing Date")
of the Recapitalization. Prior to June 1, 2003, Holdings' interest expense on
the Senior Discount Notes will consist solely of non-cash accretions of
principal. On June 1, 2003, Holdings will be required to pay the Mandatory
Principal Redemption Amount. After June 1, 2003, the Senior Discount Notes will
require semi-annual interest payments. The Company's remaining liquidity needs
relate to working capital needs, capital expenditures and potential
acquisitions.
The Company intends to fund its working capital, capital expenditures and
debt service requirements through cash flows generated from operations,
borrowings under the Credit Facilities and amounts available under the
Receivables Facility. The Credit Facilities consist of a $100 million Revolving
Facility and $270 million of Term Facilities, consisting of $80 million of
Tranche A Term Loans, $90 million of Tranche B Term Loans and a $100 million
Delayed Draw Term Facility. All amounts under the Revolving Facility were
available immediately following the Recapitalization and $25 million of the
Revolving Facility are available for the purpose of financing permitted
acquisitions. The Delayed Draw Term Facility provides for up to $100 million of
term loan borrowings for two years following the Closing Date
49
solely to fund permitted acquisitions. The Revolving Facility will mature six
years after the Closing Date. The Delayed Draw Term Facility will mature seven
years after the Closing Date. The Tranche A Term Loan will mature six years
after the Closing Date, with quarterly amortization payments during the term of
such loan. The Tranche B Term Loan will mature eight years after the Closing
Date, with nominal quarterly amortization prior to the maturity of the Tranche
A Term Loans and with the remaining amounts amortizing on a quarterly basis
thereafter. The Credit Facilities are secured by substantially all the assets
of Holdings and its subsidiaries. In addition to the Credit Facilities, upon
the Recapitalization the Company entered into the Receivables Facility, which
is also available to finance working capital needs. The Receivables Facility
provides for $300 million of financing through the sale of accounts receivable
to a wholly owned, bankruptcy remote, special purpose subsidiary, although
based on the current composition of the Company's receivables, on the Closing
Date only approximately $250 million were available under the Receivables
Facility. Although the Receivables Facility is available for six years, the
Company currently intends to replace the Receivables Facility through a
securitization of the receivables in the capital markets or another
securitization transaction. However, no assurance can be made that such
transaction will be completed or, if completed, whether such transaction may
have materially different terms from the Receivables Facility. See "Description
of the Credit Facilities" and "Description of the Receivables Facility."
Management believes that cash generated from operations, together with
amounts under the Credit Facilities and the Receivables Facility, will be
sufficient to meet the Company's working capital, capital expenditure and other
cash needs, including financing for acquisitions, in the foreseeable future.
There can be no assurance however, that this will be the case. Holdings and
Company may consider other options available to them in connection with future
liquidity needs, including the issuance of additional debt and equity
securities.
Year 2000
The Company is in the process of modifying, upgrading or replacing its
computer software applications and systems to accommodate the "Year 2000"
changes required for correct recording of dates in the year 2000 and beyond.
The Company does not expect that the cost of its Year 2000 compliance program
will be material to its financial condition or results of operations. The
Company believes that it will be able to achieve compliance by the beginning of
1999, and does not currently anticipate any material disruption in its
operations. The Company has very limited information concerning the compliance
status of its suppliers. In the event that the Company or any of the Company's
significant suppliers do not successfully achieve Year 2000 compliance, the
Company's business or operations could be adversely affected.
Inflation
The rate of inflation, as measured by changes in the consumer price index,
did not have a material effect on the sales or operating results of the Company
during the periods presented. However, inflation in the future could affect the
Company's operating costs. Price changes from suppliers have historically been
consistent with inflation and have had little impact on the Company's
profitability.
Seasonality
The Company's operating results are affected by certain seasonal factors.
Sales are typically at their lowest during the first quarter due to a reduced
level of construction activity during the winter months. Sales increase during
the warmer months beginning in March and continuing through November. Sales
drop again slightly in December as the weather cools and also as a result of
reduced level of activity during the holiday season. As a result, the Company
reports sales and earnings in the first quarter that are generally lower than
that of the remaining quarters.
The following table presents unaudited quarterly operating results for
each of the Company's last nine quarters as well as the percentage of the
Company's sales represented by each item. This information has been prepared by
Holdings on a basis consistent with Holdings' audited financial statements and
includes all adjustments (consisting only of normal recurring adjustments) that
management considers necessary for a fair presentation of the data. These
quarterly results are not necessarily
50
indicative of future results of operations. This information should be read in
conjunction with Holdings' consolidated financial statements and notes thereto
included elsewhere in this Offering Memorandum.
Quarter Ended
-----------------------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------------- ----------------------- ----------------------- -----------------------
(Dollars in millions)
1996:
Sales, net ..................... $ 477.1 100.0% $ 584.6 100.0% $ 606.6 100.0% $ 606.3 100.0%
Gross profit* .................. 89.3 18.7 102.4 17.5 104.0 17.1 109.3 18.0
Income from operations ......... 15.2 3.2 16.9 2.9 16.6 2.7 19.5 3.2
Net income ..................... 7.4 1.6 7.7 1.3 7.7 1.3 9.7 1.6
1997:
Sales, net ..................... $ 576.7 100.0% $ 659.4 100.0% $ 680.0 100.0% $ 678.7 100.0%
Gross profit* .................. 104.4 18.1 114.7 17.4 120.9 17.8 123.9 18.3
Income from operations ......... 14.9 2.6 20.8 3.2 23.4 3.4 21.0 3.1
Net income ..................... 6.1 1.1 9.5 1.4 11.0 1.6 9.6 1.4
1998:
Sales, net ..................... $ 693.4 100.0%
Gross profit* .................. 126.7 18.3
Income from operations ......... 20.2 2.9
Net income ..................... 8.5 1.2
- - - - ---------------------
* Exclusive of depreciation and amortization.
Impact of Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and displaying
comprehensive income and its components. This Statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. The provisions of SFAS
No. 130 have been adopted in the three month period ended March 31, 1998 and
all years presented have been adjusted to reflect the adoption. In Holdings'
case, comprehensive income includes net income and unrealized gains and losses
from currency translation.
The FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," which establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and related disclosures about products and services,
geographic areas and major customers. The SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997. Additionally, the Accounting Standards
Executive Committee issued Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use," which
provides guidance on accounting for the costs of computer software developed or
obtained for internal use. The SOP is effective for fiscal years beginning
after December 15, 1998. Management is currently evaluating the impact of these
standards on the financial statements.
51
BUSINESS
Overview
WESCO is the second largest provider of products and related services in
the U.S. electrical wholesale distribution industry and believes that it is
also the second largest in North America. The Company operates over 325
branches and five regional distribution centers in 48 states and nine Canadian
provinces to serve virtually the entire U.S. and Canadian market. WESCO
provides a broad product offering consisting of over 210,000 products sourced
from over 6,000 suppliers to over 130,000 customers. WESCO complements this
broad product offering with a range of services and procurement solutions,
including integrated supply, whereby it manages all aspects of the customer's
supply processes, and electronic commerce, which enables procurement to be
automated for improved service at lower cost. WESCO's diversified customer base
includes a wide variety of industrial companies, contractors for industrial,
commercial and residential projects, utility companies, and commercial,
institutional and governmental customers. WESCO's national infrastructure,
extensive local geographic coverage and complementary service offerings have
allowed WESCO to specialize in developing combined product and service
solutions tailored to meet the specific needs of its individual customers.
WESCO is particularly well positioned to meet the complex procurement needs of
multi-site customers seeking total supply chain cost reduction through
preferred supplier alliances.
Since WESCO's divestiture from Westinghouse in 1994 (the "Divestiture"),
management has realigned operations to achieve substantial growth in sales and
profitability. The current management team has: (i) substantially improved
operating margins; (ii) realigned WESCO's branch network to focus on key
customer markets; (iii) significantly expanded WESCO's National Accounts (as
defined) and other marketing programs; (iv) implemented a new incentive system
for branch managers and sales personnel; and (v) actively pursued industry
consolidation opportunities. As a result of management's actions and growth in
the industry generally, sales have increased from $1.6 billion in 1993 to $3.0
billion on a pro forma basis in the twelve months ended March 31, 1998, a
compound annual growth rate of 16.1%, and EBITDA has improved from a loss of
$1.4 million in 1993 to Adjusted EBITDA of $113.8 million on a pro forma basis
in the twelve months ended March 31, 1998. Pursuant to the Recapitalization,
management retained approximately $97.7 million of equity in Holdings and,
together with new stock options expected to be granted in connection with the
Recapitalization, will hold or have the right to acquire over 30% of the common
equity of Holdings on a fully diluted basis. See "The Recapitalization."
Industry Overview
The electrical wholesale distribution industry serves customers in the
industrial, commercial, construction and utility markets. Electrical
wholesalers provide logistical and technical services for customers by bundling
together a wide range of products typically required for the construction and
maintenance of electrical supply networks, including wire, lighting,
distribution and control equipment and a wide variety of electrical supplies.
The wholesale channel enables customers to efficiently access a broad range of
products and has the capacity to deliver value-added services. Customers are
increasingly demanding that distributors provide a broader and more complex
package of services as customers seek to outsource non-core functions and
achieve documented cost savings in purchasing, inventory and supply chain
management. As a result of these customer demands, electrical wholesalers have
approximately doubled their share of total electrical products sold in the
United States from 1972 to 1997, and sales by electrical wholesalers now
represent approximately 60% of the U.S. electrical market.
The electrical wholesale distribution industry in the U.S. is large,
growing and highly fragmented. Industry sources estimate that total electrical
wholesale distributor sales were $67 billion in 1997, a 9.6% compound annual
growth rate since 1994. In 1996, the latest year for which data is available,
the four largest wholesale distributors, including WESCO, accounted for only
14% of estimated total industry sales. In that year, no single distributor
accounted for more than 5% of estimated industry sales, and 57% of such sales
were generated by distributors with less than $21 million in annual sales.
52
Competitive Strengths
WESCO believes it is well positioned to both capitalize on the growing
customer demand for value-added services and procurement outsourcing and play a
leading role in the continued consolidation in the electrical products
distribution industry as a result of the following competitive advantages:
Market Leadership. WESCO believes it is the second largest electrical
wholesale distributor in North America, serving virtually the entire U.S. and
Canadian market. Management believes that WESCO is the industry's leading
wholesale supplier of electrical products in North America to several important
and growing markets, including: (i) customers with large, complex plant
maintenance operations requiring a national multi-site service solution for
their electrical distribution product needs; (ii) large contractors for major
industrial and commercial construction projects; (iii) the electric utility
industry; and (iv) manufacturers of factory-built homes, recreational vehicles
and other modular structures. These leadership positions provide WESCO with an
extensive base from which to continue to grow sales.
Established National and Local Distribution Infrastructure. WESCO's North
American distribution network consists of over 325 branches and five regional
distribution centers in 48 states and nine Canadian provinces. This established
network provides WESCO with a number of competitive advantages, including the
ability to: (i) offer multi-site agreements with the broad geographic scope
required by major customers who seek to coordinate their maintenance, repair
and operating ("MRO") supplies purchasing activity across multiple locations
("National Accounts"); (ii) enter into favorable preferred supplier agreements
which provide for improved payment terms, volume rebates, marketing programs
and geographic franchises; (iii) utilize a specialized and technical nationwide
sales force to meet specific customer demands for a broad range of products and
services across multiple geographic markets; and (iv) provide same-day
shipments. Management believes these competitive strengths allow it to more
effectively meet the service needs and expectations of both large national
customers who are increasingly demanding a single source supply capability and
local customers who require high service levels for their electrical product
procurement needs.
Broad Product Offering. WESCO provides its customers with a broad product
selection consisting of over 210,000 electrical, industrial and data
communications products sourced from over 6,000 suppliers. The Company's
products range from basic wire to advanced automation and control products.
Value Added Services. In partnership with its customers, WESCO combines
its product offerings with a wide range of supply management services to create
value for its customers. Examples of such services include: (i) outsourcing of
the entire MRO purchasing process; (ii) implementing inventory optimization
programs; (iii) participating in joint cost savings teams; (iv) assigning
Company employees as on-site support personnel; (v) recommending
energy-efficient product upgrades; (vi) offering safety and product training
for customer employees; and (vii) providing manufacturing process improvements
using automated solutions. This combination of products and value-added
services enhances WESCO's competitive position by allowing it to offer
comprehensive and documented cost-efficient solutions to a customer's specific
procurement needs.
Diverse Revenue Base. WESCO's diverse revenue base is derived from the
sale of its broad range of over 210,000 electrical, industrial and data
communications products to over 130,000 customers, including: (i) industrial
companies from numerous manufacturing and process industries and original
equipment manufacturers ("OEMs"); (ii) contractors for industrial, commercial
and residential projects; (iii) electrical utility customers; and (iv)
commercial, institutional and governmental customers. No customer accounted for
more than 1% of WESCO's total sales in 1997. WESCO's geographic diversity
encompasses sales in all 50 states in the U.S. and all 10 Canadian provinces.
This diversity of customers and products provides WESCO with a broad base from
which to grow sales and reduces exposure to any particular customer, industry
or regional economic cycle.
Proven and Committed Management Team. WESCO's management team has
successfully repositioned the Company following the Divestiture. The current
management team has: (i) substantially improved operating margins; (ii)
realigned WESCO's branch network to focus on key customer markets; (iii)
significantly expanded WESCO's National Accounts and other marketing programs;
(iv) implemented a new incentive system for branch managers and sales
personnel; and (v) actively pursued
53
industry consolidation opportunities. Since August 1995, WESCO's management has
successfully completed 14 acquisitions which currently account for estimated
annualized sales of over $800 million. As a result of management's actions as
well as growth in the industry generally, sales have increased from $1.6
billion in 1993 to $3.0 billion on a pro forma basis in the twelve months ended
March 31, 1998, a compound annual growth rate of 16.1%, and EBITDA has improved
from a loss of $1.4 million in 1993 to Adjusted EBITDA of $113.8 million on a
pro forma basis in the twelve months ended March 31, 1998. Pursuant to the
Recapitalization, approximately 200 managers continued to retain equity in
Holdings representing an aggregate value of approximately $97.7 million. In
addition, certain managers will have the opportunity to invest an aggregate of
up to approximately $15 million in newly issued common stock of Holdings.
Holdings also plans to adopt a new stock option plan in connection with the
Recapitalization. As a result, management will hold or have the right to
acquire over 30% of the common equity of Holdings on a fully diluted basis.
Business Strategy
Increase Large National Programs. WESCO has successfully established
National Accounts relationships with approximately 300 customers and believes
it can continue to expand revenue generated through its National Accounts
program by: (i) increasing the number of products and sites covered by its
existing National Accounts relationships; (ii) expanding MRO agreements to
include capital projects; and (iii) extending the program to new customers.
National Accounts provide WESCO with a recurring base of revenue through
strategic multi-year agreements. In addition, through its Major Projects Group,
the Company plans to intensify its focus on large construction projects, such
as new stadiums, industrial sites, wastewater treatment plants, airport
expansions, healthcare facilities and correctional facilities. The Company
intends to secure new National Accounts and Major Projects contracts through:
(i) aggressive national marketing of WESCO's demonstrated project management
capabilities; (ii) further development of relationships with leading
construction and engineering firms; and (iii) close coordination with National
Accounts customers on their major renovation and new construction projects.
Continue to Improve Operating Profit Margins and Cash Flow. WESCO has
successfully improved its operating profit margins over the past four years,
increasing Adjusted EBITDA to over $113.8 million on a pro forma basis for the
twelve months ended March 31, 1998 from a loss in EBITDA of $1.4 million in
1993. WESCO believes a successful business strategy must include the commitment
to continuous improvement in profitability and productivity. The Company is
emphasizing the widespread use of innovative and disciplined approaches to
managing its business processes, employee productivity, and working capital and
capital expenditure efficiency. These continuous improvement initiatives
include: (i) improving product pricing controls to maximize gross margin; (ii)
utilizing activity-based costing to more accurately measure and enhance
profitability by customer, supplier and other categories; (iii) enhancing the
coordination of purchasing and inventory management across its branch network
and regional distribution centers; (iv) improving information systems
processing capabilities in order to realize more efficient branch and
headquarters operations; and (v) leveraging the existing corporate
infrastructure by continuing to eliminate redundant back-office functions of
acquired companies.
Encourage Branch Level Entrepreneurship. A distributor's reputation is
often determined at the local branch level, where timely supply and customer
service are critical. Accordingly, WESCO grants its branch managers substantial
autonomy and responsibility to best respond to customer needs in local markets.
WESCO's branch managers are responsible for optimizing business activities in
their local markets, including managing the branch sales force, configuring
inventories, selecting potential customers for targeted marketing efforts and
developing local service options. WESCO's compensation system for branch
managers, a significant portion of which is incentive based, strongly
encourages sales and cash flow growth as well as efficient working capital
management at the branch level.
Gain Share in Key Local Markets. WESCO intends to increase its market
share in key geographic markets with a substantial base of potential customers
through a combination of new branch openings, increased sales and marketing
efforts and acquisitions. In addition, WESCO's marketing team, together with
local branch managers, are expanding the Company's program of detailed market
analysis and opportunity identification on a branch-by-branch and product line
basis. The Company has developed a detailed database of potential customers for
its individual markets which it will utilize to implement this
54
strategy. Furthermore, the Company intends to leverage its existing
relationships with preferred suppliers to increase sales of their products in
local markets through various initiatives, including sales promotions,
cooperative marketing efforts, direct participation by suppliers in National
Accounts implementation, dedicated sales forces and product exclusivity.
Expand Product and Service Offering. WESCO intends to build on its
demonstrated ability to introduce new products and services to meet customer
demands and capitalize on market opportunities. For example, the Company plans
to expand its presence in the fast-growing data communications market. In the
past two years, WESCO has significantly increased its focus on this market,
generating sales of $83 million in 1997, up from $52 million in 1995. By
utilizing a dedicated data communications sales team and leveraging its
existing sales force, the Company intends to expand sales to new and existing
customers, as well as broaden its offering into additional data communications
product lines. In addition, the Company plans to expand its integrated supply
programs with both new and existing accounts. Given the initial success of its
integrated supply initiatives and the rapid growth in the demand for such
services anticipated by the Company, WESCO believes it has a significant
opportunity to develop additional customer relationships by leveraging its
comprehensive service and supply
expertise.
Pursue Consolidation Opportunities. WESCO utilizes a disciplined approach
toward acquisitions which includes established targets for cash return on
investment. Since August 1995, WESCO's management has successfully completed 14
acquisitions which currently account for estimated annualized sales of over
$800 million. WESCO intends to continue to pursue its consolidation strategy
and believes that the highly fragmented nature of the electrical distribution
industry will provide WESCO with a significant number of acquisition
opportunities. The Company evaluates potential acquisitions based on their
ability to: (i) accelerate expansion into key growth markets; (ii) add support
capabilities for important new customers; (iii) enhance sales of acquired
branches by immediately broadening the product and service mix; (iv) expand
local presence to better serve existing customers; (v) strengthen relationships
with manufacturers; and (vi) provide operating efficiencies by leveraging
WESCO's existing infrastructure.
55
Acquisitions
In mid-1995 WESCO launched its program to make acquisitions that
complement its existing business. See " -- Business Strategy." Since August
1995, WESCO has completed 14 acquisitions which currently account for estimated
annualized sales of over $800 million. In order to improve operating
efficiencies, management has closed or consolidated 25 of the acquired branches
due to overlapping locations. The Company paid cash consideration of
approximately $6.2, $103.9, $13.9 and $87.6 million for acquisitions in 1995,
1996, 1997 and 1998 (through May 12, 1998), respectively. See Notes 14 and 15
to the consolidated financial statements of Holdings included elsewhere in this
Offering Memorandum. These acquisitions and the key rationale for each are
summarized below.
Number
of Annual
Year Company Headquarters Branches Sales(1) Key Rationale
- - - - ------ ----------------------- ------------------ ---------- ------------ -------------------------------------------
(millions)
1995 Fife Electric Company Detroit, MI 1 $ 42 Capitalized on strong relationships with
auto manufacturers and obtained a
Square D distributorship.
Manufactured Monroe, NC 1 5 Expanded product offering for
Housing Supply Manufactured Structures customers.
1996 Murco, Inc. Monroe, LA 3 14 Leveraged systems integration capabilities
with paper manufacturing and wastewater
treatment customers.
Standard Electric Bangor, ME 9 25 Improved coverage of pulp and paper
Company, Inc. National Accounts.
EESCO, Inc. Chicago, IL 36 288 Increased Midwest industrial presence and
obtained a major Allen-Bradley distribu-
torship.
Hamby-Young Power Aurora, OH 2 22 Introduced product and design capabilities
Supply Products, Inc. for electrical substation facilities.
Nevada Electric Las Vegas, NV 1 5 Expanded into growing Las Vegas market.
Supply
Power Supply, Inc. Houston, TX 5 20 Enhanced utility market share in Texas.
Ace Electric Supply Jacksonville, FL 11 44 Obtained an additional Allen-Bradley
Company distributorship in the Southeast.
1997 Diversified Electric Little Rock, AR 2 28 Further consolidated utility leadership in
Supply Company, Inc. the Southeast.
Maydwell & Hartzell, Brisbane, CA 7 24 Built utility leadership in the West.
Inc.
1998 Avon Electrical Hauppauge, NY 2 80 Expanded presence in metropolitan New
Supplies, Inc. York.
Brown Wholesale Sun Valley, CA 9 70 Expanded industrial/construction market
Electric Company share in the Southwest.
Reily Electric New Orleans, LA 7 140 Enhanced existing National Accounts
Supply, Inc. customer relationship.
-- ----
Total 96 $807
== ====
- - - - ---------------------
(1) Represents WESCO's estimate of annual sales at the time of acquisition,
based on WESCO's review of internal and/or audited statements of the
acquired business.
The largest acquisition completed to date was EESCO, Inc. ("EESCO"), the
eighth largest electrical wholesale distributor in the U.S. at the time it was
acquired by WESCO in April 1996. As a result of the EESCO acquisition, WESCO
increased coverage in the key Chicago and Minneapolis markets, developed
important new supplier relationships (Allen-Bradley and General Electric),
increased scale and realized cost savings through the consolidation of branches
and the reduction of selling, general and administrative expenses. WESCO has
substantially increased the sales and profitability of EESCO by: (i) increasing
investment capital for new and existing EESCO branches; (ii) expanding EESCO's
56
technical support group; and (iii) including EESCO branches in National
Accounts programs and preferred supplier agreements. Since its acquisition,
EESCO's annual net sales have increased to $341 million in 1997 from $288
million in 1995.
On January 1, 1998, WESCO acquired the electrical distribution businesses
of Avon Electrical and Brown Wholesale. Avon Electrical, operating two branch
locations, is a leading distributor in the New York metropolitan area. Brown
Wholesale, with two branches in Arizona, is the leader in the high-growth
Phoenix market. Brown Wholesale also had seven branches which were closed or
sold in California and Hawaii to improve operating efficiency. These
acquisitions will add approximately $150 million in annualized sales.
On May 8, 1998, WESCO acquired the assets of, and assumed certain
liabilities of, Reily, a distributor headquartered in New Orleans, Louisiana
with seven branches in the Gulf Coast region. The Reily acquisition provides
the Company with several strategic benefits, including: (i) strengthening its
market position in the Gulf Coast region; (ii) complementing an existing
National Accounts customer relationship in the petrochemical industry; and
(iii) improving its position in the Houston market, where Reily's strong market
position will complement WESCO's existing branch operations.
As a result of the acquisitions of Avon Electrical, Brown Wholesale and
Reily, the Company contemplates consolidating and/or closing 5 WESCO branches
by the end of 1998 which the Company expects will result in $3.6 million of
annual cost savings. The Company does not expect to incur any material expenses
or charges in connection therewith.
Products and Services
WESCO's network of branches and distribution centers contains
approximately 210,000 product stock keeping units ("SKUs"), and the average
branch maintains in its warehouse stock approximately 4,000 to 8,000 SKUs,
tailored to meet the needs of the customers in its markets. WESCO's major
product categories, and the representative products and the percentage of 1997
sales for each such category, are set forth below:
Product Category Representative Products Percent of 1997 Sales
- - - - -------------------------------- ------------------------------------------------------ ----------------------
Supplies Fuses, terminals, connectors, boxes fittings, tools, 25
lugs, tapes and other miscellaneous supplies
Distribution Equipment Circuit breakers, transformers, switchboards, 23
panelboards and busway
Wire and Conduit Wire, cable, steel and PVC conduit 22
Lighting Lamps (light bulbs), fixtures and ballasts 19
Control, Automation and Motors Motor control centers, drives, programmable logic 8
controllers, pushbuttons and operator interfaces
Data Communications Premise wiring, patch panels, terminals, 3
connectors, hubs and routers
In conjunction with product sales, WESCO offers customers a range of
services and procurement solutions that draws on its product and supply
management expertise and systems capabilities. These services include National
Accounts programs, integrated supply programs and electronic commerce.
National Accounts Programs. The typical National Accounts customer is a
Fortune 500 industrial company, a large utility or other major customer, in
each case with multiple locations. Recently, through rigorous selection
processes, these customers have been seeking to substantially reduce their
electrical supply base -- in some cases from several hundred suppliers to just
one -- with expectations for documented cost reductions, high levels of service
and consistent product and pricing across all locations. WESCO's national
platform, strong branch network and product breadth give it the capacity to
offer multi-site agreements with the scope required by National Accounts.
WESCO's National Accounts programs provide customers with total supply
chain cost reductions by coordinating purchasing activity for MRO supplies
across multiple locations. WESCO is able to demonstrate documented savings of
over 10% within the first year of program launch. Comprehensive roll-out plans
establish jointly-managed implementation teams at the local and national level
to prioritize
57
activities, track progress against objectives, and identify key performance
measures. WESCO is increasingly involving its preferred suppliers early in the
implementation process, where they can contribute expertise and product
knowledge to accelerate program implementation and the achievement of savings.
Integrated Supply Programs. WESCO's integrated supply programs offer
customers a variety of services to support their objectives for improved supply
chain management. WESCO integrates its personnel, product and distribution
expertise, electronic technologies and service capabilities with the customer's
own internal resources to meet particular service requirements. Each integrated
supply program is uniquely configured to deliver a significant reduction in the
number of MRO suppliers, reduce total procurement costs, improve operating
controls and lower administrative expenses. Although integrated supply programs
currently account for a small portion of revenue, management believes that
customers will increasingly seek to utilize WESCO as an "integrator,"
responsible for selecting and managing the supply of a wide range of MRO and
OEM products.
Electronic Commerce. WESCO enhances its ability to service customers
accurately and efficiently by incorporating technologies such as EDI,
electronic mail, electronic cataloging (such as CD-ROM and Internet ordering),
direct order entry and barcoded bin labelling to streamline inventory
replenishment. WESCO also employs technological and logistical innovations in
its internal operating processes to improve customer service, including
paperless warehousing, cross-docking, barcoding and automatic stock
replenishment. Although constituting a small percentage of WESCO's total number
of transactions, WESCO typically completes in excess of 65,000 EDI transactions
per month.
Suppliers and Purchasing
WESCO's supplier relationships are strategically important to WESCO,
providing access to a wide range of products, technical training and sales and
marketing support. Suppliers often take an active role in marketing products to
the customer by deploying their own sales force and/or independent
manufacturers' representatives to work together with WESCO's sales
organization. WESCO's growth, size, geographic scope and marketing initiatives
with large, high profile customers make it an attractive partner for suppliers
by allowing them to expand customer access to their product offerings, improve
their market position and introduce new products. As a result, WESCO has been
able to negotiate broad access to most product lines, including preferred
supplier agreements with regard to volume discounts, payment terms, marketing
support and logistics.
WESCO purchases products from a diverse group of over 6,000 suppliers. In
1997, the ten largest suppliers accounted for approximately 45% of the
Company's purchases, and the top 200 suppliers accounted for approximately 85%
of purchases. The largest of these was Eaton Corporation, through its
Cutler-Hammer division, successor to the Distribution and Control Business Unit
of Westinghouse, accounting for approximately 18% of total purchases. No other
supplier accounted for more than 6%. WESCO's ten largest suppliers in 1997 and
their principal products are as follows:
Supplier Products
- - - - --------------------- -----------------------------------
Cutler-Hammer Distribution and control equipment
Allen-Bradley Control and automation equipment
Asea Brown Boveri Transformers
Philips Lighting Lamps
Southwire Company Wire and cable
Cooper Lighting Lighting fixtures
Thomas & Betts Electrical supplies
Lithonia Lighting Lighting fixtures
Crouse Hinds Fittings
General Electric Lamps and distribution equipment
WESCO has preferred supplier agreements with approximately 150 of its
suppliers, and purchases approximately 60% of its stock inventories from
suppliers pursuant to these agreements. Consistent
58
with industry practice, most of WESCO's agreements with suppliers, including
both distribution agreements and preferred supplier agreements, are terminable
by either party on no more than 60 days notice. See "Risk Factors -- Product
Supply."
In order to capitalize on its buying power as a national network, WESCO
has increasingly centralized buying by supplying a larger proportion of branch
stock sales through its five regional distribution centers. To preserve local
flexibility in tailoring their inventories to meet local customer requirements,
branches are often offered the option of purchasing a choice of competing lines
from the distribution centers. In limited cases where a product ordered by a
customer is not otherwise available, a branch may purchase such product from a
competitor to resell to the customer.
Certain suppliers to the electrical wholesale market supply their products
pursuant to exclusive geographic arrangements whereby the distributor is
granted the exclusive ability to sell the supplier's products in a geographic
market and may be restricted from offering competing products. Although
relatively few suppliers have such exclusive geographic distributorship
arrangements, some involve much sought after product lines. The most notable of
these is the highly regarded Allen-Bradley distributorship. In 1996, as a
result of two acquisitions, the Company significantly increased the number of
branches offering the Allen-Bradley product.
WESCO has a product management group which manages key supplier
relationships, including negotiating preferred supplier agreements, managing
cooperative marketing funds, organizing product training, developing joint
marketing plans with suppliers and evaluating supplier performance.
Markets and Customers
WESCO has a large base of approximately 130,000 customers diversified
across its principal markets. With no customer accounting for more than 1% of
1997 sales, WESCO is not dependent on any single customer. WESCO's broad
customer base includes: (i) industrial companies from numerous manufacturing
and process industries, and OEMs, including manufacturers of factory-built
homes and other modular structures; (ii) contractors for industrial, commercial
and residential projects; (iii) investor-owned utilities, municipal power
authorities and rural electric cooperatives; and (iv) commercial, institutional
and governmental ("CIG") customers.
Industrial Customers. Sales to industrial customers, which include MRO and
OEM sales, accounted for approximately 40% of WESCO's sales in 1997 and
approximately 25% of the electric wholesale market in 1996.
Electrical MRO products are needed to maintain and upgrade the electrical
network at all industrial sites. Expenditures are greatest in the heavy process
industries, such as pulp and paper and petrochemical. Typically, electrical MRO
is the first or second ranked product category by purchase value for total MRO
requirements for an industrial site. Other MRO product categories include,
among other things, lubricants; pipe, valves and fittings; fasteners; and power
transmission products. MRO activity has been difficult for industrial users to
manage, as it is characterized by a fragmented supply base, a high volume of
low dollar transactions, poor usage and cost information and relatively high
inventory levels. For example, it is not unusual for a customer to inventory as
many as 10,000 MRO SKUs. Furthermore, customers are sensitive to supply
reliability, since a lack of critical spares could cause an entire
manufacturing process to shut down.
WESCO is responding aggressively to the needs of this market, particularly
for the high-use customers in heavy process industries. To more efficiently
manage the MRO process on behalf of its customers, WESCO offers a range of
supply management services, including: (i) outsourcing of the entire MRO
purchasing process; (ii) implementing inventory optimization programs; (iii)
participating in joint cost savings teams; (iv) assigning Company employees as
on-site support personnel; (v) recommending energy-efficient product upgrades;
(vi) offering safety and product training for customer employees; and (vii)
providing manufacturing process improvements using automated solutions. WESCO's
most distinctive service is its National Accounts program, with the ability to
offer multi-site agreements to large industrial customers to ensure local
supply with nationwide consistency in product and pricing.
59
OEM customers incorporate electrical assemblies and components into their
own products and typically require a reliable, high-volume supply of a narrow
range of electrical items. The wholesale channel generally serves the smaller
and medium-sized OEMs, while the larger OEMs typically purchase directly from
manufacturers. Customers in this segment are particularly service and price
sensitive due to the volume and the critical nature of the product used. OEMs
also expect value-added services such as design and technical support,
just-in-time supply and electronic commerce. While prices tend to be lower in
this market due to higher volume, long-term relationships are typical, which
leads to an efficient supply process and stable, recurring revenues.
WESCO serves the OEM market by: (i) providing experienced,
technically-oriented sales specialists who assist in product specification and
selection, prototype development and supplier coordination; (ii) offering
supply management services similar to those provided to industrial MRO
customers; (iii) securing access to product lines that are commonly specified
by OEMs; (iv) working with suppliers on product applications; and (v) offering
specialized packaging or kitting services that bring efficiencies to the
customer's manufacturing process.
Management believes that WESCO is the leading electrical wholesaler in the
manufactured structures market (factory built homes, recreational vehicles and
other modular structures), a particular type of OEM. For the past several years
WESCO has been expanding its service to these customers by offering integrated
supply solutions including a wide range of non-electrical products such as
structural components, air conditioning units, plumbing fixtures, cabinets and
kitchen ventilation equipment.
Electrical Contractors. Sales to electrical contractors accounted for
approximately 38% of WESCO's sales in 1997 and approximately 40% of the
electrical wholesale market in 1996. These customers range from large
contractors for major industrial and commercial projects, the customer types
which WESCO principally serves, to small residential contractors which
represent a small portion of WESCO's sales. Electrical products purchased by
contractors typically account for approximately 40% to 50% of the total
installed cost, and therefore accurate cost estimates and competitive material
costs are critical to a contractor's success in obtaining profitable projects.
Contractors choose wholesale suppliers on the basis of price, availability and
various support services such as design assistance, bill of material
development, credit policies and inventory management.
WESCO is one of the industry leaders in serving the complex needs of large
commercial and industrial contractors, and has established a Major Projects
Group to focus some of its most experienced personnel on serving the needs of
the top 50 U.S. electrical contractors on a multi-regional basis. WESCO also
offers a wide range of services to meet the needs of contractors, including
blanket purchase agreements, on-line ordering, CD-ROM catalogs, on-site
trailers, lighting and distribution equipment lay-outs and access to low
voltage products, particularly data communications products. WESCO has also
worked to strengthen its relationships with independent manufacturers'
representatives who provide additional sales coverage, technical assistance and
training on behalf of manufacturers.
Utilities. Sales to utilities accounted for approximately 14% of WESCO's
sales in 1997 and approximately 4% of the electrical wholesale market in 1996.
The Company believes that its estimated 13% market share positions it as the
leading electrical wholesaler to this market, which includes large investor-
owned utilities, smaller rural electric cooperatives and municipal power
authorities. WESCO provides its utility customers with an extensive range of
supplies to meet their MRO and capital projects needs. Integrated supply
arrangements are also important in this market as cost pressures and
deregulation cause utility customers to streamline procurement practices. WESCO
has been selected for supply management agreements with ComEd, PECO Energy and
Wisconsin Electric Power Company.
Traditionally, investor-owned utilities have purchased products directly
from manufacturers, while smaller rural electric cooperatives and municipal
power authorities have been supplied by electrical wholesalers, including
WESCO. Both large and small utility customers require relatively high dollar
volumes of specialized product to maintain their electrical networks. Access to
these specialized utility products is limited by geographic distributorship
agreements granted by manufacturers. These products are, therefore, not
generally available to all electrical wholesalers at the pricing required by
utility customers. Recent trends in the utility industry favor utility-oriented
electrical wholesalers, such as WESCO. The most important trend is the
deregulation of utility power generation, which has forced large utilities
60
to seek better asset utilization and cost savings in all aspects of their
operations, including purchasing and supply management. Investor-owned
utilities, in focusing on their core business, have moved to outsource certain
supply functions to wholesalers in order to reduce costs and enhance cash flow.
Commercial, Institutional and Governmental Customers. Sales to CIG
customers accounted for approximately 7% of WESCO's sales in 1997 and
approximately 21% of the electrical wholesale market in 1996. This is a
fragmented market which includes schools, hospitals, property management firms,
retailers (for their own use) and government agencies of all types. These
customers often have complex infrastructure construction requirements, but
their MRO requirements are typically less complex than large industrial or
utility customers. WESCO's locally oriented and entrepreneurial branch
operations are well positioned to serve both construction and MRO needs of
these customers. WESCO's Major Products Group often assists in new construction
and the National Accounts group supports the MRO needs of multi-site financial
institutions, department stores and amusement parks. National retail or service
chains tend to favor distributors such as WESCO who can meet their recurring
needs at dozens or hundreds of store or office locations.
Other Electrical Customers. Sales to other electrical customers accounted
for less than 1% of WESCO's sales in 1997 and approximately 10% of the
electrical wholesale market in 1996. These customers include the general
public, retailers (for resale), farmers and other wholesalers.
Data Communications Customers. WESCO provides its customers with a wide
range of data communications products including (i) components of facilities
and premise wiring for data networks and (ii) electronic devices and processors
that transmit and manage the data flowing through a network. WESCO's customers
in this market include Bell Atlantic, IBM, Kodak and LTV Steel. Because of the
convergence of voice, data, and video applications, this growing market
consists of a wide range of new products and manufacturers that are not
included in the market size estimates for the electrical industry. The premise
wiring component of the data communications market is estimated by industry
sources to grow to approximately $4 billion in total sales by the year 2001
from an estimated $3 billion in 1997. The Company's sales to this market
increased from $52 million in 1995 to $83 million in 1997, and the Company
believes that such sales will continue to grow at a greater rate than most of
its other product categories. The Company's sales to this market in the first
quarter of 1998 were 22% higher than that of the comparable period in 1997.
Distribution Network
Branch Network. WESCO operates a system of over 325 branches, of which
approximately 275 are located in the U.S., approximately 50 are located in
Canada and the remainder are located in Puerto Rico, Mexico and Guam. Over the
last two years WESCO has opened approximately 15 branches per year, principally
to service National Accounts customers. In addition to consolidations in
connection with acquisitions, the Company occasionally closes or consolidates
existing branch locations to improve operating efficiency.
The size of individual branches within WESCO's nationwide network varies
broadly. In 1997, WESCO's branches had annual sales as high as $66 million,
with an average of approximately $8 million. A representative branch employs 10
to 15 people and typically stocks a product mix of 4,000 to 8,000 SKUs,
tailored to its local customer base. Customers can typically place orders at
the branches through facsimile, telephone, mail, EDI, on-line order entry or
counter appearances.
WESCO grants its branch managers substantial autonomy in directing the
branch sales force, configuring inventories, selecting markets served and
developing local service options. Branches operate as separate profit and loss
centers. A key aspect of WESCO's growth strategy is to encourage higher levels
of productivity by creating appropriate economic incentives for branch managers
through a mix of bonuses and stock options tied to the branch's growth and
profit improvement. Since the Divestiture and the implementation of this
incentive system, WESCO's average compensation for branch managers has
increased by approximately 60%. See "Management -- Stock Option Plan for Branch
Employees."
61
Distribution Centers. To support its branch network, WESCO has a system of
five regional distribution centers ("DCs") which supply approximately 40% of
stock purchases. The DCs add value to customers through: (i) shorter lead times
for product supply; (ii) better product selection and availability; (iii) same
day shipments; and (iv) central order handling and fulfillment for certain
multi-site customers. In addition to creating value for customers, the DCs
improve WESCO's supply chain management through: (i) automatic replenishment of
branch stock; (ii) on-line ordering for branches; (iii) redeployment of
slow-moving branch stock; (iv) automation of branch purchasing administration;
(v) bulk purchasing to achieve order discounts; and (vi) advanced distribution
techniques such as paperless picking, flow racking, barcoding, weight
verification, electronic freight management and cross-docking. Suppliers also
benefit from the DCs due to larger order sizes and lower transportation costs.
DCs ship to branches every day, for same-day orders or orders previously
generated through WESCO's computerized automated stock replenishment system.
Transportation and Logistics. WESCO offers its customers a variety of
delivery methods, including: (i) direct shipment from the manufacturer, which
is employed for many large orders and engineered products; (ii) branch
shipment, which is used for the large majority of stock and special order
sales; (iii) branch pick-up, which is used by some customers, particularly
contractors, for their day-to-day business; and (iv) shipment from a DC on an
exception or emergency basis, since DCs are primarily used to replenish branch
stock. Substantially all branch shipments to customers are made by contract
carriers or by Company or third party delivery vehicles, with minimal use of
overnight parcel services.
Typically, manufacturers pay freight charges for inbound shipments to DCs,
branches or customers. In some instances, prepaid freight terms are contingent
upon WESCO meeting certain minimum order requirements. For some suppliers and
where it results in lower overall transportation costs, WESCO has negotiated
pick-up allowances in lieu of prepaid freight.
Sales Organization
General Sales Force. WESCO's general sales force is based at the local
branches, and comprises approximately 2,000 Company employees, split equally
between outside sales representatives and inside sales personnel. Outside sales
representatives, who have an average of more than eight years of experience at
WESCO, are paid under a compensation structure which is heavily weighted
towards commissions. They are responsible for making direct customer calls,
performing on-site technical support, generating new customer relations and
developing existing territories. The inside sales force supports the outside
sales force and is a key point of contact for responding to routine customer
inquiries such as price and availability requests and for entering and tracking
orders.
National Accounts. WESCO has what management believes to be the largest
National Accounts sales force in the industry, led by an experienced group of
sales executives who negotiate and administer contracts, coordinate branch
participation and identify sales and service opportunities. National Accounts
managers' efforts are aligned by targeted customer industries, including
automotive, pulp and paper, petrochemical, steel, mining and food processing.
Data Communications. Data communications products are supported by a
dedicated sales force of approximately 70 inside and outside representatives
who focus primarily on the premise wiring systems market. This team is
supported by additional resources in the purchasing, inventory management,
product training, product management and regional sales areas. WESCO also
operates a training facility where customers and the general sales force can
receive industry-recognized certification in data communications product
installation.
Major Projects. In 1995, WESCO established a group of highly experienced
sales managers to target, on a national basis, the market for large
construction projects with electrical material valued in excess of $1 million.
WESCO's approach distinguishes it from almost all of its competitors, who
typically handle even the largest construction projects on a local basis.
Through the Major Projects Group, WESCO can meet the needs of contractors for
complex construction projects such as new stadiums, industrial sites,
wastewater treatment plants, airport expansions, healthcare facilities and
correctional facilities.
62
Industrial Automation Specialists. According to industry estimates, sales
of automation and control products are growing faster than the overall industry
average as technology advances and industrial firms of all types seek more
productive processes. The Company's EESCO Division, with its highly regarded
Allen-Bradley distributorship, specializes in automation and control products.
The Company's general sales staff is highly trained in assisting customers with
process control applications, and a separate staff of 58 technical support and
automation specialists provides sales assistance for analysis, design,
specification and implementation. In addition, other WESCO branches which
primarily serve industrial MRO and OEM customers draw on a dedicated staff of
technically trained industrial automation specialists, who are strategically
located in selected high-potential market areas and provide support and
assistance to multiple branches. Overall, a total of approximately 90
automation and control specialists are currently employed throughout WESCO.
Canada
To serve the Canadian market, WESCO operates a network of approximately 50
branches in nine provinces. Branch operations are supported by two distribution
centers located near Montreal and Vancouver. With sales of approximately US$280
million, Canada represented 11% of total WESCO sales in 1997. The Canadian
market for electrical wholesale is considerably smaller than the U.S. market,
with roughly US$2.4 billion in total sales in 1997 according to industry
sources. The Canadian market is also far more concentrated than the U.S.
market, based on estimated market data, with Westburne (33% share), Guillevin,
owned by Consolidated Electrical Distributors (12% share), WESCO's Canadian
branches (11% share) and Sonepar (8% share) collectively representing
approximately 64% of the market in 1997, compared to approximately 14% for the
top four U.S. wholesalers.
WESCO's Canadian operations have a strong reputation for serving the needs
of medium and large contractors, which in 1997 represented 61% of WESCO's
Canadian sales. More recently, WESCO has been successful in growing sales with
industrial customers, through marketing of control products and the development
and expansion of instrumentation product sales. National Accounts programs are
also being successfully applied to this market, building on WESCO's U.S.
experience with industrial customers. Data communications product sales have
grown rapidly in Canada from a negligible amount in 1993 to approximately 8% of
WESCO's total Canadian sales in 1997.
International
WESCO is continuing to build its international presence outside of the
U.S. and Canada, principally by following its National Accounts customers and
key suppliers into their high-growth markets, thereby limiting start-up risk
and enhancing profit. Other opportunities to grow international sales include
expanding and improving the quality of the network of the Company's independent
export sales representatives outside of North America, increasing the number of
North American-based export sales offices and building closer relationships
with global engineering, procurement and construction firms. With sales of
approximately US$64 million, international sales (excluding Canada) represented
2% of total WESCO sales in 1997. WESCO channels its international sales
principally through 13 sales offices, six of which are located within North
America as export offices and seven of which are in international locations,
and through sales representatives in 22 foreign countries. WESCO is in the
process of opening an administrative office in the United Kingdom to support
its sales efforts in Europe, Africa and the former Soviet Union.
WESCO recently opened two branches in the Mexico City area, where WESCO
was awarded the highly regarded Allen-Bradley distributorship for the Federal
District and three surrounding states. WESCO estimates that the Mexico City
market area represents 40% of total purchases in the $1.5 to $2.0 billion
Mexican market. Up to three additional branches may be opened in the states
surrounding Mexico City in the next three years.
A sales contact database of the foreign locations of WESCO's National
Accounts customers is under development. It is estimated that over 1,000 plant
sites outside of North America will eventually be covered by a direct sales and
telemarketing program.
63
Management Information Systems
WESCO's corporate information system, WESCOM, provides low-cost, highly
functional processing of a full range of WESCO's business operations, such as
customer service, inventory and logistics management, accounting and
administrative support. The system has been upgraded with decision support,
executive information system analysis and retrieval capabilities to provide
detailed income statement and balance sheet variance and trend reporting at the
branch level. The system also provides activity based costing capabilities for
analyzing profitability by customer, supplier, sales representative and
shipment type. Sales and margin trends and variances can be analyzed by branch,
customer, product category, supplier, or account representative.
The WESCOM system is fully distributed within WESCO, and every branch
(other than EESCO and certain newly acquired branches) utilizes its computer
system to support local business activities, on a real time basis, from sales
quotation to delivery of products to customers. Telecommunication links through
a central system in Pittsburgh give each branch access to information on
inventory status in WESCO's distribution centers as well as other branches and
an increasing number of on-line suppliers. EESCO operates its own system which
is linked to the Company's central system. The Company intends to integrate
EESCO into the WESCOM system over the next 12 to 18 months which is expected to
reduce costs associated with operating dual systems.
WESCO conducts a portion of its business through EDI transactions,
typically completing in excess of 65,000 EDI transactions per month with its
trading partners. WESCO's electronic commerce strategy calls for tighter
linkages to both customers and suppliers through greater use of technological
advances, including Internet and CD-ROM catalogs, barcoding, enhanced EDI,
electronic funds transfer and other innovative improvements.
Competition
WESCO competes directly with national, regional and local distributors.
National competitors who offer a broad base of products include Graybar
Electric Company, Inc., Consolidated Electrical Distributors and General
Electric Supply Company. Regional competitors include Rexel, Inc., Crescent
Electric Supply Company, Cameron & Barkley Company, Platt Electric Supply Inc.,
Sonepar and Westburne Inc. Certain other competitors, such as W.W. Grainger
Inc., which focuses primarily on industrial supplies distribution, overlap with
electrical wholesale distributors in some product lines. Distinct from these
full-line distributors are niche distributors that carry only certain products
such as wire, lighting products, or data communications equipment.
Competition among electrical wholesale distributors is primarily focused
on the local service area, and is generally based on product line breadth,
product availability and price. WESCO believes that it has certain competitive
advantages over many of its local competitors, which are not able to carry the
range of products stocked by WESCO or achieve purchasing economies of scale.
However, some of WESCO's competitors are larger and have access to greater
financial and marketing resources than WESCO. Another source of competition is
buying groups formed by smaller distributors to increase purchasing power and
provide some cooperative marketing capability. The two largest of these are
Affiliated Distributors, representing an estimated $5 billion of electrical
wholesale distribution sales in 1996, and IMARK, representing an estimated $3
billion of sales in 1996, based on industry sources. While increased buying
power may improve the competitive position of buying groups locally, WESCO does
not believe these groups have been able to compete effectively with WESCO for
National Accounts customers due to the difficulty in coordinating a diverse
ownership group.
Outside of the wholesale distribution channel, manufacturers employ, and
may increase the use of, direct sales and/or independent manufacturers
representatives. Some manufacturers with sufficient size, geographic scope and
financial and marketing resources may be in a position to offer customers
National Accounts services. Consumer channels such as hardware stores, DIY
retail outlets (such as Home Depot), mass merchants and grocery stores also
compete for certain customers. Some retail chains, with nationwide purchasing
advantages, can in certain product categories offer prices comparable to those
of the wholesale distributors, although with a much narrower product offering
overall. These channels attract smaller residential contractors who work on
projects generally requiring basic
64
electrical supplies. Such contractors represent a small portion of WESCO's
sales. The Company's customers typically require a broader range of products
and services than those provided by these retail channels.
Employees
As of March 31, 1998, WESCO had approximately 4,900 employees worldwide,
of which approximately 4,200 were located in the U.S. and approximately 700 in
Canada and WESCO's other foreign locations. Less than 5% of WESCO's employees
are represented by unions. WESCO believes its labor relations to be generally
good.
Properties
WESCO operates a system of over 325 branches, of which approximately 275
are located in the U.S., approximately 50 are located in Canada and the
remainder are located in Puerto Rico, Mexico and Guam. Approximately 30% of
branches are owned facilities, and the remainder are leased.
Set forth below is a table summarizing the Company's DC facilities:
Location Square Feet Regions Served Leased/Owned
- - - - ------------------------- ------------- ---------------------------- -----------------
Warrendale, PA .......... 252,700 Eastern U.S. Owned and Leased
Sparks, NV .............. 195,800 Western U.S. Leased
Byhalia, MS ............. 148,000 Southeastern U.S. Owned
Dorval, QE .............. 97,000 Eastern and Central Canada Leased
Burnaby, BC ............. 34,300 Western Canada Owned
WESCO also leases its 60,400 square foot headquarters in Pittsburgh,
Pennsylvania. WESCO does not regard the real property associated with any
single branch location as material to its operations. WESCO believes its
facilities are in good operating condition.
Intellectual Property
WESCO's trade and service mark, composed of the words "WESCO the extra
effort people(R)," together with the running man design, is registered in the
United States Patent and Trademark Office, the Canadian Trademark Office and
the Mexican Instituto de la Propriedad Industrial. WESCO considers this mark to
be material to its businesses.
Environmental Matters
WESCO believes that it is in compliance in all material respects with
applicable Environmental Laws. There are no significant capital expenditures
for environmental control matters either estimated in the current year or
expected in the near future. In connection with the Divestiture, Westinghouse
agreed to indemnify the Company for certain liabilities under Environmental
Laws resulting from conditions at the Predecessor's branch locations and other
real property at the time of the Divestiture. By the terms of this indemnity,
the Company is not entitled to indemnification for claims made under the
indemnity after February 27, 1996. Based on its due diligence investigation,
including environmental assessments, Holdings made a claim under this indemnity
in the amount of approximately $1.5 million, which Westinghouse is disputing.
See "Risk Factors -- Environmental Risks."
Legal Proceedings
WESCO is party to routine litigation incidental to WESCO's business. WESCO
does not believe that any legal proceedings to which it is a party or to which
any of its property is subject will have a material adverse effect on WESCO's
financial position or results of operations.
65
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of Holdings and WESCO and their
respective ages and positions are set forth below.
Name Age Position
- - - - ------------------------------- ----- ---------------------------------------------------
Roy W. Haley .................. 51 Chairman, President and Chief Executive Officer
David F. McAnally ............. 42 Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Treasurer
Stanley C. Weiss .............. 69 Executive Vice President, Industry Affairs
Steven A. Burleson ............ 39 Vice President and Corporate Controller
John R. Burke ................. 50 Vice President, Operations
William M. Goodwin ............ 52 Vice President, Operations
James H. Mehta ................ 42 Vice President, Business Development
James V. Piraino .............. 38 Vice President, Marketing
Patrick M. Swed ............... 55 Vice President, Operations
Donald H. Thimjon ............. 54 Vice President, Operations
Robert E. Vanderhoff .......... 43 Vice President, Operations
Jeffrey B. Kramp .............. 38 Corporate Secretary and General Counsel
James L. Singleton ............ 42 Director
James A. Stern ................ 47 Director
Anthony D. Tutrone ............ 33 Director
Messrs. Haley, Kramp, Singleton, Stern and Tutrone hold the same positions
with both Holdings and WESCO.
Messrs. Weiss, Burleson, Burke, Goodwin, Mehta, Piraino, Swed, Thimjon and
Vanderhoff hold these positions with WESCO only.
Mr. McAnally is Treasurer of Holdings and WESCO, and Executive Vice
President, Chief Operating Officer and Chief Financial Officer of WESCO only.
Set forth below is biographical information for the executive officers and
directors of Holdings and WESCO listed above.
Roy W. Haley became Chairman of the Board upon the Recapitalization. Mr.
Haley has been President and Chief Executive Officer and a Director of Holdings
and WESCO since February 1994. Prior to joining the Company, from 1988 to 1993,
Mr. Haley was an executive at American General Corporation, a diversified
financial services company, where he served as Chief Operating Officer and as
President and Director. Between 1989 and 1991, Mr. Haley was President and
Chief Executive Officer of American General Finance, Inc., a consumer finance
company. Previously Mr. Haley was a partner with Arthur Andersen & Co., working
as a management consultant principally for manufacturing and distribution
clients. Mr. Haley is also a director of United Stationers, Inc.
David F. McAnally has been Executive Vice President, Chief Operating
Officer and Chief Financial Officer of WESCO and Treasurer of Holdings and
WESCO since December 1997. Prior to joining WESCO, from 1996 to November 1997,
Mr. McAnally was Senior Vice President, Chief Financial Officer of
Rykoff-Sexton, Inc., a foodservice distribution company. Between 1992 and 1996,
Mr. McAnally was Senior Vice President and Chief Financial Officer of U.S.
Foodservice, Inc., also a foodservice distribution company.
Stanley C. Weiss has been Executive Vice President, Industry Affairs since
April 1996. From 1956 to April 1996, Mr. Weiss held a number of senior
executive positions at EESCO, most recently Chairman of the Board and Chief
Executive Officer.
Steven A. Burleson joined WESCO in January 1995 as Corporate Controller
and became Vice President and Corporate Controller in 1997. From 1990 to 1995,
Mr. Burleson was Vice President and Treasurer of The Bon-Ton Stores, Inc. in
York, Pennsylvania.
66
John R. Burke has been Vice President, General Manager of WESCO's EESCO
Division since April 1996. Prior to joining WESCO, Mr. Burke was a Vice
President of EESCO, an electrical distributor acquired by the Company in April
1996. Prior to joining EESCO in 1986, Mr. Burke occupied various positions with
General Electric Corporation, where he began his career in 1973.
William M. Goodwin has been Vice President, International Group of WESCO
since March 1984. Since 1977, Mr. Goodwin has served as a branch, district and
region manager for WESCO in various locations and also served as Managing
Director of WESCOSA, a former Westinghouse manufacturing and distribution
business in Saudi Arabia.
James H. Mehta has been Vice President, Business Development of WESCO
since November 1995. Prior to joining WESCO, from 1993 to 1995 Mr. Mehta was a
principal with Schroder Ventures, a private equity investment firm based in
London, England. From 1991 to 1993 he was managing private family investments.
From 1988 to 1990 Mr. Mehta was Vice President, Corporate Development with the
Uniroyal Goodrich Tire Company, and from 1990 to 1991 he was a consultant to
CD&R.
James V. Piraino has been Vice President, Marketing since joining WESCO in
August 1996. From 1995 to 1996, Mr. Piraino was a Vice President of
AlliedSignal Corp. From 1989 to 1995, Mr. Piraino occupied marketing and sales
management positions with W.W. Grainger, Inc. Prior to joining W.W. Grainger,
Inc., Mr. Piraino worked in product and sales management with General Electric
Corporation, where he began his career in 1981.
Patrick M. Swed has been Vice President, Industrial Group of WESCO since
March 1994. Prior to joining WESCO, Mr. Swed had been Vice President of Branch
Operations for the Predecessor from 1991 to 1994. Mr. Swed joined Westinghouse
as a sales engineer in 1966 and first moved to the Predecessor in 1978 as a
division marketing manager.
Donald H. Thimjon has been Vice President, Utility Group of WESCO since
March 1994. Prior to joining WESCO, Mr. Thimjon served as Vice President,
Utility Group for the Predecessor from 1991 to 1994 and as Regional Manager
from 1980 to 1991.
Robert E. Vanderhoff has been Vice President, Manufactured Structures
Group since March 1994. Prior to joining WESCO, Mr. Vanderhoff had been Vice
President of the Predecessor since April 1993. Prior to 1993, Mr. Vanderhoff
acted as District Manager from 1990 to 1993, Branch Manager from March to June
1990 and Account Executive from 1986 to 1990 of the Predecessor.
Jeffrey B. Kramp has been Corporate Secretary and General Counsel of
Holdings and WESCO since March 1994. From 1987 to February 1994 Mr. Kramp
served as Assistant General Counsel at Westinghouse, with WESCO as his primary
legal responsibility during this time period.
James L. Singleton became a Director of Holdings and WESCO upon the
Recapitalization. Mr. Singleton has been a Vice Chairman of Cypress since its
formation in April 1994. Prior to joining Cypress, he was a Managing Director
in the Merchant Banking Group at Lehman Brothers Inc. Mr. Singleton is also a
director of Able Body Corporation, Cinemark USA, Inc., Genesis ElderCare Corp.,
L.P. Thebault Company and Williams Scotsman, Inc.
James A. Stern became a Director of Holdings and WESCO upon the
Recapitalization. Mr. Stern has been Chairman of Cypress since its formation in
April 1994. Prior to joining Cypress, Mr. Stern spent his entire career with
Lehman Brothers Inc., most recently as head of the Merchant Banking Group.
During his twenty years with Lehman Brothers, he also served as head of
Lehman's High Yield and Primary Capital Markets Groups, and was co-head of
Investment Banking. In addition, Mr. Stern was a member of Lehman's Operating
Committee. Mr. Stern is also a director of AMTROL Inc., Cinemark USA, Inc.,
Frank's Nursery & Crafts, Inc., Lear Corporation, Noel Group, Inc., R.P.
Scherer Corporation, Genesis ElderCare Corp. and a trustee of Tufts University.
Anthony D. Tutrone became a Director of Holdings and WESCO upon the
Recapitalization. Mr. Tutrone has been a Principal of Cypress since its
formation in April 1994. Prior to joining Cypress, he was a member of the
Merchant Banking Group of Lehman Brothers Inc. Mr. Tutrone is also a director
of AMTROL Inc.
67
Composition of Board and Committees
The Board of Directors of both Holdings and WESCO (the "Board") has three
standing committees: an Executive Committee, an Audit Committee and a
Compensation Committee.
The Executive Committee consists of Messrs. Singleton, Haley and Stern,
with Mr. Singleton serving as Chairman. It is responsible for overseeing the
management of the affairs and business of Holdings and WESCO and has been
delegated authority to exercise the powers of the Board during intervals
between Board meetings.
The Audit Committee consists of Messrs. Singleton and Tutrone, with Mr.
Singleton serving as Chairman. It is responsible for recommending the firm to
be appointed as independent accountants to audit the Company's financial
statements and to perform services related to the audit; reviewing the scope
and results of the audit with the independent accountants; reviewing with the
management and the independent accountants the Company's year-end operating
results; considering the adequacy of the internal accounting and control
procedures of the Company; reviewing the non-audit services to be performed by
the independent accountants, if any, and considering the effect of such
performance on the accountants' independence.
The Compensation Committee consists of Messrs. Singleton, Tutrone and
Stern, with Mr. Stern serving as Chairman. It is responsible for the review,
recommendation and approval of compensation arrangements for directors and
executive officers, for the approval of such arrangements for other senior
level employees, and for the administration of certain benefit and compensation
plans and arrangements of the Company.
Cypress intends to appoint one or more additional directors who are not
affiliated with Holdings.
Executive Compensation
The information set forth below describes the components of the total
compensation of the Chief Executive Officer and the four other most highly
compensated executive officers of the Company, based on 1997 salary and bonuses
(the "Named Executives"). The principal components of such individuals' current
cash compensation are the annual base salary and bonus included in the Summary
Compensation Table. Also described below is other compensation such individuals
can receive under Holdings' stock and option programs.
SUMMARY COMPENSATION TABLE
Annual Compensation
----------------------------------
Name and Principal Position Year Salary Bonus All Other Compensation(1)
- - - - ---------------------------------- ------ ----------- ----------- --------------------------
Roy W. Haley,
President & CEO ................. 1997 $466,667 $425,000 $ 52,300
Stanley C. Weiss
Executive Vice President,
Industry Affairs ................ 1997 300,000 150,000 62,010(2)
James H. Mehta,
Vice President,
Business Development ............ 1997 258,339 115,000 13,325
Patrick M. Swed,
Vice President,
Industrial/Construction ......... 1997 200,000 130,000 33,000
James V. Piraino,
Vice President,
Marketing ....................... 1997 165,000 110,000 14,463
- - - - ---------------------
(1) (A) Includes contributions by the Company under the WESCO Distribution,
Inc. Retirement Savings Plan in the amounts of $9,550, $13,700, $7,675,
$15,950, and $7,543 for Messrs. Haley, Weiss, Mehta, Swed and Piraino,
respectively.
(B) Includes contributions by the Company under the WESCO Distribution, Inc.
Deferred Compensation Plan in the amounts of $42,750, $31,900, $5,650,
$17,050 and $6,920 for Messrs. Haley, Weiss, Mehta, Swed and Piraino,
respectively.
(2) Includes life insurance premiums in the amount of $16,410.
68
Employment Agreements
In connection with WESCO's acquisition of EESCO, WESCO entered into an
employment agreement with Mr. Weiss (the "Weiss Agreement"), pursuant to which
WESCO agreed to employ Mr. Weiss during the period commencing on the date of
the acquisition and ending on December 31, 1998, subject to WESCO's right to
terminate Mr. Weiss' employment prior to such date for "cause" (as defined in
the Weiss Agreement) without any continuing liability. During the employment
term under the Weiss Agreement, Mr. Weiss is entitled to an annual base salary
of $300,000 and, provided WESCO attains annual performance objectives
established from year to year by WESCO, an annual incentive bonus equal to a
percentage of his annual base salary, not to exceed 75%. In the event of the
termination of Mr. Weiss' employment with WESCO by Mr. Weiss for "good reason"
(as defined in the Weiss Agreement), Mr. Weiss will continue to receive
payments of his annual base salary for the remainder of the employment term.
The Weiss Agreement also contains customary covenants regarding nondisclosure
of confidential information and non-competition and non-solicitation
restrictions.
In connection with the Recapitalization, WESCO has entered into an
employment agreement with Mr. Haley (the "Haley Agreement") providing for a
rolling employment term of three years. Pursuant to the Haley Agreement, Mr.
Haley is entitled to an annual base salary of $500,000 and an annual incentive
bonus equal to a percentage of his annual base salary ranging from 0% to 200%.
The actual amount of Mr. Haley's annual incentive bonus will be determined
based upon the financial performance of WESCO as compared to the annual
performance objectives established by Holdings for the relevant fiscal year.
Under the proposed terms of the Haley Agreement, if Mr. Haley's employment with
Holdings and WESCO is terminated by Holdings and WESCO without "cause" (as
defined in the Haley Agreement), by Mr. Haley for "good reason" (as so defined)
or as a result of Mr. Haley's death or disability (any such termination, a
"Qualifying Termination"), Mr. Haley (or, in the event of his death, Mr.
Haley's spouse) is entitled to continued payments of his average annual base
salary and his average annual incentive bonus (reduced by any disability
payments, if applicable) for the three-year period, or in the case of a
termination due to Mr. Haley's death or disability, the two-year period,
following such termination, and continued welfare benefit coverage for the
two-year period following such termination. In addition, in the event of any
such Qualifying Termination, all outstanding options held by Mr. Haley will
become fully vested. The Haley Agreement further provides that, in the event of
the termination of Mr. Haley's employment by Holdings and WESCO without cause
or by Mr. Haley for good reason, in either such case, within the two-year
period following a "change in control" of Holdings or WESCO (as defined in such
agreement) (such termination, a "Qualifying CIC Termination"), in addition to
the termination benefits described above, Mr. Haley is entitled to receive
continued welfare benefit coverage and payments in lieu of additional
contributions to WESCO's Retirement Savings Plan and Deferred Compensation Plan
for the three year period following such Qualifying CIC Termination. WESCO has
agreed to provide Mr. Haley with an excise tax gross up with respect to any
excise taxes Mr. Haley may be obligated to pay pursuant to Section 4999 of the
United States Internal Revenue Code of 1986, as amended, on any excess
parachute payments. In addition, following a change in control, Mr. Haley is
entitled to a minimum annual bonus equal to 50% of his base salary and the
definition of "good reason" is modified to include certain additional events.
The Haley Agreement also contains customary covenants regarding nondisclosure
of confidential information and non-competition and non-solicitation
restrictions.
Holdings and WESCO also intend to enter in an employment agreement with
David McAnally (the "McAnally Agreement"), the Executive Vice President, Chief
Operating Officer and Chief Financial Officer of WESCO and Treasurer of each of
Holdings and WESCO, providing for an employment term of two years, subject to
automatic renewal at the end of each year for an additional year. Pursuant to
the proposed terms of the McAnally Agreement, Mr. McAnally will be entitled to
an annual base salary of $300,000 and, depending upon the extent, if any, to
which WESCO achieves the performance objectives established for an applicable
fiscal year, an annual incentive bonus ranging from 0 to 100% of his annual
base salary; provided that Mr. McAnally is entitled to a minimum annual bonus
for 1998 of $150,000. The proposed terms of the McAnally Agreement provide that
in the event of a Qualifying Termination of Mr. McAnally's employment, Mr.
McAnally (or, in the event of his death, his spouse) will be entitled to
continued payments of his average annual base salary and average annual
incentive bonus
69
(reduced by any disability payments, if applicable) and to continued welfare
benefit coverage, in each such case, for a period ending on the later of (1)
the date of the expiration of the then current employment term and (2) the
first anniversary of the date of such Qualifying Termination, provided that if
such Qualifying Termination occurs prior to the second anniversary of Mr.
McAnally's commencement of employment with WESCO, such payments and benefit
coverage will be provided for a period of one year following such termination.
In addition, in the event of a Qualifying Termination of Mr. McAnally's
employment following the second anniversary of the commencement of his
employment, 50% of any outstanding options granted to Mr. McAnally will become
vested. It is expected that the McAnally Agreement will contain provisions
similar to the provisions of the Haley Agreement concerning a "change in
control" of Holdings or WESCO, except that in the event of a Qualifying CIC
Termination, Mr. McAnally will be entitled to continued payments of his average
annual base salary and average bonus and continued welfare benefit coverage for
up to two years following such termination and Mr. McAnally will be entitled to
receive a cash-out payment in respect of his options if (i) he does not resign
from employment without "good reason" (as defined in the McAnally Agreement),
or (ii) he is terminated without "cause" (as defined in the McAnally Agreement)
by a successor, prior to the first anniversary of the change in control. The
McAnally Agreement also contains customary covenants regarding nondisclosure of
confidential information and non-competition and non-solicitation restrictions.
New Stock Option Plan
In connection with the Recapitalization, Holdings will establish a new
stock option plan that will provide certain members of management options to
purchase shares of Common Stock at an exercise price per share determined by
the Board to represent the estimated fair market value per share on the date of
the grant. It is anticipated that a majority of such stock options will be
granted in connection with the closing of the Recapitalization. Approximately
one-half of the new stock options will vest ratably over four years. The
remainder of the new stock options will vest based upon meeting certain
performance targets.
Stock Option Plan for Branch Employees
Under Holdings' Stock Option Plan for Branch Employees (the "Branch Option
Plan"), the Compensation Committee, which is responsible for administering the
Branch Option Plan, may grant to branch managers and other key employees of the
Company employed at a branch or contributing significantly to growth and
profitability of a branch (the "Branch Participants") options to purchase
shares of Common Stock (the "Branch Options"). The outstanding Branch Options
have an exercise price per share determined by the Board to represent the
estimated fair market value per share on the date of grant. None of the Named
Executives currently participate in the Branch Option Plan. Under the terms of
the Recapitalization Agreement, the Compensation Committee has adopted a
resolution causing 100% of all Branch Options to be rolled over and remain
outstanding without any acceleration of the vesting schedule.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information for each Named Executive with
regard to the aggregate stock options held at December 31, 1997. No stock
options were granted to, or exercised by, any of the Named Executives during
1997.
Number of Securities Value of Unexercised
Unexercised In-the-Money Options
Options at FY-End (#) at FY-End ($)(1)
Name (Exercisable/Unexercisable) (Exercisable/Unexercisable)
- - - - -------------------------- ----------------------------- ----------------------------
Roy W. Haley ............. 13,368\8,912 $8,302,597\$5,535,065
Stanley C. Weiss ......... --\-- --\--
James H. Mehta ........... 3,428\5,142 2,129,062\3,193,593
Patrick M. Swed .......... 3,426\2,284 2,127,820\1,418,547
James V. Piraino ......... 286\1,144 177,629\710,516
- - - - ---------------------
(1) Based on a price per share of common stock of $621.08. The price reflects
the estimated fair market value as of December 31, 1997.
70
The foregoing options were issued under Holdings' existing stock option
plan. In connection with the Recapitalization, the Board caused all unvested
options (including those held by the Named Executives) under such plan to vest
(and become exercisable) upon the closing of the Recapitalization.
Retention Bonus Payment
Holdings paid an aggregate amount of approximately $11 million to a group
of approximately 45 managers (including the Named Executives) upon the closing
of the Recapitalization. With respect to each such manager, such payment was
equal to approximately one to two times base salary. Immediately prior to the
closing of the Recapitalization, CD&R made an equity contribution to Holdings
equal to one-half of such aggregate amount.
Compensation Committee Interlocks and Insider Participation
During 1997, a former outside director and three former directors
affiliated with CD&R served on the Compensation Committee.
Holdings paid an affiliate of CD&R fees of $400,000 for advisory,
management consulting and monitoring services rendered during 1997. Holdings
has agreed to indemnify certain members of the Board and such CD&R affiliate
against liabilities incurred under securities laws or with respect to their
services for Holdings.
71
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Amended and Restated Registration and Participation Agreement
In connection with the Recapitalization, the Investor Group, CD&R,
Westinghouse and Holdings entered into an Amended and Restated Registration and
Participation Agreement (the "Registration and Participation Agreement"), which
amended and restated the previous agreement among CD&R, Westinghouse and
Holdings, to reflect, among other things, the succession of the Investor Group
to CD&R's and Westinghouse's rights and obligations thereunder. Pursuant to the
Registration and Participation Agreement, the Investor Group and the Management
Stockholders (as defined) have the right, under certain circumstances and
subject to certain conditions, to request that Holdings register under the
Securities Act shares of Common Stock held by them. Subject to certain
conditions and exceptions, the Investor Group and the Management Stockholders
also have the right to require that shares of Common Stock held by them be
included in any registration under the Securities Act commenced by Holdings.
The Registration and Participation Agreement provides that Holdings will pay
all expenses in connection with the first three registrations requested by the
Investor Group and the Management Stockholders. The Registration and
Participation Agreement also provides that Holdings will indemnify the
Investors and the Management Stockholders and their affiliates for certain
liabilities they may incur under the securities laws.
The Registration and Participation Agreement also contains certain
restrictions which prohibit the sale of Common Stock by Cypress unless Cypress
provides each holder of Common Stock entitled to the benefits of the
Registration and Participation Agreement (including the other members of the
Investor Group and the Management Stockholders) with a 30-day prior notice
pursuant to which such holders may agree to participate in such sale on a pro
rata basis with Cypress. The Registration and Participation Agreement provides
that, if Cypress sells all of its shares of Common Stock to a third party,
Cypress may require such other holders of Common Stock to sell all of their
shares to such third party pursuant to such sale at the same price and on the
same terms as Cypress. In addition, the Registration and Participation
Agreement provides that if prior to any equity public offering by Holdings,
Holdings issues additional shares of Common Stock to Cypress (subject to
certain exceptions), Holdings will offer to all holders of registrable
securities that are "accredited investors" the right to purchase a pro rata
share of such newly-issued shares (based on such holder's equity interest in
Holdings) at the same price and on the same terms as Cypress.
In addition, the Registration and Participation Agreement provides that so
long as Cypress owns any securities of Holdings, Cypress shall have the right
to designate one director to the board of directors of each of Holdings, the
Company and WESCO Distribution-Canada, Inc.
Management Stockholders
Each member of management who holds Common Stock (a "Management
Stockholder") is a party to a stock subscription agreement with Holdings which
provides that such Management Stockholder is entitled to certain benefits of,
and bound by certain obligations in, the Registration and Participation
Agreement, including certain registration rights thereunder. Such stock
subscription agreements also provide the Management Stockholder with the right
to require Holdings to purchase all such Management Stockholder's shares of
Common Stock at the then fair market value based upon certain events. Pursuant
to the stock option agreements governing each Management Stockholder's stock
options, such Management Stockholder also has the right to require Holdings to
purchase all of such Management Stockholder's options at the then fair market
value of the Common Stock minus the exercise price upon such events. Such
rights terminate upon an initial equity public offering of Holdings. In
addition, such stock subscription agreements and stock option agreements
provide that such rights are subject to, and limited by, any restrictions on
Holdings' ability to redeem or repurchase its equity contained in the Credit
Facilities, the Indentures or other debt instruments.
A portion of the purchase price paid for the Common Stock purchased by
certain Management Stockholders has been financed by full-recourse bank loans
guaranteed by the Company. Since February 28, 1994, Messrs. Burke, Burleson,
Goodwin, Haley, Kramp, Mehta, Piraino, Swed, Thimjon and
72
Vanderhoff have had outstanding loans guaranteed by the Company in the amount
of $167,262, $68,800, $161,200, $1,377,956, $68,800, $587,959, $167,262,
$343,200, $155,000 and $34,400, respectively.
Payment of Certain Fees and Expenses
In connection with the Recapitalization, Cypress received a transaction
fee of approximately $9.5 million from Holdings and will be reimbursed for all
out-of-pocket expenses. Holdings has also agreed to indemnify Cypress to the
fullest extent allowable under applicable Delaware law and against any suits,
claims, damages or expenses which may be made against or incurred by Cypress
under applicable securities laws, including in connection with the Offerings.
Payments to CD&R and Westinghouse Pursuant to the Recapitalization
Approximately $517.5 and $62.1 million of the Equity Consideration paid in
connection with the Recapitalization was paid to CD&R and Westinghouse,
respectively, to purchase their shares of Common Stock. In addition,
approximately $52.1 million of the Equity Consideration was paid to cash-out an
option held by Westinghouse to purchase 100,000 shares of Common Stock at an
exercise price of $100 per share. Westinghouse also held approximately $66.6
million of the formerly existing indebtedness of WESCO which was repaid in
connection with the Recapitalization.
Certain Relationships With Chase
Chase Securities Inc. ("CSI"), one of the Initial Purchasers, is an
affiliate of The Chase Manhattan Bank ("Chase") which is the agent bank and a
lender to the Company under the Credit Facilities and is the funding agent,
liquidity bank and trustee under the Receivables Facility. Chase was also a
lender to the Company under an existing revolving credit facility and received
its proportionate share of the repayment by the Company of amounts outstanding
under such facility pursuant to the Recapitalization. Chase Capital Partners,
an affiliate of CSI and Chase, is a member of the Investor Group and owns
approximately 13.9% of the outstanding Common Stock as a result of the
Recapitalization. In addition, CSI, Chase and their affiliates perform various
investment banking and commercial banking services on a regular basis for
Cypress, CD&R and their respective affiliates.
73
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the outstanding capital stock of the Company is owned by Holdings.
The following table sets forth certain information as to the beneficial
ownership of Common Stock by (i) owners of more than 5% of the outstanding
shares of Common Stock, (ii) each executive officer and director of Holdings
and the Company and (iii) all such executive officers and directors, as a
group. Except as indicated in the footnotes to this table, Holdings believes
that the persons named in the table have sole voting and investment power with
respect to all shares shown as beneficially owned by them.
Shares of Percentage
Name Common Stock Owned
- - - - ---------------------------------------------------------------------- -------------- -----------
Cypress Merchant Banking Partners L.P.(1)
c/o The Cypress Group L.L.C.
65 East 55th Street
New York, New York 10022 ........................................... 321,470 55.4%
Cypress Offshore Partners L.P.(1)
Bank of Bermuda (Cayman) Limited
P.O. Box 513 G.T.
Third Floor
British America Tower
George Town, Grand Cayman
Cayman Islands, B.W.I. ............................................. 16,650 2.9%
Chase Equity Associates, L.P.(2)
c/o Chase Capital Partners, L.P.
380 Madison Avenue, 12th Floor
New York, New York 10017 ........................................... 80,504 13.9%
Co-Investment Partners, L.P.
c/o CIP Partners, LLC
660 Madison Avenue
New York, New York 10021 ........................................... 80,505 13.9%
Roy W. Haley ......................................................... 16,720 2.9%
David F. McAnally .................................................... 1,932 *
Stanley C. Weiss ..................................................... -- --
Steven A. Burleson ................................................... 860 *
John R. Burke ........................................................ 804 *
William M. Goodwin ................................................... 2,140 *
James H. Mehta ....................................................... 6,430 1.1%
James V. Piraino ..................................................... 1,070 *
Patrick M. Swed ...................................................... 4,290 *
Donald H. Thimjon .................................................... 2,140 *
Robert E. Vanderhoff ................................................. 430 *
Jeffrey B. Kramp ..................................................... 860 *
James L. Singleton(1) ................................................ -- --
James A. Stern(1) .................................................... -- --
Anthony D. Tutrone ................................................... -- --
All executive officers and directors as a group (15 persons) ......... 37,676 6.5%
- - - - ---------------------
* Represents holdings of less than 1%.
(1) Cypress Merchant Banking Partners L.P. and Cypress Offshore Partners L.P.
are affiliates of Cypress. Messrs. Singleton and Stern are members of
Cypress and may be deemed to share beneficial ownership of the shares of
Common Stock shown as beneficially owned by such Cypress funds. Such
individuals disclaim beneficial ownership of such shares.
(2) These shares constitute shares of non-voting class B common stock.
74
DESCRIPTION OF THE CREDIT FACILITIES
The following is a summary of the material terms of the Credit Agreement
entered into among the Company, WESCO Distribution-Canada, Inc. ("WESCO
Canada"), Holdings, certain financial institutions to be party thereto, Chase,
as U.S. administrative agent, syndication agent and U.S. collateral agent, The
Chase Manhattan Bank of Canada, as Canadian administrative agent and Canadian
collateral agent ("Chase Canada"), and Lehman Commercial Paper Inc. ("Lehman
Commercial Paper"), as documentation agent. The following summary is qualified
in its entirety by reference to the Credit Agreement, which has been filed as
an exhibit to the Registration Statement of which this Prospectus is a part.
The Facilities
Structure. The Credit Agreement provides for (a) three Term Loan
Facilities in an aggregate principal amount of up to $270.0 million (the "Term
Facilities"), consisting of (i) a Tranche A Term Loan Facility (the "Tranche A
Term Facility") providing for term loans ("Tranche A Term Loans") to the
Company in an aggregate principal amount of up to $80.0 million, (ii) a Tranche
B Term Loan Facility (the "Tranche B Term Facility") providing for term loans
to the Company in an aggregate principal amount of up to $90.0 million and
(iii) a Delayed Draw Term Loan Facility (the "Delayed Draw Term Facility")
providing for term loans to the Company in an aggregate principal amount of up
to $100.0 million and (b) a Revolving Credit Facility providing for (i) U.S.
dollar revolving loans in an aggregate principal amount outstanding at any time
not to exceed U.S. $50.0 million and (ii) U.S. dollar and/or Canadian dollar
revolving loans in an aggregate principal amount outstanding at any time not to
exceed U.S. $50.0 million (the "Revolving Facility" and, together with the Term
Facilities, the "Credit Facilities"). An aggregate principal amount not to
exceed $25.0 million is available under the Revolving Facility for acquisitions
permitted under the Credit Agreement.
Availability. The full amount of the Tranche A Term Facility and the
Tranche B Term Facility was required to be drawn on the Closing Date and
amounts repaid or prepaid will not be able to be reborrowed. The Delayed Draw
Term Facility is available for two years after the Closing Date solely for
acquisitions permitted under the Credit Agreement and amounts repaid or prepaid
will not be able to be reborrowed. Amounts under the Revolving Facility are
available on a revolving basis.
Interest
Borrowings under the Term Facilities and borrowings in U.S. dollars under
the Revolving Facility bear interest at a rate per annum equal (at the
Company's option) to: (a) an adjusted London inter-bank offered rate ("LIBOR")
plus a borrowing margin based on the Company's financial performance or (b) a
rate equal to the highest of Chase's published prime rate, a certificate of
deposit rate plus 1% and the Federal Funds effective rate plus 0.5% ("ABR")
plus, in each case a borrowing margin based on the Company's financial
performance. The borrowing margins applicable to the Tranche A Term Loans and
U.S. dollar borrowings under the Revolving Facility will initially be 2.25% for
LIBOR loans and 1.25% for ABR loans. The borrowing margins applicable to the
Tranche B Term Loans and the Delayed Draw Term Facility will initially be 2.50%
for LIBOR loans and 1.50% for ABR loans. Borrowings in Canadian dollars under
the Revolving Facility bear interest at a rate per annum equal (at the
Company's option) to: (a) the higher of Chase Canada's published prime rate and
the Canadian Dollar Offered Rate plus 1% (the "Canadian Prime Rate") plus, in
each case, a borrowing margin based on the Company's financial performance or
(b) the Canadian banker's acceptance rate (the "B/A Rate"), plus a borrowing
margin based on the Company's financial performance. The borrowing margins
applicable to any Canadian dollar borrowing under the Revolving Facility will
initially be 2.25% for B/A Rate loans and 1.25% for Canadian Prime Rate loans.
Amounts outstanding under the Credit Facilities not paid when due will bear
interest at a default rate equal to 2% above the rates otherwise applicable to
the loans under the Credit Agreement.
75
Fees
The Company has agreed to pay certain fees with respect to the Credit
Agreement, including (i) fees on the unused commitments of the lenders equal to
0.5% on the undrawn portion of the commitments in respect of the Revolving
Facility and the Delayed Draw Term Facility (subject to a reduction based on
the Company's financial performance); (ii) letter of credit fees on the
aggregate face amount of outstanding letters of credit equal to the then
applicable borrowing margin for LIBOR loans under the Revolving Facility and a
negotiated per annum issuing bank fee for the letter of credit issuing bank;
(iii) annual administration fees; and (iv) agent, arrangement and other similar
fees.
Security; Guarantees
The obligations of the Company under the Credit Facilities are irrevocably
guaranteed, jointly and severally, by Holdings and by each existing and
subsequently acquired or organized domestic subsidiary and, to the extent no
adverse tax consequences would result, foreign subsidiary of Holdings other
than the Company and the Receivables Subsidiary (the "U.S. Guarantors"). In
addition, the obligations of the Company under the Credit Facilities and the
related guarantees are secured by substantially all of the assets of Holdings,
the Company and each other existing and subsequently acquired or organized
domestic subsidiary and, to the extent no adverse tax consequences would
result, foreign subsidiary of Holdings other than the Receivables Subsidiary
(collectively, the "U.S. Collateral"), including but not limited to (i) a first
priority pledge of all the capital stock of the Company and of each existing
and subsequently acquired or organized domestic subsidiary and, subject to the
foregoing limitation, foreign subsidiary of Holdings and (ii) a perfected first
priority security interest in, and mortgage on, substantially all tangible and
intangible assets of the Company and the U.S. Guarantors (including, but not
limited to, accounts receivable, documents, inventory, equipment, intellectual
property, investment property, general intangibles, real property, cash and
cash accounts and proceeds of the foregoing), in each case subject to certain
exceptions.
The obligations of WESCO Canada under the Revolving Facility are
irrevocably guaranteed, jointly and severally, by the Company, Holdings and by
each existing and subsequently acquired or organized subsidiary of WESCO Canada
and any other subsidiary of Holdings organized under the laws of Canada and the
U.S. Guarantors. In addition, the obligations of WESCO Canada under the
Revolving Facility and the related guarantees are secured by (i) the U.S.
Collateral and (ii) substantially all of the assets of WESCO Canada and each
existing and subsequently acquired or organized subsidiary of WESCO Canada and
any other subsidiary of Holdings organized under the laws of Canada including
but not limited to (A) a first priority pledge of all the capital stock of
WESCO Canada and each existing and subsequently acquired or organized
subsidiary of WESCO Canada and any other subsidiary of Holdings organized under
the laws of Canada and (B) a perfected first-priority security interest in, and
mortgage on, substantially all tangible and intangible assets of WESCO Canada
and each existing and subsequently acquired or organized subsidiary of WESCO
Canada and any other subsidiary of Holdings organized under the laws of Canada
(including, but not limited to, accounts receivable, documents, inventory,
equipment, intellectual property, investment property, general intangibles,
real property, intercompany notes, cash and proceeds of the foregoing), in each
case subject to certain exceptions.
Commitment Reductions and Repayments
The Revolving Facility will mature six years after the Closing Date. The
Tranche A Term Loan will mature six years after the Closing Date with quarterly
amortization payments during the term of such loan in an annual aggregate
principal amount as follows: 1999, $4.0 million; 2000, $8.0 million; 2001,
$12.0 million; 2002, $16.0 million; 2003, $20.0 million; and 2004, $20.0
million. The Tranche B Term Loan will mature eight years after the Closing
Date, with quarterly amortization payments during the term of such loan in an
annual aggregate principal amount as follows: 1999 through 2004, $500,000;
2005, $34.2 million; and 2006, $52.3 million. The Delayed Draw Term Facility
will mature seven years after the Closing Date, with quarterly amortization
payments during the term of such facility in an annual aggregate principal
amount as follows: 2002, $25.0 million; 2003, $25.0 million; 2004, $25.0
million; and 2005, $25.0 million (assuming the Company borrows the full amount
available under the Delayed Draw Term Facility); provided that on the last day
of each fiscal quarter of the Company that loans are
76
outstanding under the Delayed Draw Term Facility, the Company is required to
repay 1/4 of 1% of the aggregate principal amount of such loans, with any such
repayment being applied against the amortization schedule set forth above.
In addition, the Credit Facilities will be subject to mandatory prepayment
and reductions in an amount equal to (a) 100% of the net cash proceeds of
certain equity issuances by Holdings, the Company, WESCO Canada or any of their
respective subsidiaries, (b) 100% of the net cash proceeds of certain debt
issuances of Holdings, the Company, WESCO Canada or any of their respective
subsidiaries, (c) 75% of the Company's excess cash flow (subject to a reduction
to 50% if the Company's long-term senior unsecured debt receives an investment
grade rating from Standard and Poor's Rating Service or Moody's Investors
Service, Inc.) and (d) 100% of the net cash proceeds of certain asset sales or
other dispositions of property by Holdings, the Company or any of their
respective subsidiaries, in each case subject to certain exceptions.
Affirmative, Negative and Financial Covenants
The Credit Agreement contains a number of covenants that, among other
things, restrict the ability of Holdings, the Company, WESCO Canada and their
respective subsidiaries to dispose of assets, incur additional indebtedness,
incur or guarantee obligations, repay other indebtedness or amend other debt
instruments, pay dividends, create liens on assets, make investments, loans or
advances, make acquisitions, engage in mergers or consolidations, change the
business conducted by the Company, WESCO Canada and their respective
subsidiaries, make capital expenditures, or engage in certain transactions with
affiliates and otherwise restrict certain corporate activities. In addition,
the Credit Agreement requires Holdings to comply with specified financial
ratios and tests, including a maximum leverage ratio, a minimum working capital
test and a minimum interest coverage ratio. The Credit Agreement also contains
provisions that prohibit any modifications of the Indentures in any manner
adverse to the lenders under the Credit Agreement and that limit the Issuers'
ability to refinance or otherwise prepay the Notes without the consent of such
lenders.
Events of Default
The Credit Agreement contains customary events of default, including
non-payment of principal, interest or fees, violation of covenants, inaccuracy
of representations or warranties in any material respect, cross default to
certain other indebtedness, bankruptcy, ERISA events, material judgments and
liabilities, actual or asserted invalidity of any material security interest
and change of control.
77
DESCRIPTION OF THE RECEIVABLES FACILITY
The following is a summary of the material terms of the Receivables
Facility entered into among the Company, WESCO Canada, WESCO Receivables Corp.,
a newly formed special purpose subsidiary of the Company (the "SPC"), Chase as
liquidity bank (the "Liquidity Bank") and funding agent for a multi-seller
asset-backed commerical paper issuer (the "CP Issuer"). The following summary
is qualified in its entirety by reference to the Receivables Sale Agreements
and the Pooling Agreement (each as defined below), which has been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
The Receivables Facility
The Company has established the SPC as a wholly-owned, special purpose,
bankruptcy-remote subsidiary. The SPC purchases the receivables (the
"Receivables") generated by the Company, WESCO Canada and certain other
subsidiaries (the "Receivables Sellers") pursuant to two receivables sale
agreements (collectively, the "Receivables Sale Agreements"). The Receivables
Sale Agreements contain customary terms for similar transactions, including
representations and warranties of the Receivables Sellers as to the Receivables
and certain corporate matters, affirmative and negative covenants and purchase
termination events, and will be limited recourse to the Receivables Sellers for
breach of representations, warranties and covenants.
The SPC has entered into a pooling agreement, as supplemented (the
"Pooling Agreement") with Chase as trustee (the "Trustee") pursuant to which
the SPC transfers to a trust (the "Trust") all the Receivables, and the CP
Issuer, or in certain circumstances, the Liquidity Bank (together with the CP
Issuer, the "Purchasers") provides financing to the SPC (which in turn uses
such financing to pay a portion of the purchase price of the Receivables
purchased from the Receivables Sellers) through the purchase of an undivided
percentage ownership interest in the Trust ("Transferred Interests"). If the CP
Issuer no longer wishes to, or is unable to, provide financing, which may occur
at any time, the Liquidity Bank is committed to thereafter be the Purchaser.
The Receivables Facility will be supported by a commitment of the Liquidity
Bank, subject to the terms and conditions of the Pooling Agreement, to purchase
Transferred Interests for a period of approximately six years (the "Revolving
Period") on a revolving basis in an amount not to exceed $300 million at any
time outstanding. The availability of the Receivables Facility is subject to
the Trust holding Receivables meeting certain eligibility requirements equal to
the amount of the outstanding Transferred Interests and required reserves. On
the Closing Date only approximately $250 million was funded under the
Receivables Facility.
The Trust, on behalf of the Purchasers, has a first priority perfected
ownership or security interest in the Receivables, the rights of the SPC under
the Receivables Sale Agreements and cash collections and other proceeds
received in respect of the Receivables.
Pursuant to a servicing agreement entered into by the Receivables Sellers,
the SPC and the Trust, the Receivables Sellers have agreed to service the
Receivables for the Trust; provided, that, upon the occurrence of certain
events, the servicing agreement may be terminated by the Trustee.
Interest
The effective financing rate under the Receivables Facility will be the
weighted average of the interest rates on all outstanding commercial paper
issued by the CP Issuer to fund its purchase of the Transferred Interests,
except if the Liquidity Bank is the Purchaser, the effective financing rate
will be either (i) adjusted LIBOR plus a margin of up to 2.25% per annum or
(ii) ABR plus a margin of up to 1.25% per annum, at the option of the SPC, plus
in each case the fees described below.
Fees
The SPC has agreed to pay certain fees with respect to the Receivables
Facility, including a commitment fee to the Liquidity Bank, calculated on the
excess of the average aggregate purchase commitment for any monthly period over
the average aggregate Transferred Interests funded by the Liquidity Banks for
such period, a program fee and agent, arrangement and other similar fees.
78
Facility Reductions
After the end of the Revolving Period, all collections in respect of
Receivables purchased by the SPC from the Receivables Sellers will be used to
reduce the Transferred Interests of the Purchasers in the Receivables.
Additionally, at any time, the SPC at its option may reduce the purchase
commitment upon notice to the Purchasers or terminate the purchases of
Transferred Interests by the Purchasers.
Early Termination Events
The Pooling Agreement contains certain early amortization events which
will cause the termination of, or permit the Purchasers to terminate, the
Revolving Period and effectively reduce the amount of financing available under
the Receivables Facility to zero. Early amortization events include nonpayment
of amounts when due, violation of covenants, inaccuracy of representations and
warranties in any material respect, cross-acceleration and certain
cross-defaults to certain other indebtedness of the Company (including the
Credit Facilities), failure to comply with specified Receivables performance
tests, purchase termination events under the Receivables Sale Agreements,
bankruptcy, material judgments, imposition of PBGC liens and actual or asserted
invalidity of the Purchasers' ownership interest in the Receivables. Purchase
termination events under the Receivables Sale Agreements relating to the
Receivables Sellers include nonpayment of amounts when due, violation of
covenants, inaccuracy of representations and warranties in any material
respect, bankruptcy, ERISA events, imposition of PBGC liens and actual or
asserted invalidity of the Company's ownership interest in the Receivables.
Replacement Facility
Although the Company has received a six-year commitment, the Company
currently intends to replace the Receivables Facility through a securitization
of the Receivables in the capital markets or another securitization
transaction. However, no assurance can be made that such transaction will be
completed or, if completed, whether such transaction may have materially
different terms from the Receivables Facility.
79
THE SENIOR SUBORDINATED EXCHANGE OFFER
General
The Company hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the applicable Letter of Transmittal (which
together constitute the Senior Subordinated Exchange Offer), (i) to exchange an
aggregate of up to $300,000,000 principal amount of its Senior Subordinated
Exchange Notes for an equal principal amount of its issued and outstanding
Senior Subordinated Old Notes properly tendered on or prior to the Senior
Subordinated Expiration Date and not withdrawn as permitted pursuant to the
procedures described below. This Prospectus and the Letter of Transmittal
related to the Senior Subordinated Notes together constitute the Senior
Subordinated Exchange Offer. The Senior Subordinated Exchange Notes will be
unconditionally guaranteed by Holdings (the "Holdings Guarantee") on a senior
subordinated basis. Throughout this Prospectus, references to the "Letter of
Transmittal" refer to the form of Letter of Transmittal that is applicable to
the Senior Subordinated Notes or the Senior Discount Notes, as the context
requires, whether so expressed or not. The Senior Subordinated Exchange Offer
is being made with respect to all of the Senior Subordinated Old Notes.
As of the date of this Prospectus, $300,000,000 aggregate principal amount
of Senior Subordinated Old Notes is outstanding. This Prospectus and the
applicable Letter of Transmittal are first being sent on or about , 1998,
to all holders of Senior Subordinated Old Notes known to the Company. The
Company's obligation to accept Senior Subordinated Old Notes for exchange
pursuant to the Senior Subordinated Exchange Offer is subject to certain
conditions set forth under "Certain Conditions to the Senior Subordinated
Exchange Offer" below. The Company currently expects that each of the
conditions will be satisfied and that no waivers will be necessary.
Purpose of the Senior Subordinated Exchange Offer
The Senior Subordinated Old Notes were issued on June 5, 1998 in
transactions exempt from the registration requirements of the Securities Act.
Accordingly, the Senior Subordinated Old Notes may not be reoffered, resold, or
otherwise transferred unless so registered or unless an applicable exemption
from the registration and prospectus delivery requirements of the Securities
Act is available.
In connection with the issuance and sale of the Senior Subordinated Old
Notes, the Company and Holdings entered into the Senior Subordinated
Registration Rights Agreement, which requires the Company to file with the
Commission a registration statement relating to the Senior Subordinated
Exchange Offer not later than 90 days after the date of issuance of the Senior
Subordinated Old Notes and to use its best efforts to cause the registration
statement relating to the Senior Subordinated Exchange Offer to become
effective under the Securities Act not later than 200 days after the date of
issuance of the Senior Subordinated Old Notes. In addition, the Senior
Subordinated Registration Rights Agreement provides for certain remedies if the
Senior Subordinated Exchange Offer is not consummated or a shelf registration
statement with respect to Senior Subordinated Old Notes is not made effective
within the time periods specified therein. See "Senior Subordinated Exchange
Offer; Senior Subordinated Registration Rights."
The Senior Subordinated Exchange Offer is being made by the Company to
satisfy its obligations with respect to the Senior Subordinated Registration
Rights Agreement. The term "holder," with respect to the Senior Subordinated
Exchange Offer, means any person in whose name Senior Subordinated Old Notes
are registered on the books of the Company or any other person who has obtained
a properly completed bond power from the registered holder, or any person whose
Senior Subordinated Old Notes are held of record by The Depository Trust
Company or its nominee. Other than pursuant to the Senior Subordinated
Registration Rights Agreement, the Company and Holdings are not required to
file any registration statement to register any outstanding Senior Subordinated
Old Notes. Holders of Senior Subordinated Old Notes who do not tender their
Senior Subordinated Old Notes or whose Senior Subordinated Old Notes are
tendered but not accepted would have to rely on exceptions to the registration
requirements under the securities laws, including the Securities Act, if they
wish to sell their Senior Subordinated Old Notes.
The Company is making the Senior Subordinated Exchange Offer in reliance
on the position of the Staff of the Commission as set forth in certain
interpretive letters addressed to third parties in other
80
transactions. However, the Company has not sought its own interpretive letter
and there can be no assurance that the Staff would make a similar determination
with respect to the Senior Subordinated Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Staff, the Company believes that the Senior Subordinated Exchange Notes issued
pursuant to the Senior Subordinated Exchange Offer in exchange for Senior
Subordinated Old Notes may be offered for resale, resold and otherwise
transferred by a Holder (other than any Holder who is a broker-dealer or an
"affiliate" of the Company within the meaning of Rule 405 of the Securities
Act) without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Senior Subordinated
Exchange Notes are acquired in the ordinary course of such Holder's business
and that such Holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such Senior Subordinated Exchange Notes. See
" -- Resale of Senior Subordinated Exchange Notes." Each broker-dealer that
receives Senior Subordinated Exchange Notes for its own account in exchange for
Senior Subordinated Old Notes, where such Senior Subordinated Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Senior Subordinated Exchange Notes. See
"Plan of Distribution."
Terms of the Exchange
The Company hereby offers, subject to the conditions set forth herein and
in the applicable Letter of Transmittal accompanying this Prospectus, to
exchange $1,000 principal amount of Senior Subordinated Exchange Notes for each
$1,000 principal amount of its issued and outstanding Senior Subordinated Old
Notes properly tendered on or prior to the Senior Subordinated Expiration Date
and not withdrawn as permitted pursuant to the procedures described below. The
terms of the Senior Subordinated Exchange Notes are identical in all material
respects to the terms of the Senior Subordinated Old Notes for which they may
be exchanged pursuant to the Senior Subordinated Exchange Offer, except that
the Senior Subordinated Exchange Notes will generally be freely transferable by
holders thereof and will not be subject to any covenant regarding registration.
The Senior Subordinated Exchange Notes will evidence the same indebtedness as
the Senior Subordinated Old Notes and will be entitled to the benefits of the
Senior Subordinated Indenture. See "Description of Senior Subordinated Exchange
Notes."
The Senior Subordinated Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Senior Subordinated Old Notes being tendered for
exchange.
The Company has not requested, and does not intend to request, an
interpretation by the Staff of the Commission with respect to whether the
Senior Subordinated Exchange Notes issued pursuant to the Senior Subordinated
Exchange Offer in exchange for the Senior Subordinated Old Notes may be offered
for sale, resold or otherwise transferred by any holder without compliance with
the registration and prospectus delivery provisions of the Securities Act.
Instead, based on an interpretation by the Staff of the Commission set forth in
a series of no-action letters issued to third parties, the Company believes
that Senior Subordinated Exchange Notes issued pursuant to the Senior
Subordinated Exchange Offer in exchange for Senior Subordinated Old Notes may
be offered for sale, resold and otherwise transferred by any holder of such
Senior Subordinated Exchange Notes (other than any such holder that is a
broker-dealer or is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such Senior
Subordinated Exchange Notes are acquired in the ordinary course of such
holder's business and such holder has no arrangement or understanding with any
person to participate in the distribution of such Senior Subordinated Exchange
Notes and neither such holder nor any other such person is engaging in or
intends to engage in a distribution of such Senior Subordinated Exchange Notes.
Since the Commission has not considered the Senior Subordinated Exchange Offer
in the context of a no-action letter, there can be no assurance that the Staff
of the Commission would make a similar determination with respect to the Senior
Subordinated Exchange Offer. Any holder who is an affiliate of the Company or
who tenders in the Senior Subordinated Exchange Offer for the purpose of
participating in a distribution of the Senior Subordinated Exchange Notes
cannot rely on such interpretation by the Staff of the Commission and must
comply with the registration and prospectus delivery
81
requirements of the Securities Act in connection with any resale transaction.
Each holder, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a distribution of Senior
Subordinated Exchange Notes. Each broker-dealer that receives Senior
Subordinated Exchange Notes for its own account in exchange for Senior
Subordinated Old Notes, where such Senior Subordinated Old Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Senior Subordinated Exchange Notes. A broker-dealer may
not participate in the Senior Subordinated Exchange Offer with respect to
Senior Subordinated Old Notes acquired other than as a result of market-making
activities or other trading activities. See "Plan of Distribution."
Interest on the Senior Subordinated Exchange Notes will accrue from the
last Interest Payment Date on which interest was paid on the Senior
Subordinated Old Notes so surrendered or, if no interest has been paid on such
Notes, from June 5, 1998.
Tendering holders of the Senior Subordinated Old Notes will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
the Senior Subordinated Old Notes pursuant to the Senior Subordinated Exchange
Offer.
Expiration Date; Extension; Termination; Amendment
The Senior Subordinated Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1998 (the "Senior Subordinated Expiration Date"), unless the
Senior Subordinated Exchange Offer is extended, in which case the term "Senior
Subordinated Expiration Date" means the latest date and time to which the
Senior Subordinated Exchange Offer is extended. The Senior Subordinated
Expiration Date will be at least 20 business days after the commencement of the
Senior Subordinated Exchange Offer in accordance with Rule 14e-1(a) under the
Exchange Act. The Company expressly reserves the right, at any time or from
time to time, to extend the period of time during which the Senior Subordinated
Exchange Offer is open, and thereby delay acceptance for exchange of any Senior
Subordinated Old Notes by giving oral or written notice to the Senior
Subordinated Exchange Agent and by timely public announcement no later than
9:00 a.m. New York City time, on the next business day after the Senior
Subordinated Expiration Date previously in effect. During any such extension,
all Senior Subordinated Old Notes previously tendered will remain subject to
the Senior Subordinated Exchange Offer unless properly withdrawn. The Company
does not anticipate extending the Senior Subordinated Expiration Date.
The Company expressly reserves the right to (i) terminate or amend the
Senior Subordinated Exchange Offer and not to accept for exchange any Senior
Subordinated Old Notes not theretofore accepted for exchange upon the
occurrence of any of the events specified below under "Certain Conditions to
the Senior Subordinated Exchange Offer" which have not been waived by the
Company and (ii) amend the terms of the Senior Subordinated Exchange Offer in
any manner which, in its good faith judgment, is advantageous to the holders of
the Senior Subordinated Old Notes, whether before or after any tender of Senior
Subordinated Old Notes. If any such termination or amendment occurs, the
Company will notify the Senior Subordinated Exchange Agent and will either
issue a press release or give oral or written notice to the holders of the
Senior Subordinated Old Notes as promptly as practicable.
For purposes of the Senior Subordinated Exchange Offer, a "business day"
means any day other than Saturday, Sunday or a date on which banking
institutions are required or authorized by New York State law to be closed, and
consists of the time period from 12:01 a.m. through 12:00 midnight, New York
City time. Unless the Company terminates the Senior Subordinated Exchange Offer
prior to 5:00 p.m., New York City time, on the Senior Subordinated Expiration
Date, the Company will exchange the Senior Subordinated Exchange Notes for
Senior Subordinated Old Notes on the Senior Subordinated Exchange Date.
Procedures for Tendering Senior Subordinated Old Notes
The tender to the Company of Senior Subordinated Old Notes by a holder
thereof as set forth below and the acceptance thereof by the Company will
constitute a binding agreement between the
82
tendering holder and the Company upon the terms and subject to the conditions
set forth in this Prospectus and in the applicable Letter of Transmittal.
A holder of Senior Subordinated Old Notes may tender the same by (i)
properly completing and signing the applicable Letter of Transmittal or a
facsimile thereof (all references in this Prospectus to a Letter of Transmittal
shall be deemed to include a facsimile thereof) and delivering the same,
together with the certificate or certificates representing the Senior
Subordinated Old Notes being tendered and any required signature guarantees and
any other documents required by the Letter of Transmittal, to the Senior
Subordinated Exchange Agent at its address set forth below on or prior to the
Senior Subordinated Expiration Date (or complying with the procedure for
book-entry transfer described below) or (ii) complying with the guaranteed
delivery procedures described below.
The method of delivery of Senior Subordinated Old Notes, Letters of
Transmittal and all other required documents is at the election and risk of the
holders. If such delivery is by mail, it is recommended that registered mail
properly insured, with return receipt requested, be used. In all cases,
sufficient time should be allowed to insure timely delivery. No Senior
Subordinated Old Notes or Letters of Transmittal should be sent to the Company.
If tendered Senior Subordinated Old Notes are registered in the name of
the signer of the Letter of Transmittal and the Senior Subordinated Exchange
Notes to be issued in exchange therefor are to be issued (and any untendered
Senior Subordinated Old Notes are to be reissued) in the name of the registered
holder (which term, for the purposes described herein, shall include any
participant in The Depository Trust Company (also referred to as a "book-entry
transfer facility") whose name appears on a security listing as the owner of
Senior Subordinated Old Notes), the signature of such signer need not be
guaranteed. In any other case, the tendered Senior Subordinated Old Notes must
be endorsed or accompanied by written instruments of transfer in form
satisfactory to the Company and duly executed by the registered holder, and the
signature on the endorsement or instrument of transfer must be guaranteed by a
bank, broker, dealer, credit union, savings association, clearing agency or
other institution (each an "Eligible Institution") that is a member of a
recognized signature guarantee medallion program within the meaning of Rule
17Ad-15 under the Exchange Act. In addition, if the Senior Subordinated
Exchange Notes and/or Senior Subordinated Old Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for such Senior Subordinated Old Notes, the signature on the
Letter of Transmittal must be guaranteed by an Eligible Institution.
The Senior Subordinated Exchange Agent will make a request within two
business days after the date of receipt of this Prospectus to establish
accounts with respect to the Senior Subordinated Old Notes at the book-entry
transfer facility for the purpose of facilitating the Senior Subordinated
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Senior Subordinated Old Notes by causing such
book-entry transfer facility to transfer such Senior Subordinated Old Notes
into the Senior Subordinated Exchange Agent's account with respect to the
Senior Subordinated Old Notes in accordance with the book-entry transfer
facility's procedures for such transfer. Although delivery of Senior
Subordinated Old Notes may be effected through book-entry transfer into the
Senior Subordinated Exchange Agent's account at the book-entry transfer
facility, a Letter of Transmittal with any required signature guarantee and all
other required documents must in each case be transmitted to and received or
confirmed by the Senior Subordinated Exchange Agent at its address set forth
below on or prior to the Senior Subordinated Expiration Date, or, if the
guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures.
If a holder desires to accept the Senior Subordinated Exchange Offer and
time will not permit the Letter of Transmittal or Senior Subordinated Old Notes
to reach the Senior Subordinated Exchange Agent before the Senior Subordinated
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Senior Subordinated Exchange
Agent has received at its address set forth below on or prior to the Senior
Subordinated Expiration Date, a letter, telegram or facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) from an Eligible Institution setting forth the name and
address of the tendering holder, the names in which the Senior Subordinated Old
Notes are registered and, if possible,
83
the certificate numbers of the Senior Subordinated Old Notes to be tendered,
and stating that the tender is being made thereby and guaranteeing that within
three business days after the Senior Subordinated Expiration Date, the Senior
Subordinated Old Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Senior Subordinated Old Notes into the Senior
Subordinated Exchange Agent's account at the book-entry transfer facility),
will be delivered by such Eligible Institution together with a properly
completed and duly executed Letter of Transmittal (and any other required
documents). Unless Senior Subordinated Old Notes being tendered by the
above-described method are deposited with the Senior Subordinated Exchange
Agent within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documents), the
Company may, at its option, reject the tender. Copies of the forms of notice of
guaranteed delivery ("Notice of Guaranteed Delivery") relating to the Senior
Subordinated Notes which may be used by Eligible Institutions for the purposes
described in this paragraph are available from the Senior Subordinated Exchange
Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Subordinated Old Notes (or a confirmation of
book-entry transfer of such Senior Subordinated Old Notes into the Senior
Subordinated Exchange Agent's account at the book-entry transfer facility) is
received by the Senior Subordinated Exchange Agent, or (ii) the applicable
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) from an Eligible Institution is received by
the Senior Subordinated Exchange Agent. Issuances of Senior Subordinated
Exchange Notes in exchange for Senior Subordinated Old Notes tendered pursuant
to a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided above) by an Eligible Institution
will be made only against deposit of the applicable Letter of Transmittal (and
any other required documents) and the tendered Senior Subordinated Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Senior Subordinated Old Notes tendered for exchange
will be determined by the Company in its sole discretion, which determination
shall be final and binding. The Company reserves the absolute right to reject
any and all tenders of any particular Senior Subordinated Old Notes not
properly tendered or not to accept any particular Senior Subordinated Old Notes
which acceptance might, in the judgment of the Company or its counsel, be
unlawful. The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Senior Subordinated Exchange Offer as to
any particular Senior Subordinated Old Notes either before or after the Senior
Subordinated Expiration Date (including the right to waive the ineligibility of
any holder who seeks to tender Senior Subordinated Old Notes in the Senior
Subordinated Exchange Offer). The interpretation of the terms and conditions of
the Senior Subordinated Exchange Offer (including the Letter of Transmittal and
the instructions thereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Senior Subordinated Old Notes for exchange must be cured within such
reasonable period of time as the Company shall determine. Neither the Company,
the Senior Subordinated Exchange Agent nor any other person shall be under any
duty to give notification of any defect or irregularity with respect to any
tender of Senior Subordinated Old Notes for exchange, nor shall any of them
incur any liability for failure to give such notification.
If a Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Senior Subordinated Old Notes, such Senior
Subordinated Old Notes must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders appear on the Senior Subordinated Old Notes.
If a Letter of Transmittal or any Senior Subordinated Old Notes or powers
of attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
its authority to so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Senior Subordinated Exchange Notes acquired pursuant to the Senior
Subordinated Exchange Offer are being
84
acquired in the ordinary course of business of the person receiving such Senior
Subordinated Exchange Notes, whether or not such person is the holder, that
neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such Senior
Subordinated Exchange Notes and that neither the holder nor any such other
person is an "affiliate," as defined under Rule 405 of the Securities Act, of
the Company, or if it is an affiliate it will comply with the registration and
prospectus requirements of the Securities Act to the extent applicable.
Each broker-dealer that receives Senior Subordinated Exchange Notes for
its own account in exchange for Senior Subordinated Old Notes where such Senior
Subordinated Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities must acknowledge that it
will deliver a prospectus in connection with any resale of such Senior
Subordinated Exchange Notes. See "Plan of Distribution."
Terms and Conditions of the Letter of Transmittal
The Letter of Transmittal contains, among other things, the following
terms and conditions, which are part of the Senior Subordinated Exchange Offer.
The party tendering Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Senior Subordinated Old Notes to the Company and
irrevocably constitutes and appoints the Senior Subordinated Exchange Agent as
the Transferor's agent and attorney-in-fact to cause the Senior Subordinated
Old Notes to be assigned, transferred and exchanged. The Transferor represents
and warrants that it has full power and authority to tender, exchange, assign
and transfer the Senior Subordinated Old Notes and to acquire Senior
Subordinated Exchange Notes issuable upon the exchange of such tendered Notes,
and that, when the same are accepted for exchange, the Company will acquire
good and unencumbered title to the tendered Senior Subordinated Old Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Senior Subordinated
Exchange Agent or the Company to be necessary or desirable to complete the
exchange, assignment and transfer of tendered Senior Subordinated Old Notes or
transfer ownership of such Senior Subordinated Old Notes on the account books
maintained by a book-entry transfer facility. The Transferor further agrees
that acceptance of any tendered Senior Subordinated Old Notes by the Company
and the issuance of Senior Subordinated Exchange Notes in exchange therefor
shall constitute performance in full by the Company of certain of its
obligations under the Senior Subordinated Registration Rights Agreement. All
authority conferred by the Transferor will survive the death or incapacity of
the Transferor and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and administrators
of such Transferor.
The Transferor certifies that it is not an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act and that it is
acquiring the Senior Subordinated Exchange Notes offered hereby in the ordinary
course of such Transferor's business and that such Transferor has no
arrangement with any person to participate in the distribution of such Senior
Subordinated Exchange Notes. Each holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of Senior Subordinated Exchange Notes. Each Transferor which is a
broker-dealer receiving Senior Subordinated Exchange Notes for its own account
must acknowledge that it will deliver a prospectus in connection with any
resale of such Senior Subordinated Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Senior Subordinated Exchange Notes
received in exchange for Senior Subordinated Old Notes where such Senior
Subordinated Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company will, for a
period of 180 days after the Senior Subordinated Expiration Date, make copies
of this Prospectus available to any broker-dealer for use in connection with
any such resale.
85
Withdrawal Rights
Tenders of Senior Subordinated Old Notes may be withdrawn at any time
prior to the Senior Subordinated Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter
must be received by the Senior Subordinated Exchange Agent at the address set
forth herein prior to the Senior Subordinated Expiration Date. Any such notice
of withdrawal must (i) specify the name of the person having tendered the
Senior Subordinated Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Senior Subordinated Old Notes to be withdrawn (including the certificate
number or numbers and principal amount of such Senior Subordinated Old Notes),
(iii) specify the principal amount of Senior Subordinated Old Notes to be
withdrawn, (iv) include a statement that such holder is withdrawing his
election to have such Senior Subordinated Old Notes exchanged, (v) be signed by
the holder in the same manner as the original signature on the Letter of
Transmittal by which such Senior Subordinated Old Notes were tendered or as
otherwise described above (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Senior Subordinated
Trustee under the Senior Subordinated Indenture register the transfer of such
Senior Subordinated Old Notes into the name of the person withdrawing the
tender and (vi) specify the name in which any such Senior Subordinated Old
Notes are to be registered, if different from that of the Depositor. The Senior
Subordinated Exchange Agent will return the properly withdrawn Senior
Subordinated Old Notes promptly following receipt of notice of withdrawal.
If Senior Subordinated Old Notes have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility to be
credited with the withdrawn Senior Subordinated Old Notes or otherwise comply
with the book-entry transfer facility procedure. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company and such determination will be final and binding on
all parties.
Any Senior Subordinated Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Senior Subordinated
Exchange Offer. Any Senior Subordinated Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Senior
Subordinated Old Notes tendered by book-entry transfer into the Senior
Subordinated Exchange Agent's account at the book-entry transfer facility
pursuant to the book-entry transfer procedures described above, such Senior
Subordinated Old Notes will be credited to an account with such book-entry
transfer facility specified by the holder) as soon as practicable after
withdrawal, rejection of tender or termination of the Senior Subordinated
Exchange Offer. Properly withdrawn Senior Subordinated Old Notes may be
retendered by following one of the procedures described under " -- Procedures
for Tendering Senior Subordinated Old Notes" above at any time on or prior to
the Senior Subordinated Expiration Date.
Acceptance of Senior Subordinated Old Notes for Exchange; Delivery of Senior
Subordinated Exchange Notes
Upon satisfaction or waiver of all of the conditions to the Senior
Subordinated Exchange Offer, the Company will accept, promptly on the Senior
Subordinated Exchange Date, all Senior Subordinated Old Notes properly tendered
and will issue the Senior Subordinated Exchange Notes promptly after such
acceptance. See " -- Certain Conditions to the Senior Subordinated Exchange
Offer" below. For purposes of the Senior Subordinated Exchange Offer, the
Company shall be deemed to have accepted properly tendered Senior Subordinated
Old Notes for exchange when, as and if the Company has given oral or written
notice thereof to the Senior Subordinated Exchange Agent.
For each Senior Subordinated Old Note accepted for exchange, the holder of
such Senior Subordinated Old Note will receive a Senior Subordinated Exchange
Note having a principal amount equal to that of the surrendered Senior
Subordinated Old Note.
In all cases, issuance of Senior Subordinated Exchange Notes for Senior
Subordinated Old Notes that are accepted for exchange pursuant to the Senior
Subordinated Exchange Offer will be made only
86
after timely receipt by the Senior Subordinated Exchange Agent of certificates
for such Senior Subordinated Old Notes or a timely book-entry confirmation of
such Senior Subordinated Old Notes into the Senior Subordinated Exchange
Agent's account at the book-entry transfer facility, a properly completed and
duly executed Letter of Transmittal and all other required documents. If any
tendered Senior Subordinated Old Notes are not accepted for any reason set
forth in the terms and conditions of the Senior Subordinated Exchange Offer or
if Senior Subordinated Old Notes are submitted for a greater principal amount
than the holder desires to exchange, such unaccepted or non-exchanged Senior
Subordinated Old Notes will be returned without expense to the tendering holder
thereof (or, in the case of Senior Subordinated Old Notes tendered by
book-entry transfer into the Senior Subordinated Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such non-exchanged Senior Subordinated Old Notes will be
credited to an account maintained with such book-entry transfer facility
specified by the holder) as promptly as practicable after the expiration of the
Senior Subordinated Exchange Offer.
Certain Conditions to the Senior Subordinated Exchange Offer
Notwithstanding any other provision of the Senior Subordinated Exchange
Offer, or any extension of the Senior Subordinated Exchange Offer, the Company
shall not be required to accept for exchange, or to issue Senior Subordinated
Exchange Notes in exchange for, any Senior Subordinated Old Notes and may
terminate or amend the Senior Subordinated Exchange Offer (by oral or written
notice to the Senior Subordinated Exchange Agent or by a timely press release)
if at any time before the acceptance of such Senior Subordinated Old Notes for
exchange or the exchange of the Senior Subordinated Exchange Notes for such
Senior Subordinated Old Notes, any of the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Senior
Subordinated Exchange Offer which, in the sole judgment of the Company,
might materially impair the ability of the Company to proceed with the
Senior Subordinated Exchange Offer or have a material adverse effect on the
contemplated benefits of the Senior Subordinated Exchange Offer to the
Company; or
(b) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company that, in the sole judgment of the Company, is or
may be adverse to the Company, or the Company shall have become aware of
facts that have or may have adverse significance with respect to the value
of the Senior Subordinated Old Notes or the Senior Subordinated Exchange
Notes or that may, in the sole judgment of the Company, materially impair
the contemplated benefits of the Senior Subordinated Exchange Offer to the
Company; or
(c) any law, rule or regulation or applicable interpretations of the
Staff of the Commission is issued or promulgated which, in the good faith
determination of the Company, does not permit the Company to effect the
Senior Subordinated Exchange Offer; or
(d) any governmental approval has not been obtained, which approval the
Company, in its sole discretion, deem necessary for the consummation of the
Senior Subordinated Exchange Offer; or
(e) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law, statute, rule or
regulation) which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Senior Subordinated
Exchange Offer or have a material adverse effect on the contemplated
benefits of the Senior Subordinated Exchange Offer to the Company; or
(f) there shall occur a change in the current interpretation by the
Staff of the Commission which permits the Senior Subordinated Exchange
Notes issued pursuant to the Senior Subordinated Exchange Offer in exchange
for Senior Subordinated Old Notes to be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the
87
registration and prospectus delivery provisions of the Securities Act
provided that such Senior Subordinated Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such
Senior Subordinated Exchange Notes; or
(g) there shall have occurred (i) any general suspension of, shortening
of hours for, or limitation on prices for, trading in securities on any
national securities exchange or in the over-the-counter market (whether or
not mandatory), (ii) any limitation by any governmental agency or authority
which may adversely affect the ability of the Company to complete the
transactions contemplated by the Senior Subordinated Exchange Offer, (iii)
a declaration of a banking moratorium or any suspension of payments in
respect of banks by Federal or state authorities in the United States
(whether or not mandatory), (iv) a commencement of a war, armed hostilities
or other international or national crisis directly or indirectly involving
the United States, (v) any limitation (whether or not mandatory) by any
governmental authority on, or other event having a reasonable likelihood of
affecting, the extension of credit by banks or other lending institutions
in the United States, or (vi) in the case of any of the foregoing existing
at the time of the commencement of the Senior Subordinated Exchange Offer,
a material acceleration or worsening thereof.
The Company expressly reserves the right to terminate the Senior
Subordinated Exchange Offer and not accept for exchange any of the Senior
Subordinated Old Notes upon the occurrence of any of the foregoing conditions
(which represent all of the material conditions to the acceptance by the
Company of the Senior Subordinated Old Notes which are properly tendered). In
addition, the Company may amend the Senior Subordinated Exchange Offer at any
time prior to the Senior Subordinated Expiration Date if any of the conditions
set forth above occurs. Moreover, regardless of whether any of such conditions
has occurred, the Company may amend the Senior Subordinated Exchange Offer in
any manner which, in its good faith judgment, is advantageous to holders of the
Senior Subordinated Old Notes.
The foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company in whole or in part at any time
and from time to time in its sole discretion. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time. If the Company waives or amends
the foregoing conditions, it will, if required by law, extend the Subordinated
Exchange Offer for a minimum of five business days from the date that the
Company first gives notice, by public announcement or otherwise, of such waiver
or amendment, if the Senior Subordinated Exchange Offer would otherwise expire
within such five business-day period. Any determination by the Company
concerning the events described above will be final and binding upon all
parties.
In addition, the Company will not accept for exchange any Senior
Subordinated Old Notes tendered, and no Senior Subordinated Exchange Notes will
be issued in exchange for any such Senior Subordinated Old Notes, if at such
time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Senior Subordinated Indenture under the Trust Indenture
Act of 1939, as amended. In any such event, the Company is required to use
every reasonable effort to obtain the withdrawal of any stop order at the
earliest possible time.
The Senior Subordinated Exchange Offer is not conditioned upon any minimum
principal amount of Senior Subordinated Old Notes being tendered for exchange.
Senior Subordinated Exchange Agent
Bank One, N.A. has been appointed as the Senior Subordinated Exchange
Agent for the Senior Subordinated Exchange Offer. All executed Letters of
Transmittal related to the Senior Subordinated Exchange Offer should be
directed to the Senior Subordinated Exchange Agent at one of the addresses set
forth in the Letter of Transmittal.
88
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal related to the Senior
Subordinated Notes and requests for Notices of Guaranteed Delivery related to
the Senior Subordinated Notes should be directed to the Senior Subordinated
Exchange Agent at the address and telephone number set forth in the Letter of
Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF TRANSMITTAL, OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE SET
FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID DELIVERY.
Solicitation of Tenders; Fees and Expenses
The Company has not retained any dealer-manager in connection with the
Senior Subordinated Exchange Offer and will not make any payments to broker,
dealers or others soliciting acceptances of the Senior Subordinated Exchange
Offer. The Company, however, will pay the Senior Subordinated Exchange Agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith. The Company will
also pay brokerage houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding copies of this
and other related documents to the beneficial owners of the Senior Subordinated
Old Notes and in handling or forwarding tenders for their customers.
The estimated cash expenses to be incurred in connection with the Senior
Subordinated Exchange Offer will be paid by the Company and are estimated in
the aggregate to be approximately $ , including fees and expenses of the
Senior Subordinated Exchange Agent or the Senior Subordinated Trustee,
registration fees, and accounting, legal, printing and related fees and
expenses.
No person has been authorized to give any information or to make any
representations in connection with the Senior Subordinated Exchange Offer other
than those contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the respective dates as of
which information is given herein. The Senior Subordinated Exchange Offer is
not being made to (nor will tenders be accepted from or on behalf of) holders
of Senior Subordinated Old Notes in any jurisdiction in which the making of the
Senior Subordinated Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Senior
Subordinated Exchange Offer in any such jurisdiction and extend the Senior
Subordinated Exchange Offer to holders of Senior Subordinated Old Notes in such
jurisdiction. In any jurisdiction in which the securities or "blue sky" laws
require the Senior Subordinated Exchange Offer to be made by a licensed broker
or dealer, the Senior Subordinated Exchange Offer is being made on behalf of
the Company by one or more registered brokers or dealers which are licensed
under the laws of such jurisdiction.
Transfer Taxes
The Company will pay all transfer taxes, if any, to the exchange of Senior
Subordinated Old Notes pursuant to the Senior Subordinated Exchange Offer. If,
however, certificates representing Senior Subordinated Exchange Notes or Senior
Subordinated Old Notes for principal amounts not tendered or accepted for
exchange are to be delivered to, or are to be issued in the name of, any person
other than the registered holder of the Senior Subordinated Old Notes tendered,
or if tendered Senior Subordinated Old Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Senior
Subordinated Old Notes pursuant to the Senior Subordinated Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered holder
or any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
89
Consequences of Failure to Exchange
Holders of Senior Subordinated Old Notes who do not exchange their Senior
Subordinated Old Notes for Senior Subordinated Exchange Notes pursuant to the
Senior Subordinated Exchange Offer will continue to be subject to the
restrictions on transfer of such Senior Subordinated Old Notes as set forth in
the legend thereon. Senior Subordinated Old Notes not exchanged pursuant to the
Senior Subordinated Exchange Offer will continue to remain outstanding in
accordance with their terms. In general, the Senior Subordinated Old Notes may
not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Senior Subordinated Old Notes
under the Securities Act.
Participation in the Senior Subordinated Exchange Offer is voluntary, and
holders of Senior Subordinated Old Notes should carefully consider whether to
participate. Holders of Senior Subordinated Old Notes are urged to consult
their financial and tax advisors in making their own decision on what action to
take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Subordinated Old Notes pursuant to the terms of, the
Senior Subordinated Exchange Offer, the Company will have fulfilled a covenant
contained in the Senior Subordinated Registration Rights Agreement. Holders of
Senior Subordinated Old Notes who do not tender their Senior Subordinated Old
Notes in the Senior Subordinated Exchange Offer will continue to hold such
Senior Subordinated Old Notes and will be entitled to all the rights and
limitations applicable thereto under the Senior Subordinated Indenture, except
for any such rights under the Senior Subordinated Registration Rights Agreement
that by their terms terminate or cease to have further effectiveness as a
result of the making of the Senior Subordinated Exchange Offer. All untendered
Senior Subordinated Old Notes will continue to be subject to the restrictions
on transfer set forth in the Senior Subordinated Indenture. To the extent that
Senior Subordinated Old Notes are tendered and accepted in the Senior
Subordinated Exchange Offer, the trading market for untendered Senior
Subordinated Old Notes could be adversely affected.
The Company may in the future seek to acquire, subject to the terms of the
Senior Subordinated Indenture, untendered Senior Subordinated Old Notes in
open-market or privately-negotiated transactions, through subsequent exchange
offers or otherwise. The Company has no present plan to acquire any Senior
Subordinated Old Notes which are not tendered in the Senior Subordinated
Exchange Offer.
Resale of Senior Subordinated Exchange Notes
The Company is making the Senior Subordinated Exchange Offer in reliance
on the position of the Staff of the Commission as set forth in certain
interpretive letters addressed to third parties in other transactions. However,
the Company has not sought its own interpretive letter and there can be no
assurance that the Staff would make a similar determination with respect to the
Senior Subordinated Exchange Offer as it has in such interpretive letters to
third parties. Based on these interpretations by the Staff, the Company
believes that the Senior Subordinated Exchange Notes issued pursuant to the
Senior Subordinated Exchange Offer in exchange for Senior Subordinated Old
Notes may be offered for resale, resold and otherwise transferred by a Holder
(other than any Holder who is a broker-dealer or an "affiliate" of the Company
within the meaning of Rule 405 of the Securities Act) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Senior Subordinated Exchange Notes are
acquired in the ordinary course of such Holder's business and that such Holder
is not participating, and has no arrangement or understanding with any person
to participate, in a distribution (within the meaning of the Securities Act) of
such Senior Subordinated Exchange Notes. However, any holder who is an
"affiliate" of the Company who has an arrangement or understanding with respect
to the distribution of the Senior Subordinated Exchange Notes to be acquired
pursuant to the Senior Subordinated Exchange Offer, or any broker-dealer who
purchased Senior Subordinated Old Notes from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act (i) could
not rely on the applicable interpretations of the Staff and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act. A broker-dealer who holds Senior Subordinated Old Notes that were acquired
for its own account as a
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result of market-making or other trading activities may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Senior Subordinated Exchange Notes. Each such
broker-dealer that receives Senior Subordinated Exchange Notes for its own
account in exchange for Senior Subordinated Old Notes, where such Senior
Subordinated Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge in the
Letter of Transmittal that it will deliver a prospectus in connection with any
resale of such Senior Subordinated Exchange Notes. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Senior Subordinated Exchange Notes may not be offered or
sold unless they have been registered or qualified for sale in such
jurisdiction or an exemption from registration or qualification is available
and is complied with. The Company has agreed, pursuant to the Senior
Subordinated Registration Rights Agreement and subject to certain specified
limitations therein, to register or qualify the Senior Subordinated Exchange
Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Senior Subordinated Exchange Notes
reasonably requests. Such registration or qualification may require the
imposition of restrictions or conditions (including suitability requirements
for offerees or purchasers) in connection with the offer or sale of any Senior
Subordinated Exchange Notes.
THE SENIOR DISCOUNT EXCHANGE OFFER
General
Holdings hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the applicable Letter of Transmittal (which
together constitute the Senior Discount Exchange Offer), to exchange up to
$87,000,000 aggregate principal amount at maturity of its Senior Discount
Exchange Notes for a like aggregate principal amount at maturity of its Senior
Discount Old Notes properly tendered on or prior to the Senior Discount
Expiration Date and not withdrawn as permitted pursuant to the procedures
described below. Throughout this Prospectus, references to the "Letter of
Transmittal" refer to the form of Letter of Transmittal that is applicable to
the Senior Discount Notes or the Senior Subordinated Notes, as the context
requires, whether so expressed or not. The Senior Discount Exchange Offer is
being made with respect to all of the Senior Discount Old Notes.
As of the date of this Prospectus, $87,000,000 aggregate principal amount
at maturity of Senior Discount Old Notes is outstanding. This Prospectus and
the applicable Letter of Transmittal are first being sent on or about
, 1998, to all holders of Senior Discount Old Notes known to
Holdings. Holdings' obligation to accept Senior Discount Old Notes for exchange
pursuant to the Senior Discount Exchange Offer is subject to certain conditions
set forth under "Certain Conditions to the Senior Discount Exchange Offer"
below. Holdings currently expect that each of the conditions will be satisfied
and that no waivers will be necessary.
Purpose of the Senior Discount Exchange Offer
The Senior Discount Old Notes were issued on June 5, 1998 in a transaction
exempt from the registration requirements of the Securities Act. Accordingly,
the Senior Discount Old Notes may not be reoffered, resold, or otherwise
transferred unless so registered or unless an applicable exemption from the
registration and prospectus delivery requirements of the Securities Act is
available.
In connection with the issuance and sale of the Senior Discount Old Notes,
Holdings entered into the Senior Discount Registration Rights Agreement, which
requires Holdings to file with the Commission a registration statement relating
to the Senior Discount Exchange Offer not later than 90 days after the date of
issuance of the Senior Discount Old Notes, and to use its best efforts to cause
the registration statement relating to the Senior Discount Exchange Offer to
become effective under the Securities Act not later than 200 days after the
date of issuance of the Senior Discount Old Notes. In addition, the Senior
Discount Registration Rights Agreement provides for certain remedies if the
Senior Discount Exchange Offer is not consummated or a shelf registration
statement with respect to Senior Discount Old Notes is not made effective
within the time periods specified therein. See "Senior Discount Exchange Offer;
Senior Discount Registration Rights."
91
The Senior Discount Exchange Offer is being made by Holdings to satisfy
its obligations with respect to the Senior Discount Registration Rights
Agreement. The term "holder," with respect to the Senior Discount Exchange
Offer, means any person in whose name Senior Discount Old Notes are registered
on the books of Holdings or any other person who has obtained a properly
completed bond power from the registered holder, or any person whose Senior
Discount Old Notes are held of record by The Depository Trust Company or its
nominee. Other than pursuant to the Senior Discount Registration Rights
Agreement, Holdings is not required to file any registration statement to
register any outstanding Senior Discount Old Notes. Holders of Senior Discount
Old Notes who do not tender their Senior Discount Old Notes or whose Senior
Discount Old Notes are tendered but not accepted would have to rely on
exceptions to the registration requirements under the securities laws,
including the Securities Act, if they wish to sell their Senior Discount Old
Notes.
Holdings is making the Senior Discount Exchange Offer in reliance on the
position of the Staff of the Commission as set forth in certain interpretive
letters addressed to third parties in other transactions. However, Holdings has
not sought its own interpretive letter and there can be no assurance that the
Staff would make a similar determination with respect to the Senior Discount
Exchange Offer as it has in such interpretive letters to third parties. Based
on these interpretations by the Staff, Holdings believes that the Senior
Discount Exchange Notes issued pursuant to the Senior Discount Exchange Offer
in exchange for Senior Discount Old Notes may be offered for resale, resold and
otherwise transferred by a Holder (other than any Holder who is a broker-dealer
or an "affiliate" of Holdings within the meaning of Rule 405 of the Securities
Act) without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Senior Discount Exchange
Notes are acquired in the ordinary course of such Holder's business and that
such Holder is not participating, and has no arrangement or understanding with
any person to participate, in a distribution (within the meaning of the
Securities Act) of such Senior Discount Exchange Notes. See " -- Resale of
Senior Discount Exchange Notes." Each broker-dealer that receives Senior
Discount Exchange Notes for its own account in exchange for Senior Discount Old
Notes, where such Senior Discount Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Senior Discount Exchange Notes. See "Plan of Distribution."
Terms of the Exchange
Holdings hereby offers to exchange, subject to the conditions set forth
herein and in the applicable Letter of Transmittal accompanying this
Prospectus, $1,000 in principal amount at maturity of Senior Discount Exchange
Notes for each $1,000 principal amount at maturity of the Senior Discount Old
Notes, properly tendered on or prior to the Senior Discount Expiration Date and
not withdrawn as permitted pursuant to the procedures described below. The
terms of the Senior Discount Exchange Notes are identical in all material
respects to the terms of the Senior Discount Old Notes for which they may be
exchanged pursuant to the Senior Discount Exchange Offer, except that the
Senior Discount Exchange Notes will generally be freely transferable by holders
thereof and will not be subject to any covenant regarding registration. The
Senior Discount Exchange Notes will evidence the same indebtedness as the
Senior Discount Old Notes and will be entitled to the benefits of the Senior
Discount Indenture. See "Description of Senior Discount Exchange Notes."
The Senior Discount Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Senior Discount Old Notes being tendered for
exchange.
Holdings has not requested, and does not intend to request, an
interpretation by the Staff of the Commission with respect to whether the
Senior Discount Exchange Notes issued pursuant to the Senior Discount Exchange
Offer in exchange for the Senior Discount Old Notes may be offered for sale,
resold or otherwise transferred by any holder without compliance with the
registration and prospectus delivery provisions of the Securities Act. Instead,
based on an interpretation by the Staff of the Commission set forth in a series
of no-action letters issued to third parties, Holdings believes that Senior
Discount Exchange Notes issued pursuant to the Senior Discount Exchange Offer
in exchange for Senior Discount Old Notes may be offered for sale, resold and
otherwise transferred by any holder of such Senior
92
Discount Exchange Notes (other than any such holder that is a broker-dealer or
is an "affiliate" of Holdings within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Senior Discount
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder has no arrangement or understanding with any person to
participate in the distribution of such Senior Discount Exchange Notes and
neither such holder nor any other such person is engaging in or intends to
engage in a distribution of such Senior Discount Exchange Notes. Since the
Commission has not considered the Senior Discount Exchange Offer in the context
of a no-action letter, there can be no assurance that the Staff of the
Commission would make a similar determination with respect to the Senior
Discount Exchange Offer. Any holder who is an affiliate of Holdings or who
tenders in the Senior Discount Exchange Offer for the purpose of participating
in a distribution of the Senior Discount Exchange Notes cannot rely on such
interpretation by the Staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each holder, other than a
broker-dealer, must acknowledge that it is not engaged in, and does not intend
to engage in, a distribution of Senior Discount Exchange Notes. Each
broker-dealer that receives Senior Discount Exchange Notes for its own account
in exchange for Senior Discount Old Notes, where such Senior Discount Old Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Senior Discount Exchange Notes. A
broker-dealer may not participate in the Senior Discount Exchange Offer with
respect to Senior Discount Old Notes acquired other than as a result of market-
making activities or other trading activities. See "Plan of Distribution."
Cash interest on the Senior Discount Exchange Notes will not accrue until
June 1, 2003. Thereafter, interest on the Senior Discount Exchange Notes will
accrue from June 1, 2003 at the rate of 11 1/8% per annum on the principal
amount at maturity of the Senior Discount Exchange Notes, and will be payable
semiannually in arrears on June 1 and December 1 of each year, commencing
December 1, 2003.
Tendering holders of the Senior Discount Old Notes will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of the Senior
Discount Old Notes pursuant to the Senior Discount Exchange Offer.
Senior Discount Expiration Date; Extension; Termination; Amendment
The Senior Discount Exchange Offer will expire at 5:00 p.m., New York City
time, on , 1998, unless Holdings, in its sole discretion, has extended
the period of time for which the Senior Discount Exchange Offer is open (such
date, as it may be extended, is referred to herein as the "Senior Discount
Expiration Date" and, together with the Senior Subordinated Expiration Dates,
the "Expiration Dates.") . The Senior Discount Expiration Date will be at least
20 business days after the commencement of the Senior Discount Exchange Offer
in accordance with Rule 14e-1(a) under the Exchange Act. Holdings expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Senior Discount Exchange Offer is open, and thereby delay
acceptance for exchange of any Senior Discount Old Notes, by giving oral or
written notice to the Senior Discount Exchange Agent and by timely public
announcement no later than 9:00 a.m. New York City time, on the next business
day after the previously scheduled Senior Discount Expiration Date. During any
such extension, all Senior Discount Old Notes previously tendered will remain
subject to the Senior Discount Exchange Offer unless properly withdrawn.
Holdings does not anticipate extending the Senior Discount Expiration Date.
Holdings expressly reserves the right to (i) terminate or amend the Senior
Discount Exchange Offer and not to accept for exchange any Senior Discount Old
Notes not theretofore accepted for exchange upon the occurrence of any of the
events specified below under "Certain Conditions to the Senior Discount
Exchange Offer" which have not been waived by Holdings and (ii) amend the terms
of the Senior Discount Exchange Offer in any manner which, in its good faith
judgment, is advantageous to the holders of the Senior Discount Old Notes,
whether before or after any tender of the Senior Discount Old Notes. If any
such termination or amendment occurs, Holdings will notify the Senior Discount
Exchange Agent and will either issue a press release or give oral or written
notice to the holders of the Senior Discount Old Notes as promptly as
practicable.
93
For purposes of the Senior Discount Exchange Offer, a "business day" means
any day other than Saturday, Sunday or a date on which banking institutions are
required or authorized by New York State law to be closed, and consists of the
time period from 12:01 a.m. through 12:00 midnight, New York City time. Unless
Holdings terminates the Senior Discount Exchange Offer prior to 5:00 p.m., New
York City time, on the Senior Discount Expiration Date, Holdings will exchange
the Senior Discount Exchange Notes for the Senior Discount Old Notes on the
Senior Discount Exchange Date.
Procedures for Tendering Senior Discount Old Notes
The tender to Holdings of Senior Discount Old Notes by a holder thereof as
set forth below and the acceptance thereof by Holdings will constitute a
binding agreement between the tendering holder and Holdings upon the terms and
subject to the conditions set forth in this Prospectus and in the applicable
Letter of Transmittal.
A holder of Senior Discount Old Notes may tender the same by (i) properly
completing and signing the applicable Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall
be deemed to include a facsimile thereof) and delivering the same, together
with the certificate or certificates representing the Senior Discount Old Notes
being tendered and any required signature guarantees and any other documents
required by the applicable Letter of Transmittal, to the Senior Discount
Exchange Agent at its address set forth below on or prior to the Senior
Discount Expiration Date (or complying with the procedure for book-entry
transfer described below) or (ii) complying with the guaranteed delivery
procedures described below.
The method of delivery of Senior Discount Old Notes, Letters of
Transmittal and all other required documents is at the election and risk of the
holders. If such delivery is by mail, it is recommended that registered mail
properly insured, with return receipt requested, be used. In all cases,
sufficient time should be allowed to insure timely delivery. No Senior Discount
Old Notes or Letters of Transmittal should be sent to Holdings.
If tendered Senior Discount Old Notes are registered in the name of the
signer of the Letter of Transmittal and the Senior Discount Exchange Notes to
be issued in exchange therefor are to be issued (and any untendered Senior
Discount Old Notes are to be reissued) in the name of the registered holder
(which term, for the purposes described herein, shall include any participant
in The Depository Trust Company (also referred to as a "book-entry transfer
facility") whose name appears on a security listing as the owner of Senior
Discount Old Notes), the signature of such signer need not be guaranteed. In
any other case, the tendered Senior Discount Old Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to Holdings
and duly executed by the registered holder, and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other institution
(each an "Eligible Institution") that is a member of a recognized signature
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act. In addition, if the Senior Discount Exchange Notes and/or Senior
Discount Old Notes not exchanged are to be delivered to an address other than
that of the registered holder appearing on the note register for the Senior
Discount Old Notes, the signature on the Letter of Transmittal must be
guaranteed by an Eligible Institution.
The Senior Discount Exchange Agent will make a request within two business
days after the date of receipt of this Prospectus to establish accounts with
respect to the Senior Discount Old Notes at the book-entry transfer facility
for the purpose of facilitating the Senior Discount Exchange Offer, and subject
to the establishment thereof, any financial institution that is a participant
in the book-entry transfer facility's system may make book-entry delivery of
Senior Discount Old Notes by causing such book-entry transfer facility to
transfer such Senior Discount Old Notes into the Senior Discount Exchange
Agent's account with respect to the Senior Discount Old Notes in accordance
with the book-entry transfer facility's procedures for such transfer. Although
delivery of Senior Discount Old Notes may be effected through book-entry
transfer into the Senior Discount Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Senior Discount Exchange Agent
at its address set forth below on or prior to the Senior Discount Expiration
Date,
94
or, if the guaranteed delivery procedures described below are complied with,
within the time period provided under such procedures.
If a holder desires to accept the Senior Discount Exchange Offer and time
will not permit the Letter of Transmittal or Senior Discount Old Notes to reach
the Senior Discount Exchange Agent before the Senior Discount Expiration Date
or the procedure for book-entry transfer cannot be completed on a timely basis,
a tender may be effected if the Senior Discount Exchange Agent has received at
its address set forth below on or prior to the Senior Discount Expiration Date,
a letter, telegram or facsimile transmission (receipt confirmed by telephone
and an original delivered by guaranteed overnight courier) from an Eligible
Institution setting forth the name and address of the tendering holder, the
names in which the Senior Discount Old Notes are registered and, if possible,
the certificate numbers of the Senior Discount Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within
three business days after the Senior Discount Expiration Date, the Senior
Discount Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Senior Discount Old Notes into the Senior Discount Exchange
Agent's account at the book-entry transfer facility), will be delivered by such
Eligible Institution together with a properly completed and duly executed
Letter of Transmittal (and any other required documents). Unless Senior
Discount Old Notes being tendered by the above-described method are deposited
with the Senior Discount Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents), Holdings may, at its option, reject the tender.
Copies of the notice of guaranteed delivery ("Notice of Guaranteed Delivery")
which may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Senior Discount Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Discount Old Notes (or a confirmation of book-entry
transfer of such Senior Discount Old Notes into the Senior Discount Exchange
Agent's account at the book-entry transfer facility) is received by the Senior
Discount Exchange Agent, or (ii) a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) from
an Eligible Institution is received by the Senior Discount Exchange Agent.
Issuances of Senior Discount Exchange Notes in exchange for Senior Discount Old
Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram
or facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the applicable Letter of
Transmittal (and any other required documents) and the tendered Senior Discount
Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Senior Discount Old Notes tendered for exchange will
be determined by Holdings in its sole discretion, which determination shall be
final and binding. Holdings reserves the absolute right to reject any and all
tenders of any particular Senior Discount Old Notes not properly tendered or
not to accept any particular Senior Discount Old Notes which acceptance might,
in the judgment of Holdings or its counsel, be unlawful. Holdings also reserves
the absolute right to waive any defects or irregularities or conditions of the
Senior Discount Exchange Offer as to any particular Senior Discount Old Notes
either before or after the Senior Discount Expiration Date (including the right
to waive the ineligibility of any holder who seeks to tender Senior Discount
Old Notes in the Senior Discount Exchange Offer). The interpretation of the
terms and conditions of the Senior Discount Exchange Offer (including the
applicable Letter of Transmittal and the instructions thereto) by Holdings
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Senior Discount Old Notes for
exchange must be cured within such reasonable period of time as Holdings shall
determine. Neither Holdings, the Senior Discount Exchange Agent nor any other
person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Senior Discount Old Notes for
exchange, nor shall any of them incur any liability for failure to give such
notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Senior Discount Old Notes, such Senior
Discount Old Notes must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders appear on the Senior Discount Old Notes.
95
If the Letter of Transmittal or any Senior Discount Old Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by Holdings, proper evidence satisfactory to Holdings of its
authority to so act must be submitted.
By tendering, each holder will represent to Holdings that, among other
things, the Senior Discount Exchange Notes acquired pursuant to the Senior
Discount Exchange Offer are being acquired in the ordinary course of business
of the person receiving such Senior Discount Exchange Notes, whether or not
such person is the holder, that neither the holder nor any such other person
has an arrangement or understanding with any person to participate in the
distribution of such Senior Discount Exchange Notes and that neither the holder
nor any such other person is an "affiliate," as defined under Rule 405 of the
Securities Act, of Holdings, or if it is an affiliate it will comply with the
registration and prospectus requirements of the Securities Act to the extent
applicable.
Each broker-dealer that receives Senior Discount Exchange Notes for its
own account in exchange for Senior Discount Old Notes where such Senior
Discount Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities must acknowledge that it
will deliver a prospectus in connection with any resale of such Senior Discount
Exchange Notes. See "Plan of Distribution."
Terms and Conditions of the Letter of Transmittal
The Letter of Transmittal contains, among other things, the following
terms and conditions, which are part of the Senior Discount Exchange Offer.
The party tendering Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Senior Discount Old Notes to Holdings and irrevocably
constitutes and appoints the Senior Discount Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Senior Discount Old Notes to be
assigned, transferred and exchanged. The Transferor represents and warrants
that it has full power and authority to tender, exchange, assign and transfer
the Senior Discount Old Notes and to acquire Senior Discount Exchange Notes
issuable upon the exchange of such tendered Notes, and that, when the same are
accepted for exchange, Holdings will acquire good and unencumbered title to the
tendered Senior Discount Old Notes, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim. The Transferor
also warrants that it will, upon request, execute and deliver any additional
documents deemed by the Senior Discount Exchange Agent or Holdings to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Senior Discount Old Notes or transfer ownership of such Senior
Discount Old Notes on the account books maintained by a book-entry transfer
facility. The Transferor further agrees that acceptance of any tendered Senior
Discount Old Notes by Holdings and the issuance of Senior Discount Exchange
Notes in exchange therefor shall constitute performance in full by Holdings of
certain of its obligations under the Senior Discount Registration Rights
Agreement. All authority conferred by the Transferor will survive the death or
incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
The Transferor certifies that it is not an "affiliate" of Holdings within
the meaning of Rule 405 under the Securities Act and that it is acquiring the
Senior Discount Exchange Notes offered hereby in the ordinary course of such
Transferor's business and that such Transferor has no arrangement with any
person to participate in the distribution of such Senior Discount Exchange
Notes. Each holder, other than a broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a distribution of Senior Discount
Exchange Notes. Each Transferor which is a broker-dealer receiving Senior
Discount Exchange Notes for its own account must acknowledge that it will
deliver a prospectus in connection with any resale of such Senior Discount
Exchange Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Senior Discount Exchange Notes received in exchange for Senior
Discount Old Notes where such Senior Discount Old Notes were
96
acquired by such broker-dealer as a result of market-making activities or other
trading activities. Holdings will, for a period of 180 days after the Senior
Discount Expiration Date, make copies of this Prospectus available to any
broker-dealer for use in connection with any such resale.
Withdrawal Rights
Tenders of Senior Discount Old Notes may be withdrawn at any time prior to
the Senior Discount Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter
must be received by the Senior Discount Exchange Agent at the address set forth
herein prior to the Senior Discount Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having tendered the Senior
Discount Old Notes to be withdrawn (the "Depositor"), (ii) identify the Senior
Discount Old Notes to be withdrawn (including the certificate number or numbers
and principal amount of such Senior Discount Old Notes), (iii) specify the
principal amount of Senior Discount Old Notes to be withdrawn, (iv) include a
statement that such holder is withdrawing his election to have such Senior
Discount Old Notes exchanged, (v) be signed by the holder in the same manner as
the original signature on the Letter of Transmittal by which such Senior
Discount Old Notes were tendered or as otherwise described above (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee under the Senior Discount Indenture register the
transfer of such Senior Discount Old Notes into the name of the person
withdrawing the tender and (vi) specify the name in which any such Senior
Discount Old Notes are to be registered, if different from that of the
Depositor. The Senior Discount Exchange Agent will return the properly
withdrawn Senior Discount Old Notes promptly following receipt of notice of
withdrawal.
If Senior Discount Old Notes have been tendered pursuant to the procedure
for book-entry transfer, any notice of withdrawal must specify the name and
number of the account at the book-entry transfer facility to be credited with
the withdrawn Senior Discount Old Notes or otherwise comply with the book-entry
transfer facility procedure. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by Holdings and such
determination will be final and binding on all parties.
Any Senior Discount Old Notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Senior Discount Exchange
Offer. Any Senior Discount Old Notes which have been tendered for exchange but
which are not exchanged for any reason will be returned to the holder thereof
without cost to such holder (or, in the case of Senior Discount Old Notes
tendered by book-entry transfer into the Senior Discount Exchange Agent's
account at the book-entry transfer facility pursuant to the book-entry transfer
procedures described above, such Senior Discount Old Notes will be credited to
an account with such book-entry transfer facility specified by the holder) as
soon as practicable after withdrawal, rejection of tender or termination of the
Senior Discount Exchange Offer. Properly withdrawn Senior Discount Old Notes
may be retendered by following one of the procedures described under " --
Procedures for Tendering Senior Discount Old Notes" above at any time on or
prior to the Senior Discount Expiration Date.
Acceptance of Senior Discount Old Notes for Exchange; Delivery of Senior
Discount Exchange Notes
Upon satisfaction or waiver of all of the conditions to the Senior
Discount Exchange Offer, Holdings will accept, promptly on the Senior Discount
Exchange Date, all Senior Discount Old Notes properly tendered and will issue
the Senior Discount Exchange Notes promptly after such acceptance. See " --
Certain Conditions to the Senior Discount Exchange Offer" below. For purposes
of the Senior Discount Exchange Offer, Holdings shall be deemed to have
accepted properly tendered Senior Discount Old Notes for exchange when, as and
if Holdings has given oral or written notice thereof to the Senior Discount
Exchange Agent.
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For each Senior Discount Old Note accepted for exchange, the holder of
such Senior Discount Old Note will receive a Senior Discount Exchange Note
having a principal amount equal to that of the surrendered Senior Discount Old
Note.
In all cases, issuance of Senior Discount Exchange Notes for Senior
Discount Old Notes that are accepted for exchange pursuant to the Senior
Discount Exchange Offer will be made only after timely receipt by the Senior
Discount Exchange Agent of certificates for such Senior Discount Old Notes or a
timely book-entry confirmation of such Senior Discount Old Notes into the
Senior Discount Exchange Agent's account at the book-entry transfer facility, a
properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Senior Discount Old Notes are not accepted
for any reason set forth in the terms and conditions of the Senior Discount
Exchange Offer or if Senior Discount Old Notes are submitted for a greater
principal amount than the holder desires to exchange, such unaccepted or
non-exchanged Senior Discount Old Notes will be returned without expense to the
tendering holder thereof (or, in the case of Senior Discount Old Notes tendered
by book-entry transfer into the Senior Discount Exchange Agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such non-exchanged Senior Discount Old Notes will be credited
to an account maintained with such book-entry transfer facility specified by
the holder) as promptly as practicable after the expiration of the Senior
Discount Exchange Offer.
Certain Conditions to the Senior Discount Exchange Offer
Notwithstanding any other provision of the Senior Discount Exchange Offer,
or any extension of the Senior Discount Exchange Offer, Holdings shall not be
required to accept for exchange, or to issue Senior Discount Exchange Notes in
exchange for, any Senior Discount Old Notes and may terminate or amend the
Senior Discount Exchange Offer (by oral or written notice to the Senior
Discount Exchange Agent or by a timely press release) if at any time before the
acceptance of such Senior Discount Old Notes for exchange or the exchange of
the Senior Discount Exchange Notes for such Senior Discount Old Notes, any of
the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Senior Discount
Exchange Offer which, in the sole judgment of Holdings, might materially
impair the ability of Holdings to proceed with the Senior Discount Exchange
Offer or have a material adverse effect on the contemplated benefits of the
Senior Discount Exchange Offer to Holdings; or
(b) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of Holdings that, in the sole judgment of Holdings, is or may be
adverse to Holdings, or Holdings shall have become aware of facts that have
or may have adverse significance with respect to the value of the Senior
Discount Old Notes or the Senior Discount Exchange Notes or that may, in
the sole judgment of Holdings, materially impair the contemplated benefits
of the Senior Discount Exchange Offer to Holdings; or
(c) any law, rule or regulation or applicable interpretations of the
Staff of the Commission is issued or promulgated which, in the good faith
determination of Holdings, does not permit Holdings to effect the Senior
Discount Exchange Offer; or
(d) any governmental approval has not been obtained, which approval
Holdings, in its sole discretion, deem necessary for the consummation of
the Senior Discount Exchange Offer; or
(e) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law, statute, rule or
regulation) which, in the sole judgment of Holdings, might materially
impair the ability of Holdings to proceed with the Senior Discount Exchange
Offer or have a material adverse effect on the contemplated benefits of the
Senior Discount Exchange Offer to Holdings; or
(f) there shall occur a change in the current interpretation by the
Staff of the Commission which permits the Senior Discount Exchange Notes
issued pursuant to the Senior Discount Exchange
98
Offer in exchange for Senior Discount Old Notes to be offered for resale,
resold and otherwise transferred by holders thereof (other than any such
holder that is an "affiliate" of Holdings within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such
Senior Discount Exchange Notes are acquired in the ordinary course of such
holders' business and such holders have no arrangement with any person to
participate in the distribution of such Senior Discount Exchange Notes; or
(g) there shall have occurred (i) any general suspension of, shortening
of hours for, or limitation on prices for, trading in securities on any
national securities exchange or in the over-the-counter market (whether or
not mandatory), (ii) any limitation by any governmental agency or authority
which may adversely affect the ability of Holdings to complete the
transactions contemplated by the Senior Discount Exchange Offer, (iii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks by Federal or state authorities in the United States
(whether or not mandatory), (iv) a commencement of a war, armed hostilities
or other international or national crisis directly or indirectly involving
the United States, (v) any limitation (whether or not mandatory) by any
governmental authority on, or other event having a reasonable likelihood of
affecting, the extension of credit by banks or other lending institutions
in the United States, or (vi) in the case of any of the foregoing existing
at the time of the commencement of the Senior Discount Exchange Offer, a
material acceleration or worsening thereof.
Holdings expressly reserves the right to terminate the Senior Discount
Exchange Offer and not accept for exchange any Senior Discount Old Notes upon
the occurrence of any of the foregoing conditions (which represent all of the
material conditions to the acceptance by Holdings of properly tendered Senior
Discount Old Notes). In addition, Holdings may amend the Senior Discount
Exchange Offer at any time prior to the Senior Discount Expiration Date if any
of the conditions set forth above occurs. Moreover, regardless of whether any
of such conditions has occurred, Holdings may amend the Senior Discount
Exchange Offer in any manner which, in its good faith judgment, is advantageous
to holders of the Senior Discount Old Notes.
The foregoing conditions are for the sole benefit of Holdings and may be
asserted by Holdings regardless of the circumstances giving rise to any such
condition or may be waived by Holdings in whole or in part at any time and from
time to time in its sole discretion. The failure by Holdings at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. If Holdings waives or amends the
foregoing conditions, it will, if required by law, extend the Senior Discount
Exchange Offer for a minimum of five business days from the date that Holdings
first gives notice, by public announcement or otherwise, of such waiver or
amendment, if the Senior Discount Exchange Offer would otherwise expire within
such five business-day period. Any determination by Holdings concerning the
events described above will be final and binding upon all parties.
In addition, Holdings will not accept for exchange any Senior Discount Old
Notes tendered, and no Senior Discount Exchange Notes will be issued in
exchange for any such Senior Discount Old Notes, if at such time any stop order
shall be threatened or in effect with respect to the Registration Statement of
which this Prospectus constitutes a part or the qualification of the Senior
Discount Indenture under the Trust Indenture Act of 1939, as amended. In any
such event, Holdings is required to use every reasonable effort to obtain the
withdrawal of any stop order at the earliest possible time.
The Senior Discount Exchange Offer is not conditioned upon any minimum
principal amount of Senior Discount Old Notes being tendered for exchange.
Senior Discount Exchange Agent
Bank One, N.A. has been appointed as the Senior Discount Exchange Agent
for the Senior Discount Exchange Offer. All executed Letters of Transmittal
should be directed to the Senior Discount Exchange Agent at one of the
addresses set forth in the Letter of Transmittal:
99
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Senior Discount Exchange Agent at
the address and telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF TRANSMITTAL, OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE SET
FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE A VALID DELIVERY.
Solicitation of Tenders; Fees and Expenses
Holdings has not retained any dealer-manager in connection with the Senior
Discount Exchange Offer and will not make any payments to brokers, dealers or
others soliciting acceptances of the Senior Discount Exchange Offer. Holdings,
however, will pay the Senior Discount Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. Holdings will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this and other related
documents to the beneficial owners of the Senior Discount Old Notes and in
handling or forwarding tenders for their customers.
The estimated cash expenses to be incurred in connection with the Senior
Discount Exchange Offer will be paid by Holdings and are estimated in the
aggregate to be approximately $ , including fees and expenses of the
Senior Discount Exchange Agent and the Senior Discount Trustee, registration
fees, and accounting, legal, printing and related fees and expenses.
No person has been authorized to give any information or to make any
representations in connection with the Senior Discount Exchange Offer other
than those contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by
Holdings. Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of Holdings since the respective dates as of
which information is given herein. The Senior Discount Exchange Offer is not
being made to (nor will tenders be accepted from or on behalf of) holders of
Senior Discount Old Notes in any jurisdiction in which the making of the Senior
Discount Exchange Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. However, Holdings may, at its discretion,
take such action as it may deem necessary to make the Senior Discount Exchange
Offer in any such jurisdiction and extend the Senior Discount Exchange Offer to
holders of Senior Discount Old Notes in such jurisdiction. In any jurisdiction
in which the securities or "blue sky" laws require the Senior Discount Exchange
Offer to be made by a licensed broker or dealer, the Senior Discount Exchange
Offer is being made on behalf of Holdings by one or more registered brokers or
dealers which are licensed under the laws of such jurisdiction.
Transfer Taxes
Holdings will pay all transfer taxes, if any, applicable to the exchange
of Senior Discount Old Notes pursuant to the Senior Discount Exchange Offer.
If, however, certificates representing Senior Discount Exchange Notes or Senior
Discount Old Notes for principal amounts not tendered or accepted for exchange
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of the Senior Discount Old Notes tendered, or if
tendered Senior Discount Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax
is imposed for any reason other than the exchange of Senior Discount Old Notes
pursuant to the Senior Discount Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
Consequences of Failure to Exchange
Holders of Senior Discount Old Notes who do not exchange their Senior
Discount Old Notes for Senior Discount Exchange Notes pursuant to the Senior
Discount Exchange Offer will continue to be
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subject to the restrictions on transfer of such Senior Discount Old Notes as
set forth in the legend thereon. Senior Discount Old Notes not exchanged
pursuant to the Senior Discount Exchange Offer will continue to remain
outstanding in accordance with their terms. In general, the Senior Discount Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. Holdings does not
currently anticipate that they will register the Senior Discount Old Notes
under the Securities Act.
Participation in the Senior Discount Exchange Offer is voluntary, and
holders of Senior Discount Old Notes should carefully consider whether to
participate. Holders of Senior Discount Old Notes are urged to consult their
financial and tax advisors in making their own decision on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Discount Old Notes pursuant to the terms of, the Senior
Discount Exchange Offer, Holdings will have fulfilled a covenant contained in
the Senior Discount Registration Rights Agreement. Holders of Senior Discount
Old Notes who do not tender their Senior Discount Old Notes in the Senior
Discount Exchange Offer will continue to hold such Senior Discount Old Notes
and will be entitled to all the rights and limitations applicable thereto under
the Senior Discount Indenture, except for any such rights under the Senior
Discount Registration Rights Agreement that by their terms terminate or cease
to have further effectiveness as a result of the making of this Senior Discount
Exchange Offer. All untendered Senior Discount Old Notes will continue to be
subject to the restrictions on transfer set forth in the Senior Discount
Indenture. To the extent that Senior Discount Old Notes are tendered and
accepted in the Senior Discount Exchange Offer, the trading market for
untendered Senior Discount Old Notes could be adversely affected.
Holdings may in the future seek to acquire, subject to the terms of the
Senior Discount Indenture, untendered Senior Discount Old Notes in open-market
or privately-negotiated transactions, through subsequent exchange offers or
otherwise. Holdings has no present plan to acquire any Senior Discount Old
Notes which are not tendered in the Senior Discount Exchange Offer.
Resale of Senior Discount Exchange Notes
Holdings is making the Senior Discount Exchange Offer in reliance on the
position of the Staff of the Commission as set forth in certain interpretive
letters addressed to third parties in other transactions. However, Holdings has
not sought its own interpretive letter and there can be no assurance that the
Staff would make a similar determination with respect to the Senior Discount
Exchange Offer as it has in such interpretive letters to third parties. Based
on these interpretations by the Staff, Holdings believes that the Senior
Discount Exchange Notes issued pursuant to the Senior Discount Exchange Offer
in exchange for Senior Discount Old Notes may be offered for resale, resold and
otherwise transferred by a Holder (other than any Holder who is a broker-dealer
or an "affiliate" of Holdings within the meaning of Rule 405 of the Securities
Act) without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Senior Discount Exchange
Notes are acquired in the ordinary course of such Holder's business and that
such Holder is not participating, and has no arrangement or understanding with
any person to participate, in a distribution (within the meaning of the
Securities Act) of such Senior Discount Exchange Notes. However, any holder who
is an "affiliate" of Holdings or who has an arrangement or understanding with
respect to the distribution of the Senior Discount Exchange Notes to be
acquired pursuant to the Senior Discount Exchange Offer, or any broker-dealer
who purchased Senior Discount Old Notes from Holdings to resell pursuant to
Rule 144A or any other available exemption under the Securities Act (i) could
not rely on the applicable interpretations of the Staff and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act. A broker-dealer who holds Senior Discount Old Notes that were acquired for
its own account as a result of market-making or other trading activities may be
deemed to be an "underwriter" within the meaning of the Securities Act and
must, therefore, deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of Senior Discount Exchange Notes.
Each such broker-dealer that receives Senior Discount Exchange Notes for its
own account in exchange for Senior Discount Old Notes, where such Senior
Discount Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge
101
in the Letter of Transmittal that it will deliver a prospectus in connection
with any resale of such Senior Discount Exchange Notes. See "Plan of
Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Senior Discount Exchange Notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
an exemption from registration or qualification is available and is complied
with. Holdings has agreed, pursuant to the Senior Discount Registration Rights
Agreement and subject to certain specified limitations therein, to register or
qualify the Senior Discount Exchange Notes for offer or sale under the
securities or blue sky laws of such jurisdictions as any holder of the Senior
Discount Exchange Notes reasonably requests. Such registration or qualification
may require the imposition of restrictions or conditions (including suitability
requirements for offerees or purchasers) in connection with the offer or sale
of any Senior Discount Exchange Notes.
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DESCRIPTION OF THE SENIOR SUBORDINATED EXCHANGE NOTES
General
The Senior Subordinated Old Notes were issued, and the Senior Subordinated
Exchange Notes will be issued, under an Indenture, dated as of June 5, 1998
(the "Senior Subordinated Notes Indenture"), among the Company, Holdings, as
guarantor, and Bank One, N.A., as Trustee (the "Senior Subordinated Notes
Trustee"), which has been filed as an exhibit to the Registration Statment of
which this Prospectus is part.
The following summary of certain provisions of the Senior Subordinated
Notes Indenture and the Senior Subordinated Notes does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Senior Subordinated Notes Indenture, including the
definitions of certain terms therein and those terms made a part thereof by the
TIA. Capitalized terms used herein and not otherwise defined have the meanings
set forth in the section "Certain Definitions". For purposes of this
"Description of the Senior Subordinated Exchange Notes", the term Company
refers only to WESCO Distribution, Inc. and not to any of its Subsidiaries.
On June 5, 1998, the Company issued $300 million aggregate principal
amount of Senior Subordinated Old Notes under the Senior Subordinated Notes
Indenture. The terms of the Senior Subordinated Exchange Notes are identical in
all material repsects to the Senior Subordinated Old Notes, except for certain
transfer restrictions and registration and other rights relating to the
exchange of the Senior Subordinated Old Notes for Senior Subordinated Exchange
Notes. The Trustee will authenticate and deliver Senior Subordinated Exchange
Notes for original issue only in exchange for a like principal amount of Senior
Subordinated Old Notes. Any Senior Subordinated Old Notes that remain
outstanding after the consummation of the Senior Subordinated Exchange Offer,
together with the Senior Subordinated Exchange Notes, will be treated as a
single class of securities under the Senior Subordinated Notes Indenture.
Accordingly, all references herein to specified percentages in aggregate
principal amount of the outstanding Senior Subordinated Notes shall be deemed
to mean, at any time after the Senior Subordinated Exchange Offer is
consummated, such percentage in aggregate principal amount of the Senior
Subordinated Old Notes and Senior Subordinated Exchange Notes then outstanding.
The Senior Subordinated Notes Indenture provides for the issuance of up to
$200 million aggregate principal amount of additional Senior Subordinated Notes
having identical terms and conditions to the Senior Subordinated Exchange Notes
offered hereby (the "Additional Senior Subordinated Notes"), subject to
compliance with the covenants contained in the Senior Subordinated Notes
Indenture. Any Additional Senior Subordinated Notes will be part of the same
issue as the Senior Subordinated Exchange Notes offered hereby and will vote on
all matters with the Senior Subordinated Exchange Notes offered hereby.
Principal of, premium, if any, and interest on the Senior Subordinated
Notes will be payable, and the Senior Subordinated Notes may be exchanged or
transferred, at the office or agency of the Company in the Borough of
Manhattan, The City of New York (which initially shall be the corporate trust
office of the Senior Subordinated Notes Trustee in New York, New York), except
that, at the option of the Company, payment of interest may be made by check
mailed to the registered holders of the Senior Subordinated Notes at their
registered addresses.
The Senior Subordinated Notes will be issued only in fully registered
form, without coupons, in denominations of $1,000 and any integral multiple of
$1,000. No service charge will be made for any registration of transfer or
exchange of Senior Subordinated Notes, but the Company may require payment of a
sum sufficient to cover any transfer tax or other similar governmental charge
payable in connection therewith.
Terms of the Senior Subordinated Notes
The Senior Subordinated Notes will be unsecured senior subordinated
obligations of the Company and will mature on June 1, 2008. Each Senior
Subordinated Note will bear interest at a rate per annum shown on the front
cover of this Prospectus from June 5, 1998, or from the most recent date to
which interest has been paid or provided for, payable semiannually to Senior
Subordinated Noteholders of
103
record at the close of business on the May 15 or November 15 immediately
preceding the interest payment date on June 1 and December 1 of each year,
commencing December 1, 1998.
Optional Redemption
Except as set forth in the following two paragraphs, the Senior
Subordinated Notes will not be redeemable at the option of the Company prior to
June 1, 2003. Thereafter, the Senior Subordinated Notes will be redeemable at
the option of the Company, in whole or in part, on not less than 30 nor more
than 60 days' prior notice, at the following redemption prices (expressed as
percentages of principal amount), plus accrued and unpaid interest and
liquidated damages (if any) to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on June 1 of the years set forth below:
Redemption
Year Price
- - - - --------------------------------------- -------------
2003 ........................ 104.563%
2004 ........................ 103.042%
2005 ........................ 101.521%
2006 and thereafter ......... 100.000%
In addition, at any time and from time to time prior to June 1, 2001, the
Company may redeem up to a maximum of 35% of the original aggregate principal
amount of the Senior Subordinated Notes (calculated giving effect to any
issuance of Additional Senior Subordinated Notes) with the Net Cash Proceeds of
one or more Equity Offerings by (i) the Company or (ii) Holdings to the extent
the Net Cash Proceeds thereof are (a) contributed to the Company as a capital
contribution to the common equity of the Company or (b) used to purchase
Capital Stock of the Company (in either case, other than Disqualified Stock),
at a redemption price equal to 109.125% of the principal amount thereof, plus
accrued and unpaid interest and liquidated damages thereon, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that after giving effect to any such redemption, at least
65% of the original aggregate principal amount of the Senior Subordinated Notes
(calculated giving effect to any issuance of Additional Senior Subordinated
Notes) remains outstanding. Any such redemption shall be made within 120 days
of such Equity Offering upon not less than 30 nor more than 60 days' notice
mailed to each holder of Senior Subordinated Notes being redeemed and otherwise
in accordance with the procedures set forth in the Senior Subordinated Notes
Indenture.
At any time prior to June 1, 2003, the Senior Subordinated Notes may be
redeemed, in whole but not in part, at the option of the Company at any time
within 180 days after a Change of Control, at a redemption price equal to the
sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest
and liquidated damages, if any, to the redemption date (subject to the right of
Senior Subordinated Noteholders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of redemption) plus (iii) the Applicable Premium.
Selection
In the case of any partial redemption, selection of the Senior
Subordinated Notes for redemption will be made by the Senior Subordinated Notes
Trustee on a pro rata basis, by lot or by such other method as the Senior
Subordinated Notes Trustee in its sole discretion shall deem to be fair and
appropriate, although no Senior Subordinated Note of $1,000 in original
principal amount or less will be redeemed in part. If any Senior Subordinated
Note is to be redeemed in part only, the notice of redemption relating to such
Senior Subordinated Note shall state the portion of the principal amount
thereof to be redeemed. A new Senior Subordinated Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the
Senior Subordinated Noteholder thereof upon cancelation of the original Senior
Subordinated Note.
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Ranking
The indebtedness evidenced by the Senior Subordinated Notes will be
unsecured Senior Subordinated Indebtedness of the Company, will be subordinated
in right of payment, as set forth in the Senior Subordinated Notes Indenture,
to all existing and future Senior Indebtedness of the Company, will rank pari
passu in right of payment with all existing and future Senior Subordinated
Indebtedness of the Company and will be senior in right of payment to all
existing and future Subordinated Obligations of the Company. The Senior
Subordinated Notes will also be effectively subordinated to any Secured
Indebtedness of the Company and its Subsidiaries to the extent of the value of
the assets securing such Indebtedness. However, payment from the money or the
proceeds of U.S. Government Obligations held in any defeasance trust described
under "Defeasance" below is not subordinated to any Senior Indebtedness or
subject to the restrictions described herein.
Certain of the operations of the Company are conducted through its
Subsidiaries. Claims of creditors of such Subsidiaries, including trade
creditors, and claims of preferred stockholders (if any) of such Subsidiaries
generally will have priority with respect to the assets and earnings of such
Subsidiaries over the claims of creditors of the Company, including the Senior
Subordinated Noteholders. The Senior Subordinated Notes, therefore, will be
effectively subordinated to creditors (including trade creditors) and preferred
stockholders (if any) of Subsidiaries of the Company. As of March 31, 1998, on
a pro forma basis, the Company's Subsidiaries would have had no Indebtedness,
excluding Guarantees of $170.0 million of Indebtedness under the Credit
Facilities (but would have had trade payables and other liabilities Incurred in
the ordinary course of business). Although the Senior Subordinated Notes
Indenture limits the Incurrence of Indebtedness by and the issuance of
preferred stock of certain of the Company's Subsidiaries, such limitation is
subject to a number of significant qualifications.
As of March 31, 1998, on a pro forma basis, (i) the outstanding Senior
Indebtedness of the Company would have been $193.2 million, of which $170.0
million would have been Secured Indebtedness (exclusive of unused commitments
under the Credit Facilities), and (ii) the Company would have had no
outstanding Senior Subordinated Indebtedness (other than the Senior
Subordinated Notes) and no outstanding Indebtedness that is subordinate or
junior in right of repayment to the Senior Subordinated Notes. Although the
Senior Subordinated Notes Indenture contains limitations on the amount of
additional Indebtedness which the Company may Incur, under certain
circumstances the amount of such Indebtedness could be substantial and, in any
case, such Indebtedness may be Senior Indebtedness. See "Certain Covenants --
Limitation on Indebtedness".
"Senior Indebtedness" of the Company means the principal of, premium (if
any) and accrued and unpaid interest on (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization of the
Company, regardless of whether or not a claim for post-filing interest is
allowed in such proceedings), and fees and other amounts owing in respect of,
Bank Indebtedness and all other Indebtedness of the Company, whether
outstanding on the Closing Date or thereafter Incurred, unless in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding it is provided that such obligations are not superior in right of
payment to the Senior Subordinated Notes; provided, however, that Senior
Indebtedness shall not include (i) any obligation of the Company to any
Subsidiary, (ii) any liability for Federal, state, local or other taxes owed or
owing by the Company, (iii) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (iv) any Indebtedness or
obligation of the Company (and any accrued and unpaid interest in respect
thereof) that by its terms is subordinate or junior in any respect to any other
Indebtedness or obligation of the Company, including any Senior Subordinated
Indebtedness of the Company and any Subordinated Obligations of the Company,
(v) any payment obligations with respect to any Capital Stock or (vi) any
Indebtedness Incurred in violation of this Senior Subordinated Notes Indenture.
"Senior Indebtedness" of Holdings has a correlative meaning.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Senior Subordinated Notes in accordance with the provisions of
the Senior Subordinated Notes Indenture. The Senior Subordinated Notes will in
all respects rank pari passu with all other Senior Subordinated Indebtedness of
the Company. The Company has agreed in the Senior Subordinated Notes Indenture
that it
105
will not Incur, directly or indirectly, any Indebtedness which is subordinate
or junior in ranking in any respect to Senior Indebtedness unless such
Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated
in right of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness
is not deemed to be subordinate or junior to Secured Indebtedness merely
because it is unsecured.
The Company may not pay principal of, premium (if any) or interest on the
Senior Subordinated Notes, or any liquidated damages payable pursuant to the
provisions set forth in the Senior Subordinated Notes and the Senior
Subordinated Notes Exchange and Registration Rights Agreement, or make any
deposit pursuant to the provisions described under "Defeasance" below, and may
not otherwise repurchase, redeem or otherwise retire any Senior Subordinated
Notes (collectively, "pay the Senior Subordinated Notes") if (i) any Designated
Senior Indebtedness is not paid in cash or cash equivalents when due or (ii)
any other default on Designated Senior Indebtedness occurs and the maturity of
such Designated Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, (x) the default has been cured or waived and any such
acceleration has been rescinded or (y) such Designated Senior Indebtedness has
been paid in full in cash or cash equivalents. However, the Company may pay the
Senior Subordinated Notes without regard to the foregoing if the Company and
the Senior Subordinated Notes Trustee receive written notice approving such
payment from the Representative of the Designated Senior Indebtedness with
respect to which either of the events set forth in clause (i) or (ii) of the
immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or
(ii) of the second preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
the Company may not pay the Senior Subordinated Notes for a period (a "Payment
Blockage Period") commencing upon the receipt by the Senior Subordinated Notes
Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of
such default from the Representative of such Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Senior Subordinated Notes Trustee and the Company from
the Person or Persons who gave such Blockage Notice, (ii) by repayment in full
in cash or cash equivalents of such Designated Senior Indebtedness or (iii)
because the default giving rise to such Blockage Notice is no longer
continuing). Notwithstanding the provisions described in the immediately
preceding sentence (but subject to the provisions contained in the first
sentence of this paragraph), unless the holders of such Designated Senior
Indebtedness or the Representative of such holders have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume
payments on the Senior Subordinated Notes after the end of such Payment
Blockage Period. Not more than one Blockage Notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness during such period. However, if any Blockage
Notice within such 360-day period is given by or on behalf of any holders of
Designated Senior Indebtedness other than the Bank Indebtedness, the
Representative of the Bank Indebtedness may give another Blockage Notice within
such period. In no event, however, may the total number of days during which
any Payment Blockage Period or Periods is in effect exceed 179 days in the
aggregate during any 360 consecutive day period. For purposes of this
paragraph, no default or event of default that existed or was continuing on the
date of the commencement of any Payment Blockage Period with respect to the
Designated Senior Indebtedness initiating such Payment Blockage Period shall
be, or be made, the basis of the commencement of a subsequent Payment Blockage
Period by the Representative of such Designated Senior Indebtedness, whether or
not within a period of 360 consecutive days, unless such default or event of
default shall have been cured or waived for a period of not less than 90
consecutive days.
Upon any payment or distribution of the assets of the Company to creditors
upon a total or partial liquidation or a total or partial dissolution of the
Company or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property, the holders of Senior
Indebtedness of the Company will be entitled to receive payment in full in cash
or cash equivalents of such Senior Indebtedness before the Senior Subordinated
Noteholders are entitled to receive any payment of principal of, interest,
premium (if any) or liquidated damages on the Senior Subordinated Notes and
until such Senior Indebtedness is paid in full in cash or cash equivalents, any
payment or distribution to which Senior Subordinated Noteholders would be
entitled but for the subordination provisions of the
106
Senior Subordinated Notes Indenture will be made to holders of such Senior
Indebtedness as their interests may appear. If a distribution is made to Senior
Subordinated Noteholders that due to the subordination provisions of the Senior
Subordinated Notes Indenture should not have been made to them, such Senior
Subordinated Noteholders are required to hold it in trust for the holders of
Senior Indebtedness of the Company and pay it over to them as their interests
may appear.
If payment of the Senior Subordinated Notes is accelerated because of an
Event of Default, the Company or the Senior Subordinated Notes Trustee shall
promptly notify the holders of the Designated Senior Indebtedness (or their
Representative) of the acceleration. If any Designated Senior Indebtedness is
outstanding, the Company may not pay the Senior Subordinated Notes until five
Business Days after such holders or the Representative of the Designated Senior
Indebtedness receive notice of such acceleration and, thereafter, may pay the
Senior Subordinated Notes only if the subordination provisions of the Senior
Subordinated Notes Indenture otherwise permit payment at that time.
By reason of such subordination provisions contained in the Senior
Subordinated Notes Indenture, in the event of insolvency, creditors of the
Company who are holders of Senior Indebtedness of the Company may recover more,
ratably, than the Senior Subordinated Noteholders, and creditors of the Company
who are not holders of Senior Indebtedness of the Company or of Senior
Subordinated Indebtedness of the Company (including the Senior Subordinated
Notes) may recover less, ratably, than holders of Senior Indebtedness of the
Company and may recover more, ratably, than the holders of Senior Subordinated
Indebtedness of the Company.
Holdings Guarantee
Holdings, as primary obligor and not merely as surety, has irrevocably and
unconditionally Guaranteed on an unsecured senior subordinated basis the
performance and full and punctual payment when due, whether at Stated Maturity,
by acceleration or otherwise, of all obligations of the Company under the
Senior Subordinated Notes Indenture and the Senior Subordinated Notes, whether
for payment of principal of or interest on or liquidated damages in respect of
the Senior Subordinated Notes, expenses, indemnification or otherwise (all such
obligations guaranteed by Holdings being herein called the "Guaranteed
Obligations"). Holdings has agreed to pay, in addition to the amount stated
above, any and all costs and expenses (including reasonable counsel fees and
expenses) incurred by the Senior Subordinated Notes Trustee or the Senior
Subordinated Noteholders in enforcing any rights under the Holdings Guarantee.
The Holdings Guarantee will be limited in amount to an amount not to exceed the
maximum amount that can be Guaranteed by Holdings without rendering the
Holdings Guarantee, as it relates to Holdings, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
The obligations of Holdings under its Holdings Guarantee are senior
subordinated obligations. As such, the rights of Senior Subordinated
Noteholders to receive payment by Holdings pursuant to its Holdings Guarantee
will be subordinated in right of payment to the rights of holders of Senior
Indebtedness of Holdings. Investors should not rely on the Holdings Guarantee
in evaluating an investment in the Senior Subordinated Notes. The terms of the
subordination provisions described above with respect to the Company's
obligations under the Senior Subordinated Notes apply equally to Holdings and
the obligations of Holdings under its Holdings Guarantee.
Change of Control
Upon the occurrence of any of the following events (each a "Change of
Control"), unless all Senior Subordinated Notes have been called for redemption
pursuant to the provisions described above under " -- Optional Redemption,"
each Senior Subordinated Noteholder will have the right to require the Company
to repurchase all or any part of such Senior Subordinated Noteholder's Senior
Subordinated Notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest and liquidated damages, if any,
to the date of repurchase (subject to the right of Senior Subordinated
Noteholders of record on the relevant record date to receive interest due on
the relevant interest payment date):
107
(i) prior to the earlier to occur of (A) the first public offering of
common stock of Holdings or (B) the first public offering of common stock
of the Company, the Permitted Holders cease to be the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of a majority in the aggregate of the total voting power of the
Voting Stock of the Company or Holdings, whether as a result of issuance of
securities of Holdings or the Company, any merger, consolidation,
liquidation or dissolution of Holdings or the Company, any direct or
indirect transfer of securities by any Permitted Holder or otherwise (for
purposes of this clause (i) and clause (ii) below, the Permitted Holders
shall be deemed to beneficially own any Voting Stock of an entity (the
"specified entity") held by any other entity (the "parent entity") so long
as the Permitted Holders beneficially own (as so defined), directly or
indirectly, in the aggregate a majority of the voting power of the Voting
Stock of the parent entity);
(ii) on or after any such public offering referred to in clause (i), (A)
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (i) above, except that for purposes
of this clause (ii) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of the Voting Stock of the Company or Holdings and (B) the Permitted
Holders "beneficially own" (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Voting Stock of the Company or Holdings than such other person and
do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the board of directors of the
Company or Holdings, as the case may be (for the purposes of this clause
(ii), such other person shall be deemed to beneficially own any Voting
Stock of a specified corporation held by a parent corporation, if such
other person is the beneficial owner (as defined in this clause (ii)),
directly or indirectly, more than 35% of the voting power of the Voting
Stock of such parent corporation and the Permitted Holders "beneficially
own" (as defined in clause (i) above), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock of
such parent corporation and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of such parent corporation);
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors of the Company
or Holdings, as the case may be (together with any new directors whose
election by such board of directors of the Company or Holdings, as the case
may be, or whose nomination for election by the shareholders of the Company
or Holdings, as the case may be, was approved by a vote of 66 2/3% of the
directors of the Company or Holdings, as the case may be, then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the board of directors of the
Company or Holdings, as the case may be, then in office; or
(iv) the merger or consolidation of the Company or Holdings with or into
another Person or the merger of another Person with or into the Company or
Holdings, or the sale of all or substantially all the assets of the Company
or Holdings to another Person (other than a Person that is controlled by
the Permitted Holders), and, in the case of any such merger or
consolidation, the securities of the Company or Holdings that are
outstanding immediately prior to such transaction and which represent 100%
of the aggregate voting power of the Voting Stock of the Company or
Holdings are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving Person that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of the
surviving Person; provided, however, that any sale of accounts receivable
in connection with a Qualified Receivables Transaction shall not constitute
a Change of Control.
108
Within 30 days following any Change of Control, the Company shall mail a
notice to each Senior Subordinated Noteholder with a copy to the Senior
Subordinated Notes Trustee (the "Change of Control Offer") stating: (1) that a
Change of Control has occurred and that such Senior Subordinated Noteholder has
the right to require the Company to purchase such Senior Subordinated
Noteholder's Senior Subordinated Notes at a purchase price in cash equal to
101% of the principal amount thereof, plus accrued and unpaid interest and
liquidated damages, if any, to the date of repurchase (subject to the right of
Senior Subordinated Noteholders of record on the relevant record date to
receive interest on the relevant interest payment date); (2) the circumstances
and relevant facts regarding such Change of Control; (3) the repurchase date
(which shall be no earlier than 30 days nor later than 60 days from the date
such notice is mailed); and (4) the instructions determined by the Company,
consistent with this covenant, that a Senior Subordinated Noteholder must
follow in order to have its Senior Subordinated Notes purchased.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Senior Subordinated Notes Indenture applicable to a Change of
Control Offer made by the Company and purchases all Senior Subordinated Notes
validly tendered and not withdrawn under such Change of Control Offer.
The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Senior Subordinated Notes
pursuant to this covenant. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this covenant, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this paragraph by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the
limitations discussed below, the Company could, in the future, enter into
certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Senior Subordinated Notes Indenture, but that could increase the amount of
Indebtedness outstanding at such time or otherwise affect the Company's capital
structure or credit ratings. Restrictions on the ability of the Company to
incur additional Indebtedness are contained in the covenants described under
"Certain Covenants -- Limitation on Indebtedness" and "Limitation on Liens".
Such restrictions can only be waived with the consent of the holders of a
majority in principal amount of the Senior Subordinated Notes then outstanding.
Except for the limitations contained in such covenants, however, the Senior
Subordinated Notes Indenture will not contain any covenants or provisions that
may afford holders of the Senior Subordinated Notes protection in the event of
a highly leveraged transaction.
The occurrence of certain of the events which would constitute a Change of
Control would constitute a default under the Credit Agreement. Future Senior
Indebtedness of the Company may contain prohibitions of certain events which
would constitute a Change of Control or require such Senior Indebtedness to be
repurchased upon a Change of Control. Moreover, the exercise by the Senior
Subordinated Noteholders of their right to require the Company to repurchase
the Senior Subordinated Notes could cause a default under such Senior
Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to the Senior Subordinated Noteholders upon a repurchase
may be limited by the Company's then existing financial resources. There can be
no assurance that sufficient funds will be available when necessary to make any
required repurchases. The provisions under the Senior Subordinated Notes
Indenture relative to the Company's obligation to make an offer to repurchase
the Senior Subordinated Notes as a result of a Change of Control may be waived
or modified with the written consent of the holders of a majority in principal
amount of the Senior Subordinated Notes.
Certain Covenants
The Senior Subordinated Notes Indenture contains covenants including,
among others, the following:
109
Limitation on Indebtedness. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness;
provided, however, that the Company may Incur Indebtedness if on the date of
such Incurrence and after giving effect thereto the Consolidated Coverage Ratio
would be greater than 2.00:1.00.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Credit Agreement or any other
Credit Facility in an aggregate principal amount at any time outstanding
not to exceed $400 million;
(ii) Indebtedness of the Company owed to and held by any Wholly Owned
Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by
the Company or any Wholly Owned Subsidiary; provided, however, that (i) any
subsequent issuance or transfer of any Capital Stock or any other event
that results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or a Wholly Owned Subsidiary) shall be deemed, in
each case, to constitute the Incurrence of such Indebtedness by the issuer
thereof and (ii) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in cash
of all obligations with respect to the Senior Subordinated Notes;
(iii) Indebtedness (A) represented by the Senior Subordinated Notes (not
including any Additional Senior Subordinated Notes), (B) outstanding on the
Closing Date (other than the Indebtedness described in clauses (i) and (ii)
above), (C) consisting of Refinancing Indebtedness Incurred in respect of
any Indebtedness described in this clause (iii) (including Indebtedness
Refinancing Refinancing Indebtedness) or the foregoing paragraph (a) and
(D) consisting of Guarantees of any Indebtedness permitted under clauses
(i) and (ii) of this paragraph (b);
(iv) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary was
acquired by the Company (other than Indebtedness Incurred as consideration
in, or to provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related transactions
pursuant to which such Restricted Subsidiary became a Subsidiary of or was
otherwise acquired by the Company); provided, however, if the aggregate
amount of all such Indebtedness of all such Restricted Subsidiaries would
exceed $20 million, that on the date that such Restricted Subsidiary is
acquired by the Company, the Company would have been able to Incur $1.00 of
additional Indebtedness pursuant to the foregoing paragraph (a) after
giving effect to the Incurrence of such Indebtedness pursuant to this
clause (iv) and (B) Refinancing Indebtedness Incurred by a Restricted
Subsidiary in respect of Indebtedness Incurred by such Restricted
Subsidiary pursuant to this clause (iv);
(v) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by the
Company and the Restricted Subsidiaries in the ordinary course of their
business, and (B) under Hedging Obligations consisting of Interest Rate
Agreements directly related (as determined in good faith by the Company) to
Indebtedness permitted to be Incurred by the Company and its Restricted
Subsidiaries pursuant to the Senior Subordinated Notes Indenture and
Currency Agreements Incurred in the ordinary course of business;
(vi) Indebtedness Incurred by the Company or any Restricted Subsidiary
(including Capitalized Lease Obligations) financing the purchase, lease or
improvement of property (real or personal) or equipment (whether through
the direct purchase of assets or the Capital Stock of the Person owning
such assets), in each case Incurred no more than 180 days after such
purchase, lease or improvement of such property and any Refinancing
Indebtedness in respect of such Indebtedness; provided, however, that at
the time of the Incurrence of such Indebtedness and after giving effect
thereto, the aggregate principal amount of all Indebtedness incurred
pursuant to this clause (vi) and then outstanding shall not exceed the
greater of $25.0 million and 5% of Adjusted Consolidated Assets;
(vii) Indebtedness Incurred by the Company in connection with the
acquisition of a Related Business and any Refinancing Indebtedness in
respect of such Indebtedness; provided, however,
110
that the aggregate amount of Indebtedness Incurred and outstanding pursuant
to this clause (vii) shall not exceed $50.0 million at any one time;
(viii) Attributable Debt Incurred by the Company in respect of
Sale/Leaseback Transactions; provided, however, that the aggregate amount
of Attributable Debt Incurred and outstanding pursuant to this clause
(viii) shall not exceed $75.0 million at any one time;
(ix) Indebtedness arising from agreements of the Company or a Restricted
Subsidiary providing for indemnification, purchase price adjustment or
similar obligations, in each case, Incurred or assumed in connection with
the disposition of any business, assets or a Subsidiary, other than
Guarantees of Indebtedness Incurred by any Person acquiring all or any
portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; provided, however, that the maximum assumable
liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds actually received by the Company and its Restricted
Subsidiaries in connection with such disposition;
(x) any Guarantee by the Company of Indebtedness or other obligations of
any of its Restricted Subsidiaries so long as the Incurrence of such
Indebtedness Incurred by such Restricted Subsidiary is permitted under the
terms of the Senior Subordinated Notes Indenture;
(xi) Indebtedness arising from Guarantees to suppliers, lessors,
licensees, contractors, franchisees or customers Incurred in the ordinary
course of business;
(xii) Indebtedness Incurred by a Receivables Entity in a Qualified
Receivables Transaction that is not recourse to the Company or any other
Restricted Subsidiary of the Company (except for Standard Securitization
Undertakings); and
(xiii) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to the foregoing paragraph (a) or any other clause of this
paragraph (b)) in an aggregate principal amount on the date of Incurrence
that, when added to all other Indebtedness Incurred pursuant to this clause
(xiii) and then outstanding, shall not exceed $50.0 million.
(c) The Company may not Incur any Indebtedness if such Indebtedness is
subordinate or junior in ranking in any respect to any Senior Indebtedness
unless such Indebtedness is Senior Subordinated Indebtedness or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness.
(d) Notwithstanding any other provision of this covenant, the maximum
amount of Indebtedness that the Company or any Restricted Subsidiary may Incur
pursuant to this covenant shall not be deemed to be exceeded solely as a result
of fluctuations in the exchange rates of currencies. For purposes of
determining the outstanding principal amount of any particular Indebtedness
Incurred pursuant to this covenant, (i) Indebtedness permitted by this covenant
need not be permitted solely by reference to one provision permitting such
Indebtedness but may be permitted in part by one such provision and in part by
one or more other provisions of this covenant permitting such Indebtedness and
(ii) in the event that Indebtedness meets the criteria of more than one of the
types of Indebtedness described in this covenant, the Company, in its sole
discretion, shall classify or reclassify such Indebtedness and only be required
to include the amount of such Indebtedness in one of such clauses.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay
any dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Company) or similar payment to the direct or indirect holders of its
Capital Stock except dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and except dividends or distributions
payable to the Company or another Restricted Subsidiary (and, if such
Restricted Subsidiary has equity holders other than the Company or other
Restricted Subsidiaries, to its other equity holders on a pro rata basis), (ii)
purchase, redeem, retire or otherwise acquire for value any Capital Stock of
Holdings, the Company or any Restricted Subsidiary held by Persons other than
the Company or another Restricted Subsidiary, (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of
111
Subordinated Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within
one year of the date of acquisition) or (iv) make any Investment (other than a
Permitted Investment) in any Person (any such dividend, distribution, purchase,
redemption, repurchase, defeasance, other acquisition, retirement or Investment
being herein referred to as a "Restricted Payment") if at the time the Company
or such Restricted Subsidiary makes such Restricted Payment: (1) a Default will
have occurred and be continuing (or would result therefrom); (2) the Company
could not Incur at least $1.00 of additional Indebtedness under paragraph (a)
of the covenant described under "Limitation on Indebtedness"; or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
(the amount so expended, if other than in cash, to be determined in good faith
by the Board of Directors, whose determination will be conclusive and evidenced
by a resolution of the Board of Directors) declared or made subsequent to the
Closing Date would exceed the sum of: (A) 50% of the Consolidated Net Income
accrued during the period (treated as one accounting period) from the beginning
of the fiscal quarter immediately following the fiscal quarter during which the
Closing Date occurs to the end of the most recent fiscal quarter for which
internal financial statements are available prior to the date of such
Restricted Payment (or, in case such Consolidated Net Income will be a deficit,
minus 100% of such deficit); (B) the aggregate Net Cash Proceeds or fair market
value of assets or property received by the Company as a contribution to its
equity capital or from the issue or sale of its Capital Stock (in each case
other than Disqualified Stock and Excluded Contributions) subsequent to the
Closing Date (other than an issuance or sale to (x) a Subsidiary of the Company
or (y) an employee stock ownership plan or other trust established by the
Company or any of its Subsidiaries); (C) the amount by which Indebtedness or
Disqualified Stock of the Company or its Restricted Subsidiaries is reduced on
the Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Closing Date of any Indebtedness
or Disqualified Stock of the Company or its Restricted Subsidiaries issued
after the Closing Date for Capital Stock (other than Disqualified Stock) of the
Company (less the amount of any cash or the fair market value of other property
distributed by the Company or any Restricted Subsidiary upon such conversion or
exchange); and (D) the amount equal to the net reduction in Investments in any
Person (other than a Restricted Subsidiary) resulting from (i) payments of
dividends, repayments of the principal of loans or advances or other transfers
of assets to the Company or any Restricted Subsidiary from such Person, (ii)
the sale or liquidation for cash of such Investment or (iii) the redesignation
of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investment") not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by the
Company or any Restricted Subsidiary in such Unrestricted Subsidiary, which
amount was included in the calculation of the amount of Restricted Payments.
(b) The provisions of the foregoing paragraph (a) will not prohibit: (i)
any Restricted Payment made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary
of the Company or an employee stock ownership plan or other trust established
by the Company or any of its Subsidiaries); provided, however, that (A) such
Restricted Payment will be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale applied in the
manner set forth in this clause (i) will be excluded from the calculation of
amounts under clause (3)(B) of paragraph (a) above; (ii) any purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value
of Subordinated Obligations of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Indebtedness of the Company
that is permitted to be Incurred pursuant to paragraph (b) of the covenant
described under "Limitation on Indebtedness"; provided, however, that such
purchase, repurchase, redemption, defeasance or other acquisition or retirement
for value will be excluded in the calculation of the amount of Restricted
Payments; (iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by the covenant described under
"Limitation on Sales of Assets and Subsidiary Stock"; provided, however, that
such purchase or redemption will be excluded in the calculation of the amount
of Restricted Payments; (iv) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would have
complied with this covenant; provided, however, that such dividend will be
included in the calculation of the amount of Restricted Payments; (v) any
Restricted Payment made for the repurchase, redemption or other acquisition or
retirement for value of any Capital Stock
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of Holdings, the Company or any of their respective Subsidiaries held by any
employee, former employee, director or former director of Holdings, the Company
or any of their respective Subsidiaries (and any permitted transferees thereof)
pursuant to any equity subscription agreement, stock option agreement or plan
or other similar agreement; provided, however, that the aggregate amount of
such Restricted Payments shall not exceed $5.0 million in any calendar year and
$20.0 million in the aggregate; provided further, however, that such Restricted
Payments shall be included in the calculation of the amount of Restricted
Payments; (vi) payment of dividends, other distributions or other amounts by
the Company for the purposes set forth in clauses (A) through (E) below;
provided, however, that such dividend, distribution or amount shall be excluded
in the calculation of the amount of Restricted Payments: (A) to Holdings in
amounts equal to the amounts required for Holdings to pay franchise taxes and
other fees required to maintain its corporate existence and provide for other
operating costs of up to $2.0 million per calendar year; (B) to Holdings in
amounts equal to amounts required for Holdings to pay Federal, state and local
income taxes that are then actually due and owing by Holdings to the extent
such items relate to the Company and its Subsidiares; (C) to Holdings to permit
Holdings to pay financial advisory, financing, underwriting or placement fees
to Cypress and its Affiliates; (D) to Holdings to permit Holdings to pay any
employment, noncompetition, compensation or confidentiality arrangements
entered into with its employees in the ordinary course of business to the
extent such employees are primarily engaged in activities which relate to the
Company and its Subsidiaries; and (E) to Holdings to permit Holdings to pay
customary fees and indemnities to directors and officers of Holdings to the
extent such directors and officers are primarily engaged in activities which
relate to the Company and its Subsidiaries; (vii) following the initial Equity
Offering by the Company or Holdings, any payment of dividends or common stock
buybacks by the Company in an aggregate amount in any year not to exceed 6% of
the aggregate Net Cash Proceeds actually received by the Company in connection
with such initial Equity Offering and any subsequent Equity Offering by the
Company or Holdings; provided, however, that no Default or Event of Default
shall have occurred and be continuing immediately before or after any such
payment; provided further, however, that such dividends or common stock
buybacks shall be included in the calculation of the amount of Restricted
Payments; (viii) any repurchase of Capital Stock deemed to occur upon exercise
of stock options if such Capital Stock represents a portion of the exercise
price of such option; provided, however, that such repurchase shall be included
in the calculation of the amount of Restricted Payments; (ix) the payment of
any dividend or the making of any distribution to Holdings in amounts
sufficient to permit Holdings (A) to pay interest when due on the Senior
Discount Notes and (B) to make any mandatory redemptions, repurchases or
principal or accreted value payments in respect of the Senior Discount Notes;
provided, however, that such payments, dividends and distributions shall be
excluded in the calculation of the amount of Restricted Payments; (x) the
declaration and payment of dividends to holders of any class or series of
Disqualified Stock of the Company issued in accordance with the covenant
described under " -- Limitation on Indebtedness" to the extent such dividends
are included in the definition of Consolidated Interest Expense; provided,
however, that such dividends shall be included in the calculation of the amount
of Restricted Payments; (xi) Investments made with Excluded Contributions;
provided, however, that such Investments shall be excluded in the calculation
of the amount of Restricted Payments; (xii) any Restricted Payment made to fund
the Recapitalization (including fees and expenses); provided, however, that
such Restricted Payment shall be excluded in the calculation of the amount of
Restricted Payments; or (xiii) other Restricted Payments in an aggregate amount
not to exceed $10.0 million; provided, however, that such payments shall be
included in the calculation of the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company will not, and will not permit any Restricted Subsidiary to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (i)
pay dividends or make any other distributions on its Capital Stock or pay any
Indebtedness or other obligations owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company, except: (1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Closing Date; (2) any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior
to the date on which such Restricted Subsidiary was acquired by the Company
(other than Indebtedness Incurred as consideration in, in contemplation of, or
to provide
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all or any portion of the funds or credit support utilized to consummate the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was otherwise acquired by the
Company) and outstanding on such date; (3) any encumbrance or restriction
pursuant to an agreement effecting a Refinancing of Indebtedness Incurred
pursuant to an agreement referred to in clause (1) or (2) of this covenant or
this clause (3) or contained in any amendment to an agreement referred to in
clause (1) or (2) of this covenant or this clause (3); provided, however, that
the encumbrances and restrictions contained in any such Refinancing agreement
or amendment are no less favorable to the Senior Subordinated Noteholders than
the encumbrances and restrictions contained in such predecessor agreements; (4)
in the case of clause (iii), any encumbrance or restriction (A) that restricts
in a customary manner the subletting, assignment or transfer of any property or
asset that is subject to a lease, license or similar contract, (B) contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such encumbrance or restriction restricts the transfer
of the property subject to such security agreements or mortgages or (C) in
connection with purchase money obligations for property acquired in the
ordinary course of business; (5) with respect to a Restricted Subsidiary, any
restriction imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition; (6) any
encumbrance or restriction of a Receivables Entity effected in connection with
a Qualified Receivables Transaction; provided, however, that such restrictions
apply only to such Receivables Entity; and (7) any encumbrance or restriction
existing pursuant to other Indebtedness permitted to be Incurred subsequent to
the Senior Subordinated Notes Issue Date pursuant to the provisions of the
covenant described under " -- Limitations on Indebtedness"; provided, however,
that any such encumbrance or restrictions are ordinary and customary with
respect to the type of Indebtedness being Incurred (under the relevant
circumstances).
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
sole responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value (as
determined in good faith by the Company) of the shares and assets subject to
such Asset Disposition, (ii) at least 75% of the consideration thereof received
by the Company or such Restricted Subsidiary is in the form of cash or cash
equivalents (provided that the amount of (w) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Senior Subordinated
Notes) that are assumed by the transferee of any such assets without recourse
to the Company or any of the Restricted Subsidiaries, (x) any notes or other
obligations received by the Company or such Restricted Subsidiary from such
transferee that are converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received) within 180 days following the closing
of such Asset Disposition, (y) any Designated Noncash Consideration received by
the Company or any of its Restricted Subsidiaries in such Asset Disposition
having an aggregate fair market value, taken together with all other Designated
Noncash Consideration received pursuant to this clause (y) that is at that time
outstanding, not to exceed 5% of Adjusted Consolidated Assets at the time of
the receipt of such Designated Noncash Consideration (with the fair market
value of each item of Designated Noncash Consideration being measured at the
time received and without giving effect to subsequent changes in value) and (z)
any assets received in exchange for assets related to a Related Business of
comparable market value in the good faith determination of the Board of
Directors shall be deemed to be cash for purposes of this provision) and (iii)
an amount equal to 100% of the Net Available Cash from such Asset Disposition
is applied by the Company (or such Restricted Subsidiary, as the case may be)
(A) first, to the extent the Company elects (or is required by the terms of any
Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness of the
Company or Indebtedness (other than any Disqualified Stock and other than any
Preferred Stock) of a Wholly Owned Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within 365
days after the later of the date of such Asset Disposition or the receipt of
such Net Available Cash; (B) second, to the extent of the balance of Net
Available Cash after application in accordance with clause (A), to the extent
the Company or such Restricted Subsidiary elects, to reinvest in Additional
Assets (including by means of an Investment in Additional Assets by a
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Restricted Subsidiary with Net Available Cash received by the Company or
another Restricted Subsidiary) within 365 days from the later of such Asset
Disposition or the receipt of such Net Available Cash; and (C) third, to the
extent of the balance of such Net Available Cash after application in
accordance with clauses (A) and (B), to make an Offer (as defined below) to
purchase Senior Subordinated Notes pursuant to and subject to the conditions
set forth in section (b) of this covenant; provided, however, that if the
Company elects (or is required by the terms of any other Senior Subordinated
Indebtedness), such Offer may be made ratably to purchase the Senior
Subordinated Notes and other Senior Subordinated Indebtedness of the Company;
provided, however, that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (A) or (C) above, the Company or
such Restricted Subsidiary will retire such Indebtedness and will cause the
related loan commitment (if any) to be permanently reduced in an amount equal
to the principal amount so prepaid, repaid or purchased. Notwithstanding the
foregoing provisions of this covenant, the Company and the Restricted
Subsidiaries will not be required to apply any Net Available Cash in accordance
with this covenant except to the extent that the aggregate Net Available Cash
from all Asset Dispositions that is not applied in accordance with this
covenant exceeds $20.0 million.
(b) In the event of an Asset Disposition that requires the purchase of
Senior Subordinated Notes (and other Senior Subordinated Indebtedness) pursuant
to clause (a)(iii)(C) of this covenant, the Company will be required to
purchase Senior Subordinated Notes (and other Senior Subordinated Indebtedness)
tendered pursuant to an offer by the Company for the Senior Subordinated Notes
(and other Senior Subordinated Indebtedness) (the "Offer") at a purchase price
of 100% of their principal amount plus accrued and unpaid interest and
liquidated damages, if any, to the date of purchase in accordance with the
procedures (including prorating in the event of oversubscription), set forth in
the Senior Subordinated Notes Indenture. If the aggregate purchase price of
Senior Subordinated Notes (and other Senior Subordinated Indebtedness) tendered
pursuant to the Offer is less than the Net Available Cash allotted to the
purchase of the Senior Subordinated Notes (and other Senior Subordinated
Indebtedness), the Company may apply the remaining Net Available Cash for any
purpose permitted by the terms of the Senior Subordinated Notes Indenture. The
Company will not be required to make an Offer for Senior Subordinated Notes
(and other Senior Subordinated Indebtedness) pursuant to this covenant if the
Net Available Cash available therefor (after application of the proceeds as
provided in clauses (A) and (B) of this covenant section (a)(iii)) is less than
$10.0 million for any particular Asset Disposition (which lesser amount will be
carried forward for purposes of determining whether an Offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Senior Subordinated Notes
pursuant to this covenant. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this covenant, the Company will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under this covenant by virtue thereof.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not cause or permit any of its Restricted Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction") involving aggregate consideration in
excess of $5.0 million, unless (i) such Affiliate Transaction is on terms that
are not materially less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable transaction
by the Company or such Restricted Subsidiary with an unrelated Person and (ii)
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million, the
Company delivers to the Senior Subordinated Notes Trustee a resolution adopted
by the majority of the Board of Directors, approving such Affiliate Transaction
and set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i)
any Restricted Payment permitted to be paid pursuant to the covenant described
under "Limitation on Restricted Payments", (ii)
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any issuance of securities, or other payments, Guarantees, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board of
Directors, (iii) the grant of stock options or similar rights to employees and
directors of the Company pursuant to plans approved by the Board of Directors,
(iv) loans or advances to employees in the ordinary course of business in
accordance with past practices of the Company, but in any event not to exceed
$5.0 million in the aggregate outstanding at any one time, (v) the payment of
reasonable fees to directors of the Company and its Restricted Subsidiaries who
are not employees of the Company or its Subsidiaries, (vi) any transaction
between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries, (vii) any transaction effected as part of a Qualified Receivables
Transaction, (viii) any payment by the Company to Holdings to permit Holdings
to pay any Federal, state, local or other taxes that are then actually due and
owing by Holdings, (ix) indemnification agreements with, and the payment of
fees and indemnities to, directors, officers and employees of the Company and
its Restricted Subsidiaries, in each case, in the ordinary course of business,
(x) any employment, compensation, noncompetition or confidentiality agreement
entered into by the Company and its Restricted Subsidiaries with its employees
in the ordinary course of business, (xi) the payment by the Company of fees,
expenses and other amounts to Cypress and its Affiliates in connection with the
Recapitalization, (xii) payments by the Company or any of its Restricted
Subsidiaries to Cypress and its Affiliates made pursuant to any financial
advisory, financing, underwriting or placement agreement, or in respect of
other investment banking activities, in each case, as determined by the Board
of Directors in good faith, (xiii) any issuance of Capital Stock of the Company
(other than Disqualified Stock), (xiv) any agreement as in effect as of the
date of the Senior Subordinated Notes Indenture or any amendment or replacement
thereto so long as any such amendment or replacement agreement is not more
disadvantageous to the Senior Subordinated Noteholders of the Senior
Subordinated Notes in any material respect than the original agreement as in
effect on the date of the Senior Subordinated Notes Indenture and (xv)
transactions in which the Company or any of its Restricted Subsidiaries, as the
case may be, delivers to the Senior Subordinated Notes Trustee a letter from an
Independent Financial Advisor stating that such transaction is fair to the
Company or such Restricted Subsidiary from a financial point of view or meets
the requirements of clause (a) of the preceding paragraph.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company will not sell or otherwise dispose of any shares of
Capital Stock of a Restricted Subsidiary, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of
any shares of its Capital Stock except: (i) to the Company or a Wholly Owned
Subsidiary or to any director of a Restricted Subsidiary to the extent required
as director's qualifying shares; (ii) if, immediately after giving effect to
such issuance, sale or other disposition, neither the Company nor any of its
Subsidiaries own any Capital Stock of such Restricted Subsidiary or (iii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any
Investment in such Person remaining after giving effect thereto would have been
permitted to be made under the covenant described under "Limitation on
Restricted Payments" if made on the date of such issuance, sale or other
disposition. The provisions of this covenant will not prohibit any transaction
effected as part of a Qualified Receivables Transaction. The proceeds of any
sale of such Capital Stock permitted hereby will be treated as Net Available
Cash from an Asset Disposition and must be applied in accordance with the terms
of the covenant described under "Limitation on Sales of Assets and Subsidiary
Stock".
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any
Lien of any nature whatsoever that secures Senior Subordinated Indebtedness or
Subordinated Obligations on any of its property or assets (including Capital
Stock of a Restricted Subsidiary), whether owned at the Closing Date or
thereafter acquired, other than Permitted Liens, without effectively providing
that the Senior Subordinated Notes shall be secured equally and ratably with
(or on a senior basis to in the case of Subordinated Obligations) the
obligations so secured for so long as such obligations are so secured.
SEC Reports. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the SEC and provide the Senior
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Subordinated Notes Trustee and any Senior Subordinated Noteholder or
prospective Senior Subordinated Noteholder (upon the request of such Senior
Subordinated Noteholder or prospective Senior Subordinated Noteholder) with
such annual reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S.
corporation subject to such Sections, such information, documents and other
reports to be so filed and provided at the times specified for the filing of
such information, documents and reports under such Sections.
Merger and Consolidation
The Company will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company")
will be a corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and the
Successor Company (if not the Company) will expressly assume, by an indenture
supplemental hereto, executed and delivered to the Senior Subordinated Notes
Trustee, in form satisfactory to the Senior Subordinated Notes Trustee, all the
obligations of the Company under the Senior Subordinated Notes and the Senior
Subordinated Notes Indenture; (ii) immediately after giving effect to such
transaction (and treating any Indebtedness which becomes an obligation of the
Successor Company or any Restricted Subsidiary as a result of such transaction
as having been Incurred by the Successor Company or such Restricted Subsidiary
at the time of such transaction), no Default will have occurred and be
continuing; (iii) immediately after giving effect to such transaction, (A) the
Successor Company would be able to Incur an additional $1.00 of Indebtedness
under paragraph (a) of the covenant described under "Certain Covenants --
Limitation on Indebtedness" or (B) the Consolidated Coverage Ratio for the
Successor Company and its Restricted Subsidiaries would be greater than such
ratio for the Company and its Restricted Subsidiaries immediately prior to such
transaction; (iv) immediately after giving effect to such transaction, the
Successor Company will have Consolidated Net Worth in an amount which is not
less than the Consolidated Net Worth of the Company immediately prior to such
transaction; and (v) the Company will have delivered to the Senior Subordinated
Notes Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and such supplemental indenture (if
any) comply with the Senior Subordinated Notes Indenture. Notwithstanding
clause (iii) above, a Wholly Owned Subsidiary may be consolidated with or
merged into the Company and the Company may consolidate with or merge with or
into (A) another Person, if such Person is a single purpose corporation that
has not conducted any business or Incurred any Indebtedness or other
liabilities and such transaction is being consummated solely to change the
state of incorporation of the Company and (B) Holdings; provided, however,
that, in the case of clause (B), (x) Holdings shall not have owned any assets
other than the Capital Stock of the Company (and other immaterial assets
incidental to its ownership of such Capital Stock) or conducted any business
other than owning the Capital Stock of the Company, (y) Holdings shall not have
any Indebtedness or other liabilities (other than ordinary course liabilities
incidental to its ownership of the Capital Stock of the Company) and (z)
immediately after giving effect to such consolidation or merger, the Successor
Company shall have a pro forma Consolidated Coverage Ratio that is not less
than the Consolidated Coverage Ratio of the Company immediately prior to such
consolidation or merger.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Senior Subordinated
Notes Indenture, but the predecessor Company in the case of a conveyance,
transfer or lease of all or substantially all its assets will not be released
from the obligation to pay the principal of and interest on the Senior
Subordinated Notes.
Defaults
An Event of Default is defined in the Senior Subordinated Notes Indenture
as (i) a default in any payment of interest on any Senior Subordinated Note
when due and payable, whether or not prohibited by the provisions described
under "Ranking", continued for 30 days, (ii) a default in the payment of
principal of any Senior Subordinated Note when due and payable at its Stated
Maturity, upon required redemption or repurchase, upon declaration or
otherwise, whether or not such payment is prohibited by the provisions
described under "Ranking", (iii) the failure by the Company to comply with its
obligations under the covenant described under "Merger and Consolidation", (iv)
the failure by the Company
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to comply for 30 days after notice with any of its obligations under the
covenants described under "Change of Control" or "Certain Covenants" (in each
case, other than a failure to purchase Senior Subordinated Notes), (v) the
failure by the Company to comply for 60 days after notice with its other
agreements contained in the Senior Subordinated Notes or the Senior
Subordinated Notes Indenture, (vi) the failure by the Company or any
Significant Subsidiary to pay any Indebtedness within any applicable grace
period after final maturity or the acceleration of any such Indebtedness by the
holders thereof because of a default if the total amount of such Indebtedness
unpaid or accelerated exceeds $25 million or its foreign currency equivalent
(the "cross acceleration provision") and such failure continues for 10 days
after receipt of the notice specified in the Senior Subordinated Notes
Indenture, (vii) certain events of bankruptcy, insolvency or reorganization of
the Company or a Significant Subsidiary (the "bankruptcy provisions") or (viii)
the rendering of any judgment or decree for the payment of money in excess of
$25 million or its foreign currency equivalent against the Company or a
Significant Subsidiary if (A) an enforcement proceeding thereon is commenced by
any creditor or (B) such judgment or decree remains outstanding for a period of
60 days following such judgment and is not discharged, waived or stayed within
10 days after notice (the "judgment default provision").
The foregoing will constitute Events of Default whatever the reason for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.
However, a default under clauses (iv), (v), (vi) or (viii) will not
constitute an Event of Default until the Senior Subordinated Notes Trustee or
the Senior Subordinated Noteholders of at least 25% in principal amount of the
outstanding Senior Subordinated Notes notify the Company of the default and the
Company does not cure such default within the time specified in clauses (iv),
(v), (vi) or (viii) hereof after receipt of such notice.
If an Event of Default (other than an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Company) occurs and
is continuing, the Senior Subordinated Notes Trustee or the Senior Subordinated
Noteholders of at least 25% in principal amount of the outstanding Senior
Subordinated Notes by notice to the Company may declare the principal of and
accrued but unpaid interest on all the Senior Subordinated Notes to be due and
payable. Upon such a declaration, such principal and interest will be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs, the principal
of and interest on all the Senior Subordinated Notes will become immediately
due and payable without any declaration or other act on the part of the Senior
Subordinated Notes Trustee or any Senior Subordinated Noteholders. Under
certain circumstances, the Senior Subordinated Noteholders of a majority in
principal amount of the outstanding Senior Subordinated Notes may rescind any
such acceleration with respect to the Senior Subordinated Notes and its
consequences.
Subject to the provisions of the Senior Subordinated Notes Indenture
relating to the duties of the Senior Subordinated Notes Trustee, in case an
Event of Default occurs and is continuing, the Senior Subordinated Notes
Trustee will be under no obligation to exercise any of the rights or powers
under the Senior Subordinated Notes Indenture at the request or direction of
any of the Senior Subordinated Noteholders unless such Senior Subordinated
Noteholders have offered to the Senior Subordinated Notes Trustee reasonable
indemnity or security against any loss, liability or expense. Except to enforce
the right to receive payment of principal, premium (if any) or interest when
due, no Senior Subordinated Noteholder may pursue any remedy with respect to
the Senior Subordinated Notes Indenture or the Senior Subordinated Notes unless
(i) such Senior Subordinated Noteholder has previously given the Senior
Subordinated Notes Trustee notice that an Event of Default is continuing, (ii)
Senior Subordinated Noteholders of at least 25% in principal amount of the
outstanding Senior Subordinated Notes have requested the Senior Subordinated
Notes Trustee in writing to pursue the remedy, (iii) such Senior Subordinated
Noteholders have offered the Senior Subordinated Notes Trustee reasonable
security or indemnity against any loss, liability or expense, (iv) the Senior
Subordinated Notes Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity and (v)
the Senior Subordinated Noteholders of a majority in principal amount of the
outstanding Senior Subordinated Notes have not given the Senior Subordinated
Notes Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Senior
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Subordinated Noteholders of a majority in principal amount of the outstanding
Senior Subordinated Notes are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Senior
Subordinated Notes Trustee or of exercising any trust or power conferred on the
Senior Subordinated Notes Trustee. The Senior Subordinated Notes Trustee,
however, may refuse to follow any direction that conflicts with law or the
Senior Subordinated Notes Indenture or that the Senior Subordinated Notes
Trustee determines is unduly prejudicial to the rights of any other Senior
Subordinated Noteholder or that would involve the Senior Subordinated Notes
Trustee in personal liability. Prior to taking any action under the Senior
Subordinated Notes Indenture, the Senior Subordinated Notes Trustee will be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
The Senior Subordinated Notes Indenture provides that if a Default occurs
and is continuing and is known to the Senior Subordinated Notes Trustee, the
Senior Subordinated Notes Trustee must mail to each Senior Subordinated
Noteholder notice of the Default within the earlier of 90 days after it occurs
or 30 days after it is known to a Trust Officer or written notice of it is
received by the Senior Subordinated Notes Trustee. Except in the case of a
Default in the payment of principal of, premium (if any) or interest on any
Senior Subordinated Note (including payments pursuant to the redemption
provisions of such Senior Subordinated Note), the Senior Subordinated Notes
Trustee may withhold notice if and so long as a committee of its Trust Officers
in good faith determines that withholding notice is in the interests of the
Senior Subordinated Noteholders. In addition, the Company is required to
deliver to the Senior Subordinated Notes Trustee, within 120 days after the end
of each fiscal year, a certificate indicating whether the signers thereof know
of any Default that occurred during the previous year. The Company also is
required to deliver to the Senior Subordinated Notes Trustee, within 30 days
after the occurrence thereof, written notice of any event which would
constitute certain Events of Default, their status and what action the Company
is taking or proposes to take in respect thereof.
Amendments and Waivers
Subject to certain exceptions, the Senior Subordinated Notes Indenture or
the Senior Subordinated Notes may be amended with the written consent of the
Senior Subordinated Noteholders of a majority in principal amount of the Senior
Subordinated Notes then outstanding and any past default or compliance with any
provisions may be waived with the consent of the Senior Subordinated
Noteholders of a majority in principal amount of the Senior Subordinated Notes
then outstanding. However, without the consent of each Senior Subordinated
Noteholder of an outstanding Senior Subordinated Note affected, no amendment
may, among other things, (i) reduce the amount of Senior Subordinated Notes
whose Senior Subordinated Noteholders must consent to an amendment, (ii) reduce
the rate of or extend the time for payment of interest or any liquidated
damages on any Senior Subordinated Note, (iii) reduce the principal of or
extend the Stated Maturity of any Senior Subordinated Note, (iv) reduce the
premium payable upon the redemption of any Senior Subordinated Note or change
the time at which any Senior Subordinated Note may be redeemed as described
under "Optional Redemption", (v) make any Senior Subordinated Note payable in
money other than that stated in the Senior Subordinated Note, (vi) make any
change to the subordination provisions of the Senior Subordinated Notes
Indenture that adversely affects the rights of any Senior Subordinated
Noteholder, (vii) impair the right of any Senior Subordinated Noteholder to
receive payment of principal of and interest or any liquidated damages on such
Senior Subordinated Noteholder's Senior Subordinated Notes on or after the due
dates therefor or to institute suit for the enforcement of any payment on or
with respect to such Senior Subordinated Noteholder's Senior Subordinated Notes
or (viii) make any change in the amendment provisions which require each Senior
Subordinated Noteholder's consent or in the waiver provisions.
Without the consent of any Senior Subordinated Noteholder, the Company,
Holdings and the Senior Subordinated Notes Trustee may amend the Senior
Subordinated Notes Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Senior Subordinated Notes Indenture, to
provide for uncertificated Senior Subordinated Notes in addition to or in place
of certificated Senior Subordinated Notes (provided that the uncertificated
Senior Subordinated Notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Senior
Subordinated Notes are
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described in Section 163(f)(2)(B) of the Code), to make any change in the
subordination provisions of the Senior Subordinated Notes Indenture that would
limit or terminate the benefits available to any holder of Senior Indebtedness
of the Company (or any representative thereof) under such subordination
provisions, to add additional Guarantees with respect to the Senior
Subordinated Notes, to secure the Senior Subordinated Notes, to add to the
covenants of the Company for the benefit of the Senior Subordinated Noteholders
or to surrender any right or power conferred upon the Company, to make any
change that does not adversely affect the rights of any Senior Subordinated
Noteholder, subject to the provisions of the Senior Subordinated Notes
Indenture, to provide for the issuance of the Senior Subordinated Exchange
Notes or Additional Senior Subordinated Notes or to comply with any requirement
of the SEC in connection with the qualification of the Senior Subordinated
Notes Indenture under the TIA. However, no amendment may be made to the
subordination provisions of the Senior Subordinated Notes Indenture that
adversely affects the rights of any holder of Senior Indebtedness of the
Company then outstanding unless the holders of such Senior Indebtedness (or any
group or representative thereof authorized to give a consent) consent to such
change.
The consent of the Senior Subordinated Noteholders is not necessary under
the Senior Subordinated Notes Indenture to approve the particular form of any
proposed amendment. It is sufficient if such consent approves the substance of
the proposed amendment.
After an amendment under the Senior Subordinated Notes Indenture becomes
effective, the Company is required to mail to Senior Subordinated Noteholders a
notice briefly describing such amendment. However, the failure to give such
notice to all Senior Subordinated Noteholders, or any defect therein, will not
impair or affect the validity of the amendment.
Transfer and Exchange
A Senior Subordinated Noteholder may transfer or exchange Senior
Subordinated Notes in accordance with the Senior Subordinated Notes Indenture.
Upon any transfer or exchange, the registrar and the Senior Subordinated Notes
Trustee may require a Senior Subordinated Noteholder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Senior Subordinated Noteholder to pay any taxes required by law or
permitted by the Senior Subordinated Notes Indenture. The Company is not
required to transfer or exchange any Senior Subordinated Note selected for
redemption or to transfer or exchange any Senior Subordinated Note for a period
of 15 days prior to a selection of Senior Subordinated Notes to be redeemed.
The Senior Subordinated Notes will be issued in registered form and the
registered holder of a Senior Subordinated Note will be treated as the owner of
such Senior Subordinated Note for all purposes.
Defeasance
The Company at any time may terminate all its obligations under the Senior
Subordinated Notes and the Senior Subordinated Notes Indenture ("legal
defeasance"), except for certain obligations, including those respecting the
defeasance trust and obligations to register the transfer or exchange of the
Senior Subordinated Notes, to replace mutilated, destroyed, lost or stolen
Senior Subordinated Notes and to maintain a registrar and paying agent in
respect of the Senior Subordinated Notes. The Company at any time may terminate
its obligations under the covenants described under "Certain Covenants", the
operation of the cross acceleration provision, the bankruptcy provisions with
respect to Significant Subsidiaries and the judgment default provision
described under "Defaults" and the limitations contained in clauses (iii) and
(iv) under the first paragraph of "Merger and Consolidation" ("covenant
defeasance"). In the event that the Company exercises its legal defeasance
option or its covenant defeasance option, Holdings will be released from all of
its obligations with respect to its Holdings Guarantee.
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Senior Subordinated Notes may not be
accelerated because of an Event of Default with respect thereto. If the Company
exercises its covenant defeasance option, payment of the Senior Subordinated
Notes may not be accelerated because of an Event of Default specified in clause
(iv), (vi), (vii) (with respect
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only to Significant Subsidiaries) or (viii)(with respect only to Significant
Subsidiaries) under "Defaults" or because of the failure of the Company to
comply with clause (iii) or (iv) under the first paragraph of "Merger and
Consolidation."
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the "defeasance trust") with the Senior
Subordinated Notes Trustee money or U.S. Government Obligations for the payment
of principal, premium (if any) and interest on the Senior Subordinated Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Senior Subordinated Notes Trustee of an
Opinion of Counsel to the effect that holders of the Senior Subordinated Notes
will not recognize income, gain or loss for Federal income tax purposes as a
result of such deposit and defeasance and will be subject to Federal income tax
on the same amounts and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred (and, in the case
of legal defeasance only, such Opinion of Counsel must be based on a ruling of
the Internal Revenue Service or other change in applicable Federal income tax
law).
Concerning the Senior Subordinated Notes Trustee
Bank One, N.A. is the Senior Subordinated Notes Trustee under the Senior
Subordinated Notes Indenture and has been appointed by the Company as Registrar
and Paying Agent with regard to the Senior Subordinated Notes.
Governing Law
The Senior Subordinated Notes Indenture provides that it and the Senior
Subordinated Notes will be governed by, and construed in accordance with, the
laws of the State of New York without giving effect to applicable principles of
conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
Certain Definitions
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; provided, however, that any such Restricted Subsidiary
described in clauses (ii) or (iii) above is primarily engaged in a Related
Business.
"Adjusted Consolidated Assets" means at any time the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), after deducting
therefrom all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items), all as set forth on the
Consolidated balance sheet of the Company and its Restricted Subsidiaries as of
the end of the most recent fiscal quarter for which financial statements are
available prior to the date of determination.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Premium" means, with respect to a Senior Subordinated Note at
any redemption date, the greater of (i) 1.0% of the principal amount of such
Senior Subordinated Note and (ii) the excess of (A) the present value at such
time of (1) the redemption price of such Senior Subordinated Note at June 1,
2003 (such redemption price being set forth in the table set forth under " --
Optional Redemption") plus (2) all required interest payments due on such
Senior Subordinated Note through June 1, 2003 (excluding accrued but unpaid
interest), computed using a discount rate equal to the Treasury Rate plus 50
basis points, over (B) the then-outstanding principal amount of such Senior
Subordinated Note.
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"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by the Company
or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation, or similar transaction (each referred to for the purposes of
this definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary), (ii) all or substantially all the assets of any
division or line of business of the Company or any Restricted Subsidiary or
(iii) any other assets of the Company or any Restricted Subsidiary outside the
ordinary course of business of the Company or such Restricted Subsidiary (other
than, in the case of (i), (ii) and (iii) above, (A) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (B) for purposes of the provisions
described under "Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock" only, a disposition subject to the covenant described under
"Certain Covenants -- Limitation on Restricted Payments", (C) a disposition of
assets with a fair market value of less than $1,000,000, (D) a sale of accounts
receivables and related assets of the type specified in the definition of
"Qualified Receivables Transaction" to a Receivables Entity in a Qualified
Receivables Transaction, (E) a transfer of accounts receivables and related
assets of the type specified in the definition of "Qualified Receivables
Transaction" (or a fractional undivided interest therein) by a Receivables
Entity in a Qualified Receivables Transaction, (F) the disposition of all or
substantially all of the assets of the Company in a manner permitted pursuant
to the provisions described above under "Merger and Consolidation" or any
disposition that constitutes a Change of Control pursuant to the Senior
Subordinated Notes Indenture, (G) any exchange of like property pursuant to
Section 1031 of the Internal Revenue Code of 1986, as amended, for use in a
Related Business, and (H) any sale of Capital Stock in, or Indebtedness or
other securities of, an Unrestricted Subsidiary).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as
at the time of determination, the present value (discounted at the interest
rate borne by the Senior Subordinated Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect
of the Credit Agreement and any Refinancing Indebtedness with respect thereto,
as amended from time to time, including principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined
in accordance with GAAP; and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be prepaid by the lessee without payment
of a penalty.
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"Closing Date" means the date of the Senior Subordinated Notes Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which internal financial statements are
available prior to the date of such determination to (ii) Consolidated Interest
Expense for such four fiscal quarters; provided, however, that (A) if the
Company or any Restricted Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding on such date of determination
or if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period (except that, in making such computation, the amount of Indebtedness
under any revolving credit facility outstanding on the date of such calculation
shall be computed based on (1) the average daily balance of such Indebtedness
(and any Indebtedness under a revolving credit facility replaced by such
Indebtedness) during such four fiscal quarters or such shorter period when such
facility and any replaced facility was outstanding or (2) if such facility was
created after the end of such four fiscal quarters, the average daily balance
of such Indebtedness (and any Indebtedness under a revolving credit facility
replaced by such Indebtedness) during the period from the date of creation of
such facility to the date of the calculation), (B) if the Company or any
Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged
any Indebtedness since the beginning of such period or if any Indebtedness is
to be repaid, repurchased, defeased or otherwise discharged (in each case other
than Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the date
of the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall
be calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as if the Company or such Restricted Subsidiary
has not earned the interest income actually earned during such period in
respect of cash or Temporary Cash Investments used to repay, repurchase,
defease or otherwise discharge such Indebtedness, (C) if since the beginning of
such period the Company or any Restricted Subsidiary shall have made any Asset
Disposition, the EBITDA for such period shall be reduced by an amount equal to
the EBITDA (if positive) directly attributable to the assets that are the
subject of such Asset Disposition for such period or increased by an amount
equal to the EBITDA (if negative) directly attributable thereto for such period
and Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (D) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
and (E) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made any
Asset Disposition or any Investment or acquisition of assets that would have
required an adjustment pursuant to clause (C) or (D) above if made by the
Company or a Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition of
assets occurred on the first day of such period. For purposes of this
definition, whenever pro forma
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effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Indebtedness Incurred in connection therewith, the pro
forma calculations shall be determined in good faith by a responsible financial
or accounting Officer of the Company, and such pro forma calculations shall
include (A)(x) the savings in cost of goods sold that would have resulted from
using the Company's actual costs for comparable goods and services during the
comparable period and (y) other savings in cost of goods sold or eliminations
of selling, general and administrative expenses as determined by a responsible
financial or accounting Officer of the Company in good faith in connection with
the Company's consideration of such acquisition and consistent with the
Company's experience in acquisitions of similar assets, less (B) the
incremental expenses that would be included in cost of goods sold and selling,
general and administrative expenses that would have been incurred by the
Company in the operation of such acquired assets during such period. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for
the entire period (taking into account any Interest Rate Agreement applicable
to such Indebtedness if such Interest Rate Agreement has a remaining term as at
the date of determination in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense (net of interest income) of the Company and its Consolidated Restricted
Subsidiaries, plus, to the extent Incurred by the Company and its Restricted
Subsidiaries in such period but not included in such interest expense, (i)
interest expense attributable to Capitalized Lease Obligations and the interest
expense attributable to leases constituting part of a Sale/Leaseback
Transaction, (ii) amortization of debt discount, (iii) capitalized interest,
(iv) non-cash interest expense, (v) commissions, discounts and other fees and
charges attributable to letters of credit and bankers' acceptance financing,
(vi) interest accruing on any Indebtedness of any other Person to the extent
such Indebtedness is Guaranteed by the Company or any Restricted Subsidiary,
(vii) net costs associated with Hedging Obligations (including amortization of
fees), (viii) dividends in respect of all Preferred Stock of the Company and
any of the Restricted Subsidiaries of the Company (other than pay in kind
dividends and accretions to liquidation value) to the extent held by Persons
other than the Company or a Wholly Owned Subsidiary, (ix) interest Incurred in
connection with investments in discontinued operations and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or
fees to any Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust, less, to the extent included in such total
interest expense, the amortization during such period of capitalized financing
costs. Notwithstanding anything to the contrary contained herein, interest
expense, commissions, discounts, yield and other fees and charges Incurred in
connection with any Qualified Receivables Transaction pursuant to which the
Company or any Subsidiary may sell, convey or otherwise transfer or grant a
security interest in any accounts receivable or related assets of the type
specified in the definition of "Qualified Receivables Transaction" shall not be
included in Consolidated Interest Expense; provided that any interest expense,
commissions, discounts, yield and other fees and charges Incurred in connection
with any receivables financing or securitization that does not constitute a
Qualified Receivables Transaction shall be included in Consolidated Interest
Expense.
"Consolidated Net Income" means, for any period, the net income of the
Company and its Consolidated Subsidiaries for such period; provided, however,
that there shall not be included in such Consolidated Net Income: (i) any net
income of any Person (other than the Company) if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations contained in
clause (iv) below, the Company's equity in the net income of any such Person
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such period
to the Company or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution made to a Restricted
Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income; (ii) any net income (or
loss) of any person acquired by the Company or a Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition;
(iii) any net income (or loss) of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the payment
of dividends or the making of
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distributions by such Restricted Subsidiary, directly or indirectly, to the
Company, except that (A) subject to the limitations contained in clause (iv)
below, the Company's equity in the net income of any such Restricted Subsidiary
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash which could have been distributed by such Restricted
Subsidiary during such period to the Company or another Restricted Subsidiary
as a dividend or other distribution (subject, in the case of a dividend or
other distribution made to another Restricted Subsidiary, to the limitation
contained in this clause) and (B) the Company's equity in a net loss of any
such Restricted Subsidiary for such period shall be included in determining
such Consolidated Net Income; (iv) any gain (or loss) realized upon the sale or
other disposition of any asset of the Company or its Consolidated Subsidiaries
(including pursuant to any Sale/Leaseback Transaction) that is not sold or
otherwise disposed of in the ordinary course of business and any gain (or loss)
realized upon the sale or other disposition of any Capital Stock of any Person;
(v) any extraordinary gain or loss; (vi) the cumulative effect of a change in
accounting principles; and (vii) any expenses or charges paid to third parties
related to any Equity Offering, Permitted Investment, acquisition,
recapitalization or Indebtedness permitted to be Incurred by the Senior
Subordinated Notes Indenture (whether or not successful) (including such fees,
expenses, or charges related to the Recapitalization). Notwithstanding the
foregoing, for the purpose of the covenant described under "Certain Covenants
- - - - -- Limitation on Restricted Payments" only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or other
transfers of assets from Unrestricted Subsidiaries to the Company or a
Restricted Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted under such covenant
pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company for which internal financial statements are available, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii)
any retained earnings or earned surplus less (A) any accumulated deficit and
(B) any amounts attributable to Disqualified Stock.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Agreement" means the credit agreement to be dated as of the
Closing Date, as amended, waived or otherwise modified from time to time, among
Holdings, the Company, WESCO Distribution -- Canada, Inc., certain financial
institutions to be party thereto, The Chase Manhattan Bank, as U.S.
administrative agent, syndication agent and U.S. collateral agent, The Chase
Manhattan Bank of Canada, as Canadian administrative agent and Canadian
collateral agent, and Lehman Commercial Paper Inc., as documentation agent.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities, or commercial paper facilities with banks or other institutional
lenders or indentures providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against receivables), letters of credit or other long-term Indebtedness, in
each case, as amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time.
"Currency Agreement" means with respect to any Person any foreign exchange
contract, currency swap agreement or other similar agreement or arrangement to
which such Person is a party or of which it is a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Noncash Consideration" means the fair market value of noncash
consideration received by the Company or any of its Restricted Subsidiaries in
connection with an Asset Disposition that is so
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designated as Designated Noncash Consideration pursuant to an Officers'
Certificate, setting forth the basis of such valuation, less the amount of cash
or cash equivalents received in connection with a subsequent sale of such
Designated Noncash Consideration.
"Designated Senior Indebtedness" of the Company means (i) the Bank
Indebtedness and (ii) any other Senior Indebtedness of the Company that, at the
date of determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are committed to
lend up to at least $25.0 million and is specifically designated by the Company
in the instrument evidencing or governing such Senior Indebtedness as
"Designated Senior Indebtedness" for purposes of the Senior Subordinated Notes
Indenture. "Designated Senior Indebtedness" of Holdings has a correlative
meaning.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to the 91st day
following the Stated Maturity of the Senior Subordinated Notes; provided,
however, that any Capital Stock that would not constitute Disqualified Stock
but for provisions thereof giving holders thereof the right to require such
Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the first anniversary of
the Stated Maturity of the Securities shall not constitute Disqualified Stock
if the "asset sale" or "change of control" provisions applicable to such
Capital Stock are not more favorable to the holders of such Capital Stock than
the provisions of the covenants described under "Change of Control" and
"Certain Covenants -- Limitation on Sale of Assets and Subsidiary Stock."
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) income tax expense of the Company and its Consolidated Restricted
Subsidiaries, (ii) Consolidated Interest Expense, (iii) depreciation expense of
the Company and its Consolidated Restricted Subsidiaries, (iv) amortization
expense of the Company and its Consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid cash item that was paid in a
prior period), (v) all other non-cash charges of the Company and its
Consolidated Restricted Subsidiaries (excluding any such non-cash charge to the
extent it represents an accrual of or reserve for cash expenditures in any
future period) in each case for such period and (vi) income attributable to
discontinued operations. Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation and amortization and
non-cash charges of, a Restricted Subsidiary of the Company shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to such Restricted Subsidiary or its stockholders.
"Equity Offering" means a private sale or public offering of Capital Stock
(other than Disqualified Stock) of the Company or Holdings.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Contribution" means the Net Cash Proceeds received by the
Company from (a) contributions to its common equity capital and (b) the sale
(other than to a Subsidiary or to any Company or Subsidiary management equity
plan or stock option plan or any other management or employee benefit plan or
agreement) of Capital Stock (other than Disqualified Stock) of the Company, in
each case designated as Excluded Contributions pursuant to an Officers'
Certificate executed by the principal executive officer and the principal
financial officer of the Company on the date such capital contributions are
made or the date such Capital Stock is sold.
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"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in
(i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
All ratios and computations based on GAAP contained in the Senior Subordinated
Notes Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning. The term
"Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holdings Guarantee" means the Guarantee of the obligations with respect
to the Senior Subordinated Notes issued by Holdings pursuant to the terms of
the Senior Subordinated Notes Indenture. Such Holdings Guarantee will have
subordination provisions equivalent to those contained in the Senior
Subordinated Notes Indenture and will be substantially in the form prescribed
in the Senior Subordinated Notes Indenture.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Person at the time it becomes a Subsidiary. The term "Incurrence" when used as
a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money; (ii) the
principal of and premium (if any) in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto) (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in clauses (i), (ii), (iv) and (v) hereof) to the
extent such letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than the 30th day following payment
on the letter of credit so long as such letter of credit is entered into in the
ordinary course of business ); (iv) all obligations of such Person to pay the
deferred and unpaid purchase price of property or services (except Trade
Payables), which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services; (v) all Capitalized Lease Obligations and all
Attributable Debt of such Person; (vi) the amount of all obligations of such
Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of such Person, any
Preferred Stock (but excluding, in each case, any accrued dividends); (vii) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; provided, however,
that the amount of Indebtedness of such Person shall be the lesser of (A) the
fair market value of such
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asset at such date of determination and (B) the amount of such Indebtedness of
such other Persons; (viii) to the extent not otherwise included in this
definition, Hedging Obligations of such Person; and (ix) all obligations of the
type referred to in clauses (i) through (viii) of other Persons and all
dividends of other Persons for the payment of which, in either case, such
Person is responsible or liable, directly or indirectly, as obligor, guarantor
or otherwise, including by means of any Guarantee. The amount of Indebtedness
of any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability, upon
the occurrence of the contingency giving rise to the obligation, of any
contingent obligations at such date; provided, however, that the amount
outstanding at any time of any Indebtedness Incurred with original issue
discount is the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP. Any "Qualified Receivables Transaction",
whether or not such transfer constitutes a sale for the purposes of GAAP, shall
not constitute Indebtedness hereunder; provided that any receivables financing
or securitization that does not constitute a Qualified Receivables Transaction
and does not qualify as a sale under GAAP shall constitute Indebtedness
hereunder.
"Independent Financial Advisor" means an accounting, appraisal, investment
banking firm or consultant of nationally recognized standing that is, in the
good faith determination of the Company, qualified to perform the task for
which it has been engaged.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and the covenant described under "Certain Covenants
- - - - -- Limitation on Restricted Payments", (i) "Investment" shall include the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of any Subsidiary of the Company at the
time that such Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received (including (a) any cash payments received upon the sale or other
disposition of any Designated Noncash Consideration received in any Asset
Disposition, (b) any cash proceeds received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and (c) any
cash proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to the properties or assets that are
the subject of such Asset Disposition or received in any other non-cash form)
therefrom, in each case net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred (including, without
limitation, all broker's and finder's fees and expenses, all investment banking
fees and expenses, employee severance and termination costs, and trade payable
and similar liabilities solely related to the assets
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sold or otherwise disposed of and required to be paid by the seller as a result
thereof), and all Federal, state, provincial, foreign and local taxes required
to be paid or accrued as a liability under GAAP, as a consequence of such Asset
Disposition, (ii) all relocation expenses incurred as a result thereof, (iii)
all payments made on any Indebtedness which is secured by any assets subject to
such Asset Disposition, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must by
its terms, or in order to obtain a necessary consent to such Asset Disposition,
or by applicable law be repaid out of the proceeds from such Asset Disposition,
(iv) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (v) appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
property or other assets disposed of in such Asset Disposition and retained by
the Company or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the Chairman of the Board, the Chief Executive Officer,
the Chief Financial Officer, the President, any Vice President, the Treasurer,
any Assistant Treasurer, the Secretary or any Assistant Secretary of the
Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Senior Subordinated Notes Trustee. The counsel may be an
employee of or counsel to the Company or the Senior Subordinated Notes Trustee.
"Permitted Holders" means: (i) The Cypress Group L.L.C., Cypress Merchant
Banking Partners L.P., Cypress Offshore Partners L.P., Chase Equity Associates,
L.P., Co-Investment Partners, L.P. and any Person who on the Senior
Subordinated Notes Issue Date is an Affiliate of any of the foregoing; (ii) any
Person who is a member of the senior management of the Company or Holdings and
a stockholder of Holdings on the Senior Subordinated Notes Issue Date; and
(iii) any Person acting in the capacity of an underwriter in connection with a
public or private offering of the Company's or Holdings' Capital Stock.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) the Company, a Restricted Subsidiary or a Person
that will, upon the making of such Investment, become a Restricted Subsidiary;
(ii) another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary; (iii)
Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such concessionary trade
terms as the Company or any such Restricted Subsidiary deems reasonable under
the circumstances; (v) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course of
business; (vi) loans or advances to employees made in the ordinary course of
business consistent with past practices of the Company or such Restricted
Subsidiary and not exceeding $5.0 million in the aggregate outstanding at any
one time; (vii) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to the Company or
any Restricted Subsidiary or in satisfaction of judgments; (viii) any Person to
the extent such Investment represents the non-cash portion of the consideration
received for an Asset Disposition that was made pursuant to and in compliance
with the covenant described under "Certain Covenants -- Limitation on Sale of
Assets and Subsidiary Stock"; (ix) Investments made in connection with any
Asset Disposition or other sale, lease, transfer or other disposition permitted
under the Senior Subordinated Notes Indenture; (x) a Receivables Entity or any
Investment by a Receivables Entity in any other Person in connection with a
Qualified Receivables Transaction, including Investments of
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funds held in accounts permitted or required by the arrangements governing such
Qualified Receivables Transaction or any related Indebtedness; provided that
any Investment in a Receivables Entity is in the form of a Purchase Money Note,
contribution of additional receivables or an equity interest; (xi) Investments
in a Related Business having an aggregate fair market value, taken together
with all other Investments made pursuant to this clause (xi) that are at that
time outstanding (and not including any Investments outstanding on the Closing
Date), not to exceed 5% of Adjusted Consolidated Assets at the time of such
Investments (with the fair market value of each Investment being measured at
the time made and without giving effect to subsequent changes in value); and
(xii) additional Investments in an aggregate amount which, together with all
other Investments made pursuant to this clause that are then outstanding, does
not exceed $10.0 million.
"Permitted Liens" means (a) Liens of the Company and its Restricted
Subsidiaries securing Indebtedness of the Company or any of its Restricted
Subsidiaries Incurred under the Credit Agreement or other Credit Facilities to
the extent permitted to be Incurred under clause (b)(i) and (xiii) of the
description of the "Limitation on Indebtedness" covenant; (b) Liens in favor of
the Company or its Wholly Owned Restricted Subsidiaries; (c) Liens on property
of a Person existing at the time such Person becomes a Restricted Subsidiary of
the Company or is merged into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided that such Liens were not
Incurred in connection with, or in contemplation of, such merger or
consolidation and such Liens do not extend to or cover any property other than
such property, improvements thereon and any proceeds therefrom; (d) Liens of
the Company securing Indebtedness of the Company Incurred under clause (b)(v)
of the description of the "Limitation on Indebtedness" covenant; (e) Liens of
the Company and its Restricted Subsidiaries securing Indebtedness of the
Company or any of its Restricted Subsidiaries (including under a Sale/
Leaseback Transaction) permitted to be Incurred under clause (b)(vi), (vii) and
(viii) of the description of the "Limitation on Indebtedness" covenant so long
as the Capital Stock, property (real or personal) or equipment to which such
Lien attaches solely consists of the Capital Stock, property or equipment which
is the subject of such acquisition, purchase, lease, improvement,
Sale/Leaseback Transaction and additions and improvements thereto (and the
proceeds therefrom); (f) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the Company; provided
that such Liens were not Incurred in connection with, or in contemplation of,
such acquisition and such Liens do not extend to or cover any property other
than such property, additions and improvements thereon and any proceeds
therefrom; (g) Liens Incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety or appeal bonds,
government contracts, performance and return of money bonds or other
obligations of a like nature Incurred in the ordinary course of business; (h)
Liens existing on the Senior Subordinated Notes Issue Date and any additional
Liens created under the terms of the agreements relating to such Liens existing
on the Senior Subordinated Notes Issue Date; (i) Liens for taxes, assessments
or governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings; provided that any reserve
or other appropriate provision as shall be required in conformity with GAAP
shall have been made therefor; (j) Liens Incurred in the ordinary course of
business of the Company or any Restricted Subsidiary with respect to
obligations that do not exceed $20.0 million in the aggregate at any one time
outstanding and that (1) are not Incurred in connection with or in
contemplation of the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (2) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of the business by the Company or such
Restricted Subsidiary; (k) statutory Liens of landlords and warehousemen's,
carrier's, mechanics', suppliers', materialmen's, repairmen's or other like
Liens (including contractual landlords' liens) arising in the ordinary course
of business of the Company and its Restricted Subsidiaries; (l) Liens Incurred
or deposits made in the ordinary course of business of the Company and its
Restricted Subsidiaries in connection with workers' compensation, unemployment
insurance and other types of social security; (m) easements, rights of way,
restrictions, minor defects or irregularities in title and other similar
charges or encumbrances not interfering in any material respect with the
business of the Company or any of its Restricted Subsidiaries; (n) Liens
securing reimbursement obligations with respect to letters of credit permitted
under the covenant entitled "Limitation on Indebtedness" which encumber only
cash and marketable securities and documents and other property relating to
such letters of credit and the products and proceeds thereof;
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(o) judgment and attachment Liens not giving rise to an Event of Default; (p)
any interest or title of a lessor in the property subject to any Capitalized
Lease Obligation permitted under the covenant entitled "Limitation on
Indebtedness"; (q) Liens on accounts receivable and related assets of the type
specified in the definition of "Qualified Receivables Transaction" Incurred in
connection with a Qualified Receivables Transaction; (r) Liens securing
Refinancing Indebtedness to the extent such Liens do not extend to or cover any
property of the Company not previously subjected to Liens relating to the
Indebtedness being refinanced; or (s) Liens on pledges of the capital stock of
any Unrestricted Subsidiary securing any Indebtedness of such Unrestricted
Subsidiary.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"principal" of a Senior Subordinated Note means the principal of the
Senior Subordinated Note plus the premium, if any, payable on the Senior
Subordinated Note which is due or overdue or is to become due at the relevant
time.
"Purchase Money Note" means a promissory note of a Receivables Entity
evidencing a line of credit, which may be irrevocable, from the Company or any
Subsidiary of the Company in connection with a Qualified Receivables
Transaction to a Receivables Entity, which note (a) shall be repaid from cash
available to the Receivables Entity, other than (i) amounts required to be
established as reserves pursuant to agreements, (ii) amounts paid to investors
in respect of interest, (iii) principal and other amounts owing to such
investors and amounts owing to such investors, (iv) amounts required to pay
expenses in connection with such Qualified Receivables Transaction and (v)
amounts paid in connection with the purchase of newly generated receivables and
(b) may be subordinated to the payments described in (a).
"Qualified Receivables Transaction" means any financing by the Company or
any of its Subsidiaries of accounts receivable in any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which (a) the Company or any of its Subsidiaries sells, conveys or
otherwise transfers to a Receivables Entity and (b) a Receivables Entity sells,
conveys or otherwise transfers to any other Person or grants a security
interest to any Person in, any accounts receivable (whether now existing or
arising in the future) of the Company or any of its Subsidiaries, and any
assets related thereto including, without limitation, all collateral securing
such accounts receivable, all contracts and all Guarantees or other obligations
in respect of such accounts receivable, proceeds of such accounts receivable
and other assets which are customarily transferred or in respect of which
security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable; provided that (i)
the Board of Directors shall have determined in good faith that such Qualified
Receivables Transaction is economically fair and reasonable to the Company and
the Receivables Entity and (ii) all sales of accounts receivable and related
assets to the Receivables Entity are made at fair market value (as determined
in good faith by the Company). The grant of a security interest in any accounts
receivable of the Company or any of its Restricted Subsidiaries to secure Bank
Indebtedness shall not be deemed a Qualified Receivables Transaction.
"Receivables Entity" means any Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company makes an
Investment and to which the Company or any Subsidiary of the Company transfers
accounts receivable and related assets) (i) which engages in no activities
other than in connection with the financing of accounts receivable, all
proceeds thereof and all rights (contractual or other), collateral and other
assets relating thereto, and any business or activities incidental or related
to such business, (ii) which is designated by the Board of Directors (as
provided below) as a Receivables Entity and (iii) no portion of the
Indebtedness or any other obligations (contingent or otherwise) of which (A) is
Guaranteed by the Company or any other Subsidiary of the Company (excluding
Guarantees of obligations (other than the principal of, and interest on,
131
Indebtedness) pursuant to Standard Securitization Undertakings), (B) is
recourse to or obligates the Company or any other Subsidiary of the Company in
any way other than pursuant to Standard Securitization Undertakings or (C)
subjects any property or asset of the Company or any other Subsidiary of the
Company, directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings. Any such
designation by the Board of Directors shall be evidenced to the Senior
Subordinated Notes Trustee by filing with the Senior Subordinated Notes Trustee
a certified copy of the resolution of the Board of Directors giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) any Indebtedness of the Company or any
Restricted Subsidiary existing on the date of the Senior Subordinated Notes
Indenture or Incurred in compliance with the Senior Subordinated Notes
Indenture (including Indebtedness of the Company that Refinances Refinancing
Indebtedness); provided, however, that (i) the Refinancing Indebtedness has a
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
Refinanced, (ii) the Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced and (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less
than the aggregate principal amount (or if issued with original issue discount,
the aggregate accreted value) then outstanding of the Indebtedness being
Refinanced (plus any accrued interest and premium thereon and reasonable
expenses Incurred in connection therewith); provided further, however, that
Refinancing Indebtedness shall not include (x) Indebtedness of a Restricted
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any businesses of the Company and the Restricted
Subsidiaries on the Closing Date and any business related, ancillary or
complementary thereto.
"Representative" means the trustee, agent or representative (if any) for
an issue of Senior Indebtedness of the Company.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by the Company or a Restricted Subsidiary whereby
the Company or a Restricted Subsidiary transfers such property to a Person and
the Company or such Restricted Subsidiary leases it from such Person, other
than leases between the Company and a Wholly Owned Subsidiary or between Wholly
Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien. "Secured Indebtedness" of Holdings has a correlative meaning.
"Senior Subordinated Indebtedness" of the Company means the Senior
Subordinated Notes and any other Indebtedness of the Company that specifically
provides that such Indebtedness is to rank pari passu with the Senior
Subordinated Notes in right of payment and is not subordinated by its terms in
right of payment to any Indebtedness or other obligation of the Company which
is not Senior Indebtedness. "Senior Subordinated Indebtedness" of Holdings has
a correlative meaning.
"Senior Subordinated Noteholder" means the Person in whose name a Senior
Subordinated Note is registered on the registrar's books.
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"Senior Subordinated Notes Issue Date" means the closing date for the sale
and original issuance of the Senior Subordinated Notes under the Senior
Subordinated Notes Indenture.
"Senior Subordinated Notes Trustee" means the party named as such in the
Senior Subordinated Notes Indenture until a successor replaces it and,
thereafter, means the successor.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC, but shall in no event include a
Receivables Entity.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which the Company has determined in good faith to be customary in an
accounts receivable transaction including, without limitation, those relating
to the servicing of the assets of a Receivables Entity.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Closing Date or thereafter Incurred) that is subordinate or
junior in right of payment to the Senior Subordinated Notes pursuant to a
written agreement. "Subordinated Obligation" of Holdings has a correlative
meaning.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and
one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of
such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in 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, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within one year of the date of acquisition
thereof issued by a bank or trust company that is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and
undivided profits aggregating in excess of $100,000,000 (or the foreign
currency equivalent thereof) and whose long-term debt is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act) or any money market fund sponsored by a registered broker-dealer or mutual
fund distributor, (iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (i) above
entered into with a financial institution meeting the qualifications described
in clause (ii) above, (iv) investments in commercial paper, maturing not more
than one year after the date of acquisition, issued by a corporation (other
than an Affiliate of the Company) organized and in existence under the laws of
the United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment therein
is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or
"A-1" (or higher) according to Standard and Poor's Ratings Service, a division
of The McGraw-Hill Companies, Inc. ("S&P"), and (v) investments in securities
with maturities of one year or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United States
of America, or by any political subdivision or taxing authority thereof, and
rated at least "A" by S&P or "A" by Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Senior Subordinated Notes
Indenture.
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"Trade Payables" means, with respect to any Person, any accounts payable
or any indebtedness or monetary obligation to trade creditors created, assumed
or Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by, and
published in, the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two Business Days prior to the
date fixed for redemption of the Senior Subordinated Notes following a Change
of Control (or, if such Statistical Release is no longer published, any
publicly available source of similar market data)) most nearly equal to the
period from the redemption date to June 1, 2003; provided, however, that if the
period from the redemption date to June 1, 2003 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average
yields of United States Treasury securities for which such yields are given,
except that if the period from the redemption date to June 1, 2003 is less than
one year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Senior Subordinated Notes Trustee
assigned by the Senior Subordinated Notes Trustee to administer its corporate
trust matters.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; provided,
however, that either (A) the Subsidiary to be so designated has total
Consolidated assets of $1,000 or less or (B) if such Subsidiary has
Consolidated assets greater than $1,000, then such designation would be
permitted under the covenant entitled "Certain Covenants -- Limitation on
Restricted Payments". The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under
"Certain Covenants -- Limitation on Indebtedness" and (y) no Default shall have
occurred and be continuing. Any such designation of a Subsidiary as a
Restricted Subsidiary or Unrestricted Subsidiary by the Board of Directors
shall be evidenced to the Senior Subordinated Notes Trustee by promptly filing
with the Senior Subordinated Notes Trustee a copy of the resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors' qualifying shares) is owned
by the Company or another Wholly Owned Subsidiary.
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DESCRIPTION OF THE SENIOR DISCOUNT EXCHANGE NOTES
General
The Senior Discount Old Notes were issued, and the Senior Discount
Exchange Notes will be issued, under an Indenture, dated as of June 5, 1998
(the "Senior Discount Notes Indenture"), between Holdings and Bank One, N.A. as
Trustee (the "Senior Discount Notes Trustee"), which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
The following summary of certain provisions of the Senior Discount Notes
Indenture and the Senior Discount Notes does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the
provisions of the Senior Discount Notes Indenture, including the definitions of
certain terms therein and those terms made a part thereof by the TIA.
Capitalized terms used herein and not otherwise defined have the meanings set
forth in the section "Certain Definitions". For purposes of this "Description
of the Senior Discount Exchange Notes", the term Company refers only to WESCO
Distribution, Inc. and not to any of its Subsidiaries.
On June 5, 1998, Holdings issued $87 million aggregate principal amount at
maturity of Senior Discount Old Notes under the Senior Discount Notes
Indenture. The terms of the Senior Discount Exchange Notes are identical in all
material respects to the Senior Discount Old Notes, except for certain transfer
restrictions and registration and other rights relating to the exchange of the
Senior Discount Old Notes for Senior Discount Exchange Notes. The Senior
Discount Trustee will authenticate and deliver Senior Discount Exchange Notes
for original issue only in exchange for a like principal amount of Senior
Discount Old Notes. Any Senior Discount Old Notes that remain outstanding after
the consummation of the Senior Discount Exchange Offer, together with the
Senior Discount Exchange Notes, will be treated as a single class of securities
under the Senior Discount Notes Indenture. Accordingly, all references herein
to specified percentages in aggregate principal amount of the outstanding
Senior Discount Notes shall be deemed to mean, at any time after the Senior
Discount Exchange Offer is consummated, such percentage in aggregate principal
amount of the Old Notes and Senior Discount Exchange Notes then outstanding.
Principal of, premium, if any, and interest on the Senior Discount Notes
will be payable, and the Senior Discount Notes may be exchanged or transferred,
at the office or agency of Holdings in the Borough of Manhattan, The City of
New York (which initially shall be the corporate trust office of the Senior
Discount Notes Trustee in New York, New York), except that, at the option of
Holdings, payment of interest may be made by check mailed to the registered
holders of the Senior Discount Notes at their registered addresses.
The Senior Discount Notes will be issued only in fully registered form,
without coupons, in denominations of $1,000 (in principal amount at maturity)
and any integral multiple of $1,000. No service charge will be made for any
registration of transfer or exchange of Senior Discount Notes, but Holdings may
require payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
Terms of the Senior Discount Notes
The Senior Discount Notes will be unsecured senior obligations of Holdings
and will mature on June 1, 2008. The Senior Discount Old Notes were issued at a
discount to their aggregate principal amount at maturity so as to generate
gross proceeds to Holdings of $50,478,270. Based on the issue price thereof,
the yield to maturity of the Senior Discount Notes is 11.175% (computed on a
semi-annual bond equivalent basis), calculated from the original date of
issuance. Cash interest will not accrue or be payable on the Senior Discount
Notes prior to June 1, 2003. Thereafter, cash interest on the Senior Discount
Notes will accrue at the rate of 11 1/8% per annum and will be payable
semiannually to Senior Discount Noteholders of record at the close of business
on the May 15 or November 15 immediately preceding the interest payment date on
June 1 and December 1 of each year, commencing December 1, 2003.
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Mandatory Principal Redemption
On June 1, 2003, Holdings will be required to redeem an amount equal to
$354.96 per $1,000 principal amount at maturity of each Senior Discount Note
then outstanding ($30,881,520 in aggregate principal amount at maturity of the
Senior Discount Notes, assuming all of the Senior Discount Notes remain
outstanding on such date (the "Mandatory Principal Redemption Amount")) on a
pro rata basis at a redemption price of 100% of the principal amount at
maturity of the Senior Discount Notes so redeemed. The Mandatory Principal
Redemption Amount represents (i) the excess of the aggregate Accreted Value of
all Senior Discount Notes outstanding on June 1, 2003 over the aggregate issue
price thereof less (ii) an amount equal to one year's simple uncompounded
interest on the aggregate issue price of such Senior Discount Notes at a rate
per annum equal to the yield to maturity on the Senior Discount Notes.
Optional Redemption
Except as set forth in the following two paragraphs, the Senior Discount
Notes will not be redeemable at the option of Holdings prior to June 1, 2003.
Thereafter, the Senior Discount Notes will be redeemable at the option of
Holdings, in whole or in part, on not less than 30 nor more than 60 days' prior
notice, at the following redemption prices (expressed as percentages of
principal amount), plus accrued and unpaid interest and liquidated damages (if
any) to the redemption date (subject to the right of holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), if redeemed during the 12-month period commencing on June 1 of the years
set forth below:
Redemption
Year Price
- - - - ---------------------------------------- -------------
2003 ........................ 105.563%
2004 ........................ 103.708%
2005 ........................ 101.854%
2006 and thereafter ......... 100.000%
In addition, at any time prior to June 1, 2001, Holdings may redeem, in
whole but not in part, the Senior Discount Notes with the Net Cash Proceeds of
one or more Equity Offerings by Holdings, at a redemption price equal to
111.125% of the Accreted Value at the date of redemption plus liquidated
damages, if any, thereon to the date of redemption. Any such redemption shall
be made within 120 days of such Equity Offering upon not less than 30 nor more
than 60 days' notice mailed to each holder of Senior Discount Notes and
otherwise in accordance with the procedures set forth in the Senior Discount
Notes Indenture.
At any time prior to June 1, 2003, the Senior Discount Notes may be
redeemed, in whole but not in part, at the option of Holdings at any time
within 180 days after a Change of Control, at a redemption price equal to the
sum of (i) 100% of the Accreted Value thereof together with liquidated damages,
if any, to the redemption date, plus (ii) the Applicable Premium.
Selection
In the case of any partial redemption, selection of the Senior Discount
Notes for redemption will be made by the Senior Discount Notes Trustee on a pro
rata basis, by lot or by such other method as the Senior Discount Notes Trustee
in its sole discretion shall deem to be fair and appropriate, although no
Senior Discount Note of $1,000 in principal amount at maturity or less will be
redeemed in part. If any Senior Discount Note is to be redeemed in part only,
the notice of redemption relating to such Senior Discount Note shall state the
portion of the principal amount at maturity thereof to be redeemed. A new
Senior Discount Note in principal amount at maturity equal to the unredeemed
portion thereof will be issued in the name of the Senior Discount Noteholder
thereof upon cancelation of the original Senior Discount Note. Notwithstanding
the foregoing, in the case of the Mandatory Principal Redemption, each Senior
Discount Note shall be partially redeemed on a pro rata basis; provided that,
if such redemption would result in an outstanding Senior Discount Note in a
denomination (i) of less than $1,000 principal amount at maturity or (ii) other
than an integral multiple of $1,000 principal amount at maturity, such Senior
Discount Note will be redeemed (a) in whole, in the case of clause (i), or (b)
by an additional
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amount so that such Senior Discount Note will be in a denomination of an
integral multiple of $1,000 principal amount at maturity, in the case of clause
(ii).
Ranking
The indebtedness evidenced by the Senior Discount Notes will be unsecured
Senior Indebtedness of Holdings, will rank pari passu in right of payment with
all existing and future Senior Indebtedness of Holdings and will be senior in
right of payment to all existing and future Subordinated Obligations of
Holdings. The Senior Discount Notes will also be effectively subordinated to
any Secured Indebtedness of Holdings and its Subsidiaries to the extent of the
value of the assets securing such Indebtedness.
All of the operations of Holdings are conducted through its Subsidiaries.
Claims of creditors of such Subsidiaries, including trade creditors, and claims
of preferred stockholders (if any) of such Subsidiaries generally will have
priority with respect to the assets and earnings of such Subsidiaries over the
claims of creditors of Holdings, including the Senior Discount Noteholders. The
Senior Discount Notes, therefore, will be effectively subordinated to creditors
(including trade creditors) and preferred stockholders (if any) of Subsidiaries
of Holdings. As of March 31, 1998, on a pro forma basis, Holdings' Subsidiaries
would have had total liabilities of $735.0 million, excluding $170.0 million of
Indebtedness and Guarantees under the Credit Facilities. Although the Senior
Discount Notes Indenture limits the Incurrence of Indebtedness by and the
issuance of preferred stock of certain of Holdings' Subsidiaries, such
limitation is subject to a number of significant qualifications.
As of March 31, 1998, on a pro forma basis, Holdings would have had no
outstanding Senior Indebtedness (other than the Senior Discount Notes and
Guarantees under the Credit Facilities) or Secured Indebtedness. Although the
Senior Discount Notes Indenture contains limitations on the amount of
additional Indebtedness that Holdings may Incur, under certain circumstances
the amount of such Indebtedness could be substantial and, in any case, such
Indebtedness may be Senior Indebtedness. See " -- Certain Covenants --
Limitation on Indebtedness."
Change of Control
Upon the occurrence of any of the following events (each a "Change of
Control"), unless all Senior Discount Notes have been called for redemption
pursuant to the provisions described above under " -- Optional Redemption,"
each Senior Discount Noteholder will have the right to require Holdings to
repurchase all or any part of such Senior Discount Noteholder's Senior Discount
Notes at a purchase price in cash equal to (a) 101% of the Accreted Value
thereof at the date of repurchase plus liquidated damages thereon, if any, to
the date of repurchase, if repurchased on or prior to June 1, 2003 and (b) 101%
of the principal amount thereof plus accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase (subject to the right of Senior
Discount Noteholders of record on the relevant record date to receive interest
due on the relevant interest payment date), if repurchased after June 1, 2003:
(i) prior to the first public offering of common stock of Holdings, the
Permitted Holders cease to be the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a
majority in the aggregate of the total voting power of the Voting Stock of
Holdings, whether as a result of issuance of securities of Holdings, any
merger, consolidation, liquidation or dissolution of Holdings, any direct
or indirect transfer of securities by any Permitted Holder or otherwise
(for purposes of this clause (i) and clause (ii) below, the Permitted
Holders shall be deemed to beneficially own any Voting Stock of an entity
(the "specified entity") held by any other entity (the "parent entity") so
long as the Permitted Holders beneficially own (as so defined), directly or
indirectly, in the aggregate a majority of the voting power of the Voting
Stock of the parent entity);
(ii) on or after any such public offering referred to in clause (i), (A)
any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (i) above, except that for purposes
of this clause (ii) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of the Voting Stock of Holdings and (B) the Permitted Holders "beneficially
own" (as defined in clause
137
(i) above), directly or indirectly, in the aggregate a lesser percentage of
the total voting power of the Voting Stock of Holdings than such other
person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of Holdings (for the purposes of this clause (ii), such other
person shall be deemed to beneficially own any Voting Stock of a specified
corporation held by a parent corporation, if such other person is the
beneficial owner (as defined in this clause (ii)), directly or indirectly,
more than 35% of the voting power of the Voting Stock of such parent
corporation and the Permitted Holders "beneficially own" (as defined in
clause (i) above), directly or indirectly, in the aggregate a lesser
percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the board of
directors of such parent corporation);
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of Holdings
(together with any new directors whose election by the Board of Directors
of Holdings or whose nomination for election by the shareholders of
Holdings was approved by a vote of 66-2/3% of the directors of Holdings
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Holdings then in office; or
(iv) the merger or consolidation of Holdings with or into another Person
or the merger of another Person with or into Holdings, or the sale of all
or substantially all the assets of Holdings to another Person (other than a
Person that is controlled by the Permitted Holders), and, in the case of
any such merger or consolidation, the securities of Holdings that are
outstanding immediately prior to such transaction and which represent 100%
of the aggregate voting power of the Voting Stock of Holdings are changed
into or exchanged for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in addition
to any other consideration, securities of the surviving Person that
represent immediately after such transaction, at least a majority of the
aggregate voting power of the Voting Stock of the surviving Person;
provided, however, that any sale of accounts receivable in connection with
a Qualified Receivables Transaction shall not constitute a Change of
Control.
Within 30 days following any Change of Control, Holdings shall mail a
notice to each Senior Discount Noteholder with a copy to the Senior Discount
Notes Trustee (the "Change of Control Offer") stating: (1) that a Change of
Control has occurred and that such Senior Discount Noteholder has the right to
require Holdings to purchase such Senior Discount Noteholder's Senior Discount
Notes at a purchase price in cash equal to (a) 101% of the Accreted Value
thereof at the date of redemption plus liquidated damages thereon, if any, to
the date of redemption, if redeemed on or prior to June 1, 2003 and (b) 101% of
the principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase (subject to the right of Senior
Discount Noteholders of record on the relevant record date to receive interest
on the relevant interest payment date) if purchased after June 1, 2003; (2) the
circumstances and relevant facts regarding such Change of Control; (3) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (4) the instructions determined by
Holdings, consistent with this covenant, that a Senior Discount Noteholder must
follow in order to have its Senior Discount Notes purchased.
Holdings will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Senior Discount Notes Indenture applicable to a Change of Control
Offer made by Holdings and purchases all Senior Discount Notes validly tendered
and not withdrawn under such Change of Control Offer.
Holdings will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Senior Discount Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations
138
conflict with provisions of this covenant, Holdings will comply with the
applicable securities laws and regulations and will not be deemed to have
breached its obligations under this paragraph by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
Holdings and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that Holdings would decide to do so in the future. Subject to the limitations
discussed below, Holdings could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Senior Discount Notes
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect Holdings' capital structure or credit ratings.
Restrictions on the ability of Holdings to incur additional Indebtedness are
contained in the covenants described under "Certain Covenants -- Limitation on
Indebtedness" and "Limitation on Liens". Such restrictions can only be waived
with the consent of the holders of a majority in principal amount of the Senior
Discount Notes then outstanding. Except for the limitations contained in such
covenants, however, the Senior Discount Notes Indenture will not contain any
covenants or provisions that may afford holders of the Senior Discount Notes
protection in the event of a highly leveraged transaction.
The occurrence of certain of the events which would constitute a Change of
Control would constitute a default under the Credit Agreement. Future Senior
Indebtedness of Holdings may contain prohibitions of certain events which would
constitute a Change of Control or require such Senior Indebtedness to be
repurchased upon a Change of Control. Moreover, the exercise by the Senior
Discount Noteholders of their right to require Holdings to repurchase the
Senior Discount Notes could cause a default under such Senior Indebtedness,
even if the Change of Control itself does not, due to the financial effect of
such repurchase on Holdings. Finally, Holdings' ability to pay cash to the
Senior Discount Noteholders upon a repurchase may be limited by Holdings' then
existing financial resources. There can be no assurance that sufficient funds
will be available when necessary to make any required repurchases. The
provisions under the Senior Discount Notes Indenture relative to Holdings'
obligation to make an offer to repurchase the Senior Discount Notes as a result
of a Change of Control may be waived or modified with the written consent of
the holders of a majority in principal amount of the Senior Discount Notes.
Certain Covenants
The Senior Discount Notes Indenture contains covenants including, among
others, the following:
Limitation on Indebtedness. (a) Holdings will not, and will not permit any
Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness;
provided, however, that Holdings and the Company may Incur Indebtedness if on
the date of such Incurrence and after giving effect thereto the Consolidated
Coverage Ratio would be greater than 2.00:1.00.
(b) Notwithstanding the foregoing paragraph (a), Holdings and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Credit Agreement or any other
Credit Facility in an aggregate principal amount at any time outstanding
not to exceed $400 million;
(ii) Indebtedness of Holdings owed to and held by any Wholly Owned
Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by
Holdings or any Wholly Owned Subsidiary; provided, however, that (i) any
subsequent issuance or transfer of any Capital Stock or any other event
that results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to Holdings or a Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the issuer
thereof and (ii) if Holdings is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in cash
of all obligations with respect to the Senior Discount Notes;
(iii) Indebtedness (A) represented by the Senior Discount Notes and the
Senior Subordinated Notes (not including any Additional Senior Subordinated
Notes), (B) outstanding on the Closing
139
Date (other than the Indebtedness described in clauses (i) and (ii) above),
(C) consisting of Refinancing Indebtedness Incurred in respect of any
Indebtedness described in this clause (iii) (including Indebtedness
Refinancing Refinancing Indebtedness) or the foregoing paragraph (a) and
(D) consisting of Guarantees of (x) any Indebtedness permitted under
clauses (i) and (ii) of this paragraph (b) and (y) the Senior Subordinated
Notes;
(iv) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary was
acquired by Holdings (other than Indebtedness Incurred as consideration in,
or to provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Subsidiary of or was otherwise
acquired by Holdings); provided, however, if the aggregate amount of all
such Indebtedness of all such Restricted Subsidiaries would exceed $20
million, that on the date that such Restricted Subsidiary is acquired by
Holdings, Holdings would have been able to Incur $1.00 of additional
Indebtedness pursuant to the foregoing paragraph (a) after giving effect to
the Incurrence of such Indebtedness pursuant to this clause (iv) and (B)
Refinancing Indebtedness Incurred by a Restricted Subsidiary in respect of
Indebtedness Incurred by such Restricted Subsidiary pursuant to this clause
(iv);
(v) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by
Holdings and the Restricted Subsidiaries in the ordinary course of their
business, and (B) under Hedging Obligations consisting of Interest Rate
Agreements directly related (as determined in good faith by Holdings) to
Indebtedness permitted to be Incurred by Holdings and its Restricted
Subsidiaries pursuant to the Senior Discount Notes Indenture and Currency
Agreements Incurred in the ordinary course of business;
(vi) Indebtedness Incurred by Holdings or any Restricted Subsidiary
(including Capitalized Lease Obligations) financing the purchase, lease or
improvement of property (real or personal) or equipment (whether through
the direct purchase of assets or the Capital Stock of the Person owning
such assets), in each case Incurred no more than 180 days after such
purchase, lease or improvement of such property and any Refinancing
Indebtedness in respect of such Indebtedness; provided, however, that at
the time of the Incurrence of such Indebtedness and after giving effect
thereto, the aggregate principal amount of all Indebtedness incurred
pursuant to this clause (vi) and then outstanding shall not exceed the
greater of $25.0 million and 5% of Adjusted Consolidated Assets;
(vii) Indebtedness Incurred by Holdings or the Company in connection
with the acquisition of a Related Business and any Refinancing Indebtedness
in respect of such Indebtedness; provided, however, that the aggregate
amount of Indebtedness Incurred and outstanding pursuant to this clause
(vii) shall not exceed $50.0 million at any one time;
(viii) Attributable Debt Incurred by Holdings or the Company in respect
of Sale/Leaseback Transactions; provided, however, that the aggregate
amount of Attributable Debt Incurred and outstanding pursuant to this
clause (viii) shall not exceed $75.0 million at any one time;
(ix) Indebtedness arising from agreements of Holdings or a Restricted
Subsidiary providing for indemnification, purchase price adjustment or
similar obligations, in each case, Incurred or assumed in connection with
the disposition of any business, assets or a Subsidiary, other than
Guarantees of Indebtedness Incurred by any Person acquiring all or any
portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; provided, however, that the maximum assumable
liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds actually received by Holdings and its Restricted
Subsidiaries in connection with such disposition;
(x) any Guarantee by Holdings of Indebtedness or other obligations of
any of its Restricted Subsidiaries so long as the Incurrence of such
Indebtedness Incurred by such Restricted Subsidiary is permitted under the
terms of the Senior Discount Notes Indenture;
(xi) Indebtedness arising from Guarantees to suppliers, lessors,
licensees, contractors, franchisees or customers Incurred in the ordinary
course of business;
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(xii) Indebtedness Incurred by a Receivables Entity in a Qualified
Receivables Transaction that is not recourse to Holdings or any other
Restricted Subsidiary of Holdings (except for Standard Securitization
Undertakings); and
(xiii) Indebtedness (other than Indebtedness permitted to be Incurred
pursuant to the foregoing paragraph (a) or any other clause of this
paragraph (b)) in an aggregate principal amount on the date of Incurrence
that, when added to all other Indebtedness Incurred pursuant to this clause
(xiii) and then outstanding, shall not exceed $50.0 million.
(c) Notwithstanding any other provision of this covenant, the maximum
amount of Indebtedness that Holdings or any Restricted Subsidiary may Incur
pursuant to this covenant shall not be deemed to be exceeded solely as a result
of fluctuations in the exchange rates of currencies. For purposes of
determining the outstanding principal amount of any particular Indebtedness
Incurred pursuant to this covenant, (i) Indebtedness permitted by this covenant
need not be permitted solely by reference to one provision permitting such
Indebtedness but may be permitted in part by one such provision and in part by
one or more other provisions of this covenant permitting such Indebtedness and
(ii) in the event that Indebtedness meets the criteria of more than one of the
types of Indebtedness described in this covenant, Holdings, in its sole
discretion, shall classify or reclassify such Indebtedness and only be required
to include the amount of such Indebtedness in one of such clauses.
Limitation on Restricted Payments. (a) Holdings will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay
any dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
Holdings) or similar payment to the direct or indirect holders of its Capital
Stock except dividends or distributions payable solely in its Capital Stock
(other than Disqualified Stock) and except dividends or distributions payable
to Holdings or another Restricted Subsidiary (and, if such Restricted
Subsidiary has equity holders other than Holdings or other Restricted
Subsidiaries, to its other equity holders on a pro rata basis), (ii) purchase,
redeem, retire or otherwise acquire for value any Capital Stock of Holdings or
any Restricted Subsidiary held by Persons other than Holdings or another
Restricted Subsidiary, (iii) purchase, repurchase, redeem, defease or otherwise
acquire or retire for value, prior to scheduled maturity, scheduled repayment
or scheduled sinking fund payment any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of acquisition)
or (iv) make any Investment (other than a Permitted Investment) in any Person
(any such dividend, distribution, purchase, redemption, repurchase, defeasance,
other acquisition, retirement or Investment being herein referred to as a
"Restricted Payment") if at the time Holdings or such Restricted Subsidiary
makes such Restricted Payment: (1) a Default will have occurred and be
continuing (or would result therefrom); (2) Holdings could not Incur at least
$1.00 of additional Indebtedness under paragraph (a) of the covenant described
under " -- Limitation on Indebtedness"; or (3) the aggregate amount of such
Restricted Payment and all other Restricted Payments (the amount so expended,
if other than in cash, to be determined in good faith by the Board of
Directors, whose determination will be conclusive and evidenced by a resolution
of the Board of Directors) declared or made subsequent to the Closing Date
would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during
the period (treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the Closing Date
occurs to the end of the most recent fiscal quarter for which internal
financial statements are available prior to the date of such Restricted Payment
(or, in case such Consolidated Net Income will be a deficit, minus 100% of such
deficit); (B) the aggregate Net Cash Proceeds or fair market value of assets or
property received by Holdings as a contribution to its equity capital or from
the issue or sale of its Capital Stock (in each case other than Disqualified
Stock and Excluded Contributions) subsequent to the Closing Date (other than an
issuance or sale to (x) a Subsidiary of Holdings or (y) an employee stock
ownership plan or other trust established by Holdings or any of its
Subsidiaries); (C) the amount by which Indebtedness or Disqualified Stock of
Holdings or its Restricted Subsidiaries is reduced on Holdings' balance sheet
upon the conversion or exchange (other than by a Subsidiary of Holdings)
subsequent to the Closing Date of any Indebtedness or Disqualified Stock of
Holdings or its Restricted Subsidiaries issued after the Closing Date for
Capital Stock (other than Disqualified Stock) of Holdings (less the amount of
any cash
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or the fair market value of other property distributed by Holdings or any
Restricted Subsidiary upon such conversion or exchange); and (D) the amount
equal to the net reduction in Investments in any Person (other than a
Restricted Subsidiary) resulting from (i) payments of dividends, repayments of
the principal of loans or advances or other transfers of assets to Holdings or
any Restricted Subsidiary from such Person, (ii) the sale or liquidation for
cash of such Investment or (iii) the redesignation of Unrestricted Subsidiaries
as Restricted Subsidiaries (valued in each case as provided in the definition
of "Investment") not to exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made by Holdings or any Restricted Subsidiary
in such Unrestricted Subsidiary, which amount was included in the calculation
of the amount of Restricted Payments.
(b) The provisions of the foregoing paragraph (a) will not prohibit: (i)
any Restricted Payment made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of Holdings (other than
Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary
of Holdings or an employee stock ownership plan or other trust established by
Holdings or any of its Subsidiaries); provided, however, that (A) such
Restricted Payment will be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale applied in the
manner set forth in this clause (i) will be excluded from the calculation of
amounts under clause (3)(B) of paragraph (a) above; (ii) any purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value
of Subordinated Obligations of Holdings made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Indebtedness of Holdings that
is permitted to be Incurred pursuant to paragraph (b) of the covenant described
under " -- Limitation on Indebtedness"; provided, however, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value
will be excluded in the calculation of the amount of Restricted Payments; (iii)
any purchase or redemption of Subordinated Obligations from Net Available Cash
to the extent permitted by the covenant described under " -- Limitation on
Sales of Assets and Subsidiary Stock"; provided, however, that such purchase or
redemption will be excluded in the calculation of the amount of Restricted
Payments; (iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied with
this covenant; provided, however, that such dividend will be included in the
calculation of the amount of Restricted Payments; (v) any Restricted Payment
made for the repurchase, redemption or other acquisition or retirement for
value of any Capital Stock of Holdings or any Restricted Subsidiary held by any
employee, former employee, director or former director of Holdings or any of
its Subsidiaries (and any permitted transferees thereof) pursuant to any equity
subscription agreement, stock option agreement or plan or other similar
agreement; provided, however, that the aggregate amount of such Restricted
Payments shall not exceed $5.0 million in any calendar year and $20.0 million
in the aggregate; provided further, however, that such Restricted Payments
shall be included in the calculation of the amount of Restricted Payments; (vi)
following the initial Equity Offering by Holdings, any payment of dividends or
common stock buybacks by Holdings in an aggregate amount in any year not to
exceed 6% of the aggregate Net Cash Proceeds actually received by Holdings in
connection with such initial Equity Offering and any subsequent Equity Offering
by Holdings; provided, however, that no Default or Event of Default shall have
occurred and be continuing immediately before or after any such payment;
provided further, however, that such dividends or common stock buybacks shall
be included in the calculation of the amount of Restricted Payments; (vii) any
repurchase of Capital Stock deemed to occur upon exercise of stock options if
such Capital Stock represents a portion of the exercise price of such option;
provided, however, that such repurchase shall be included in the calculation of
the amount of Restricted Payments; (viii) the declaration and payment of
dividends to holders of any class or series of Disqualified Stock of Holdings
issued in accordance with the covenant described under " -- Limitation on
Indebtedness" to the extent such dividends are included in the definition of
Consolidated Interest Expense; provided, however, that such dividends shall be
included in the calculation of the amount of Restricted Payments; (ix)
Investments made with Excluded Contributions; provided, however, that such
Investments shall be excluded in the calculation of the amount of Restricted
Payments; (x) any Restricted Payment made to fund the Recapitalization
(including fees and expenses); provided, however, that such Restricted Payment
shall be excluded in the calculation of the amount of Restricted Payments; or
(xi) other Restricted Payments in an aggregate amount not to exceed $10.0
million; provided, however, that such payments shall be included in the
calculation of the amount of Restricted Payments.
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Limitation on Restrictions on Distributions from Restricted Subsidiaries.
Holdings will not, and will not permit any Restricted Subsidiary to, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (i)
pay dividends or make any other distributions on its Capital Stock or pay any
Indebtedness or other obligations owed to Holdings, (ii) make any loans or
advances to Holdings or (iii) transfer any of its property or assets to
Holdings, except: (1) any encumbrance or restriction pursuant to an agreement
in effect at or entered into on the Closing Date; (2) any encumbrance or
restriction with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted Subsidiary on or prior
to the date on which such Restricted Subsidiary was acquired by Holdings (other
than Indebtedness Incurred as consideration in, in contemplation of, or to
provide all or any portion of the funds or credit support utilized to
consummate the transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary or was otherwise
acquired by Holdings) and outstanding on such date; (3) any encumbrance or
restriction pursuant to an agreement effecting a Refinancing of Indebtedness
Incurred pursuant to an agreement referred to in clause (1) or (2) of this
covenant or this clause (3) or contained in any amendment to an agreement
referred to in clause (1) or (2) of this covenant or this clause (3); provided,
however, that the encumbrances and restrictions contained in any such
Refinancing agreement or amendment are no less favorable to the Senior Discount
Noteholders than the encumbrances and restrictions contained in such
predecessor agreements; (4) in the case of clause (iii), any encumbrance or
restriction (A) that restricts in a customary manner the subletting, assignment
or transfer of any property or asset that is subject to a lease, license or
similar contract, (B) contained in security agreements or mortgages securing
Indebtedness of a Restricted Subsidiary to the extent such encumbrance or
restriction restricts the transfer of the property subject to such security
agreements or mortgages or (C) in connection with purchase money obligations
for property acquired in the ordinary course of business; (5) with respect to a
Restricted Subsidiary, any restriction imposed pursuant to an agreement entered
into for the sale or disposition of all or substantially all the Capital Stock
or assets of such Restricted Subsidiary pending the closing of such sale or
disposition; (6) any encumbrance or restriction of a Receivables Entity
effected in connection with a Qualified Receivables Transaction; provided,
however, that such restrictions apply only to such Receivables Entity; and (7)
any encumbrance or restriction existing pursuant to other Indebtedness
permitted to be Incurred subsequent to the Senior Discount Notes Issue Date
pursuant to the provisions of the covenant described under " -- Limitations on
Indebtedness"; provided, however, that any such encumbrance or restrictions are
ordinary and customary with respect to the type of Indebtedness being Incurred
(under the relevant circumstances).
Limitation on Sales of Assets and Subsidiary Stock. (a) Holdings will not,
and will not permit any Restricted Subsidiary to, make any Asset Disposition
unless (i) Holdings or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming sole
responsibility for, any liabilities, contingent or otherwise) at the time of
such Asset Disposition at least equal to the fair market value (as determined
in good faith by Holdings) of the shares and assets subject to such Asset
Disposition, (ii) at least 75% of the consideration thereof received by
Holdings or such Restricted Subsidiary is in the form of cash or cash
equivalents (provided that the amount of (w) any liabilities (as shown on
Holdings' or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto) of Holdings or any Restricted Subsidiary (other than liabilities
that are by their terms subordinated to the Senior Discount Notes) that are
assumed by the transferee of any such assets without recourse to Holdings or
any of the Restricted Subsidiaries, (x) any notes or other obligations received
by Holdings or such Restricted Subsidiary from such transferee that are
converted by Holdings or such Restricted Subsidiary into cash (to the extent of
the cash received) within 180 days following the closing of such Asset
Disposition, (y) any Designated Noncash Consideration received by Holdings or
any of its Restricted Subsidiaries in such Asset Disposition having an
aggregate fair market value, taken together with all other Designated Noncash
Consideration received pursuant to this clause (y) that is at that time
outstanding, not to exceed 5% of Adjusted Consolidated Assets at the time of
the receipt of such Designated Noncash Consideration (with the fair market
value of each item of Designated Noncash Consideration being measured at the
time received and without giving effect to subsequent changes in value)
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and (z) any assets received in exchange for assets related to a Related
Business of comparable market value in the good faith determination of the
Board of Directors shall be deemed to be cash for purposes of this provision)
and (iii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by Holdings (or such Restricted Subsidiary, as the case
may be) (A) first, to the extent Holdings elects (or is required by the terms
of any Indebtedness), to prepay, repay, redeem or purchase Indebtedness (other
than any Disqualified Stock and other than any Preferred Stock) of a Wholly
Owned Subsidiary (in each case other than Indebtedness owed to Holdings or an
Affiliate of Holdings) within 365 days after the later of the date of such
Asset Disposition or the receipt of such Net Available Cash; (B) second, to the
extent of the balance of Net Available Cash after application in accordance
with clause (A), to the extent Holdings or such Restricted Subsidiary elects,
to reinvest in Additional Assets (including by means of an Investment in
Additional Assets by a Restricted Subsidiary with Net Available Cash received
by Holdings or another Restricted Subsidiary) within 365 days from the later of
such Asset Disposition or the receipt of such Net Available Cash; and (C)
third, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A) and (B), to make an Offer (as
defined below) to purchase Senior Discount Notes pursuant to and subject to the
conditions set forth in section (b) of this covenant; provided, however, that
if Holdings elects (or is required by the terms of any other Senior
Indebtedness), such Offer may be made ratably to purchase the Senior Discount
Notes and other Senior Indebtedness of Holdings; provided, however, that in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (A) or (C) above, Holdings or such Restricted Subsidiary will retire
such Indebtedness and will cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this covenant,
Holdings and the Restricted Subsidiaries will not be required to apply any Net
Available Cash in accordance with this covenant except to the extent that the
aggregate Net Available Cash from all Asset Dispositions that is not applied in
accordance with this covenant exceeds $20.0 million.
(b) In the event of an Asset Disposition that requires the purchase of
Senior Discount Notes (and other Senior Indebtedness) pursuant to clause
(a)(iii)(C) of this covenant, Holdings will be required to purchase Senior
Discount Notes (and other Senior Indebtedness) tendered pursuant to an offer by
Holdings for the Senior Discount Notes (and other Senior Indebtedness) (the
"Offer") at a purchase price of (a) 100% of the Accreted Value thereof at the
date of redemption plus liquidated damages thereon, if any, to the date of
redemption, if redeemed on or prior to June 1, 2003 and (b) 100% of the
principal amount thereof plus accrued and unpaid interest and liquidated
damages, if any, to the date of purchase, if purchased after June 1, 2003, in
each case in accordance with the procedures (including prorating in the event
of oversubscription), set forth in the Senior Discount Notes Indenture. If the
aggregate purchase price of Senior Discount Notes (and other Senior
Indebtedness) tendered pursuant to the Offer is less than the Net Available
Cash allotted to the purchase of the Senior Discount Notes (and other Senior
Indebtedness), Holdings may apply the remaining Net Available Cash for any
purpose permitted by the terms of the Senior Discount Notes Indenture. Holdings
will not be required to make an Offer for Senior Discount Notes (and other
Senior Indebtedness) pursuant to this covenant if the Net Available Cash
available therefor (after application of the proceeds as provided in clauses
(a)(iii)(A) and (B) of this covenant) is less than $10.0 million for any
particular Asset Disposition (which lesser amount will be carried forward for
purposes of determining whether an Offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).
(c) Holdings will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Senior Discount Notes pursuant
to this covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, Holdings will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
Limitations on Transactions with Affiliates. (a) Holdings will not, and
will not cause or permit any of its Restricted Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend
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any transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction") involving aggregate consideration in excess of $5.0
million, unless (i) such Affiliate Transaction is on terms that are not
materially less favorable to Holdings or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable transaction by
Holdings or such Restricted Subsidiary with an unrelated Person and (ii) with
respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million,
Holdings delivers to the Senior Discount Notes Trustee a resolution adopted by
the majority of the Board of Directors, approving such Affiliate Transaction
and set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i)
any Restricted Payment permitted to be paid pursuant to the covenant described
under " -- Limitation on Restricted Payments", (ii) any issuance of securities,
or other payments, Guarantees, awards or grants in cash, securities or
otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors, (iii) the
grant of stock options or similar rights to employees and directors of Holdings
pursuant to plans approved by the Board of Directors, (iv) loans or advances to
employees in the ordinary course of business in accordance with past practices
of Holdings, but in any event not to exceed $5.0 million in the aggregate
outstanding at any one time, (v) the payment of reasonable fees to directors of
Holdings and its Restricted Subsidiaries who are not employees of Holdings or
its Subsidiaries, (vi) any transaction between Holdings and a Restricted
Subsidiary or between Restricted Subsidiaries, (vii) any transaction effected
as part of a Qualified Receivables Transaction, (viii) indemnification
agreements with, and the payment of fees and indemnities to, directors,
officers and employees of Holdings and its Restricted Subsidiaries, in each
case, in the ordinary course of business, (ix) any employment, compensation,
noncompetition or confidentiality agreement entered into by Holdings and its
Restricted Subsidiaries with its employees in the ordinary course of business,
(x) the payment by Holdings of fees, expenses and other amounts to Cypress and
its Affiliates in connection with the Recapitalization, (xi) payments by
Holdings or any of its Restricted Subsidiaries to Cypress and its Affiliates
made pursuant to any financial advisory, financing, underwriting or placement
agreement, or in respect of other investment banking activities, in each case,
as determined by the Board of Directors in good faith, (xii) any issuance of
Capital Stock of Holdings (other than Disqualified Stock), (xiii) any agreement
as in effect as of the date of the Senior Discount Notes Indenture or any
amendment or replacement thereto so long as any such amendment or replacement
agreement is not more disadvantageous to the Senior Discount Noteholders of the
Senior Discount Notes in any material respect than the original agreement as in
effect on the date of the Senior Discount Notes Indenture and (xiv)
transactions in which Holdings or any of its Restricted Subsidiaries, as the
case may be, delivers to the Senior Discount Notes Trustee a letter from an
Independent Financial Advisor stating that such transaction is fair to Holdings
or such Restricted Subsidiary from a financial point of view or meets the
requirements of clause (a) of the preceding paragraph.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. Holdings will not sell or otherwise dispose of any shares of
Capital Stock of a Restricted Subsidiary, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of
any shares of its Capital Stock except: (i) to Holdings or a Wholly Owned
Subsidiary or to any director of a Restricted Subsidiary to the extent required
as director's qualifying shares; (ii) if, immediately after giving effect to
such issuance, sale or other disposition, neither Holdings nor any of its
Subsidiaries own any Capital Stock of such Restricted Subsidiary or (iii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any
Investment in such Person remaining after giving effect thereto would have been
permitted to be made under the covenant described under " -- Limitation on
Restricted Payments" if made on the date of such issuance, sale or other
disposition. The provisions of this covenant will not prohibit any transaction
effected as part of a Qualified Receivables Transaction. The proceeds of any
sale of such Capital Stock permitted hereby will be treated as Net Available
Cash from an Asset Disposition and must be applied in accordance with the terms
of the covenant described under " -- Limitation on Sales of Assets and
Subsidiary Stock."
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Limitation on Liens. Holdings will not, directly or indirectly, Incur or
permit to exist any Lien that secures Indebtedness of Holdings of any nature
whatsoever on any of its property or assets (including Capital Stock of a
Restricted Subsidiary), whether owned at the Closing Date or thereafter
acquired, other than Permitted Liens, without effectively providing that the
Senior Discount Notes shall be secured equally and ratably with (or on a senior
basis to in the case of Subordinated Obligations) the obligations so secured
for so long as such obligations are so secured.
SEC Reports. Notwithstanding that Holdings may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, Holdings
shall file with the SEC and provide the Senior Discount Notes Trustee and any
Senior Discount Noteholder or prospective Senior Discount Noteholder (upon the
request of such Senior Discount Noteholder or prospective Senior Discount
Noteholder) with such annual reports and such information, documents and other
reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such Sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such Sections.
Merger and Consolidation
Holdings will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company")
will be a corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and the
Successor Company (if not Holdings) will expressly assume, by an indenture
supplemental hereto, executed and delivered to the Senior Discount Notes
Trustee, in form satisfactory to the Senior Discount Notes Trustee, all the
obligations of Holdings under the Senior Discount Notes and the Senior Discount
Notes Indenture; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor Company
or any Restricted Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Restricted Subsidiary at the time of
such transaction), no Default will have occurred and be continuing; (iii)
immediately after giving effect to such transaction, (A) the Successor Company
would be able to Incur an additional $1.00 of Indebtedness under paragraph (a)
of the covenant described under " -- Certain Covenants -- Limitation on
Indebtedness" or (B) the Consolidated Coverage Ratio for the Successor Company
and its Restricted Subsidiaries would be greater than such ratio for Holdings
and its Restricted Subsidiaries immediately prior to such transaction; (iv)
immediately after giving effect to such transaction, the Successor Company will
have Consolidated Net Worth in an amount which is not less than the
Consolidated Net Worth of Holdings immediately prior to such transaction; and
(v) Holdings will have delivered to the Senior Discount Notes Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Senior Discount Notes Indenture. Notwithstanding clause (iii)
above, a Wholly Owned Subsidiary may be consolidated with or merged into
Holdings and Holdings may consolidate with or merge with or into another
Person, if such Person is a single purpose corporation that has not conducted
any business or Incurred any Indebtedness or other liabilities and such
transaction is being consummated solely to change the state of incorporation of
Holdings.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, Holdings under the Senior Discount Notes
Indenture, but the predecessor Company in the case of a conveyance, transfer or
lease of all or substantially all its assets will not be released from the
obligation to pay the principal of and interest on the Senior Discount Notes.
Defaults
An Event of Default is defined in the Senior Discount Notes Indenture as
(i) a default in any payment of interest on any Senior Discount Note when due
and payable, continued for 30 days, (ii) a default in the payment of Accreted
Value or principal of any Senior Discount Note when due and payable at its
Stated Maturity, upon required redemption or repurchase, upon declaration or
otherwise, (iii) the failure by Holdings to comply with its obligations under
the covenant described under " -- Merger and Consolidation", (iv) the failure
by Holdings to comply for 30 days after notice with any of its
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obligations under the covenants described under " -- Change of Control" or " --
Certain Covenants" (in each case, other than a failure to purchase Senior
Discount Notes), (v) the failure by Holdings to comply for 60 days after notice
with its other agreements contained in the Senior Discount Notes or the Senior
Discount Notes Indenture, (vi) the failure by Holdings or any Significant
Subsidiary to pay any Indebtedness within any applicable grace period after
final maturity or the acceleration of any such Indebtedness by the holders
thereof because of a default if the total amount of such Indebtedness unpaid or
accelerated exceeds $25 million or its foreign currency equivalent (the "cross
acceleration provision") and such failure continues for 10 days after receipt
of the notice specified in the Senior Discount Notes Indenture, (vii) certain
events of bankruptcy, insolvency or reorganization of Holdings or a Significant
Subsidiary (the "bankruptcy provisions"), or (viii) the rendering of any
judgment or decree for the payment of money in excess of $25 million or its
foreign currency equivalent against Holdings or a Significant Subsidiary if (A)
an enforcement proceeding thereon is commenced by any creditor or (B) such
judgment or decree remains outstanding for a period of 60 days following such
judgment and is not discharged, waived or stayed within 10 days after notice
(the "judgment default provision").
The foregoing will constitute Events of Default whatever the reason for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body.
However, a default under clauses (iv), (v), (vi) or (viii) will not
constitute an Event of Default until the Senior Discount Notes Trustee or the
Senior Discount Noteholders of at least 25% in principal amount at maturity of
the outstanding Senior Discount Notes notify Holdings of the default and
Holdings does not cure such default within the time specified in clauses (iv),
(v), (vi) or (viii) hereof after receipt of such notice.
If an Event of Default (other than an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of Holdings) occurs and is
continuing, the Senior Discount Notes Trustee or the Senior Discount
Noteholders of at least 25% in principal amount at maturity of the outstanding
Senior Discount Notes by notice to Holdings may declare (a) the Accreted Value
of all the Senior Discount Notes, if on or prior to June 1, 2003 or (b) the
principal of and accrued but unpaid interest on all the Senior Discount Notes,
if after June 1, 2003, to be due and payable. Upon such a declaration, such
amounts will be due and payable immediately. If an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of Holdings occurs,
(a) the Accreted Value of all the Senior Discount Notes, if on or prior to June
1, 2003 or (b) the principal of and interest on all the Senior Discount Notes,
if after June 1, 2003, will become immediately due and payable without any
declaration or other act on the part of the Senior Discount Notes Trustee or
any Senior Discount Noteholders. Under certain circumstances, the Senior
Discount Noteholders of a majority in principal amount at maturity of the
outstanding Senior Discount Notes may rescind any such acceleration with
respect to the Senior Discount Notes and its consequences.
Subject to the provisions of the Senior Discount Notes Indenture relating
to the duties of the Senior Discount Notes Trustee, in case an Event of Default
occurs and is continuing, the Senior Discount Notes Trustee will be under no
obligation to exercise any of the rights or powers under the Senior Discount
Notes Indenture at the request or direction of any of the Senior Discount
Noteholders unless such Senior Discount Noteholders have offered to the Senior
Discount Notes Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
Accreted Value, principal, premium (if any) or interest when due, no Senior
Discount Noteholder may pursue any remedy with respect to the Senior Discount
Notes Indenture or the Senior Discount Notes unless (i) such Senior Discount
Noteholder has previously given the Senior Discount Notes Trustee notice that
an Event of Default is continuing, (ii) Senior Discount Noteholders of at least
25% in principal amount at maturity of the outstanding Senior Discount Notes
have requested the Senior Discount Notes Trustee in writing to pursue the
remedy, (iii) such Senior Discount Noteholders have offered the Senior Discount
Notes Trustee reasonable security or indemnity against any loss, liability or
expense, (iv) the Senior Discount Notes Trustee has not complied with such
request within 60 days after the receipt of the request and the offer of
security or indemnity and (v) the Senior Discount Noteholders of a majority in
principal amount at maturity of the outstanding Senior Discount Notes have not
given the Senior Discount Notes Trustee a direction inconsistent with such
request within such 60-day period.
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Subject to certain restrictions, the Senior Discount Noteholders of a majority
in principal amount at maturity of the outstanding Senior Discount Notes are
given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Senior Discount Notes Trustee or of
exercising any trust or power conferred on the Senior Discount Notes Trustee.
The Senior Discount Notes Trustee, however, may refuse to follow any direction
that conflicts with law or the Senior Discount Notes Indenture or that the
Senior Discount Notes Trustee determines is unduly prejudicial to the rights of
any other Senior Discount Noteholder or that would involve the Senior Discount
Notes Trustee in personal liability. Prior to taking any action under the
Senior Discount Notes Indenture, the Senior Discount Notes Trustee will be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
The Senior Discount Notes Indenture provides that if a Default occurs and
is continuing and is known to the Senior Discount Notes Trustee, the Senior
Discount Notes Trustee must mail to each Senior Discount Noteholder notice of
the Default within the earlier of 90 days after it occurs or 30 days after it
is known to a Trust Officer or written notice of it is received by the Senior
Discount Notes Trustee. Except in the case of a Default in the payment of
Accreted Value of, principal of, premium (if any) or interest on any Senior
Discount Note (including payments pursuant to the redemption provisions of such
Senior Discount Note), the Senior Discount Notes Trustee may withhold notice if
and so long as a committee of its Trust Officers in good faith determines that
withholding notice is in the interests of the Senior Discount Noteholders. In
addition, Holdings is required to deliver to the Senior Discount Notes Trustee,
within 120 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any Default that occurred during the
previous year. Holdings also is required to deliver to the Senior Discount
Notes Trustee, within 30 days after the occurrence thereof, written notice of
any event which would constitute certain Events of Default, their status and
what action Holdings is taking or proposes to take in respect thereof.
Amendments and Waivers
Subject to certain exceptions, the Senior Discount Notes Indenture or the
Senior Discount Notes may be amended with the written consent of the Senior
Discount Noteholders of a majority in principal amount at maturity of the
Senior Discount Notes then outstanding and any past default or compliance with
any provisions may be waived with the consent of the Senior Discount
Noteholders of a majority in principal amount at maturity of the Senior
Discount Notes then outstanding. However, without the consent of each Senior
Discount Noteholder of an outstanding Senior Discount Note affected, no
amendment may, among other things, (i) reduce the amount of Senior Discount
Notes whose Senior Discount Noteholders must consent to an amendment, (ii)
reduce the rate of or extend the time for payment of interest or any liquidated
damages on any Senior Discount Note, (iii) reduce the Accreted Value or
principal of or extend the Stated Maturity of any Senior Discount Note, (iv)
reduce the premium payable upon the redemption of any Senior Discount Note or
change the time at which any Senior Discount Note may be redeemed as described
under " -- Optional Redemption", (v) make any Senior Discount Note payable in
money other than that stated in the Senior Discount Note, (vi) impair the right
of any Senior Discount Noteholder to receive payment of principal of and
interest or any liquidated damages on such Senior Discount Noteholder's Senior
Discount Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Senior Discount
Noteholder's Senior Discount Notes or (vii) make any change in the amendment
provisions which require each Senior Discount Noteholder's consent or in the
waiver provisions.
Without the consent of any Senior Discount Noteholder, Holdings and the
Senior Discount Notes Trustee may amend the Senior Discount Notes Indenture to
cure any ambiguity, omission, defect or inconsistency, to provide for the
assumption by a successor corporation of the obligations of Holdings under the
Senior Discount Notes Indenture, to provide for uncertificated Senior Discount
Notes in addition to or in place of certificated Senior Discount Notes
(provided that the uncertificated Senior Discount Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated Senior Discount Notes are described in Section
163(f)(2)(B) of the Code), to add Guarantees with respect to the Senior
Discount Notes, to secure the Senior Discount Notes, to add to the covenants of
Holdings for the benefit of the Senior Discount Noteholders or to surrender any
right
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or power conferred upon Holdings, to make any change that does not adversely
affect the rights of any Senior Discount Noteholder, subject to the provisions
of the Senior Discount Notes Indenture, to provide for the issuance of the
Senior Discount Exchange Notes or to comply with any requirement of the SEC in
connection with the qualification of the Senior Discount Notes Indenture under
the TIA.
The consent of the Senior Discount Noteholders is not necessary under the
Senior Discount Notes Indenture to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the substance of the
proposed amendment.
After an amendment under the Senior Discount Notes Indenture becomes
effective, Holdings is required to mail to Senior Discount Noteholders a notice
briefly describing such amendment. However, the failure to give such notice to
all Senior Discount Noteholders, or any defect therein, will not impair or
affect the validity of the amendment.
Transfer and Exchange
A Senior Discount Noteholder may transfer or exchange Senior Discount
Notes in accordance with the Senior Discount Notes Indenture. Upon any transfer
or exchange, the registrar and the Senior Discount Notes Trustee may require a
Senior Discount Noteholder, among other things, to furnish appropriate
endorsements and transfer documents and Holdings may require a Senior Discount
Noteholder to pay any taxes required by law or permitted by the Senior Discount
Notes Indenture. Holdings is not required to transfer or exchange any Senior
Discount Note selected for redemption or to transfer or exchange any Senior
Discount Note for a period of 15 days prior to a selection of Senior Discount
Notes to be redeemed. The Senior Discount Notes will be issued in registered
form and the registered holder of a Senior Discount Note will be treated as the
owner of such Senior Discount Note for all purposes.
Defeasance
Holdings at any time may terminate all its obligations under the Senior
Discount Notes and the Senior Discount Notes Indenture ("legal defeasance"),
except for certain obligations, including those respecting the defeasance trust
and obligations to register the transfer or exchange of the Senior Discount
Notes, to replace mutilated, destroyed, lost or stolen Senior Discount Notes
and to maintain a registrar and paying agent in respect of the Senior Discount
Notes. Holdings at any time may terminate its obligations under the covenants
described under " -- Certain Covenants", the operation of the cross
acceleration provision, the bankruptcy provisions with respect to Significant
Subsidiaries and the judgment default provision described under " -- Defaults"
and the limitations contained in clauses (iii) and (iv) under " -- Merger and
Consolidation" ("covenant defeasance").
Holdings may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If Holdings exercises its
legal defeasance option, payment of the Senior Discount Notes may not be
accelerated because of an Event of Default with respect thereto. If Holdings
exercises its covenant defeasance option, payment of the Senior Discount Notes
may not be accelerated because of an Event of Default specified in clause (iv),
(vi), (vii) (with respect only to Significant Subsidiaries) or (viii) (with
respect only to Significant Subsidiaries) under " -- Defaults" or because of
the failure of Holdings to comply with clause (iii) or (iv) under " -- Merger
and Consolidation".
In order to exercise either defeasance option, Holdings must irrevocably
deposit in trust (the "defeasance trust") with the Senior Discount Notes
Trustee money or U.S. Government Obligations for the payment of principal,
premium (if any) and interest on the Senior Discount Notes to redemption or
maturity, as the case may be, and must comply with certain other conditions,
including delivery to the Senior Discount Notes Trustee of an Opinion of
Counsel to the effect that holders of the Senior Discount Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such deposit and defeasance and will be subject to Federal income tax on the
same amounts and in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred (and, in the case of
legal defeasance only, such Opinion of Counsel must be based on a ruling of the
Internal Revenue Service or other change in applicable Federal income tax law).
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Concerning the Senior Discount Notes Trustee
Bank One, N.A. is the Senior Discount Notes Trustee under the Senior
Discount Notes Indenture and has been appointed by Holdings as Registrar and
Paying Agent with regard to the Senior Discount Notes.
Governing Law
The Senior Discount Notes Indenture provides that it and the Senior
Discount Notes will be governed by, and construed in accordance with, the laws
of the State of New York without giving effect to applicable principles of
conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
Certain Definitions
"Accreted Value" as of any date (the "Specified Date") means, with respect
to each $1,000 principal amount at maturity of Senior Discount Notes:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accretion Date"), the amount set forth oppose such date below:
Semi-Annual Accretion Date Accreted Value
- - - - ---------------------------------- ---------------
Issue Date ................ $ 580.21
December 1, 1998 .......... $ 611.89
June 1, 1999 .............. $ 646.07
December 1, 1999 .......... $ 682.17
June 1, 2000 .............. $ 720.29
December 1, 2000 .......... $ 760.54
June 1, 2001 .............. $ 803.03
December 1, 2001 .......... $ 847.90
June 1, 2002 .............. $ 895.28
December 1, 2002 .......... $ 945.30
June 1, 2003 .............. $ 998.12
(ii) if the Specified Date occurs between two Semi-Annual Accretion Dates,
the sum of (a) the Accreted Value for the Semi-Annual Accretion Date
immediately preceding the Specified Date and (b) an amount equal to the product
of (x) the Accreted Value for the immediately following Semi-Annual Accretion
Date less the Accreted Value for the immediately preceding Semi-Annual
Accretion Date and (y) a fraction, the numerator of which is the number of days
actually elapsed from the immediately preceding Semi-Annual Accretion Date to
the Specified Date and the denominator of which is 180, and
(iii) if the Specified Date is after June 1, 2003, $998.12.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by Holdings or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by Holdings or another Restricted Subsidiary; or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a
Restricted Subsidiary; provided, however, that any such Restricted Subsidiary
described in clauses (ii) or (iii) above is primarily engaged in a Related
Business.
"Adjusted Consolidated Assets" means at any time the total amount of
assets of Holdings and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), after deducting
therefrom all current liabilities of Holdings and its Restricted Subsidiaries
(excluding intercompany items), all as set forth on the Consolidated balance
sheet of Holdings and its Restricted Subsidiaries as of the end of the most
recent fiscal quarter for which financial statements are available prior to the
date of determination.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of
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this definition, "control" when used with respect to any Person means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Applicable Premium" means, with respect to a Senior Discount Note at any
redemption date, the greater of (i) 1.0% of the Accreted Value of such Senior
Discount Note and (ii) the excess of (A) the present value at such time of the
redemption price of such Senior Discount Note at June 1, 2003 (such redemption
price being set forth in the table set forth under " -- Optional Redemption")
computed using a discount rate equal to the Treasury Rate plus 50 basis points,
over (B) the Accreted Value of such Senior Discount Note.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers or dispositions) by Holdings or
any Restricted Subsidiary, including any disposition by means of a merger,
consolidation, or similar transaction (each referred to for the purposes of
this definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than Holdings or a
Restricted Subsidiary), (ii) all or substantially all the assets of any
division or line of business of Holdings or any Restricted Subsidiary or (iii)
any other assets of Holdings or any Restricted Subsidiary outside the ordinary
course of business of Holdings or such Restricted Subsidiary (other than, in
the case of (i), (ii) and (iii) above, (A) a disposition by a Restricted
Subsidiary to Holdings or by Holdings or a Restricted Subsidiary to a Wholly
Owned Subsidiary, (B) for purposes of the provisions described under " --
Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only,
a disposition subject to the covenant described under " -- Certain Covenants --
Limitation on Restricted Payments", (C) a disposition of assets with a fair
market value of less than $1,000,000, (D) a sale of accounts receivables and
related assets of the type specified in the definition of "Qualified
Receivables Transaction" to a Receivables Entity in a Qualified Receivables
Transaction, (E) a transfer of accounts receivables and related assets of the
type specified in the definition of "Qualified Receivables Transaction" (or a
fractional undivided interest therein) by a Receivables Entity in a Qualified
Receivables Transaction, (F) the disposition of all or substantially all of the
assets of Holdings in a manner permitted pursuant to the provisions described
above under "Merger and Consolidation" or any disposition that constitutes a
Change of Control pursuant to the Senior Discount Notes Indenture, (G) any
exchange of like property pursuant to Section 1031 of the Internal Revenue Code
of 1986, as amended, for use in a Related Business, and (H) any sale of Capital
Stock in, or Indebtedness or other securities of, an Unrestricted Subsidiary).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as
at the time of determination, the present value (discounted at the interest
rate borne by the Senior Discount Notes after June 1, 2003, compounded
annually) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction
(including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect
of the Credit Agreement and any Refinancing Indebtedness with respect thereto,
as amended from time to time, including principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of Holdings or any
committee thereof duly authorized to act on behalf of such Board.
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"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any
Preferred Stock, but excluding any debt securities convertible into such
equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined
in accordance with GAAP; and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such lease prior to the
first date upon which such lease may be prepaid by the lessee without payment
of a penalty.
"Closing Date" means the date of the Senior Discount Notes Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters for which internal financial statements are
available prior to the date of such determination to (ii) Consolidated Interest
Expense for such four fiscal quarters; provided, however, that (A) if Holdings
or any Restricted Subsidiary has Incurred any Indebtedness since the beginning
of such period that remains outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving effect on a pro forma
basis to such Indebtedness as if such Indebtedness had been Incurred on the
first day of such period and the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility outstanding on the date of such calculation shall be
computed based on (1) the average daily balance of such Indebtedness (and any
Indebtedness under a revolving credit facility replaced by such Indebtedness)
during such four fiscal quarters or such shorter period when such facility and
any replaced facility was outstanding or (2) if such facility was created after
the end of such four fiscal quarters, the average daily balance of such
Indebtedness (and any Indebtedness under a revolving credit facility replaced
by such Indebtedness) during the period from the date of creation of such
facility to the date of the calculation), (B) if Holdings or any Restricted
Subsidiary has repaid, repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of such period or if any Indebtedness is to be
repaid, repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the date
of the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall
be calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as if Holdings or such Restricted Subsidiary has
not earned the interest income actually earned during such period in respect of
cash or Temporary Cash Investments used to repay, repurchase, defease or
otherwise discharge such Indebtedness, (C) if since the beginning of such
period Holdings or any Restricted Subsidiary shall have made any Asset
Disposition, the EBITDA for such period shall be reduced by an amount equal to
the EBITDA (if positive) directly attributable to the assets that are the
subject of such Asset Disposition for such period or increased by an amount
equal to the EBITDA (if negative) directly attributable thereto for such period
and Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of Holdings or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to Holdings and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent Holdings and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (D) if since the beginning of such period Holdings or any
Restricted Subsidiary (by merger or otherwise) shall have
152
made an Investment in any Restricted Subsidiary (or any Person that becomes a
Restricted Subsidiary) or an acquisition of assets, including any acquisition
of assets occurring in connection with a transaction causing a calculation to
be made hereunder, which constitutes all or substantially all of an operating
unit of a business, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition occurred
on the first day of such period and (E) if since the beginning of such period
any Person (that subsequently became a Restricted Subsidiary or was merged with
or into Holdings or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Disposition or any Investment or acquisition
of assets that would have required an adjustment pursuant to clause (C) or (D)
above if made by Holdings or a Restricted Subsidiary during such period, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such Asset Disposition, Investment or
acquisition of assets occurred on the first day of such period. For purposes of
this definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer of Holdings and such pro
forma calculations shall include (A) (x) the savings in cost of goods sold that
would have resulted from using Holdings' actual costs for comparable goods and
services during the comparable period and (y) other savings in cost of goods
sold or eliminations of selling, general and administrative expenses as
determined by a responsible financial or accounting Officer of Holdings in good
faith in connection with Holdings' consideration of such acquisition and
consistent with Holdings' experience in acquisitions of similar assets, less
(B) the incremental expenses that would be included in cost of goods sold and
selling, general and administrative expenses that would have been incurred by
Holdings in the operation of such acquired assets during such period. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for
the entire period (taking into account any Interest Rate Agreement applicable
to such Indebtedness if such Interest Rate Agreement has a remaining term as at
the date of determination in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense (net of interest income) of Holdings and its Consolidated Restricted
Subsidiaries, plus, to the extent Incurred by Holdings and its Restricted
Subsidiaries in such period but not included in such interest expense, (i)
interest expense attributable to Capitalized Lease Obligations and the interest
expense attributable to leases constituting part of a Sale/Leaseback
Transaction, (ii) amortization of debt discount, (iii) capitalized interest,
(iv) non-cash interest expense, (v) commissions, discounts and other fees and
charges attributable to letters of credit and bankers' acceptance financing,
(vi) interest accruing on any Indebtedness of any other Person to the extent
such Indebtedness is Guaranteed by Holdings or any Restricted Subsidiary, (vii)
net costs associated with Hedging Obligations (including amortization of fees),
(viii) dividends in respect of all Preferred Stock of Holdings and any of the
Restricted Subsidiaries of Holdings (other than pay in kind dividends and
accretions to liquidation value) to the extent held by Persons other than
Holdings or a Wholly Owned Subsidiary, (ix) interest Incurred in connection
with investments in discontinued operations and (x) the cash contributions to
any employee stock ownership plan or similar trust to the extent such
contributions are used by such plan or trust to pay interest or fees to any
Person (other than Holdings) in connection with Indebtedness Incurred by such
plan or trust, less, to the extent included in such total interest expense, the
amortization during such period of capitalized financing costs. Notwithstanding
anything to the contrary contained herein, interest expense, commissions,
discounts, yield and other fees and charges Incurred in connection with any
Qualified Receivables Transaction pursuant to which Holdings or any Subsidiary
may sell, convey or otherwise transfer or grant a security interest in any
accounts receivable or related assets of the type specified in the definition
of "Qualified Receivables Transaction" shall not be included in Consolidated
Interest Expense; provided that any interest expense, commissions, discounts,
yield and other fees and charges Incurred in connection with any receivables
financing or securitization that does not constitute a Qualified Receivables
Transaction shall be included in Consolidated Interest Expense.
"Consolidated Net Income" means, for any period, the net income of
Holdings and its Consolidated Subsidiaries for such period; provided, however,
that there shall not be included in such Consolidated
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Net Income: (i) any net income of any Person (other than Holdings) if such
Person is not a Restricted Subsidiary, except that (A) subject to the
limitations contained in clause (iv) below, Holdings' equity in the net income
of any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such period to Holdings or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other distribution
made to a Restricted Subsidiary, to the limitations contained in clause (iii)
below) and (B) Holdings' equity in a net loss of any such Person for such
period shall be included in determining such Consolidated Net Income; (ii) any
net income (or loss) of any person acquired by Holdings or a Subsidiary in a
pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income (or loss) of any Restricted Subsidiary if
such Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to Holdings, except that (A) subject to the
limitations contained in clause (iv) below, Holdings' equity in the net income
of any such Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash which could have
been distributed by such Restricted Subsidiary during such period to Holdings
or another Restricted Subsidiary as a dividend or other distribution (subject,
in the case of a dividend or other distribution made to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) Holdings'
equity in a net loss of any such Restricted Subsidiary for such period shall be
included in determining such Consolidated Net Income; (iv) any gain (or loss)
realized upon the sale or other disposition of any asset of Holdings or its
Consolidated Subsidiaries (including pursuant to any Sale/Leaseback
Transaction) that is not sold or otherwise disposed of in the ordinary course
of business and any gain (or loss) realized upon the sale or other disposition
of any Capital Stock of any Person; (v) any extraordinary gain or loss; (vi)
the cumulative effect of a change in accounting principles; and (vii) any
expenses or charges paid to third parties related to any Equity Offering,
Permitted Investment, acquisition, recapitalization or Indebtedness permitted
to be Incurred by the Senior Discount Notes Indenture (whether or not
successful) (including such fees, expenses, or charges related to the
Recapitalization). Notwithstanding the foregoing, for the purpose of the
covenant described under " -- Certain Covenants -- Limitation on Restricted
Payments" only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to Holdings or a Restricted Subsidiary to the extent
such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of Holdings and its Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of Holdings
for which internal financial statements are available, as (i) the par or stated
value of all outstanding Capital Stock of Holdings plus (ii) paid-in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of Holdings in accordance with GAAP
consistently applied; provided, however, that "Consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of Holdings or any Restricted Subsidiary in an Unrestricted Subsidiary will be
accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Agreement" means the credit agreement to be dated as of the
Closing Date, as amended, waived or otherwise modified from time to time, among
Holdings, the Company, WESCO Distribution-Canada, Inc., certain financial
institutions to be party thereto, The Chase Manhattan Bank, as U.S.
administrative agent, syndication agent and U.S. collateral agent, The Chase
Manhattan Bank of Canada, as Canadian administrative agent and Canadian
collateral agent, and Lehman Commercial Paper Inc., as documentation agent.
"Credit Facilities" means, with respect to Holdings or the Company, one or
more debt facilities, or commercial paper facilities with banks or other
institutional lenders or indentures providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against receivables), letters
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of credit or other long-term Indebtedness, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time.
"Currency Agreement" means with respect to any Person any foreign exchange
contract, currency swap agreement or other similar agreement or arrangement to
which such Person is a party or of which it is a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Noncash Consideration" means the fair market value of noncash
consideration received by Holdings or any of its Restricted Subsidiaries in
connection with an Asset Disposition that is so designated as Designated
Noncash Consideration pursuant to an Officers' Certificate, setting forth the
basis of such valuation, less the amount of cash or cash equivalents received
in connection with a subsequent sale of such Designated Noncash Consideration.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to the 91st day
following the Stated Maturity of the Senior Discount Notes; provided, however,
that any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the first anniversary of the Stated
Maturity of the Securities shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the provisions
of the covenants described under " -- Change of Control" and " -- Certain
Covenants -- Limitation on Sale of Assets and Subsidiary Stock."
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) income tax expense of Holdings and its Consolidated Restricted
Subsidiaries, (ii) Consolidated Interest Expense, (iii) depreciation expense of
Holdings and its Consolidated Restricted Subsidiaries, (iv) amortization
expense of Holdings and its Consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid cash item that was paid in a
prior period), (v) all other non-cash charges of Holdings and its Consolidated
Restricted Subsidiaries (excluding any such non-cash charge to the extent it
represents an accrual of or reserve for cash expenditures in any future period)
in each case for such period and (vi) income attributable to discontinued
operations. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization and non-cash
charges of, a Restricted Subsidiary of Holdings shall be added to Consolidated
Net Income to compute EBITDA only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted
at the date of determination to be dividended to Holdings by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Equity Offering" means a private sale or public offering of Capital Stock
(other than Disqualified Stock) of Holdings.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Contribution" means the Net Cash Proceeds received by Holdings
from (a) contributions to its common equity capital and (b) the sale (other
than to a Subsidiary or to any Holdings or Subsidiary management equity plan or
stock option plan or any other management or employee benefit plan or
agreement) of Capital Stock (other than Disqualified Stock) of Holdings, in
each case designated as Excluded Contributions pursuant to an Officers'
Certificate executed by the principal executive officer
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and the principal financial officer of Holdings on the date such capital
contributions are made or the date such Capital Stock is sold.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in
(i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
All ratios and computations based on GAAP contained in the Senior Discount
Notes Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning. The term
"Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Person at the time it becomes a Subsidiary. The term "Incurrence" when used as
a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money; (ii) the
principal of and premium (if any) in respect of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto) (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in clauses (i), (ii), (iv) and (v) hereof) to the
extent such letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than the 30th day following payment
on the letter of credit so long as such letter of credit is entered into in the
ordinary course of business ); (iv) all obligations of such Person to pay the
deferred and unpaid purchase price of property or services (except Trade
Payables), which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services; (v) all Capitalized Lease Obligations and all
Attributable Debt of such Person; (vi) the amount of all obligations of such
Person with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary of such Person, any
Preferred Stock (but excluding, in each case, any accrued dividends); (vii) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; provided, however,
that the amount of Indebtedness of such Person shall be the lesser of (A) the
fair market value of such asset at such date of determination and (B) the
amount of such Indebtedness of such other Persons; (viii) to the extent not
otherwise included in this definition, Hedging Obligations of such Person; and
(ix) all obligations of the type referred to in clauses (i) through (viii) of
other Persons and all dividends
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of other Persons for the payment of which, in either case, such Person is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability, upon
the occurrence of the contingency giving rise to the obligation, of any
contingent obligations at such date provided, however, that the amount
outstanding at any time of any Indebtedness Incurred with original issue
discount is the face amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP. Any "Qualified Receivables Transaction",
whether or not such transfer constitutes a sale for the purposes of GAAP, shall
not constitute Indebtedness hereunder; provided that any receivables financing
or securitization that does not constitute a Qualified Receivables Transaction
and does not qualify as a sale under GAAP shall constitute Indebtedness
hereunder.
"Independent Financial Advisor" means an accounting, appraisal, investment
banking firm or consultant of nationally recognized standing that is, in the
good faith determination of Holdings, qualified to perform the task for which
it has been engaged.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and the covenant described under " -- Certain
Covenants -- Limitation on Restricted Payments", (i) "Investment" shall include
the portion (proportionate to Holdings' equity interest in such Subsidiary) of
the fair market value of the net assets of any Subsidiary of Holdings at the
time that such Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, Holdings shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) Holdings' "Investment" in such Subsidiary at the time of such redesignation
less (y) the portion (proportionate to Holdings' equity interest in such
Subsidiary) of the fair market value of the net assets of such Subsidiary at
the time of such redesignation; and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, in each case as determined in good faith by the Board of
Directors.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received (including (a) any cash payments received upon the sale or other
disposition of any Designated Noncash Consideration received in any Asset
Disposition, (b) any cash proceeds received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and (c) any
cash proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to the properties or assets that are
the subject of such Asset Disposition or received in any other non-cash form)
therefrom, in each case net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred (including, without
limitation, all broker's and finder's fees and expenses, all investment banking
fees and expenses, employee severance and termination costs, and trade payable
and similar liabilities solely related to the assets sold or otherwise disposed
of and required to be paid by the seller as a result thereof), and all Federal,
state, provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
relocation expenses incurred as a result thereof, (iii) all
157
payments made on any Indebtedness which is secured by any assets subject to
such Asset Disposition, in accordance with the terms of any Lien upon or other
security agreement of any kind with respect to such assets, or which must by
its terms, or in order to obtain a necessary consent to such Asset Disposition,
or by applicable law be repaid out of the proceeds from such Asset Disposition,
(iv) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (v) appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
property or other assets disposed of in such Asset Disposition and retained by
Holdings or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the Chairman of the Board, the Chief Executive Officer,
the Chief Financial Officer, the President, any Vice President, the Treasurer,
any Assistant Treasurer, the Secretary or any Assistant Secretary of Holdings.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Senior Discount Notes Trustee. The counsel may be an employee
of or counsel to Holdings or the Senior Discount Notes Trustee.
"Permitted Holders" means: (i) The Cypress Group L.L.C., Cypress Merchant
Banking Partners L.P., Cypress Offshore Partners L.P., Chase Equity Associates,
L.P., Co-Investment Partners, L.P. and any Person who on the Senior Discount
Notes Issue Date is an Affiliate of any of the foregoing; (ii) any Person who
is a member of the senior management of Holdings and a stockholder of Holdings
on the Senior Discount Notes Issue Date; and (iii) any Person acting in the
capacity of an underwriter in connection with a public or private offering of
Holdings' Capital Stock.
"Permitted Investment" means an Investment by Holdings or any Restricted
Subsidiary in (i) Holdings, a Restricted Subsidiary or a Person that will, upon
the making of such Investment, become a Restricted Subsidiary; (ii) another
Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, Holdings or a Restricted Subsidiary; (iii) Temporary Cash
Investments; (iv) receivables owing to Holdings or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as Holdings or any
such Restricted Subsidiary deems reasonable under the circumstances; (v)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business consistent with
past practices of Holdings or such Restricted Subsidiary and not exceeding $5.0
million in the aggregate outstanding at any one time; (vii) stock, obligations
or securities received in settlement of debts created in the ordinary course of
business and owing to Holdings or any Restricted Subsidiary or in satisfaction
of judgments; (viii) any Person to the extent such Investment represents the
non-cash portion of the consideration received for an Asset Disposition that
was made pursuant to and in compliance with the covenant described under " --
Certain Covenants -- Limitation on Sale of Assets and Subsidiary Stock"; (ix)
Investments made in connection with any Asset Disposition or other sale, lease,
transfer or other disposition permitted under the Senior Discount Notes
Indenture; (x) a Receivables Entity or any Investment by a Receivables Entity
in any other Person in connection with a Qualified Receivables Transaction,
including Investments of funds held in accounts permitted or required by the
arrangements governing such Qualified Receivables Transaction or any related
Indebtedness; provided that any Investment in a Receivables Entity is in the
form of a Purchase Money Note, contribution of additional receivables or an
equity interest; (xi) Investments in a Related Business having an aggregate
fair market value, taken together with all other Investments made pursuant to
this clause (xi) that are at that time outstanding (and not including any
Investments outstanding on the Closing Date),
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not to exceed 5% of Adjusted Consolidated Assets at the time of such
Investments (with the fair market value of each Investment being measured at
the time made and without giving effect to subsequent changes in value); and
(xii) additional Investments in an aggregate amount which, together with all
other Investments made pursuant to this clause that are then outstanding, does
not exceed $10.0 million.
"Permitted Liens" means (a) Liens of Holdings securing Indebtedness of
Holdings or any of its Restricted Subsidiaries Incurred under the Credit
Agreement or other Credit Facilities to the extent permitted to be Incurred
under clause (b)(i) and (xiii) of the description of the "Limitation on
Indebtedness" covenant; (b) Liens in favor of Holdings; (c) Liens of Holdings
securing Indebtedness of Holdings Incurred under clause (b)(v) of the
description of the "Limitation on Indebtedness" covenant; (d) Liens of Holdings
securing Indebtedness of Holdings (including under a Sale/Leaseback
Transaction) permitted to be Incurred under clause (b)(vi), (vii) and (viii) of
the description of the "Limitation on Indebtedness" covenant so long as the
Capital Stock, property (real or personal) or equipment to which such Lien
attaches solely consists of the Capital Stock, property or equipment which is
the subject of such acquisition, purchase, lease, improvement, Sale/Leaseback
Transaction and additions and improvements thereto (and the proceeds
therefrom); (e) Liens on property existing at the time of acquisition thereof
by Holdings; provided that such Liens were not Incurred in connection with, or
in contemplation of, such acquisition and such Liens do not extend to or cover
any property other than such property, additions and improvements thereon and
any proceeds therefrom; (f) Liens Incurred or deposits made to secure the
performance of tenders, bids, leases, statutory obligations, surety or appeal
bonds, government contracts, performance and return of money bonds or other
obligations of a like nature Incurred in the ordinary course of business; (g)
Liens existing on the Senior Discount Notes Issue Date and any additional Liens
created under the terms of the agreements relating to such Liens existing on
the Senior Discount Notes Issue Date; (h) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings; provided that any reserve
or other appropriate provision as shall be required in conformity with GAAP
shall have been made therefor; (i) Liens Incurred in the ordinary course of
business of Holdings with respect to obligations that do not exceed $20.0
million in the aggregate at any one time outstanding and that (1) are not
Incurred in connection with or in contemplation of the borrowing of money or
the obtaining of advances or credit (other than trade credit in the ordinary
course of business) and (2) do not in the aggregate materially detract from the
value of the property or materially impair the use thereof in the operation of
the business by Holdings; (j) statutory Liens of landlords and warehousemens',
carriers', mechanics', suppliers', materialmen's, repairmen's or other like
Liens (including contractual landlords' liens) arising in the ordinary course
of business of Holdings; (k) Liens Incurred or deposits made in the ordinary
course of business of Holdings in connection with workers' compensation,
unemployment insurance and other types of social security; (l) easements,
rights of way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect with
the business of Holdings; (m) Liens securing reimbursement obligations with
respect to letters of credit permitted under the covenant entitled "Limitation
on Indebtedness" which encumber only cash and marketable securities and
documents and other property relating to such letters of credit and the
products and proceeds thereof; (n) judgment and attachment Liens not giving
rise to an Event of Default; (o) any interest or title of a lessor in the
property subject to any Capitalized Lease Obligation permitted under the
covenant entitled "Limitation on Indebtedness"; (p) Liens on accounts
receivable and related assets of the type specified in the definition of
"Qualified Receivables Transaction" Incurred in connection with a Qualified
Receivables Transaction; (q) Liens securing Refinancing Indebtedness to the
extent such Liens do not extend to or cover any property of Holdings not
previously subjected to Liens relating to the Indebtedness being refinanced; or
(r) Liens on pledges of the capital stock of any Unrestricted Subsidiary
securing any Indebtedness of such Unrestricted Subsidiary.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
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"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"principal" of a Senior Discount Note means the principal of the Senior
Discount Note plus the premium, if any, payable on the Senior Discount Note
which is due or overdue or is to become due at the relevant time.
"Purchase Money Note" means a promissory note of a Receivables Entity
evidencing a line of credit, which may be irrevocable, from Holdings or any
Subsidiary of Holdings in connection with a Qualified Receivables Transaction
to a Receivables Entity, which note (a) shall be repaid from cash available to
the Receivables Entity, other than (i) amounts required to be established as
reserves pursuant to agreements, (ii) amounts paid to investors in respect of
interest, (iii) principal and other amounts owing to such investors and amounts
owing to such investors, (iv) amounts required to pay expenses in connection
with such Qualified Receivables Transaction and (v) amounts paid in connection
with the purchase of newly generated receivables and (b) may be subordinated to
the payments described in (a).
"Qualified Receivables Transaction" means any financing by Holdings or any
of its Subsidiaries of accounts receivable in any transaction or series of
transactions that may be entered into by Holdings or any of its Subsidiaries
pursuant to which (a) Holdings or any of its Subsidiaries sells, conveys or
otherwise transfers to a Receivables Entity and (b) a Receivables Entity sells,
conveys or otherwise transfers to any other Person or grants a security
interest to any Person in, any accounts receivable (whether now existing or
arising in the future) of Holdings or any of its Subsidiaries, and any assets
related thereto including, without limitation, all collateral securing such
accounts receivable, all contracts and all Guarantees or other obligations in
respect of such accounts receivable, proceeds of such accounts receivable and
other assets which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable; provided that (i) the Board of
Directors shall have determined in good faith that such Qualified Receivables
Transaction is economically fair and reasonable to Holdings and the Receivables
Entity and (ii) all sales of accounts receivable and related assests to the
Receivables Entity are made at fair market value (as determined in good faith
by Holdings). The grant of a security interest in any accounts receivable of
Holdings or any of its Restricted Subsidiaries to secure Bank Indebtedness
shall not be deemed a Qualified Receivables Transaction.
"Receivables Entity" means any Wholly Owned Subsidiary of Holdings (or
another Person in which Holdings or any Subsidiary of Holdings makes an
Investment and to which Holdings or any Subsidiary of Holdings transfers
accounts receivable and related assets) (i) which engages in no activities
other than in connection with the financing of accounts receivable, all
proceeds thereof and all rights (contractual or other), collateral and other
assets relating thereto, and any business or activities incidental or related
to such business, (ii) which is designated by the Board of Directors (as
provided below) as a Receivables Entity and (iii) no portion of the
Indebtedness or any other obligations (contingent or otherwise) of which (A) is
Guaranteed by Holdings or any other Subsidiary of Holdings (excluding
Guarantees of obligations (other than the principal of, and interest on,
Indebtedness) pursuant to Standard Securitization Undertakings), (B) is
recourse to or obligates Holdings or any other Subsidiary of Holdings in any
way other than pursuant to Standard Securitization Undertakings or (C) subjects
any property or asset of Holdings or any other Subsidiary of Holdings, directly
or indirectly, contingently or otherwise, to the satisfaction thereof, other
than pursuant to Standard Securitization Undertakings. Any such designation by
the Board of Directors shall be evidenced to the Senior Discount Notes Trustee
by filing with the Senior Discount Notes Trustee a certified copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness exchange or replacement for, such Indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
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"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) any Indebtedness of Holdings or any
Restricted Subsidiary existing on the date of the Senior Discount Notes
Indenture or Incurred in compliance with the Senior Discount Notes Indenture
(including Indebtedness of Holdings that Refinances Refinancing Indebtedness);
provided, however, that (i) the Refinancing Indebtedness has a Stated Maturity
no earlier than the Stated Maturity of the Indebtedness being Refinanced, (ii)
the Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced and (iii) such Refinancing Indebtedness is
Incurred in an aggregate principal amount (or if issued with original issue
discount, an aggregate issue price) that is equal to or less than the aggregate
principal amount (or if issued with original issue discount, the aggregate
accreted value) then outstanding of the Indebtedness being Refinanced (plus any
accrued interest and premium thereon and reasonable expenses Incurred in
connection therewith); provided further, however, that Refinancing Indebtedness
shall not include (x) Indebtedness of a Restricted Subsidiary that Refinances
Indebtedness of Holdings or (y) Indebtedness of Holdings or a Restricted
Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any businesses of Holdings and the Restricted
Subsidiaries on the Closing Date and any business related, ancillary or
complementary thereto.
"Restricted Subsidiary" means any Subsidiary of Holdings other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by Holdings or a Restricted Subsidiary whereby
Holdings or a Restricted Subsidiary transfers such property to a Person and
Holdings or such Restricted Subsidiary leases it from such Person, other than
leases between Holdings and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of Holdings secured by a
Lien.
"Senior Discount Noteholder" means the Person in whose name a Senior
Discount Note is registered on the registrar's books.
"Senior Discount Notes Issue Date" means the closing date for the sale and
original issuance of the Senior Discount Notes under the Senior Discount Notes
Indenture.
"Senior Discount Notes Trustee" means the party named as such in the
Senior Discount Notes Indenture until a successor replaces it and, thereafter,
means the successor.
"Senior Indebtedness" of Holdings means the principal of, premium (if any)
and accrued and unpaid interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization of Holdings,
regardless of whether or not a claim for post-filing interest is allowed in
such proceedings) on, and fees and other amounts owning in respect of, the
Senior Discount Notes and all other Indebtedness of Holdings, whether
outstanding on the Closing Date or thereafter Incurred, unless in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding it is provided that such obligations are subordinated in right of
payment to the Senior Discount Notes; provided, however, that Senior
Indebtedness shall not include (i) any obligation of Holdings to any
Subsidiary, (ii) any liability for Federal, state, local or other taxes owed or
owing by Holdings, (iii) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (iv) any Indebtedness or
obligation of Holdings (and any accrued and unpaid interest in respect thereof)
that by its terms is subordinate or junior in any respect to any other
Indebtedness or obligation of Holdings, including any Subordinated Obligations,
(v) any payment obligations with respect to any Capital Stock, or (vi) any
Indebtedness Incurred in violation of the Senior Discount Notes Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of Holdings within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC, but shall in no event include a
Receivables Entity.
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"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by Holdings or any Subsidiary of
Holdings which Holdings has determined in good faith to be customary in an
accounts receivable transaction including, without limitation, those relating
to the servicing of the assets of a Receivables Entity.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of Holdings (whether
outstanding on the Closing Date or thereafter Incurred) that is subordinate or
junior in right of payment to the Senior Discount Notes pursuant to a written
agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and
one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of
such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in 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, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within one year of the date of acquisition
thereof issued by a bank or trust company that is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and
undivided profits aggregating in excess of $100,000,000 (or the foreign
currency equivalent thereof) and whose long-term debt is rated "A" (or such
similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities
Act) or any money market fund sponsored by a registered broker-dealer or mutual
fund distributor, (iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (i) above
entered into with a financial institution meeting the qualifications described
in clause (ii) above, (iv) investments in commercial paper, maturing not more
than one year after the date of acquisition, issued by a corporation (other
than an Affiliate of Holdings) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. ("S&P"), and (v) investments in securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.ss.ss. 77aaa-77bbbb)
as in effect on the date of the Senior Discount Notes Indenture.
"Trade Payables" means, with respect to any Person, any accounts payable
or any indebtedness or monetary obligation to trade creditors created, assumed
or Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by, and
published in, the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two Business Days prior to the
date fixed for redemption of the Senior Discount Notes following a Change of
Control (or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to the period from
the redemption date to June 1, 2003; provided, however, that if the period from
the redemption date to June 1, 2003 is not equal to the constant maturity of a
United States
162
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the period from the
redemption date to June 1, 2003 is less than one year, the weekly average yield
on actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Senior Discount Notes Trustee
assigned by the Senior Discount Notes Trustee to administer its corporate trust
matters.
"Unrestricted Subsidiary" means (i) any Subsidiary of Holdings that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
Holdings (including any newly acquired or newly formed Subsidiary of Holdings)
to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, Holdings or any other Subsidiary of Holdings that is
not a Subsidiary of the Subsidiary to be so designated; provided, however, that
either (A) the Subsidiary to be so designated has total Consolidated assets of
$1,000 or less or (B) if such Subsidiary has Consolidated assets greater than
$1,000, then such designation would be permitted under the covenant entitled "
- - - - -- Certain Covenants -- Limitation on Restricted Payments". The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) Holdings could Incur $1.00 of additional Indebtedness under
paragraph (a) of the covenant described under " -- Certain Covenants --
Limitation on Indebtedness" and (y) no Default shall have occurred and be
continuing. Any such designation of a Subsidiary as a Restricted Subsidiary or
Unrestricted Subsidiary by the Board of Directors shall be evidenced to the
Senior Discount Notes Trustee by promptly filing with the Senior Discount Notes
Trustee a copy of the resolution of the Board of Directors giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of Holdings all
the Capital Stock of which (other than directors' qualifying shares) is owned
by Holdings or another Wholly Owned Subsidiary.
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REGISTRATION RIGHTS AGREEMENTS
Each Issuer entered into a separate Registration Rights Agreement with the
Initial Purchasers concurrently with the issuances of the Old Notes. Pursuant
to the Registration Rights Agreements, each of the Issuers has agreed to (i)
file with the Commission on or prior to 90 days after the date of issuance of
the applicable Notes (the "Issue Date") a registration statement on an
appropriate form under the Securities Act (the "Exchange Offer Registration
Statement"), relating to the Exchange Offers and (ii) use its reasonable best
efforts to cause its Exchange Offer Registration Statement to be declared
effective under the Securities Act within 200 days after the Issue Date. As
soon as practicable after the effectiveness of such Exchange Offer Registration
Statement, such Issuer will offer to the holders of applicable Transfer
Restricted Securities (as defined below) who are not prohibited by any law or
policy of the Commission from participating in the applicable Exchange Offer
the opportunity to exchange their Transfer Restricted Securities for the
Exchange Notes. Each of the Issuers has agreed to keep its Exchange Offer open
for not less than 20 business days (or longer, if required by applicable law)
after the date on which notice of the applicable Exchange Offer is mailed to
the holders of its Notes.
If (i) because of any change in law or applicable interpretations thereof
by the staff of the Commission, either Issuer is not permitted to effect the
applicable Exchange Offer as contemplated hereby, (ii) any Notes validly
tendered pursuant to the applicable Exchange Offer are not exchanged for
Exchange Notes within 230 days after the applicable Issue Date, (iii) any
Initial Purchaser so requests with respect to Notes not eligible to be
exchanged for applicable Exchange Notes in the applicable Exchange Offer, (iv)
any applicable law or interpretations do not permit any holder of Notes to
participate in the applicable Exchange Offer, (v) any holder of Notes that
participates in an applicable Exchange Offer does not receive freely
transferable Exchange Notes in exchange for tendered Notes, or (vi) either of
the Issuers so elects, then such Issuer will file with the Commission a shelf
registration statement (a "Shelf Registration Statement") to cover resales of
Transfer Restricted Securities by such holders who satisfy certain conditions
relating to the provision of information in connection with such Shelf
Registration Statement. For purposes of the foregoing, "Transfer Restricted
Securities" means each Note until (i) the date on which such Note has been
exchanged for a freely transferable Exchange Note in the applicable Exchange
Offer; (ii) the date on which such Note has been effectively registered under
the Securities Act and disposed of in accordance with a Shelf Registration
Statement; or (iii) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Securities Act or is salable pursuant to Rule
144(k) under the Securities Act.
Each Issuer will use its reasonable best efforts to have the Exchange
Offer Registration Statement or, if applicable, the Shelf Registration
Statement (each a "Registration Statement") declared effective by the
Commission as promptly as practicable after the filing thereof. Unless the
Exchange Offers would not be permitted by a policy of the Commission, the
Issuers will commence the Exchange Offers and will use their reasonable best
efforts to consummate the Exchange Offers as promptly as practicable, but in
any event prior to 230 days after the Issue Date. If applicable, the Issuers
will use their reasonable best efforts to keep the Shelf Registration
Statements effective for a period of two years after the Issue Date.
If (i) the Registration Statement is not filed with the Commission on or
prior to 90 days after the Issue Date (or, in the case of a Shelf Registration
Statement required to be filed in response to a change in law or applicable
interpretations of the Commission's staff, if later, within 45 days after
publication of the change in law or interpretations, but in no event before 90
days after the Issue Date); (ii) the Exchange Offer Registration Statement or
the Shelf Registration Statement, as the case may be, is not declared effective
within 200 days after the Issue Date (or in the case of a Shelf Registration
Statement required to be filed in response to a change in law or the applicable
interpretations of the Commission's staff, if later, within 90 days after
publication of the change in law or interpretation, but in no event before 200
days after the Issue Date); (iii) the applicable Exchange Offer is not
consummated on or prior to 230 days after the Issue Date (other than in the
event the applicable Issuer files a Shelf Registration Statement); or (iv) the
Shelf Registration Statement is filed and declared effective within 200 days
after the Issue Date (or in the case of a Shelf Registration Statement required
to be filed in response to a change in law or the applicable interpretations of
the Commission's staff, if later, within 90 days after publication of the
change in law or interpretation, but in no event before 200 days after
164
the Issue Date) but shall thereafter cease to be effective (at any time that
the applicable Issuer is obligated to maintain the effectiveness thereof)
without being succeeded within 90 days by an additional Registration Statement
filed and declared effective (each such event referred to in clauses (i)
through (iv), a "Registration Default"), the applicable Issuer will be
obligated to pay liquidated damages to each holder of Transfer Restricted
Securities, during the period of one or more such Registration Defaults, in an
amount equal to $0.192 per week per $1,000 principal amount (or Accreted Value
in the case of Senior Discount Notes) of the Notes constituting Transfer
Restricted Securities held by such holder until the applicable Registration
Statement is filed, the Exchange Offer Registration Statement is declared
effective and the applicable Exchange Offer is consummated or the Shelf
Registration Statement is declared effective or again becomes effective, as the
case may be. All accrued liquidated damages shall be paid to holders in the
same manner as interest payments on the Notes on semi-annual payment dates
which correspond to interest payment dates for the Notes (or, in the case of
Senior Discount Notes, on the scheduled Semi-Annual Accretion Date on or prior
to June 1, 2003). Following the cure of all Registration Defaults, the accrual
of liquidated damages will cease. Notwithstanding the foregoing, any Issuer may
issue a notice that the Shelf Registration Statement is unusable pending the
announcement of a material development or event and may issue any notice
suspending use of the Shelf Registration Statement required under applicable
securities laws to be issued and, in the event that the aggregate number of
days in any consecutive twelve-month period for which all such notices are
issued and effective exceeds 45 days in the aggregate, then the applicable
Issuer will be obligated to pay liquidated damages to each holder of Transfer
Restricted Securities in an amount equal to $0.192 per week per $1,000
principal amount (or Accreted Value in the case of Transfer Restricted
Securities of Holdings) of Transfer Restricted Securities held by such holder.
Upon the applicable Issuer declaring that the Shelf Registration Statement is
usable after the period of time described in the preceding sentence the accrual
of liquidated damages shall cease; provided, however, that if after any such
cessation of the accrual of liquidated damages the Shelf Registration Statement
again ceases to be usable beyond the period permitted above, liquidated damages
will again accrue pursuant to the foregoing provisions.
The Registration Rights Agreements also provide that the Issuers (i) shall
make available for a period of 180 days after the consummation of the Exchange
Offers a prospectus meeting the requirements of the Securities Act to any
broker-dealer for use in connection with any resale of any such Exchange Notes
and (ii) shall pay all expenses incident to the Exchange Offers (including the
expense of one counsel to the holders of the Notes) and will jointly and
severally indemnify certain holders of the Notes (including any broker-dealer)
against certain liabilities, including liabilities under the Securities Act. A
broker-dealer which delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the applicable
Registration Rights Agreement (including certain indemnification rights and
obligations).
Each holder of Notes who wishes to exchange such Notes for Exchange Notes
in an Exchange Offer will be required to make certain representations,
including representations that (i) any Exchange Notes to be received by it will
be acquired in the ordinary course of its business; (ii) it has no arrangement
or understanding with any person to participate in the distribution of the
Exchange Notes; and (iii) it is not an "affiliate" (as defined in Rule 405
under the Securities Act) of the applicable Issuer, or if it is an affiliate,
that it will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent
that it is not engaged in, and does not intend to engage in, the distribution
of the Exchange Notes. If the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Notes that were acquired as
a result of market-making activities or other trading activities (an
"Exchanging Dealer"), it will be required to acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes.
Holders of the Notes will be required to make certain representations to
the applicable Issuer (as described above) in order to participate in the
applicable Exchange Offer and will be required to deliver information to be
used in connection with a Shelf Registration Statement in order to have their
Notes
165
included in such Shelf Registration Statement and benefit from the provisions
regarding liquidated damages set forth in the preceding paragraphs. A holder
who sells Notes pursuant to a Shelf Registration Statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the applicable Registration Rights Agreement
which are applicable to such a holder (including certain indemnification
obligations).
For so long as the Notes are outstanding, the Issuers will continue to
provide to holders of the Notes and to prospective purchasers of the Notes the
information required by Rule 144A(d)(4) under the Securities Act.
The foregoing description of the Registration Rights Agreements is a
summary only, does not purport to be complete and is qualified in its entirety
by reference to all provisions of the Registration Rights Agreements, which
have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
166
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Senior Subordinated Exchange Notes and
the Senior Discount Exchange Notes will be issued in fully registered form. The
Senior Subordinated Exchange Notes and the Senior Discount Exchange Notes will
each initially be represented by a single, permanent global Exchange Note, in
definitive, fully registered form without interest coupons (each a "Global
Exchange Note") and will be deposited with the applicable Trustee as custodian
for The Depository Trust Company, New York, New York ("DTC") and registered in
the name of a nominee of DTC.
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time. Neither
the Issuers nor any of the Initial Purchasers takes any responsibility for
these operations or procedures, and investors are urged to contact the relevant
system or its participants directly to discuss these matters.
DTC has advised the Issuers that it is (i) a limited purpose trust company
organized under the laws of the State of New York; (ii) a "banking
organization" within the meaning of the New York Banking Law; (iii) a member of
the Federal Reserve System; (iv) a "clearing corporation" within the meaning of
the Uniform Commercial Code, as amended; and (v) a "clearing agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold securities
for its participants (collectively, the "Participants") and facilitates the
clearance and settlement of securities transactions between Participants
through electronic book-entry changes to the accounts of its Participants,
thereby eliminating the need for physical transfer and delivery of
certificates. DTC's Participants include securities brokers and dealers
(including the Initial Purchasers), banks and trust companies, clearing
corporations and certain other organizations. Indirect access to DTC's system
is also available to other entities such as banks, brokers, dealers and trust
companies (collectively, the "Indirect Participants") that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. Investors who are not Participants may beneficially own securities
held by or on behalf of DTC only through Participants or Indirect Participants.
The Issuers expect that pursuant to procedures established by DTC (i) upon
deposit of each Global Exchange Note, DTC will credit the accounts of
Participants designated by the Initial Purchasers with an interest in the
Global Exchange Note and (ii) ownership of the Exchange Notes will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the interests of Participants) and the
records of Participants and the Indirect Participants (with respect to the
interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Exchange Notes
represented by a Global Exchange Note to such persons may be limited. In
addition, because DTC can act only on behalf of its Participants, who in turn
act on behalf of persons who hold interests through Participants, the ability
of a person having an interest in Exchange Notes represented by a Global
Exchange Note to pledge or transfer such interest to persons or entities that
do not participate in DTC's system, or to otherwise take actions in respect of
such interest, may be affected by the lack of a physical definitive security in
respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Exchange
Note, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Exchange Notes represented by the Global Exchange Note
for all purposes under the applicable Indenture. Except as provided below,
owners of beneficial interests in a Global Exchange Note will not be entitled
to have Exchange Notes represented by such Global Exchange Note registered in
their names, will not receive or be entitled to receive physical delivery of
Certificated Exchange Notes, and will not be considered the owners or holders
thereof under the applicable Indenture for any purpose, including with respect
to the giving of any direction, instruction or approval to the Trustee
thereunder. Accordingly, each holder owning a beneficial interest in a Global
Exchange Note must rely on the procedures of DTC and, if such holder is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such holder owns its interest, to exercise any rights of a holder
of Notes under the applicable Indenture
167
or such Global Exchange Note. The Issuers understand that under existing
industry practice, in the event that either of the Issuers requests any action
of holders of Exchange Notes, or a holder that is an owner of a beneficial
interest in a Global Exchange Note desires to take any action that DTC, as the
holder of such Global Exchange Note, is entitled to take, DTC would authorize
the Participants to take such action and the Participants would authorize
holders owning through such Participants to take such action or would otherwise
act upon the instruction of such holders. Neither the Issuers nor the Trustees
will have any responsibility or liability for any aspect of the records
relating to or payments made on account of Exchange Notes by DTC, or for
maintaining, supervising or reviewing any records of DTC relating to such
Exchange Notes.
Payments with respect to the principal of, and premium, if any, liquidated
damages, if any, and interest on, any Exchange Notes represented by a Global
Exchange Note registered in the name of DTC or its nominee on the applicable
record date will be payable by the applicable Trustee to or at the direction of
DTC or its nominee in its capacity as the registered holder of the Global
Exchange Note representing such Exchange Notes under the applicable Indenture.
Under the terms of the Indentures, the Issuers and the Trustees may treat the
persons in whose names the Exchange Notes, including the Global Exchange Notes,
are registered as the owners thereof for the purpose of receiving payment
thereon and for any and all other purposes whatsoever. Accordingly, neither the
Issuers nor the Trustees has or will have any responsibility or liability for
the payment of such amounts to owners of beneficial interests in a Global
Exchange Note (including principal, premium, if any, liquidated damages, if
any, and interest). Payments by the Participants and the Indirect Participants
to the owners of beneficial interests in a Global Exchange Note will be
governed by standing instructions and customary industry practice and will be
the responsibility of the Participants or the Indirect Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Exchange Notes, cross-market transfers between the Participants in DTC, on the
one hand, and Euroclear or Cedel participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in such system in accordance
with the rules and procedures and within the established deadlines (Brussels
time) of such system. Euroclear or Cedel, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf
by delivering or receiving interests in the relevant Global Exchange Notes in
DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Euroclear participants and Cedel
participants may not deliver instructions directly to the depositaries for
Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Exchange Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. Cash received in Euroclear or
Cedel as a result of sales of interest in a Global Exchange Note by or through
a Euroclear or Cedel participant to a Participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or Cedel cash account only as of the business day for Euroclear or
Cedel following DTC's settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Exchange Notes among
participants in DTC, Euroclear and Cedel, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Issuers nor the Trustees will have any
responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
168
Certificated Notes
If (i) either Issuer notifies the applicable Trustee in writing that DTC
is no longer willing or able to act as a depositary or DTC ceases to be
registered as a clearing agency under the Exchange Act and a successor
depositary is not appointed within 90 days of such notice or cessation; (ii)
either Issuer, at its option, notifies the applicable Trustee in writing that
it elects to cause the issuance of the applicable Exchange Notes in definitive
form under the applicable Indenture; or (iii) upon the occurrence of certain
other events as provided in the Indentures, then, upon surrender by DTC of such
Global Exchange Note, Certificated Notes will be issued to each person that DTC
identifies as the beneficial owner of the Exchange Notes represented by such
Global Exchange Note. Upon any such issuance, the applicable Trustee is
required to register such Certificated Notes in the name of such person or
persons (or the nominee of any thereof) and cause the same to be delivered
thereto.
Neither the Issuers nor the Trustees shall be liable for any delay by DTC
or any Participant or Indirect Participant in identifying the beneficial owners
of the related Exchange Notes and each such person may conclusively rely on,
and shall be protected in relying on, instructions from DTC for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of the Exchange Notes to be issued).
169
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES
The following summary describes the material United States federal income
tax consequences of the purchase, ownership and disposition of Notes and the
exchange of Old Notes for Exchange Notes pursuant to the Exchange Offers as of
the date hereof. Unless otherwise indicated, this summary relates only to
holders who hold such Notes as capital assets, and does not cover special
situations, such as those of dealers in securities or currencies, financial
institutions, tax-exempt entities, life insurance companies, persons holding
Notes as a part of a hedging, conversion or constructive sale transaction or a
straddle or holders of Notes whose "functional currency" is not the U.S.
dollar. Furthermore, the discussion below is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and regulations,
rulings and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified so as to result in United
States federal income tax consequences different from those discussed below.
Persons considering the purchase, ownership or disposition of Notes or the
exchange of Old Notes for Exchange Notes should consult their own tax advisors
concerning the United States federal income tax consequences in light of their
particular situations as well as any consequences arising under the laws of any
other taxing jurisdiction.
As used herein, a "U.S. Holder" of a Note means a holder that is (i) a
citizen or resident of the U.S., (ii) a corporation or partnership created or
organized in or under the laws of the U.S. or any political subdivision
thereof, (iii) an estate the income of which is subject to United States
federal income taxation regardless of its source or (iv) a trust which is
subject to the supervision of a court within the United States and the control
of a United States person as described in section 7701(a)(30) of the Code. A
"Non-U.S. Holder" is a holder that is not a U.S. Holder.
Payments of Interest on Senior Subordinated Notes
Interest on a Senior Subordinated Note will generally be taxable to a U.S.
Holder as ordinary income at the time it is paid or accrued in accordance with
the U.S. Holder's method of accounting for tax purposes.
Payments of Interest on Senior Discount Notes
The Senior Discount Notes were issued at a substantial discount from their
principal amount at maturity. Therefore, the Senior Discount Notes were issued
with original issue discount ("OID") and U.S. Holders of the Senior Discount
Notes will be subject to special tax accounting rules. The amount of OID equals
the difference between (i) the sum of all amounts payable on the Senior
Discount Notes (including interest payable on such Senior Discount Notes) and
(ii) the "issue price" of the Senior Discount Notes. The "issue price" of the
Senior Discount Notes was the first price at which a substantial amount of the
Senior Discount Notes were sold (excluding sales to bond houses, brokers or
similar persons acting in the capacity of underwriter, placement agent or
wholesaler).
A U.S. Holder of a Senior Discount Note must include such OID in income on
an economic accrual basis (using the constant-yield-to-maturity method of
accrual described in section 1272(a) of the Code) and in advance of the receipt
of the cash to which such OID is attributable, regardless of such holder's
method of accounting. Under that method, a U.S. Holder generally will have to
include in income increasingly greater amounts of OID in successive accrual
periods. A U.S. Holder of a Senior Discount Note generally will not be required
to include separately in income interest actually received on the Senior
Discount Note. Amounts received pursuant to the Mandatory Principal Redemption
will be treated as payments of interest to the extent of the OID that has
accrued at the time of such redemption.
Market Discount
If a U.S. Holder purchases a Senior Subordinated Note for an amount that
is less than its stated redemption price at maturity or a Senior Discount Note
for an amount that is less than its adjusted issue price, the amount of the
difference will be treated as "market discount" for United States federal
income
170
tax purposes unless such difference is less than a specified de minimis amount.
The "adjusted issue price" of a Senior Discount Note at the beginning of any
accrual period is equal to its issue price increased by the accrued OID for
each prior accrual period (determined without regard to the amortization of any
acquisition or bond premium, as described below) and reduced by any payments
made on such Senior Discount Note on or before the first day of the accrual
period. Under the market discount rules, a U.S. Holder will be required to
treat any principal payment on, or any gain on the sale, exchange, retirement
or other disposition of, a Note as ordinary income to the extent of the market
discount which has not previously been included in income and is treated as
having accrued on such Note at the time of such payment or disposition. In
addition, the U.S. Holder may be required to defer, until the maturity of the
Note or its earlier disposition in a taxable transaction, the deduction of all
or a portion of the interest expense on any indebtedness incurred or continued
to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the U.S.
Holder elects to accrue on a constant interest method. A U.S. Holder of a Note
may elect to include market discount in income currently as it accrues (on
either a ratable or constant interest method), in which case the rule described
above regarding deferral of interest deductions will not apply. This election
to include market discount in income currently, once made, applies to all
market discount obligations acquired on or after the first taxable year to
which the election applies and may not be revoked without the consent of the
IRS.
Acquisition Premium; Amortizable Bond Premium
A U.S. Holder that purchases a Senior Discount Note for an amount that is
greater than its adjusted issue price but equal to or less than the sum of all
amounts payable on the Senior Discount Note after the purchase date will be
considered to have purchased such Senior Discount Note at an "acquisition
premium." Under the acquisition premium rules, the amount of OID which such
U.S. Holder must include in its gross income with respect to such Note for any
taxable year will be reduced by the portion of such acquisition premium
properly allocable to such year.
A U.S. Holder that purchases a Note for an amount in excess of the sum of
all amounts payable on the Note after the purchase date other than interest on
a Senior Subordinated Note will be considered to have purchased the Note at a
"premium" and will not be required to include any OID in income. A U.S. Holder
generally may elect to amortize the premium over the remaining term of the Note
on a constant yield method as an offset to interest when includible in income
under the U.S. Holder's regular accounting method. Bond premium on a Note held
by a U.S. Holder that does not make such an election will decrease the gain or
increase the loss otherwise recognized on disposition of the Note. The election
to amortize premium on a constant yield method once made applies to all debt
obligations held or subsequently acquired by the electing U.S. Holder on or
after the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the IRS.
Sale, Exchange and Retirement of Notes
Upon the sale, exchange, retirement or other disposition of a Note, a U.S.
Holder will recognize gain or loss equal to the difference between the amount
realized upon the sale, exchange, retirement or other disposition (less any
accrued interest on a Senior Subordinated Note, which will be taxable as such)
and the U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted
tax basis in a Note will, in general, be the U.S. Holder's cost therefor,
increased, in the case of the Senior Discount Notes, by OID and reduced by any
cash payments on the Note (other than payments of interest on a Senior
Subordinated Note). Capital gains of individuals derived in respect of capital
assets held for more than one year are eligible for reduced rates of taxation
which may vary depending upon the holding period of such capital assets. The
deductibility of capital losses is subject to limitations.
Exchange of Notes
The exchange of Senior Subordinated Old Notes and Senior Discount Old
Notes for Senior Subordinated Exchange Notes and Senior Discount Exchange
Notes, respectively, pursuant to the Exchange Offers should not constitute a
taxable event to holders. Consequently, no gain or loss should be recognized by
a holder upon receipt of such a Senior Subordinated Exchange Note or Senior
Discount
171
Exchange Note, the holding period of such Senior Subordinated Exchange Note or
Senior Discount Exchange Note should include the holding period of the Senior
Subordinated Old Note or the Senior Discount Old Note exchanged therefor and
the basis of such Senior Subordinated Exchange Note or Senior Discount Exchange
Note should be the same as the basis of the Senior Subordinated Old Note or
Senior Discount Old Note immediately before the exchange.
Non-U.S. Holders
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be required
with respect to the payment by the Company or any paying agent of principal
or interest (which for purposes of this discussion includes OID) on a Note
owned by a Non-U.S. Holder, provided (i) that the beneficial owner does not
actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote within the
meaning of section 871(h)(3) of the Code and the regulations thereunder,
(ii) the beneficial owner is not a controlled foreign corporation that is
related to the Company through stock ownership, (iii) the beneficial owner
is not a bank whose receipt of interest on a Note is described in section
881(c)(3)(A) of the Code and (iv) the beneficial owner satisfies the
statement requirement (described generally below) set forth in section
871(h) and section 881(c) of the Code and the regulations thereunder;
(b) no withholding of United States federal income tax will be required
with respect to any gain or income realized by a Non-U.S. Holder upon the
sale, exchange, retirement or other disposition of a Note; and
(c) a Note beneficially owned by an individual who at the time of death
is a Non-U.S. Holder will not be subject to United States federal estate
tax as a result of such individual's death, provided that such individual
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the company entitled to vote within
the meaning of section 871(h)(3) of the Code and provided that the interest
payments with respect to such Note would not have been, if received at the
time of such individual's death, effectively connected with the conduct of
a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Company with a statement to the effect that the beneficial owner
is not a U.S. person. Currently, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that he is not a U.S. person (which certification may be made on an
Internal Revenue Service ("IRS") Form W-8 (or successor form)) or (2) a
financial institution holding the Note on behalf of the beneficial owner
certifies, under penalties of perjury, that such statement has been received by
it and furnishes a paying agent with a copy thereof. Under recently finalized
Treasury regulations (the "Final Regulations"), the statement requirement
referred to in (a)(iv) above may also be satisfied with other documentary
evidence for interest paid after December 31, 1999 with respect to an offshore
account or through certain foreign intermediaries.
If a Non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described in (a) above, payments of interest (including
OID) made to such Non-U.S. Holder will be subject to a 30% withholding tax
unless the beneficial owner of the Note provides the Company or its paying
agent, as the case may be, with a properly executed (1) IRS Form 1001 (or
successor form) claiming an exemption from (or a reduction in) withholding
under the benefit of an applicable tax treaty or (2) IRS Form 4224 (or
successor form) stating that interest paid on the Note is not subject to
withholding tax because it is effectively connected with the beneficial owner's
conduct of a trade or business in the United States. Under the Final
Regulations, Non-U.S. Holders will generally be required to provide IRS Form
W-8 in lieu of IRS Form 1001 and IRS Form 4224, although alternative
documentation may be applicable in certain situations. Moreover, under the
Final Regulations, the benefit of an applicable tax treaty may, in certain
circumstances, and subject to significant limitations under the Code, be
claimed
172
by the foreign partners of a foreign partnership that holds the Notes. Foreign
partners are urged to consult their own tax advisors to determine whether they
are eligible to claim such benefits.
If a Non-U.S. Holder is engaged in a trade or business in the U.S. and
interest (including OID) on the Note is effectively connected with the conduct
of such trade or business, the Non-U.S. Holder, although exempt from the
withholding tax discussed above, will be subject to United States federal
income tax on such interest (including OID) on a net income basis in the same
manner as if it were a U.S. Holder. In addition, if such holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or lower
applicable treaty rate) of its effectively connected earnings and profits for
the taxable year, subject to adjustments. For this purpose, interest (including
OID) on a Note will be included in such foreign corporation's earnings and
profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note generally will not be subject to United States federal
income tax unless (i) such gain or income is effectively connected with a trade
or business in the U.S. of the Non-U.S. Holder, or (ii) in the case of a
Non-U.S. Holder who is an individual, such individual is present in the U.S.
for 183 days or more in the taxable year of such sale, exchange, retirement or
other disposition, and certain other conditions are met.
Special rules may apply to certain Non-U.S. Holders, such as "controlled
foreign corporations", "passive foreign investment companies" and "foreign
personal holding companies", that are subject to special treatment under the
Code. Such entities should consult their own tax advisors to determine the U.S.
federal, state, local and other tax consequences that may be relevant to them.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to certain
payments of principal, interest, OID and premium on a Note and to certain
payments of proceeds from the sale of a Note made to U.S. Holders other than
certain exempt recipients (such as corporations). A 31% backup withholding tax
will apply to such payments if the U.S. Holder fails to provide a taxpayer
identification number or certification of exempt status or fails to report in
full dividend and interest income.
In general, no information reporting or backup withholding will be
required with respect to payments made by the Company or any paying agent to
Non-U.S. Holders if a statement described in (a)(iv) under "Non-U.S. Holders"
has been received (and the payor does not have actual knowledge that the
beneficial owner is a U.S. person). Backup withholding and information
reporting may apply to the proceeds of the sale of a Note within the U.S. or
conducted through certain U.S. related financial intermediaries unless the
statement described in (a)(iv) under "Non-U.S. Holders" has been received (and
the payor does not have actual knowledge that the beneficial owner is a U.S.
person) or the holder otherwise establishes an exemption.
173
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to any of the Exchange Offers must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. A broker-dealer may not
participate in the Exchange Offer with respect to Old Notes acquired other than
as a result of market-making activities or other trading activities. To the
extent any such broker-dealer participates in the Exchange Offer and so
notifies the applicable Issuers, or causes such Issuers to be so notified in
writing, the Issuers have agreed that for a period of 180 days after the date
of this Prospectus, they will make this Prospectus, as amended or supplemented,
available to such broker-dealer for use in connection with any such resale, and
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the applicable Letter of Transmittal. In addition, until , 1998 (90
days after the date of this Prospectus), all dealers effecting transactions in
the Exchange Notes may be required to deliver a prospectus.
The Issuers will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to any of the Exchange Offers may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at prevailing market prices at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Notes. Any broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to any of the Exchange Offers and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act, and any profit
on any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. Each Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The Issuers have agreed to pay all expenses incident to each of the
Exchange Offers (other than commissions and concessions of any broker-dealers),
subject to certain prescribed limitations, and will indemnify the holders of
the Old Notes against certain liabilities, including certain liabilities that
may arise under the Securities Act.
By its acceptance of any Exchange Offer, any broker-dealer that receives
Exchange Notes pursuant to such Exchange Offer hereby agrees to notify the
applicable Issuers prior to using the Prospectus in connection with the sale or
transfer of Exchange Notes, and acknowledges and agrees that, upon receipt of
notice from the applicable Issuers of the happening of any event which makes
any statement in the Prospectus untrue in any material respect or which
requires the making of any changes in the Prospectus in order to make the
statements therein not misleading or which may impose upon the Issuers
disclosure obligations that may have a material adverse effect on the Issuers
(which notice the Issuers agree to deliver promptly to such broker-dealer),
such broker-dealer will suspend use of the Prospectus until the Issuers have
notified such broker-dealer that delivery of the Prospectus may resume and have
furnished copies of any amendment or supplement to the Prospectus to such
broker-dealer.
174
LEGAL MATTERS
Certain legal matters with respect to the Exchange Offers will be passed
upon for the Issuers by Simpson Thacher & Bartlett, New York, New York and by
Mr. Jeffrey B. Kramp, General Counsel of the Issuers.
EXPERTS
The consolidated balance sheets of Holdings as of December 31, 1996 and
1997 and the consolidated statements of income, stockholders' equity and cash
flows of Holdings for each of the three years in the period ended December 31,
1997 included in this Prospectus have been included herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
175
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants .................................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997 and March 31, 1998
(unaudited) ........................................................................ F-3
Consolidated Statements of Income for the years ended December 31, 1995, 1996 and 1997
and for the three month periods ended March 31, 1997 and 1998 (unaudited) .......... F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995,
1996 and 1997 and for the three month period ended March 31, 1998 (unaudited) ...... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1996 and
1997 and for the three month periods ended March 31, 1997 and 1998 (unaudited) ..... F-6
Notes to Consolidated Financial Statements ........................................... F-7
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
WESCO International, Inc.
We have audited the accompanying consolidated balance sheets of WESCO
International, Inc. (formerly CDW Holding Corporation) and subsidiaries as of
December 31, 1996 and 1997, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of WESCO International, Inc. and subsidiaries as of December 31, 1996 and 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
600 Grant Street
Pittsburgh, Pennsylvania
February 6, 1998, except for Note 17,
as to which the date is May 8, 1998.
F-2
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
December 31, March 31,
------------------------- ------------
1996 1997 1998
----------- ----------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents ......................................... -- $ 7,620 $ 18,405
Trade accounts receivable, net of allowance for doubtful
accounts of $10,075, $10,814 and $10,937 in 1996, 1997
and 1998, respectively ........................................... $311,896 351,170 393,368
Other accounts receivable ......................................... 19,040 17,261 16,400
Inventories ....................................................... 263,107 299,406 317,934
Income tax receivable ............................................. -- 3,405 --
Prepaid expenses and other current assets ......................... 1,998 3,699 3,430
Deferred income taxes (Note 7) .................................... 12,731 14,277 16,832
-------- -------- --------
Total current assets ............................................. 608,772 696,838 766,369
Property, buildings and equipment, net (Note 4) ..................... 93,951 95,082 100,482
Trademarks, net of accumulated amortization of $453, $586 and
$652 in 1996, 1997 and 1998, respectively ......................... 3,541 3,408 3,342
Goodwill, net of accumulated amortization of $1,887, $4,522
and $5,267 in 1996, 1997 and 1998, respectively (Note 15) ......... 62,553 65,923 80,031
Other assets (Note 5) ............................................... 4,670 9,609 11,824
-------- -------- --------
Total assets ..................................................... $773,487 $870,860 $962,048
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................................. $283,434 $311,796 $335,943
Accrued payroll and benefit costs ................................. 25,597 27,694 15,565
Restructuring reserve ............................................. 4,541 3,982 5,913
Income taxes payable .............................................. 4,972 -- 2,725
Other current liabilities (Note 6) ................................ 17,160 17,063 23,679
-------- -------- --------
Total current liabilities ........................................ 335,704 360,535 383,825
Long-term debt (Notes 8 and 17) ..................................... 260,635 294,275 350,544
Other noncurrent liabilities ........................................ 6,311 5,875 6,020
Deferred income taxes (Note 7) ...................................... 13,161 16,662 17,118
-------- -------- --------
Total liabilities ................................................ 615,811 677,347 757,507
Commitments and contingencies (Note 13)
Redeemable Class A common stock, $.01 par value, 88,082,
89,306, and 93,230 shares issued and outstanding in 1996,
1997 and 1998, respectively (Note 9) .............................. 8,930 8,978 11,416
Stockholders' equity (Note 9):
Class A common stock, $.01 par value, 2,000,000 authorized,
933,280 shares issued and outstanding in 1996, 1997 and
1998 ............................................................. 9 9 9
Class B nonvoting convertible common stock, $.01 par value,
2,000,000 shares authorized ...................................... -- -- --
Additional capital ................................................ 93,319 93,319 93,319
Retained earnings ................................................. 53,129 89,366 97,889
Common stock to be issued under option ............................ 2,500 2,500 2,500
Accumulated other comprehensive income ............................ (211) (659) (592)
-------- -------- --------
Total stockholders' equity ....................................... 148,746 184,535 193,125
-------- -------- --------
Total liabilities and stockholders' equity ....................... $773,487 $870,860 $962,048
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
For the three month period
For the year ended ended March 31,
--------------------------------------------- -------------------------
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
(unaudited)
Sales, net ........................... $1,857,042 $2,274,622 $2,594,819 $576,776 $693,448
Cost of goods sold (exclusive of
depreciation and amortization) ..... 1,535,998 1,869,565 2,130,900 472,436 566,754
---------- ---------- ---------- -------- --------
Gross profit ....................... 321,044 405,057 463,919 104,340 126,694
Selling, general and adminis-
trative expenses ................... 257,972 326,003 372,532 86,679 103,564
Depreciation and amortization ........ 7,339 10,846 11,331 2,771 2,956
---------- ---------- ---------- -------- --------
Income from operations ............. 55,733 68,208 80,056 14,890 20,174
Interest expense, net ................ 15,813 17,382 20,109 4,798 6,202
---------- ---------- ---------- -------- --------
Income before income taxes
and extraordinary charge .......... 39,920 50,826 59,947 10,092 13,972
Provision for income taxes
(Note 7) ........................... 14,790 18,364 23,710 4,007 5,449
---------- ---------- ---------- -------- --------
Income before extraordinary
charge ............................ 25,130 32,462 36,237 6,085 8,523
Extraordinary charge, net of
applicable taxes (Note 8) .......... 8,068 -- -- -- --
---------- ---------- ---------- -------- --------
Net income ........................... $ 17,062 $ 32,462 $ 36,237 $ 6,085 $ 8,523
========== ========== ========== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except share data)
Common Accumulated
Stock to Other
Comprehensive Additional Retained be Issued Comprehensive
Income Shares Amount Capital Earnings Under Option Income
--------------- --------- -------- ------------ ---------- -------------- --------------
Balances at December 31,
1994 ........................ 933,280 $ 9 $93,319 $ 3,605 $2,500 $ 42
Net income ................. $17,062 -- -- -- 17,062 -- --
Translation adjustment ..... (168) -- -- -- -- -- (168)
-------
Comprehensive income........ $16,894
=======
Balances at December 31,
1995 ....................... 933,280 9 93,319 20,667 2,500 (126)
Net income ................. $32,462 -- -- -- 32,462 -- --
Translation adjustment ..... (85) -- -- -- -- -- (85)
-------
Comprehensive income........ $32,377
=======
Balances at December 31,
1996 ....................... 933,280 9 93,319 53,129 2,500 (211)
Net income ................. $36,237 -- -- -- 36,237 -- --
Translation adjustment ..... (448) -- -- -- -- -- (448)
-------
Comprehensive income........ $35,789
=======
Balances at December 31,
1997 ....................... 933,280 9 93,319 89,366 2,500 (659)
Net income ................. $ 8,523 -- -- -- 8,523 -- --
Translation adjustment ..... 67 -- -- -- -- -- 67
-------
Comprehensive income........ $ 8,590
=======
Balances at March 31,
1998 (unaudited) ........... 933,280 $ 9 $93,319 $97,889 $2,500 $ (592)
======= === ======= ======= ====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the three month period
For the year ended ended March 31,
------------------------------------------ ------------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ---------------
Cash flows from operating activities:
Net income ............................ $ 17,062 $ 32,462 $ 36,237 $ 6,085 $ 8,523
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization ......... 7,339 10,846 11,331 2,771 2,956
Amortization of debt issuance
costs and interest rate caps ......... 1,213 531 418 111 121
Extraordinary charge, net of
applicable taxes ..................... 8,068 -- -- -- --
Charge in lieu of and deferred
income taxes ......................... 14,222 (78) 2,837 (10) (2,099)
Changes in assets and liabilities,
excluding the effects of
acquisitions:
Trade and other receivables .......... (26,844) (21,058) (32,641) 7,518 (4,181)
Inventories .......................... (26,874) (24,389) (31,671) (24,882) 6,302
Prepaid and other current assets 254 5,930 (1,120) (1,108) 467
Other assets ......................... (1,202) 700 (3,652) (559) (2)
Accounts payable ..................... 27,118 20,323 9,690 (6,962) 3,581
Accrued payroll and benefit
costs ............................... 6,287 (1,942) 1,594 (12,339) (12,129)
Restructuring reserve ................ (2,909) (1,636) (1,499) (637) (540)
Other current and noncurrent
liabilities ......................... 1,995 (6,472) (2,646) (2,501) 10,171
-------- -------- -------- -------- -----------
Net cash (used for) provided
by operating activities ........... 25,729 15,217 (11,122) (32,513) 13,170
-------- -------- -------- -------- -----------
Cash flows from investing activities:
Capital expenditures .................. (6,456) (9,411) (12,446) (1,402) (3,651)
Proceeds from the sale of
property, buildings and
equipment ............................ 668 2,338 3,996 379 --
Acquisitions, net of cash acquired
(Note 14) ............................ (6,181) (103,918) (13,914) (9,647) (43,951)
-------- -------- -------- -------- -----------
Net cash used for investing
activities ........................ (11,969) (110,991) (22,364) (10,670) (47,602)
-------- -------- -------- -------- -----------
Cash flows from financing activities:
Proceeds from long-term debt .......... 878,930 544,907 426,594 157,478 225,906
Repayments of long-term debt .......... (893,038) (459,730) (389,613) (113,362) (182,186)
Outstanding checks in excess of
cash available ....................... 2,292 1,489 4,249 -- --
Debt issuance costs ................... (218) (682) (172) (164) (204)
Issuance and repurchase of
common stock and exercise of
stock options, net ................... 2,224 1,200 48 -- 1,701
-------- -------- -------- -------- -----------
Net cash provided by (used
for) financing activities ......... (9,810) 87,184 41,106 43,952 45,217
-------- -------- -------- -------- -----------
Net change in cash and cash
equivalents ........................... 3,950 (8,590) 7,620 769 10,785
Cash and cash equivalents at the
beginning of the period ............... 4,640 8,590 -- -- 7,620
-------- -------- -------- -------- -----------
Cash and cash equivalents at the
end of the period ..................... $ 8,590 $ -- $ 7,620 $ 769 $ 18,405
======== ======== ======== ======== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)
1. ORGANIZATION:
On February 28, 1994, WESCO International, Inc. (formerly CDW Holding
Corporation) (Holdings) and its subsidiaries (collectively, the Company)
completed the acquisition of substantially all of the assets and certain
liabilities of Westinghouse Electric Supply Company from Westinghouse Electric
Corporation (Westinghouse). Holdings has as its only asset all of the
outstanding common stock of WESCO Distribution, Inc. and its subsidiaries
(WESCO); accordingly, the financial statements presented herein are identical
to those of WESCO. The Company was formed by the Clayton & Dubilier Private
Equity Fund IV Limited Partnership, managed by Clayton, Dubilier & Rice, Inc.
for the purpose of the acquisition. All of the Company's commercial activities,
which commenced February 28, 1994, are carried out by WESCO. WESCO,
headquartered in Pittsburgh, Pennsylvania, is a full-line distributor of
electrical supplies and equipment and currently operates branch locations in
the United States, Canada, Mexico, Puerto Rico and Guam.
The acquisition was accounted for as a purchase and, accordingly, the
assets and liabilities acquired have been recorded at their estimated fair
value at the date of acquisition, less the excess of the fair value of the
assets and liabilities acquired over the purchase price. This excess was
allocated to the noncurrent assets of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company
and all of its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
certain estimates and assumptions. These may affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements. They may also affect the
reported amounts of revenues and expenses during the reported period. Actual
results could differ from these estimates upon subsequent resolution of some
matters.
Revenue Recognition:
Revenues of the Company are recognized at the time of product shipment.
Cash Equivalents:
Cash equivalents are defined as highly liquid investments with original
maturities of 90 days or less when purchased.
Inventories:
Inventories primarily consist of merchandise purchased for resale and are
stated at the lower of cost or market. Cost is determined principally under the
average cost method.
Property, Buildings and Equipment:
Property, buildings and equipment are recorded at cost. Depreciation
expense is determined over the estimated useful lives of the assets using the
straight-line method. Leasehold improvements are amortized over either their
respective lease terms or their estimated lives, whichever is shorter.
F-7
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES: -- Continued
Expenditures for new facilities and improvements that extend the useful
life of an asset are capitalized. Ordinary repairs and maintenance are expensed
as incurred. When property is retired or otherwise disposed of, the cost and
the related accumulated depreciation are removed from the accounts and any
related gains or losses are recorded.
Intangibles:
Goodwill and other intangibles arising from acquisitions are being
amortized on a straight-line basis over periods not exceeding 25 years. The
Company regularly reviews the individual components of the balance by
evaluating the estimated future undiscounted cash flows to determine the
recoverability of the assets and recognizes, on a current basis, any decrease
in value.
Trademarks acquired are recorded at cost and are amortized on a
straight-line basis over periods not exceeding 25 years.
Income Taxes:
Deferred income taxes result primarily from temporary differences between
financial and tax reporting. A valuation allowance is provided when a portion
or all of a deferred tax asset may not be realized.
For interim periods, income taxes are provided for based on management's
best estimate of the effective tax rate expected to be applicable for the full
calendar year.
Foreign Currency Translation:
The local currency is the functional currency for the Company's operations
outside the United States. Assets and liabilities of these operations are
translated to U.S. dollars at the exchange rate in effect at each period-end.
Income statement accounts are translated at the average exchange rate
prevailing during the period. Translation adjustments arising from the use of
differing exchange rates from period to period are included as a component of
stockholders' equity. Gains and losses from foreign currency transactions are
included in net income for the period.
Environmental Expenditures:
The Company has facilities and operations which distribute certain
products that must comply with environmental regulations and laws. Expenditures
for current operations are expensed or capitalized, as appropriate.
Expenditures relating to existing conditions caused by past operations, and
which do not contribute to future revenue, are expensed. Liabilities are
recorded when remedial efforts are probable and the costs can be reasonably
estimated.
Interim Consolidated Financial Statements (unaudited):
The unaudited consolidated balance sheet and statement of stockholders'
equity as of March 31, 1998 and the unaudited consolidated statements of income
and cash flows for the three month periods ended March 31, 1997 and 1998, in
the opinion of management, have been prepared on the same basis as the audited
consolidated financial statements and include all adjustments necessary for the
fair presentation of the results of the interim periods. All adjustments
reflected in the consolidated financial statements are of a normal recurring
nature. The data disclosed in the notes to the consolidated financial
statements for these periods are also unaudited. Results for the three month
periods ended March 31, 1997 and 1998 are not necessarily indicative of the
results to be expected for the full year.
Reclassifications:
Certain prior year amounts have been reclassified in order to conform with
the current presentations.
F-8
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES: -- Continued
New Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and displaying
comprehensive income and its components. This Statement requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. The provisions of SFAS
No. 130 have been adopted in the three month period ended March 31, 1998 and
all years presented have been adjusted to reflect the adoption. In the
Company's case, comprehensive income includes net income and unrealized gains
and losses from currency translation.
Additionally, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and related disclosures about products and
services, geographic areas and major customers. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997. Management is currently
evaluating the impact of this standard on the financial statements.
3. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT SUPPLIERS:
The Company distributes its products and extends credit to a large number
of customers in the industrial, construction, utility and manufactured
structures market. In addition, one supplier accounted for approximately 20%,
18%, and 18% of the Company's purchases for the years ended December 31, 1995,
1996 and 1997, respectively.
4. PROPERTY, BUILDINGS AND EQUIPMENT:
December 31,
---------------------------
1996 1997
------------ ------------
Land .................................................... $ 18,543 $ 17,875
Buildings and leasehold improvements .................... 59,174 61,629
Furniture, fixtures and equipment ....................... 27,412 30,083
--------- ---------
105,129 109,587
Less: accumulated depreciation and amortization ......... (14,266) (20,721)
--------- ---------
90,863 88,866
Construction in progress ................................ 3,088 6,216
--------- ---------
$ 93,951 $ 95,082
========= =========
5. OTHER ASSETS:
December 31,
-------------------------
1996 1997
----------- -----------
Debt issuance costs .................... $ 1,098 $ 1,270
Software costs ......................... 5,162 6,846
Favorable lease commitments ............ 1,054 1,054
Other .................................. 879 1,916
-------- --------
8,193 11,086
Less: accumulated amortization ......... (6,036) (7,355)
-------- --------
2,157 3,731
Restricted cash ........................ 2,513 5,878
-------- --------
$ 4,670 $ 9,609
======== ========
F-9
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
5. OTHER ASSETS: -- Continued
Debt issuance costs are being amortized on a straight-line basis, which
does not differ significantly from the effective interest rate method, over the
term of the related debt (see Note 8).
Restricted cash represents proceeds received from the sale of properties
which collateralize the First Mortgage Notes. Such proceeds are restricted for
either repayment of the First Mortgage Notes or acquisition of additional
properties which would be issued as collateral under the First Mortgage Notes
(see Note 8).
6. OTHER CURRENT LIABILITIES:
December 31,
----------------------
1996 1997
--------- ----------
Accrued taxes other than income ......... $ 9,782 $10,696
Accrued interest ........................ 1,912 1,508
Notes payable ........................... 1,597 891
Other current liabilities ............... 3,869 3,968
------- -------
$17,160 $17,063
======= =======
The notes payable relate to a portion of the purchase price for certain
acquisitions.
7. INCOME TAXES:
At the acquisition date, February 28, 1994, the Company had approximately
$45,000 of future tax deductions ($18,000 of tax benefits) which resulted in
the creation of certain deferred tax assets. A valuation allowance was recorded
for the full amount of the assets reflected on the opening balance sheet since
the realization of these future benefits was not considered likely at that
time. However, at December 31, 1996, all of these deductions had been
recognized. The recognition of these benefits resulted in a reduction in
noncurrent intangible assets, principally trademarks.
The charge in lieu of taxes recognized in 1995 and 1996 represents the
amount of tax expense that would have been recognized had the benefits
described above been recorded at the time of the acquisition.
The provision for income taxes is as follows:
1995 1996 1997
----------- ---------- ----------
Current:
U.S. federal ................................................. $ 468 $ 15,360 $16,689
State ........................................................ 100 2,872 3,067
Foreign ...................................................... -- 210 1,117
Deferred:
U.S. federal ................................................. 7,218 (1,588) 2,727
State ........................................................ 1,314 (267) (183)
Foreign ...................................................... 740 523 293
Charge in lieu of taxes ...................................... 4,950 1,254 --
-------- -------- -------
Provision for income taxes before extraordinary charge ......... 14,790 18,364 23,710
Tax benefit of extraordinary charge ............................ (5,244) -- --
-------- -------- -------
$ 9,546 $ 18,364 $23,710
======== ======== =======
F-10
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
7. INCOME TAXES: -- Continued
The components of income before income taxes and extraordinary charge by
jurisdiction are as follows:
1995 1996 1997
---------- ---------- ----------
United States .......... $35,815 $49,072 $57,083
Canada ................. 4,105 1,754 2,864
------- ------- -------
$39,920 $50,826 $59,947
======= ======= =======
A reconciliation between the federal statutory income tax rate and the
effective rate is as follows:
1995 1996 1997
---------- ---------- ----------
Federal income taxes at the statutory rate ..................... 34.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit .......... 5.2 4.2 3.3
Nondeductible expenses ......................................... 1.8 2.5 2.6
Tax on income of foreign subsidiary ............................ 1.0 (0.1) 0.3
Net adjustment to valuation allowance .......................... (5.0) (5.8) --
Other .......................................................... -- 0.3 (1.6)
---- ---- ----
37.0% 36.1% 39.6%
==== ==== ====
In 1995 and 1996, the Company determined that it was more likely than not
that it would realize the benefits of certain deferred tax assets originating
subsequent to the acquisition. As a result, the Company recognized benefits of
approximately $1,980 and $2,928 in 1995 and 1996, respectively, associated with
the realization of the post acquisition deferred tax assets through the
reversal of the associated valuation allowance.
The deferred taxes are as follows:
1996 1997
----------- -----------
Accounts receivable ........................ $ 3,327 $ 4,236
Inventory .................................. 4,412 4,819
Restructuring reserve ...................... 90 484
Other ...................................... 4,902 4,738
--------- ---------
12,731 14,277
--------- ---------
Intangibles ................................ (320) (3,766)
Property, buildings and equipment .......... (4,429) (4,079)
Other ...................................... (8,412) (8,817)
--------- ---------
(13,161) (16,662)
--------- ---------
$ (430) $ (2,385)
========= =========
8. LONG-TERM DEBT:
December 31,
-------------------------
1996 1997
----------- -----------
United States debt agreements:
Revolving Credit Loans (A) ................................................ $177,400 $205,900
Zero Coupon First Mortgage Note, due February 2001, net of unamortized debt
discount of $21,046 in 1996 and $16,601 in 1997 (B) ...................... 54,473 58,918
Other ..................................................................... 700 2,839
Canadian debt agreements (U.S. dollar equivalents):
Revolving Credit Loans (A) ................................................ 21,900 20,245
8% First Mortgage Note, due February 2001 (C) ............................. 6,162 6,373
-------- --------
$260,635 $294,275
======== ========
F-11
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
8. LONG-TERM DEBT: -- Continued
- - - - ---------------------
(A) The Company has entered into credit agreements with various banks
providing for an aggregate of $360,000 ($300,000 at December 31, 1996) of
revolving credit facilities, expiring February 2000. The agreements
provide for floating rates, based on either Prime or LIBOR in the United
States and Prime or Bankers' Acceptance rates in Canada plus a fixed
margin. The interest rates for 1996 for the revolving credit loans ranged
from 6.3% to 8.3% in the United States and was 3.2% in Canada. The
interest rates for 1997 for the revolving credit loans ranged from 6.1% to
8.5% in the United States and was 4.4% to 5.3% in Canada. The weighted
average interest rate was 6.7% and 6.0% for the years ended December 31,
1996 and 1997, respectively (see Note 17).
In 1995, the Company terminated the existing credit agreements and
refinanced the outstanding indebtedness. In connection with this
refinancing, the Company recorded an extraordinary charge of $13,312
($8,068 after-tax) relating to the write-off of unamortized debt issuance
and other costs associated with the early termination of the debt.
(B) The Company issued a Zero Coupon First Mortgage Note to Westinghouse for
the purchase of the real estate acquired in the United States. This note
has a yield to maturity of 8% and a maturity value of $75,519.
(C) The Company issued a First Mortgage Note to Westinghouse for the purchase
of the real estate acquired in Canada. All interest and principal will be
due February 2001.
The Company has two interest rate cap agreements with individual notional
amounts of $80,000 that expire in March 1998 and August 1999. The aggregate
cost of the interest rate caps of $278 is being amortized to interest expense
over the period of the agreements on a straight-line basis. The agreements
effectively provide a ceiling for interest at rates ranging from 6.8% to 7.0%.
The market value of the interest rate caps is estimated to be $42 at December
31, 1997.
The agreements contain various restrictive covenants that, among other
things, impose (i) limitations on the incurrence of additional indebtedness or
guaranties; (ii) limitations on the issuance of additional stock of
subsidiaries; (iii) limitations on liens or negative pledges; (iv) limitations
on investments, loans, acquisitions or advances; (v) limitations on dividends;
(vi) limitations on the sale, lease or other disposal of assets; (vii)
limitations on transactions among affiliates which are not arms-length; (viii)
limitations on entering into new lines of business; and (ix) limitations on
capital expenditures. In addition, the agreements require the Company to meet
certain financial tests based on net worth, a funded indebtedness to
consolidated EBITDA ratio and fixed charge coverage.
The Company is permitted to pay dividends under certain limited
circumstances. At December 31, 1997, no retained earnings were available to pay
dividends.
The Company had outstanding letters of credit in the amount $3,250 at
December 31, 1996 and 1997. These letters of credit are used as collateral for
performance and bid bonds. The value of these letters of credit approximates
contract value.
The value of assets collateralized under the aforementioned debt
agreements was approximately $651,348 and $719,533 at December 31, 1996 and
1997, respectively.
The fair value of the Company's long-term debt is estimated to be
approximately $255,620 and $290,035 at December 31, 1996 and 1997,
respectively, based on current market interest rates and discounted cash flows.
Future principal payments of long-term debt in excess of one year as of
December 31, 1997 are as follows:
1999 .................. $228,230
2000 .................. 385
2001 .................. 65,594
2002 .................. 66
F-12
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
9. CAPITAL STOCK:
Common Stock:
There are 2,000,000 shares each of Class A and Class B common stock
authorized at a par value of $.01 per share. The Class B common stock is
identical to the Class A common stock, except for voting and conversion rights.
The holders of Class B common stock have no voting rights. With certain
exceptions, Class B common stock may be converted, at the option of the holder,
into the same number of shares of Class A common stock. No Class B common stock
was outstanding at December 31, 1996 and 1997.
At December 31, 1997, shares of common stock reserved for future issuance
were as follows:
Number of Shares
-----------------
Stock purchase plan ............................. 24,986
Stock option plan ............................... 81,114
Stock option plan for branch employees .......... 24,900
Redeemable Class A Common Stock:
Certain employees and key management of the Company who hold Class A
common stock and options may require the Company to repurchase, under certain
conditions, death, disability or termination without cause, all of the shares
and the exercisable portion of the options held. This repurchase right
terminates upon the consummation of an initial equity public offering of
Holding's Class A common stock.
10. STOCK INCENTIVE PLANS:
Stock Purchase Plan:
Under the Company's stock purchase plan, certain employees of the Company
may be granted an opportunity to purchase Holdings' Class A common stock. The
maximum number of shares available for purchase may not exceed 55,000. The
purchase price per share is determined by the Board of Directors of the Company
to represent fair market value, as defined by the Stock Subscription Agreement.
Should the purchase price of the stock be less than the fair market value of
the stock at the grant date, such excess will be recorded as compensation
expense in the consolidated statement of income. The plan will continue in
effect until either the earlier of June 15, 1999, or the date on which all
shares of common stock to be offered have been issued. At December 31, 1996 and
1997, a total of 30,504 and 31,304 shares, respectively, have been purchased
under the plan. During 1995, 14,624 shares were purchased for a
weighted-average share price, of $103 under the plan. During 1996, 2,610 shares
were purchased for a weighted-average share price of $169 under the plan.
During 1997, 800 shares were purchased for a weighted-average share price of
$251 under the plan. In conjunction with the purchase of shares pursuant to the
plan, the Company has granted options to purchase shares of common stock equal
to approximately one and one-third of the number of shares purchased. See the
stock option plan described below for further information.
Other Stock Purchases:
In addition to the stock purchase plan, certain key management employees
of the Company, nonemployee directors and other investors were granted an
opportunity to purchase Holdings' Class A common stock. The purchase price per
share was determined by the Board of Directors to represent the fair market
value, as defined by the Stock Subscription Agreement, at the date of grant. At
each of December 31, 1996 and 1997, 54,150 shares had been purchased. During
1995, 8,140 shares were purchased at a weighted-average share price of $111
under these additional offerings. During 1996, 2,140 shares were purchased at a
share price of $195 under an additional offering.
F-13
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
10. STOCK INCENTIVE PLANS: -- Continued
Stock Option Plan:
Participation in the Company's stock option plan is limited to officers
and key employees of the Company. The maximum number of Class A common stock
options (and the maximum shares of common stock subject to options) granted
under the plan may not exceed 181,000. The exercise price per share is
determined by the Board of Directors of the Company, but will not be less than
the estimated fair market value, as defined by the Stock Option Agreements, on
the grant date. Options granted to a participant will vest and will become
exercisable over five years, except in the event of a change in control. Each
option terminates on the tenth anniversary of its grant date unless terminated
sooner under certain conditions.
Stock Option Plan for Branch Employees:
The Company also has a stock option plan whose participation is limited to
branch managers and other key branch personnel. The Compensation Committee of
the Board of Directors of the Company may grant such employees up to 50,000
options. Provisions for exercise price, vesting and termination of these
options are substantially the same as the stock option plan described above.
The transactions for shares under options are as follows:
1995 1996 1997
--------- --------- ----------
Outstanding, beginning of year
Number .................................. 68,860 95,970 98,842
Weighted-average exercise price ......... $ 100 $ 102 $ 107
Granted
Number .................................. 27,110 6,300 26,140
Weighted-average exercise price ......... $ 106 $ 181 $ 198
Exercised
Number .................................. -- 3,428 1,714
Weighted-average exercise price ......... -- $ 100 $ 100
Canceled
Number .................................. -- -- 3,424
Weighted-average exercise price ......... -- -- $ 102
Outstanding, end of year
Number .................................. 95,970 98,842 119,844
Weighted-average exercise price ......... $ 102 $ 107 $ 127
Exercisable, end of year
Number .................................. 10,226 18,796 33,848
Weighted-average exercise price ......... $ 100 $ 101 $ 103
The following summarizes certain stock options information at December 31,
1997:
Options outstanding:
Range of Weighted-average Weighted-average
exercise price Number remaining life exercise price
- - - - ---------------- --------- ------------------ -----------------
$ 100--$251 119,844 7.3 $127
Options exercisable:
Range of Weighted-average
exercise price Number exercise price
- - - - ------------------ -------- -----------------
$ 100--$195 33,848 $103
The Westinghouse option, discussed in Note 12, has not been included in
the above data.
F-14
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
10. STOCK INCENTIVE PLANS: -- Continued
The stock option plans require the Company to repurchase the exercisable
portion of the options held by an employee if the employee dies, is disabled or
terminated without cause. This repurchase right terminates upon consummation of
an initial equity public offering of Holdings' Class A common stock. Since the
triggering event requiring the repurchase is considered remote, the Company
accounts for the option plans as fixed plans and accordingly no compensation
expense has been recorded.
In connection with the implementation of SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company has elected to continue to account for
stock-based compensation arrangements under the provisions of Accounting
Principles Board (APB) Opinion No. 25, which resulted in no compensation costs
being recorded.
If compensation costs had been determined based on the fair value at the
grant dates according to SFAS No. 123, the Company's net income and earnings
per share, would have been as follows:
1995 1996 1997
---------- ---------- ----------
Net income:
As reported ......... $17,062 $32,462 $36,237
Pro forma ........... 16,960 32,399 35,711
The weighted-average fair value of options granted was $6.23, $16.70 and
$33.56 per share for the years ended 1995, 1996 and 1997, respectively. The
fair value of each option grant is estimated on the date of grant using the
Black-Sholes based pricing model with the following assumptions:
1995 1996 1997
----------- ----------- -----------
Risk-free interest rate .......... 6.4% 6.5% 6.5%
Option term ...................... 7 years 7 years 7 years
11. EMPLOYEE BENEFITS:
A majority of the Company's employees are covered by defined contribution
retirement savings plans for their service rendered subsequent to the
acquisition date. Westinghouse retains certain retiree pension and health
benefits for service rendered prior to formation. U.S. employee contributions
of not more than 6% of eligible compensation are matched 50% by the Company.
Company contributions for Canadian employees range from 1% -- 6% of eligible
compensation based on years of service.
In addition, employer contributions may be made at the discretion of the
Board of Directors and can be based on the Company's current year performance.
Employees are credited for service with Westinghouse in determining the vesting
of Company contributions. For the years ended December 31, 1995, 1996 and 1997,
the Company contributed $7,096, $9,256 and $12,453, respectively, which was
charged to expense.
12. RELATED PARTIES:
Pursuant to an agreement, Clayton, Dubilier & Rice, Inc. provides
financial advisory and management consulting services to the Company for an
annual fee of approximately $400.
WESCO purchases products and services from and sells products to
Westinghouse. A summary of these purchases and sales is as follows:
1995 1996 1997
---------- ---------- ----------
Purchases from Westinghouse .......... $27,481 $19,115 $15,498
Sales to Westinghouse ................ 27,311 21,192 21,666
F-15
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
12. RELATED PARTIES: -- Continued
The amount due from Westinghouse at December 31, 1996 and 1997, net of
amounts owed, was approximately $4,664 and $2,623, respectively.
In connection with the acquisition, the Company granted Westinghouse an
option to purchase 100,000 shares of Class A common stock at a price of $100
per share. The option is exercisable until it terminates on February 28, 1999.
The Company has a right of first refusal if Westinghouse decides to sell its
option to a third party prior to its termination. The fair value of this
option, which was recorded at the acquisition, was $2,500 and is included in
the consolidated balance sheets as Common Stock to Be Issued Under Option.
13. COMMITMENTS AND CONTINGENCIES:
Future minimum rental payments required under operating leases, primarily
for real property that have noncancelable lease terms in excess of one year as
of December 31, 1997, are as follows:
1998 ........................ $17,692
1999 ........................ 14,831
2000 ........................ 12,838
2001 ........................ 10,602
2002 ........................ 6,175
Thereafter .................. 8,593
Rental expense for the years ended December 31, 1995, 1996 and 1997, was
$16,326, $22,032 and $26,371, respectively.
The Company has litigation arising from time to time in the normal course
of business. In management's opinion, any present litigation the Company is
aware of will not materially affect the Company's consolidated financial
position, results of operations or cash flows.
Westinghouse agreed to indemnify the Company for certain environmental
liabilities that existed at the time of the acquisition. The Company has made a
claim under this indemnity amounting to $1.5 million. The ultimate resolution
of this environmental compliance issue is not expected to materially impact the
Company's consolidated financial position, results of operations or cash flows.
The Company has guaranteed $5,636 in loans to certain stockholders at
December 31, 1997.
14. SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental cash flow information is as follows:
1995 1996 1997
---------- ------------ ----------
Cash paid during the year for:
Interest .............................. $ 12,433 $ 11,600 $ 15,377
Income taxes .......................... 1,062 13,756 27,523
Details of acquisitions:
Fair value of assets acquired ......... 18,455 170,583 21,498
Value of liabilities assumed .......... (6,242) (54,884) (5,334)
Restructuring reserve ................. -- (5,102) --
Notes issued to seller ................ (5,900) (2,950) (2,250)
-------- --------- --------
Cash paid for acquisitions .............. 6,313 107,647 13,914
Less: cash acquired ..................... 132 3,729 --
-------- --------- --------
$ 6,181 $ 103,918 $ 13,914
======== ========= ========
F-16
WESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
15. ACQUISITIONS:
During the three years ended December 31, 1997, the Company acquired
eleven distributors with branches located across the United States for an
aggregate purchase price of $12,423 and $158,802 and $19,248, respectively. The
largest acquisition, in April 1996, was EESCO, Inc. with headquarters in
Chicago, Illinois. These acquisitions resulted in goodwill of approximately
$6,146, $59,766 and $5,913 for the years ending 1995, 1996 and 1997,
respectively.
The acquisitions have been accounted for under the purchase method of
accounting for business combinations. The results of operations of these
companies are included in the consolidated financial statements from the
acquisition dates forward. Pro forma results of these acquisitions, assuming
they had been made at the beginning of each year presented, would not be
materially different from the results reported.
In December 1997, the Company entered into definitive agreements to
acquire two distribution businesses for approximately $59,500 financed
principally through $45,000 in borrowings under the Company's credit agreement
and $14,500 of uncollateralized notes. Up to $5,000 of such notes may be
converted to shares of Class A common stock at an initial equity public
offering price at the election of the holder, which election is required to be
made prior to an initial equity public offering. Both acquisitions closed in
January 1998. These acquisitions have been accounted for under the purchase
method of accounting for business combinations.
16. GEOGRAPHIC INFORMATION:
The Company is engaged principally in one line of business -- distribution
of electrical supplies -- which represents more than 90% of consolidated sales.
The following table presents information about the Company by geographic area.
There were no material amounts of sales or transfers among geographic areas and
no material amounts of United States export sales:
United States Canada Total
--------------- ----------- -------------
As of and for the year ended December 31, 1995
Sales, net ................................... $1,598,618 $258,424 $1,857,042
Income from operations ....................... 47,910 7,823 55,733
Identifiable assets .......................... 500,905 80,431 581,336
As of and for the year ended December 31, 1996
Sales, net ................................... 2,014,107 260,515 2,274,622
Income from operations ....................... 63,562 4,646 68,208
Identifiable assets .......................... 688,791 84,696 773,487
As of and for the year ended December 31, 1997
Sales, net ................................... 2,313,862 280,957 2,594,819
Income from operations ....................... 74,774 5,282 80,056
Identifiable assets .......................... 781,692 89,168 870,860
17. SUBSEQUENT EVENTS:
On May 8, 1998, the Company acquired a distribution business for
approximately $47,200 financed principally through borrowings under the
Company's credit agreement and seller notes.
On February 13, 1998, the Company amended the revolving credit agreements
(see Note 8). The amendment allows the Company to borrow up to a maximum of
$445,000 through February 2001, releases all previously required collateral and
amends certain restrictive covenants. The loans continue to adjust for floating
rates, based on either Prime or LIBOR in the United States and Prime or
Bankers' Acceptance rates in Canada plus a fixed margin.
F-17
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given or
made, such information or representations must not be relied upon as having
been authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or any offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus nor any offer or sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Issuers since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
- - - - --------------------------------------------------------------------------------
Table of Contents
Available Information ............................... i
Summary ............................................. 1
Summary Historical and Pro Forma Financial
and Other Data.................................... 19
Risk Factors ........................................ 21
The Recapitalization ................................ 29
Use of Proceeds ..................................... 31
Capitalization ...................................... 31
Unaudited Pro Forma Financial Information ........... 32
Selected Historical Consolidated Financial
Data ............................................. 42
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ....................................... 45
Business ............................................ 52
Management .......................................... 66
Certain Relationships and Related
Transactions ..................................... 72
Security Ownership of Certain Beneficial
Owners and Management ............................ 74
Description of the Credit Facilities ................ 75
Description of the Receivables Facility ............. 78
Senior Subordinated Exchange Offer .................. 80
Senior Discount Exchange Offer ...................... 91
Description of the Senior Subordinated
Exchange Notes ................................... 103
Description of the Senior Discount Exchange
Notes ............................................ 135
Registration Rights Agreements ...................... 164
Book-Entry; Delivery and Form ....................... 167
Certain United States Federal Income Tax
Consequences ..................................... 170
Plan of Distribution ................................ 174
Legal Matters ....................................... 175
Experts ............................................. 175
Index to Consolidated Financial Statements .......... F-1
Prospectus
WESCO Distribution, Inc.
Offer to Exchange up to $300,000,000 of its
9 1/8% Senior Subordinated Notes Due 2008,
Series B, which have been registered under
the Securities Act,
for any and all of its Outstanding
9 1/8% Senior Subordinated Notes Due 2008,
Series A
WESCO International, Inc.
Offer to Exchange $87,000,000 of its
11 1/8% Senior Discount Notes
Due 2008, Series B, which have been
registered under the Securities Act, for
$87,000,000 of its
Outstanding 11 1/8% Senior Discount Notes
Due 2008, Series A
, 1998
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Under Section 145 of the Delaware General Corporation Law (the "Delaware
Law"), a corporation may indemnify its directors, officers, employees and
agents and its former directors, officers, employees and agents and those who
serve, at the corporation's request, in such capacity with another enterprise,
against expenses (including attorney's fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in which they or
any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. The Delaware General
Corporation Law provides, however, that such person must have acted in good
faith and in a manner such person reasonably believed to be in (or not opposed
to) the best interests of the corporation and, in the right of the corporation,
where such person has been adjudged liable to the corporation, unless, and only
to the extent that a court determines that such person fairly and reasonably is
entitled to indemnity for costs the court deems proper in light of liability
adjudication. Indemnity is mandatory to the extent a claim, issue or matter has
been successfully defended.
The Certificate of Incorporation and By-Laws of each Issuer provide for
mandatory indemnification of directors and officers on generally the same terms
as permitted by the Delaware General Corporation Law.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits:
See the Exhibit Index included immediately preceding the exhibits to this
registration Statement.
(b) Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts.
All other schedules have been omitted because they are not applicable or
not required or the required information is included in the financial
statements or notes thereto.
In connection with our audits of the consolidated financial statements of
WESCO International, Inc. (formerly CDW Holding Corporation) and subsidiaries as
of December 31, 1996 and 1997 and for each of the three years in the period
ended December 31, 1997, which financial statements are included in the
Registration Statement, we have also audited the financial statement schedule
listed in Item 20 herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
/s/ Coopers & Lybrand LLC
600 Grant Street
Pittsburgh, Pennsylvania
February 6, 1998, except for
Note 17, as to which the date is
May 8, 1998
Item 22. Undertakings.
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-1
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereto, which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrants hereby undertake as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed to be underwriters, in addition to the information
called for by the other Items of the applicable form.
The Registrants undertake that every prospectus: (i) that is filed
pursuant to the immediately preceding undertaking or (ii) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of a Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Pittsburgh, Pennsylvania, on June
24, 1998.
WESCO INTERNATIONAL, INC.
By: /s/ ROY W. HALEY
Name: Roy W. Haley
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of WESCO International, Inc.,
do hereby constitute and appoint David F. McAnally, Steven A. Burleson and
Anthony D. Tutrone, or either of them, our true and lawful attorneys and
agents, to do any and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all instruments for
us and in our names in the capacities indicated below, which said attorneys and
agents, or either of them, may deem necessary or advisable to enable said
corporation to comply with the Securities Act of 1933 and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but
without limitation, power and authority to sign for us or any of us in our
names in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto and we do hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 24th day of June, 1998 by the
following persons in the capacities indicated, with respect to WESCO
International, Inc.:
Signature Title
- - - - ---------------------------------- ----------------------------------------
/s/ ROY W. HALEY Chairman, President and Chief
------------------------------
Roy W. Haley Executive Officer (Principal Executive
Officer)
/s/ DAVID F. MCANALLY Treasurer (Principal Financial Officer)
------------------------------
David F. McAnally
/s/ STEVEN A. BURLESON Vice President and Corporate
------------------------------
Steven A. Burleson Controller (Principal Accounting
Officer)
/s/ JAMES L. SINGLETON Director
------------------------------
James L. Singleton
/s/ JAMES A. STERN Director
------------------------------
James A. Stern
/s/ ANTHONY D. TUTRONE Director
------------------------------
Anthony D. Tutrone
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Pittsburgh, Pennsylvania, on June
24, 1998.
WESCO DISTRIBUTION, INC.
By: /s/ ROY W. HALEY
Name: Roy W. Haley
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of WESCO Distribution, Inc., do
hereby constitute and appoint David F. McAnally, Steven A. Burleson and Anthony
D. Tutrone, or either of them, our true and lawful attorneys and agents, to do
any and all acts and things in our name and on our behalf in our capacities as
directors and officers and to execute any and all instruments for us and in our
names in the capacities indicated below, which said attorneys and agents, or
either of them, may deem necessary or advisable to enable said corporation to
comply with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with this
Registration Statement, including specifically, but without limitation, power
and authority to sign for us or any of us in our names in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 24th day of June, 1998 by the
following persons in the capacities indicated, with respect to WESCO
Distribution, Inc.:
Signature Title
- - - - ------------------------------------------ ---------------------------------------
/s/ ROY W. HALEY Chairman, President and Chief
-------------------------------------
Roy W. Haley Executive Officer (Principal Executive
Officer)
/s/ DAVID F. MCANALLY Executive Vice President, Chief
-------------------------------------
David F. McAnally Operating Officer, Chief Financial
Officer and Treasurer (Principal
Financial Officer)
/s/ STEVEN A. BURLESON Vice President and Corporate
-------------------------------------
Steven A. Burleson Controller (Principal Accounting
Officer)
/s/ JAMES L. SINGLETON Director
-------------------------------------
James L. Singleton
/s/ JAMES A. STERN Director
-------------------------------------
James A. Stern
/s/ ANTHONY D. TUTRONE Director
-------------------------------------
Anthony D. Tutrone
II-4
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
EXHIBITS
FILED WITH
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
WESCO INTERNATIONAL, INC.
(Exact name of issuer as specified in its charter)
WESCO DISTRIBUTION, INC.
(Exact name of issuer as specified in its charter)
Volume I
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
EXHIBIT INDEX
(a) Exhibits:
Exhibit No. Description of Exhibit
- - - - ------------- ----------------------------------------------------------------------------
2.1 Recapitalization Agreement dated as of March 27, 1998 among Thor
Acquisitions L.L.C., WESCO International, Inc. (formerly known as CDW
Holding Corporation, "Holdings") and certain securityholders of Holdings.
2.2 Purchase Agreement dated May 29, 1998 among Holdings, WESCO
Distribution, Inc. (the "Company"), Chase Securities Inc. and Lehman
Brothers Inc. (the "Initial Purchasers").
3.1 Certificate of Incorporation of Holdings.
3.2 + By-Laws of Holdings.
3.3 Certificate of Incorporation of the Company.
3.4 By-Laws of the Company.
4.1 Indenture dated as of June 5, 1998 among the Company, Holdings and Bank
One, N.A.
4.2 Form of 9 1/8% Senior Subordinated Note Due 2008, Series A (included in
Exhibit 4.1).
4.3 Form of 9 1/8% Senior Subordinated Note Due 2008, Series B (included in
Exhibit 4.1).
4.4 Exchange and Registration Rights Agreement dated as of June 5, 1998
among the Company, Holdings and the Initial Purchasers.
4.5 Indenture dated as of June 5, 1998 between Holdings and Bank One, N.A.
4.6 Form of 11 1/8% Senior Discount Note Due 2008, Series A (included in
Exhibit 4.5).
4.7 Form of 11 1/8% Senior Discount Note Due 2008, Series B (included in
Exhibit 4.5).
4.8 Exchange and Registration Rights Agreement dated as of June 5, 1998
among Holdings and the Initial Purchasers.
5.1* Opinion of Simpson Thacher & Bartlett relating to the Notes.
5.2* Opinion of Jeffrey B. Kramp relating to the Notes.
10.1 + CDW Holding Corporation Stock Purchase Plan.
10.2 + Form of Stock Subscription Agreement.
10.3 + CDW Holding Corporation Stock Option Plan.
10.4 + Form of Stock Option Agreement.
10.5 + CDW Holding Corporation Stock Option Plan for Branch Employees.
10.6 * Form of Branch Stock Option Agreement.
10.7 + [Intentionally deleted.]
10.8 + Non-Competition Agreement, dated as of February 28, 1996, between
Westinghouse Electric Corporation, Holdings and the Company
10.9 + Employment Agreement between the Company and Stanley C.
Weiss.
10.10+ Lease dated May 24, 1995 as amended by Amendment One dated June,
1995 and by Amendment Two dated December 24, 1995 by and between
the Company as Tenant and Opal Investors, L.P. and Mural GEM
Investors as Landlord.
10.11+ Lease dated April 1, 1992 as renewed by Letter of Notice of Intent to Renew
dated December 13, 1996 by and between the Company successor in interest
to Westinghouse Electric Supply Company, a former division of Westinghouse
Electric Corporation as Tenant and Utah State Retirement Fund as Landlord.
10.12+ Lease dated September 4, 1997 by and between the Company as Tenant and The
Buncher Company as Landlord.
10.13+ Lease dated March, 1995 by and between WESCO Distribution-Canada, Inc.
("WESCO Canada") as Tenant and Atlantic Construction, Inc. as Landlord.
Exhibit No. Description of Exhibit
- - - - ------------- ----------------------------------------------------------------------------
10.14 Credit Agreement dated as of June 5, 1998 among Holdings, the Company,
WESCO Canada, The Chase Manhattan Bank, The Chase Manhattan Bank
of Canada and Lehman Commercial Paper, Inc.
10.15 U.S. Receivables Sales Agreement dated June 5, 1998 among the Company,
WESCO Receivables Corp. (the "SPC"), The Chase Manhattan Bank and
other sellers named therein.
10.16 Canadian Receivables Sales Agreement dated June 5, 1998 among the
Company, WESCO Canada, the SPC, The Chase Manhattan Bank of
Canada and other sellers named therein.
10.17 WESCO Receivables Master Trust Pooling Agreement dated June 5, 1998
among the Company, WESCO Canada, the SPC, and The Chase Manhattan
Bank.
10.18 WESCO Receivables Master Trust Pooling Agreement Series 1998-1
Supplement dated June 5, 1998.
10.19 Amended and Restated Registration and Participation Agreement dated
June 5, 1998 among Holdings and certain securityholders of Holdings named
therein.
10.20 Employment Agreement dated June 5, 1998 between Roy W. Haley
and the Company.
12 Computation of Ratios of Earnings to Fixed Charges.
21.1* Subsidiaries of Holdings and the Company.
23.1* Consent of Simpson Thacher & Bartlett (included in its opinion filed as
Exhibit 5.1 hereto).
23.2* Consents of Jeffrey B. Kramp (included in its opinion filed as Exhibit 5.2
hereto).
23.3 Consent of Coopers & Lybrand LLP, Independent Auditors.
24 Powers of Attorney - Pages II- through II hereof.
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of Bank One, N.A., as Trustee.
27 * Financial Data Schedule.
99.1* Form of Senior Subordinated Letter of Transmittal.
99.2* Form of Senior Subordinated Notice of Guaranteed Delivery.
99.3* Form of Senior Discount Letter of Transmittal.
99.4* Form of Senior Discount Notice of Guaranteed Delivery.
- - - - ---------------------
* To be filed by amendment.
+ Previously filed
(b) Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts.+
All other schedules have been omitted because they are not applicable or
not required or the required information is included in the financial
statements or notes thereto.
================================================================================
RECAPITALIZATION AGREEMENT
among
THOR ACQUISITIONS L.L.C., as Investor,
CDW HOLDING CORPORATION
and
CERTAIN SECURITYHOLDERS OF
CDW HOLDING CORPORATION, as Participating Securityholders
Dated as of March 27, 1998
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I
RECAPITALIZATION; CLOSING.........................2
1.1 Sale and Purchase of Shares................................2
1.2 Surrendered Options........................................3
1.3 Rolled-Over Options........................................4
1.4 Offer Notice...............................................4
1.5 Purchase and Sale of Newly Issued Shares...................6
1.6 Closing....................................................6
ARTICLE II
DEFINITIONS................................8
2.1 Specific Definitions.......................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES AS TO
THE PARTICIPATING SECURITYHOLDERS................... 16
3.1 Authorization, etc....................................... 16
3.2 Conflicts; Consents...................................... 16
3.3 Title to Repurchased Shares, Investor Purchased
Shares and Surrendered Options........................... 17
3.4 Litigation............................................... 18
3.5 Brokers and Finders...................................... 18
3.6 Unregistered Shares...................................... 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES..................... 19
4.1 Corporate Status, etc.................................... 19
4.2 Capitalization........................................... 19
4.3 Conflicts; Consents...................................... 21
4.4 Financial Statements..................................... 22
4.5 Events Subsequent to Latest Financial Statements......... 22
4.6 Tax Matters.............................................. 23
4.7 Litigation............................................... 25
4.8 Compliance with Laws..................................... 25
4.9 Employee Benefits........................................ 26
4.10 Permits.................................................. 27
4.11 Owned Real Property...................................... 28
4.12 Leases................................................... 29
4.13 Personal Property; Condition of Assets................... 29
4.14 Intellectual Property.................................... 30
4.15 Contracts................................................ 31
4.16 Insurance................................................ 32
4.17 Environmental Matters.................................... 33
4.18 Labor Matters............................................ 34
4.19 Information in Form S-1.................................. 34
4.20 Brokers and Finders...................................... 34
Page
----
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR............. 34
5.1 Investor's Corporate Status.............................. 34
5.2 Authorization, etc....................................... 34
5.3 Conflicts, Consents...................................... 35
5.4 Litigation............................................... 35
5.5 Purchase for Investment.................................. 35
5.6 Financing................................................ 36
5.7 Brokers and Finders...................................... 36
5.8 Investment Canada Act.................................... 36
ARTICLE VI
COVENANTS............................... 36
6.1 Conduct of the Company and its Subsidiaries.............. 36
6.2 Efforts to Consummate Transaction........................ 38
6.3 Access and Information................................... 38
6.4 Non-Solicitation......................................... 39
6.5 Publicity................................................ 39
6.6 Employee Matters......................................... 40
6.7 Transfer Taxes........................................... 40
6.8 Employment Agreements and Other Benefits................. 40
6.9 Financing................................................ 41
6.10 Restrictions on Participating Securityholders............ 41
6.11 Waiver of Participation Rights........................... 41
6.12 Actions with respect to Equity Agreements................ 42
6.13 Actions with respect to Management Loans................. 42
6.14 Financing Commitments.................................... 43
ARTICLE VII
CONDITIONS TO CLOSING......................... 43
7.1 Conditions to the Obligation of the Investor............. 43
7.2 Conditions to the Obligation of the Participating
Securityholders and the Company.......................... 45
7.3 Conditions to the Obligations of All Parties............. 46
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES............... 46
8.1 Survival of Representations and Warranties............... 46
ARTICLE IX
TERMINATION.............................. 47
9.1 Termination.............................................. 47
9.2 Effect of Termination.................................... 48
10.1 Expenses................................................. 48
10.2 Amendments to Schedules.................................. 48
10.3 Notices.................................................. 49
ii
Page
----
10.4 Governing Law............................................ 50
10.5 Assignment; Successors; Binding Effect................... 50
10.6 Amendment; Waivers, etc.................................. 51
10.7 Entire Agreement......................................... 51
10.8 Severability............................................. 51
10.9 Headings................................................. 52
10.10 Counterparts............................................. 52
iii
Page
----
EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of Securityholder Acceptance (Non-Management)
Exhibit B Form of Securityholder Acceptance (Management)
Exhibit C Form of Custody Agreement (Non-Management)
Exhibit D Form of Custody Agreement (Management)
Exhibit E Form of Amended and Restated Registration and
Participation Agreement
SCHEDULES
Schedule 1.1 Securityholders, Shares, Repurchased Shares
and Investor Purchased Shares
Schedule 1.2 Option Holders, Options and Exercise Price
Schedule 3.2(a) Conflicts
Schedule 3.2(b) Consents
Schedule 4.1 Subsidiaries of the Company
Schedule 4.2(b) Authorized Capital Stock of the Subsidiaries;
Equity Interests
Schedule 4.2(d) Agreements with Respect to Common Stock
Schedule 4.3(a) Conflicts
Schedule 4.3(b) Consents
Schedule 4.5 Events Subsequent to Latest Financial Statements
Schedule 4.6(a) Filing of Returns and Payment of Interest
Schedule 4.6(b) Extensions, etc.
Schedule 4.6(c) Tax Filing Groups; Income Tax Jurisdictions
Schedule 4.6(d) Assessments, Deficiencies, etc.
Schedule 4.6(f) Tax Sharing Agreements
Schedule 4.7 Litigation
Schedule 4.8 Compliance with Laws
Schedule 4.9(a) Employee Benefits
Schedule 4.9(b) Litigation Relating to the Benefit Plans
Schedule 4.9(g) Effect of Consummation on Employee Benefits
Schedule 4.11(a) Owned Real Property
Schedule 4.11(b) Liens
Schedule 4.11(c) Options/Rights of First Refusal
Schedule 4.11(f) Violations of Real Property Laws
Schedule 4.12 Leases
Schedule 4.13 Personal Property
Schedule 4.14(a) Intellectual Property
Schedule 4.14(b) Licenses
Schedule 4.15 Contracts
Schedule 4.16 Insurance
Schedule 4.17 Environmental Matters
Schedule 4.18 Labor Matters
iv
Page
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Schedule 6.1 Conduct of the Company and its Subsidiaries
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RECAPITALIZATION AGREEMENT
RECAPITALIZATION AGREEMENT, dated as of March 27, 1998, among Thor
Acquisitions L.L.C., a Delaware limited liability company (the "Investor"), CDW
Holding Corporation, a Delaware corporation (the "Company"), and each party
(each, a "Participating Securityholder") that either (a) is listed on the
signature pages hereof under the heading "Participating Securityholders" or (b)
becomes party to this Agreement as a Participating Securityholder after the date
hereof pursuant to Section 1.4.
W I T N E S S E T H :
WHEREAS, the parties listed in Schedule 1.1 (each, a
"Securityholder") own all of the issued and outstanding capital stock of the
Company, consisting of 1,026,510 shares (each a "Share") of Class A Common
Stock, par value $.01 per share ("Class A Common Stock"), of which (a) 958,282
Shares are owned by the parties listed in Part A of Schedule 1.1 (each, a "Non-
Management Securityholder") and (b) 68,228 Shares are owned by the parties
listed in Part B of Schedule 1.1, as such Schedule may be amended prior to the
Closing in accordance with Section 1.4 (each, a "Management Securityholder");
WHEREAS, the parties listed in Schedule 1.2 (each, an "Option
Holder") hold all of the issued and outstanding options to acquire additional
shares of capital stock of the Company, consisting of 230,844 options, each to
acquire one share of Class A Common Stock (each, an "Option"), of which (a)
110,284 Options are held by the parties listed in Part A of Schedule 1.2 (each,
a "Non-Management Option Holder"), (b) 95,460 Options are held by the parties
listed in Part B of Schedule 1.2, as such Schedule may be amended prior to the
Closing in accordance with Section 1.4 (each, a "Management Option Holder") and
(c) 25,100 Options (each, a "Branch Option") are held by the parties listed in
Part C of Schedule 1.2;
WHEREAS, the Company desires, on the terms and conditions and for
the consideration set forth in this Agreement, to (a) repurchase the aggregate
number of Shares set forth in the column entitled "Number of Repurchased Shares"
in Part A of Schedule 1.1 (the "Repurchased Shares"), (b) cancel in exchange for
the payment provided herein (i) the aggregate number of Options set forth in the
column entitled "Number of Surrendered Options" in Part A of Schedule 1.2, and
(ii) the aggregate number of Options set forth in the column entitled "Number of
Surrendered Options" in Part B of Schedule 1.2, as such Part B of Schedule 1.2
may be amended prior to the Closing in accordance with Section 1.4 (such Options
so cancelled as contemplated by the preceding clauses (i) and (ii), the
"Surrendered Options"), and (c) to maintain outstanding after the Closing all of
the Branch Options (without acceleration of the vesting schedule for
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such Options);
WHEREAS, the Investor desires, on the terms and conditions and for
the consideration set forth in this Agreement, to (a) purchase from the Company,
and the Company desires to issue and sell to the Investor, the number of newly
issued shares of Class A Common Stock equal to the Number of Newly Issued Shares
(the "Newly Issued Shares"), and (b) purchase from the Management
Securityholders the aggregate number of Shares set forth in the column entitled
"Number of Investor Purchased Shares" in Part B of Schedule 1.1, as such
Schedule may be amended prior to the Closing in accordance with Section 1.4 (the
"Investor Purchased Shares"); and
WHEREAS, each Management Securityholder that is a Participating
Securityholder (a "Management Participating Securityholder") desires to hold,
and not sell to (or have cashed-out by) the Company, each Share owned by such
Securityholder that is not an Investor Purchased Share and each Option owned by
such Securityholder that is not a Surrendered Option, and, to the extent
provided herein, such Securityholder desires to maintain his or her remaining
equity interests in the Company after giving effect to all of the transactions
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties made herein and of the mutual benefits to be
derived therefrom, the parties hereto agree as follows:
ARTICLE I
RECAPITALIZATION; CLOSING
1.1 Sale and Purchase of Shares. (a) Repurchased Shares. Subject to
the terms and conditions hereof, at the Closing, each Non-Management
Securityholder that is a Participating Securityholder (a "Non-Management
Participating Securityholder") will sell to the Company, and the Company will
purchase from such Securityholder, the number of Repurchased Shares set forth
opposite such Securityholder's name in the column entitled "Number of
Repurchased Shares" in Part A of Schedule 1.1, which Shares shall constitute
such Securityholder's Repurchased Shares, for a purchase price (such
Securityholder's "Purchase Price for Repurchased Shares") equal to the product
of (i) $621.08 (the "Per Share Purchase Price") and (ii) the number of such
Repurchased Shares. Unless the Company and the Investor otherwise agree, the
aggregate Purchase Price for Repurchased Shares payable for all Repurchased
Shares (the "Aggregate Purchase Price for Repurchased Shares") shall in no event
exceed $595,169,785.
(b) Investor Purchased Shares. Subject to the terms and conditions
hereof, at the Closing, each Management
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Participating Securityholder will sell to the Investor, and the Investor will
purchase from such Securityholder, the number of Investor Purchased Shares set
forth opposite such Securityholder's name in the column entitled "Number of
Investor Purchased Shares" in Part B of Schedule 1.1, which Shares shall
constitute such Securityholder's Investor Purchased Shares, for a purchase price
(such Securityholder's "Purchase Price for Investor Purchased Shares") equal to
the product of (i) the Per Share Purchase Price and (ii) the number of such
Investor Purchased Shares. Unless the Company and the Investor otherwise agree,
the aggregate Purchase Price for Investor Purchased Shares payable for all
Investor Purchased Shares (the "Aggregate Purchase Price for Investor Purchased
Shares") shall in no event exceed $10,680,713.
1.2 Surrendered Options. (a) Non-Management Options. Subject to the
terms and conditions hereof, at the Closing, the Company will pay for the
account of each Non-Management Option Holder, in exchange for the cancellation
of the number of Options set forth opposite such Option Holder's name in the
column entitled "Number of Surrendered Options" in Part A of Schedule 1.2, which
Options shall constitute such Option Holder's Surrendered Options, an amount
(such Option Holder's "Option Cancellation Amount") equal to the product of (i)
the number of such Surrendered Options and (ii) the amount by which the Per
Share Purchase Price exceeds the per share exercise price of such Options set
forth opposite such Option Holder's name in the column entitled "Exercise Price"
in Part A of Schedule 1.2. Unless the Company and the Investor otherwise agree,
the aggregate Option Cancellation Amount payable in respect of all
Non-Management Options shall in no event exceed $57,466,787.
(b) Management Options. Subject to the terms and conditions hereof,
at the Closing, the Company will pay for the account of each Management Option
Holder, in exchange for the cancellation of the number of Options set forth
opposite such Option Holder's name in the column entitled "Number of Surrendered
Options" in Part B of Schedule 1.2, which Options shall constitute such Option
Holder's Surrendered Options, an Option Cancellation Amount equal to the product
of (i) the number of such Surrendered Options and (ii) the amount by which the
Per Share Purchase Price exceeds the per share exercise price of such Options
set forth opposite such Option Holder's name in the column entitled "Exercise
Price" in Part B of Schedule 1.2. Unless the Company and the Investor otherwise
agree, the aggregate Option Cancellation Amount payable in respect of all
Management Options shall in no event exceed $7,082,811.
(c) Release. The surrender by an Option Holder of an Option for
cancellation in exchange for the payment provided in this Section 1.2 shall
constitute a release of any and all rights such Option Holder has or may have
had in such Option.
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1.3 Rolled-Over Options. Each Option held by a Management Option
Holder that is not a Surrendered Option and each Branch Option (each, a " Rolled
Over Option") shall (a) continue to be held, and not surrendered for payment at
the Closing, by the Option Holder holding such Option and (b) continue to be an
option to acquire shares of Class A Common Stock on the terms and conditions
provided in the Option Plans and the Management Stock Option Agreements,
provided that, in the case of each Management Option that is a Rolled Over
Option, subject to Section 6.8, all conditions to vesting of any such Options
that are then unvested shall be terminated.
1.4 Offer Notice. (a) Delivery of Offer Notice. Promptly following
the execution and delivery of this Agreement by the Company, the Investor and
Fund IV, the Company and the Investor shall prepare and deliver a joint offer
notice (an "Offer Notice") to each Securityholder that is not an original
signatory to this Agreement, pursuant to which (i) if such Securityholder is a
Non-Management Securityholder, the Company will offer (A) to purchase from such
Securityholder his, her or its Repurchased Shares and (B) to cash out such
Securityholder's Surrendered Options, in each case, on the terms and conditions
provided in Sections 1.1(a) and 1.2(a), and (ii) if such Securityholder is a
Management Securityholder, (A) the Investor will offer to purchase from such
Securityholder his or her Investor Purchased Shares on the terms and conditions
provided in Section 1.1(b) and (B) the Company will offer to cash out his or her
Surrendered Options on the terms and conditions provided in Section 1.2(b). The
Offer Notice shall contain such information (financial and otherwise) as the
Company and the Investor shall determine to be appropriate so that the Offer
Notice, as of its date, shall not contain an untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) Acceptance of Offer Notice. Each Securityholder receiving an
Offer Notice may accept such Offer Notice and thereby become a Participating
Securityholder by delivering to the Company, the Investor and the Custodian, not
later than the last day of the Participation Election Period a written notice
substantially in the form of, if such Securityholder is a Non-Management
Securityholder, Exhibit A hereto or, if such Securityholder is a Management
Securityholder, Exhibit B hereto (each a "Securityholder Acceptance"), duly
executed by such Securityholder. Each Management Securityholder delivering a
Securityholder Acceptance shall specify in such Securityholder Acceptance (i)
the number of Shares owned by such Securityholder that are to constitute
Investor Purchased Shares, which shall not be greater than the number of Shares
originally specified in Part B of Schedule 1.1 on the date hereof as such
Securityholder's Investor Purchased Shares, and (ii) the number of Options owned
by such Securityholder that are to constitute Surrendered Options, which shall
not be greater than the number of Options
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originally specified in Part B of Schedule 1.2 on the date hereof as such
Securityholder's Surrendered Options. Upon timely delivery by a Securityholder
of a duly executed Securityholder Acceptance, such Securityholder shall become a
Participating Securityholder for all purposes, and bound by all provisions, of
this Agreement. Upon timely delivery by a Securityholder (other than CBS) of a
duly executed Securityholder Acceptance, such Securityholder shall be deemed to
have executed and delivered, and to be bound by all provisions of, a Power of
Attorney and Custody Agreement, in the form of, if such Securityholder is a
Non-Management Securityholder, Exhibit C hereto, or if such Securityholder is a
Management Securityholder, Exhibit D hereto (each a "Custody Agreement"),
including, but not limited to, the appointment, on the terms and condition of
such Custody Agreement, of (A) Clayton, Dubilier & Rice, Inc. ("CD&R") and each
of the other persons named therein as such Securityholder's attorney-in-fact and
(B) CD&R as custodian (the "Custodian") of such Securityholder's Repurchased
Shares or Investor Purchased Shares, as the case may be.
(c) Additional Shares and Options. Prior to the expiration of the
Participation Election Period, the Company may, in compliance with applicable
securities laws, issue to a limited number of members of WESCO's management
(each, a "New Securityholder") up to an additional 600 shares of Class A Common
Stock (each, a "New Share") in the aggregate and grant to such New
Securityholders up to an additional 780 options, each to acquire one share of
Class A Common Stock (each, a "New Option"), in the aggregate, provided that (i)
each such New Securityholder shall enter into a stock subscription agreement and
stock option agreement substantially in the form of the Management Stock
Subscription Agreements and Management Stock Option Agreements, (ii) such shares
shall be issued and sold to such New Securityholders for a per share purchase
price equal to the Per Share Purchase Price and such options shall have a per
share exercise price equal to the Per Share Purchase Price and (iii) each such
New Securityholder shall, at the time of the issuance of such shares and the
grant of such options, execute and deliver to the Company, Investor and the
Custodian a Securityholder Acceptance substantially in the form Exhibit B
hereto. Upon timely delivery by a New Securityholder of a Securityholder
Acceptance, for all purposes of this Agreement, such New Securityholder shall
become a Securityholder and a Participating Securityholder and such New
Securityholder's New Shares and New Options shall become Shares and Options.
(d) Amendment of Schedules 1.1 and 1.2. Upon timely delivery by a
Management Securityholder of a duly executed Securityholder Acceptance, if such
Securityholder Acceptance has specified a number of Investor Purchased Shares or
Surrendered Options that is less than the number set forth in Part B of Schedule
1.1 or Part B of Schedule 1.2, as the case may be, on the date hereof, (i) Part
B of Schedule 1.1 shall be amended to insert opposite such Securityholder's name
in the column entitled
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"Number of Investor Purchased Shares" in such Part B of Schedule 1.1 the number
of such Securityholder's Investor Purchased Shares specified in such
Securityholder Acceptance, and (ii) Part B of Schedule 1.2 shall be deemed to be
amended to insert opposite such Securityholder's name in the column entitled
"Number of Surrendered Options" in such Part B of Schedule 1.2 the number of
such Securityholder's Surrendered Options specified in such Securityholder
Acceptance. Upon timely delivery by a New Securityholder of a duly executed
Securityholder Acceptance pursuant to Section 1.4(c), (A) Part B of Schedule 1.1
shall be deemed to be amended to (1) insert such New Securityholder's name in
the appropriate position in the column entitled "Securityholder", (2) insert
opposite such New Securityholder's name in the column entitled "Number of
Shares" the number of such New Securityholder's New Shares and (3) insert
opposite such Securityholder's name in the column entitled "Number of Investor
Purchased Shares" the number of such New Shares that are to constitute Investor
Purchased Shares pursuant to such New Securityholder's Securityholder
Acceptance, which shall not be greater than 25% of such New Shares, and (B) Part
B of Schedule 1.2 shall be deemed to be amended to (1) insert such New
Securityholder's name in the appropriate position in the column entitled
"Management Option Holder", (2) insert opposite such New Securityholder's name
in the column entitled "Number of Options" the number of such New
Securityholder's New Options, (3) insert opposite such Securityholder's name in
the column entitled "Exercise Price" the per share exercise price of such New
Options and (4) insert opposite such New Securityholder's name in the column
entitled "Number of Surrendered Options" the number of such New Options that are
to constitute Surrendered Options pursuant to such New Securityholder's
Securityholder Acceptance, which shall not be greater than 15% of such New
Options. Promptly following the expiration of the Participation Election Period,
Part B of Schedule 1.1 and Part B of Schedule 1.2 shall be revised to reflect
any amendments thereto deemed to have been made pursuant to this Section 1.4(d),
provided that all such amendments deemed to have been made pursuant to this
Section 1.4(d) shall be effective whether or not such revisions are actually
made. Except as provided in this Section 1.4(d), Schedules 1.1 and 1.2 may not
be amended without the prior written consent of the Investor, the Company and
the Participating Securityholder affected by such amendment.
1.5 Purchase and Sale of Newly Issued Shares. Subject to the terms
and conditions hereof, at the Closing, the Company will sell to the Investor,
and the Investor will purchase from the Company, the Newly Issued Shares for a
purchase price equal to the product of (a) the Per Share Purchase Price and (b)
the Number of the Newly Issued Shares. Unless the Company and the Investor
otherwise agree, the aggregate purchase price to be paid by the Investor for the
Newly Issued Shares (the "Purchase Price for Newly Issued Shares") shall in no
event exceed $310,000,000.
1.6 Closing. Unless this Agreement shall have been
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terminated pursuant to Section 9.1, and subject to the satisfaction or waiver of
the conditions set forth in Article VII, the closing of the sale and purchase of
the Repurchased Shares, Investor Purchased Shares, Surrendered Options and Newly
Issued Shares (the "Closing") will take place at the offices of Debevoise &
Plimpton, 875 Third Avenue, New York, New York, at 10:00 a.m. on the date that
is 74 days after the date of this Agreement, or such later date as may be agreed
pursuant to Section 9.1(b), but in no event earlier than the second Business Day
following the date on which the last of the conditions to be fulfilled or waived
set forth in Article VII shall be fulfilled or waived in accordance with this
Agreement, or such other time as the parties hereto may agree in writing (the
"Closing Date"). At the Closing:
(a) each Non-Management Participating Securityholder will deliver to
the Company, free and clear of all Liens, certificates representing all of
the Repurchased Shares set forth opposite such Securityholder's name in
Part A of Schedule 1.1, duly endorsed in blank or accompanied by stock
powers or other instruments of transfer duly executed in blank, and
bearing or accompanied by all requisite stock transfer stamps;
(b) each Management Participating Securityholder will deliver to the
Investor, free and clear of all Liens, certificates representing all of
the Investor Purchased Shares set forth opposite such Securityholder's
name in Part B of Schedule 1.1, duly endorsed in blank or accompanied by
stock powers or other instruments of transfer duly executed in blank, and
bearing or accompanied by all requisite stock transfer stamps;
(c) the Investor will pay:
(i) to the Company the Purchase Price for Newly Issued Shares
by wire transfer of immediately available funds to such account as
shall be designated in writing by the Company to the Investor at
least two Business Days prior to the Closing Date; and
(ii) to the Custodian the Aggregate Purchase Price for
Investor Purchased Shares by wire transfer of immediately available
funds to such account as shall be designated in writing by the
Custodian to the Investor at least two Business Days prior to the
Closing Date, and such payment to the Custodian shall constitute
payment in full to each Management Participating Securityholder of
such Securityholder's Purchase Price for Investor Purchased Shares;
(d) the Company will:
(i) deliver to the Investor certificates
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representing all of the Newly Issued Shares, registered in the name
of the Investor (or its nominee), all of which Newly Issued Shares
will have been duly authorized and validly issued and, upon payment
as provided in clause (c)(i) above, will be fully paid and
nonassessable;
(ii) pay to the Custodian the Aggregate Purchase Price for
Repurchased Shares (excluding CBS' Purchase Price for Repurchased
Shares) by wire transfer of immediately available funds to such
account as shall be designated in writing by the Custodian to the
Company at least two Business Days prior to the Closing Date, and
such payment to the Custodian shall constitute payment in full to
each Non-Management Participating Securityholder (other than CBS) of
such Securityholder's Purchase Price for Repurchased Shares;
(iii) pay to CBS CBS' Purchase Price for Repurchased Shares
and CBS' Option Cancellation Amount by wire transfer of immediately
available funds to such account as shall be designated in writing by
CBS to the Company in writing at least two Business Days prior to
the Closing Date; and
(iv) pay to each Non-Management Option Holder (other than CBS)
and each Management Option Holder an amount equal to such Option
Holder's Option Cancellation Amount.
Upon consummation of the Closing, (1) all Options held by CBS shall
be cancelled and terminated and (2) all other Options that are Surrendered
Options shall, pursuant to the terms of the related Management Stock Option
Agreement and Stock Option Plan, be cancelled and terminated. All payments made
pursuant to this Section 1.6 shall be made net of applicable Employment and
Withholding Taxes and any such withheld amounts shall be deemed to have been
received by the person entitled to payment pursuant to this Section 1.6. Each
Option Holder holding any Surrendered Options shall execute and deliver such
agreements, receipts or acknowledgments as the Company may reasonably request to
confirm cancellation of such Option Holder's Surrendered Options (including, but
not limited to, an appropriate amendment to any applicable Management Stock
Option Agreement).
ARTICLE II
DEFINITIONS
2.1 Specific Definitions. As used in this Agreement and the
Schedules hereto, the following terms have the following meanings:
Acquisition Proposal: the meaning set forth in
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Section 6.4.
Affiliate: with respect to any Person, a Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with such Person. "Control" (including the terms
"controlled by" and "under common control with") 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 credit arrangement, as trustee or executor, or otherwise.
Agreement: this Recapitalization Agreement, including the Exhibits
and Schedules hereto.
Aggregate Purchase Price for Investor Purchased Shares: the meaning
set forth in Section 1.1(b).
Aggregate Purchase Price for Repurchased Shares: the meaning set
forth in Section 1.1(a).
Antitrust Division: the meaning set forth in Section 7.3(a).
Branch Option: the meaning set forth in the recitals.
Branch Option Plan: the CDW Holding Corporation Stock Option Plan
for Branch Employees.
Business Day: any day other than a Saturday or Sunday or other day
on which commercial banks in New York City are authorized or required by law to
close.
CBS: CBS Corporation, formerly known as Westinghouse Electric
Corporation.
CBS Equity Agreement: the Stock Subscription, Stock Option and
Stockholders Agreement, dated as of February 28, 1994, among the Company, Fund
IV and CBS.
Class A Common Stock: the meaning set forth in the recitals.
Closing: the meaning set forth in Section 1.6.
Closing Date: the meaning set forth in Section 1.6.
Code: the Internal Revenue Code of 1986, as amended.
Company: the meaning set forth in the preamble.
Company Taxes: the meaning set forth in Section 4.6(a).
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Confidentiality Agreement: the meaning set forth in Section 6.3.
Consent: any consent, approval, authorization, order, notice,
filing, registration or qualification of or with or waiver from any Person.
Contracts: the meaning set forth in Section 4.15(a).
Custodian: the meaning set forth in Section 1.4(b).
Custody Agreement: the meaning set forth in Section 1.4(b).
Employment and Withholding Taxes: any federal, state, provincial,
local, foreign or other employment, unemployment insurance, social security,
disability, workers' compensation, payroll, health care or other similar tax,
duty or other governmental charge or assessment or deficiencies thereof and all
Taxes required to be withheld by or on behalf of each of the Company and each of
its Subsidiaries in connection with amounts paid or owing to any employee,
independent contractor, creditor or other Person, in each case, on or in respect
of the business or assets thereof.
Environmental Law: any foreign, federal, state, provincial or local
law, statute, rule, regulation, order, judgment or decree relating to (a) the
manufacture, transport, use, treatment, storage, recycling, disposal release or
threatened release of Hazardous Substances, or (b) the protection of human
health or the environment (including, without limitation, natural resources,
structures, air, and surface or subsurface land or waters).
Equity Agreements: the CBS Equity Agreement, the Fund IV Stock
Subscription Agreement, the Management Stock Option Agreements, the Management
Stock Subscription Agreements, the Option Plans, the Stock Purchase Plan and the
Registration and Participation Agreement.
ERISA: the meaning set forth in Section 4.9(b).
Financial Statements: the meaning set forth in Section 4.4(a).
Financing: the meaning set forth in Section 5.6(a).
Financing Commitments: the meaning set forth in Section 5.6(b).
Form S-1: the meaning set forth in Section 3.6.
FTC: the meaning set forth in Section 7.3(a).
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Fund IV: The Clayton & Dubilier Private Equity Fund IV Limited
Partnership.
Fund IV Stock Subscription Agreement: the Stock Subscription
Agreement, dated as of February 28, 1994, between the Company and Fund IV.
GAAP: the meaning set forth in Section 4.4(a).
Governmental Entity: any governmental or regulatory authority,
agency, court, commission or other entity, domestic or foreign.
Hazardous Substance: any material or substance that is either: (a)
listed, defined, classified or regulated as a waste, hazardous or toxic or any
other term of similar import pursuant to any applicable Environmental Law, or
(b) any petroleum, petroleum product or by-product, asbestos containing
material, polychlorinated biphenyls or radioactive materials.
HSR Act: the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
Income Tax: any federal, state, provincial, local or foreign income,
alternative, minimum, accumulated earnings, personal holding company, franchise,
capital stock, net worth, capital, profits or windfall profits tax or other
similar tax, estimated tax, duty or other governmental charge or assessment or
deficiencies thereof.
Income Tax Return: any Tax Return relating to Income Taxes.
Intellectual Property: the meaning set forth in Section 4.14(a).
Investor: the meaning set forth in the preamble.
Investor Purchased Shares: the meaning set forth in the recitals.
IRS: the Internal Revenue Service.
Leased Real Property: all real property interests leased by the
Company or its Subsidiaries pursuant to the Leases.
Leases: the meaning set forth in Section 4.12(a).
Licenses: the meaning set forth in Section 4.14(b).
Lien: any mortgage, pledge, deed of trust, hypothecation, claim,
security interest, title defect, encumbrance, burden, charge or other similar
restriction, lease,
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sublease, claim, title retention agreement, option, easement, covenant,
encroachment or other adverse claim.
Management Option Holder: the meaning set forth in the recitals.
Management Participating Securityholder: the meaning set forth in
the recitals.
Management Securityholder: the meaning set forth in the recitals.
Management Stock Option Agreements: the stock option agreements
which have been entered into between the Company and each Option Holder other
than CBS with respect to the issuance of such Option Holder's Options.
Management Stock Subscription Agreements: the stock subscription
agreements which have been entered into between the Company and each
Securityholder other than Fund IV and CBS with respect to the issuance of such
Securityholder's Shares.
Material Adverse Change: since any specified date, a material
adverse change (a) in the properties, assets, liabilities, business, financial
condition or results of operations of the Company and its Subsidiaries taken as
a whole or (b) that would have a material adverse effect on the ability of the
Company to consummate the transactions contemplated by this Agreement, in each
case, other than as a result of general economic conditions in the industry in
which the Company and its Subsidiaries operate.
Material Adverse Effect: a material adverse effect (a) on the
properties, assets, liabilities, business, financial condition or results of
operations of the Company and its Subsidiaries taken as a whole or (b) that
would have a material adverse effect on the ability of the Company to consummate
the transactions contemplated by this Agreement, in each case, other than as a
result of general economic conditions in the industry in which the Company and
its Subsidiaries operate.
New Option: the meaning set forth in Section 1.4(c).
New Securityholder: the meaning set forth in Section 1.4(c).
New Share: the meaning set forth in Section 1.4(c).
Newly Issued Shares: the meaning set forth in the recitals.
Non-Management Option Holder: the meaning set forth in the recitals.
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Non-Management Participating Securityholder: the meaning set forth
in Section 1.1(a).
Non-Management Securityholder: the meaning set forth in the
recitals.
Number of Newly Issued Shares: a number (rounded to the nearest
whole number) equal to (a) the quotient obtained by dividing the Aggregate
Investment by Investor by the Per Share Purchase Price minus (b) the aggregate
number of Investor Purchased Shares. The term "Aggregate Investment by Investor"
means an amount equal to (i) if the Actual Rollover is equal to or less than $90
million, $310 million, and (ii) if the Actual Rollover is greater than $90
million, an amount equal to $400 million minus the Actual Rollover. The term
"Actual Rollover" means an amount equal to the sum of (A) the product of the
aggregate number of Rolled Over Shares and the Per Share Purchase Price, and (B)
the product of the aggregate number of Rolled Over Options and the Per Share
Purchase Price, and subtracting from such product the aggregate exercise price
in respect of such Rolled Over Options. The Actual Rollover amount will be
determined based on, and following, the elections made by the Securityholders
pursuant to the Securityholder Acceptances delivered hereunder.
Offer Notice: the meaning set forth in Section 1.4(a).
Option: the meaning set forth in the recitals.
Option Cancellation Amount: the meaning set forth in Section 1.2(a).
Option Holder: the meaning set forth in the recitals.
Option Plans: the Branch Option Plan and the Stock Option Plan.
Ordinary Course of Business: the meaning set forth in Section 4.5.
Organizational Documents: (a) with respect to any corporation, its
articles or certificate of incorporation or memorandum and articles of
association and by-laws, and (b) with respect to any a partnership, its
partnership agreement.
Owned Real Property: the meaning set forth in Section 4.11(a).
Participating Securityholder: the meaning set forth in the preamble.
Participating Securityholder Signing Date: the later to occur of (a)
the date on which all Securityholders have become Participating Securityholders
in accordance with the terms of
14
this Agreement and (b) the date on which the Participation Election Period ends.
Participation Election Period: the period commencing on the Offer
Date and ending at the end of the day that is the 20th Business Day from and
including the Offer Date, or, if the Offer Date is not a Business Day, from and
including the first Business Day after the Offer Date. The term "Offer Date"
means the date on which the Offer Notice is first published or sent to
Securityholders.
Pension Plan: the meaning set forth in Section 4.9(b).
Permits: the meaning set forth in Section 4.10.
Permitted Liens: the meaning set forth in Section 4.11(b).
Per Share Purchase Price: the meaning set forth in Section 1.1(a).
Person: any natural person, firm, partnership, association,
corporation, company, trust, business trust, Governmental Entity or other
entity.
Plans: the meaning set forth in Section 4.9(a).
Pro Forma Balance Sheet: the meaning set forth in Section 4.4(b).
Purchase Price for Investor Purchased Shares: the meanings set forth
in Section 1.1(b).
Purchase Price for Newly Issued Shares: the meaning set forth in
Section 1.5.
Purchase Price for Repurchased Shares: the meaning set forth in
Section 1.1(a).
Real Property: the meaning set forth in Section 4.11(d).
Real Property Laws: the meaning set forth in Section 4.11(f).
Registration and Participation Agreement: the Registration and
Participation Agreement, dated as of February 28, 1994, among the Company, Fund
IV, CBS and Roy W. Haley.
Repurchased Shares: the meaning set forth in the recitals.
Required Participating Securityholders: Participating
Securityholders holding at least a majority of all Shares held by
15
Participating Securityholders.
Rolled Over Option: the meaning set forth in Section 1.3.
Rolled Over Share: each Share owned by a Management Securityholder
that is not an Investor Purchased Share.
Securityholder: the meaning set forth in the recitals.
Securityholder Acceptance: the meaning set forth in Section 1.4(b).
Share: the meaning set forth in the recitals.
Stock Option Plan: the CDW Holding Corporation Stock Option Plan.
Stock Purchase Plan: the CDW Holding Corporation Stock Purchase
Plan.
Subsidiary: with respect to any Person (the "Parent"), any other
Person (other than a natural person), whether incorporated or unincorporated, of
which at least a majority of the securities or ownership interests having by
their terms ordinary voting power to elect a majority of the board of directors
or other persons performing similar functions is directly or indirectly owned or
controlled by the Parent or by one or more of its respective Subsidiaries or by
the Parent and any one or more of its respective Subsidiaries.
Surrendered Options: the meaning set forth in the recitals.
Tax: any federal, state, provincial, local or foreign income,
alternative, minimum, accumulated earnings, personal holding company, franchise,
capital stock, profits, windfall profits, gross receipts, sales, use, value
added, transfer, registration, stamp, premium, excise, customs duties,
severance, real property, personal property, ad valorem, occupancy, license,
occupation, employment, payroll, social security, disability, unemployment,
workers' compensation, withholding, estimated or other similar tax, assessment
or other governmental charge.
Tax Return: any return, report, declaration, form, claim for refund
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof that relates to the
Company or any of its Subsidiaries.
Treasury Regulations: the regulations prescribed under the Code.
WESCO: WESCO Distribution, Inc.
16
2.2 Other Definitional Provisions. (a) The words "hereof", "herein"
and "hereunder" and words of similar import, when used in this Agreement, refer
to this Agreement as a whole and not to any particular provision of this
Agreement.
(b) Terms defined in the singular have the same meaning when used in
the plural, and vice versa.
(c) References to "Sections", "Exhibits" and "Schedules" refer to
Sections of, and Exhibits and Schedules to, this Agreement (as each of the same
may be amended in accordance with the terms hereof), unless otherwise specified.
ARTICLE III
REPRESENTATIONS AND WARRANTIES AS TO
THE PARTICIPATING SECURITYHOLDERS
With respect to Sections 3.1 through 3.5, each Participating Securityholder, and
with respect to Section 3.6, each Management Participating Securityholder, as to
itself, severally and not jointly represents and warrants to the Investor and
the Company as follows:
3.1 Authorization, etc. Such Securityholder has full power,
authority and legal capacity to enter into this Agreement and any Custody
Agreement to which such Securityholder is a party and to perform such
Securityholder's obligations hereunder and thereunder. If such Securityholder is
not a natural person, the execution and delivery by such Securityholder of this
Agreement and any Custody Agreement to which such Securityholder is a party, and
the consummation by such Securityholder of the transactions contemplated hereby
and thereby have been duly authorized by all requisite partnership or corporate
action, as the case may be, of such Securityholder. This Agreement and any
Custody Agreement to which such Securityholder is a party have been duly
executed and delivered by such Securityholder and constitute the legal, valid
and binding obligations of such Securityholder enforceable against such
Securityholder in accordance with their respective terms.
3.2 Conflicts; Consents. (a) Conflicts. Except as set forth in
Schedule 3.2(a), the execution and delivery by such Securityholder of this
Agreement and any Custody Agreement to which such Securityholder is a party, and
the consummation by such Securityholder of the transactions contemplated hereby
and thereby, do not and will not conflict with, or result in any violation of,
or default under (or any event that, with notice or lapse of time or both, would
constitute a default under), or give rise to any right of termination,
cancellation or acceleration of any obligation or loss of material benefit
under, or result in the creation of a Lien on any property or assets of such
Securityholder pursuant to, any provision of (i) if such
17
Securityholder is not a natural person, such Securityholder's Organizational
Documents, (ii) any mortgage, indenture, loan agreement, note, bond, deed of
trust, other agreement, commitment or obligation for the borrowing of money or
the obtaining of credit, lease or other agreement, contract, license, franchise,
permit or instrument to which such Securityholder is a party or by which such
Securityholder or such Securityholder's Shares may be bound, or (iii) any
judgment, order, decree, law, statute, rule or regulation applicable to such
Securityholder or to such Securityholder's Shares, other than, in the case of
clause (ii) or (iii), any conflicts, violations, defaults, terminations,
cancellations, accelerations, losses of benefits or Liens that, individually or
in the aggregate, would not reasonably be expected to have a material adverse
effect on such Securityholder's ability to consummate the transactions
contemplated by this Agreement or any Custody Agreement to which such
Securityholder is a party.
(b) Consents. Except (i) as set forth in Schedule 3.2(b), (ii) as
may be required under the HSR Act or the Competition Act (Canada) and (iii) for
any Consents where the failure to obtain such Consents, either in any individual
case or in the aggregate, would not reasonably be expected to have a material
adverse effect on such Securityholder's ability to consummate the transactions
contemplated by this Agreement or any Custody Agreement to which such
Securityholder is a party: no Consent of or with any court, Governmental Entity
or third person is required to be obtained or made by such Securityholder in
connection with the execution and delivery by such Securityholder of this
Agreement or any Custody Agreement to which such Securityholder is a party or
consummation by such Securityholder of the transactions contemplated herein or
therein.
3.3 Title to Repurchased Shares, Investor Purchased Shares and
Surrendered Options. Such Securityholder owns beneficially and of record and
free and clear of any Liens, (a) if such Securityholder is a Non-Management
Securityholder, the number of Repurchased Shares set forth opposite such
Securityholder's name in the column entitled "Number of Repurchased Shares" in
Part A of Schedule 1.1, (b) if such Securityholder is a Management
Securityholder, the number of Investor Purchased Shares set forth opposite such
Securityholder's name in the column entitled "Number of Investor Purchased
Shares" in Part B of Schedule 1.1, (c) if such Securityholder is a
Non-Management Option Holder, the number of Options set forth opposite such
Securityholder's name in the column entitled "Number of Surrendered Options" in
Part A of Schedule 1.2, and (d) if such Securityholder is a Management Option
Holder, the number of Options set forth opposite such Securityholder's name in
the column entitled "Number of Surrendered Options" in Part B of Schedule 1.2.
Upon the delivery of, and payment for, such Securityholder's Surrendered Options
at the Closing as provided in this Agreement, such Securityholder will transfer
to the Company good and valid title
18
to such Surrendered Options, free and clear of any Lien. If such Securityholder
is a Non-Management Securityholder, upon the delivery of, and payment for, such
Securityholder's Repurchased Shares at the Closing as provided in this
Agreement, such Securityholder will transfer to the Company good and valid title
to such Repurchased Shares, free and clear of any Lien. If such Securityholder
is a Management Securityholder, upon the delivery of, and payment for, such
Securityholder's Investor Purchased Shares at the Closing as provided in this
Agreement, such Securityholder will transfer to the Investor good and valid
title to such Investor Purchased Shares, free and clear of any Lien.
3.4 Litigation. There is no action, claim, suit, arbitration or
proceeding pending or, to such Securityholder's knowledge, threatened against
such Securityholder and there is no investigation pending or, to such
Securityholder's knowledge, threatened against such Securityholder, in each
case, before any court or Governmental Entity, that could have a material
adverse effect on such Securityholder's ability to consummate the transactions
contemplated by this Agreement or any Custody Agreement to which such
Securityholder is a party.
3.5 Brokers and Finders. Such Securityholder has not employed any
broker, finder or investment banker in connection with the transactions
contemplated herein so as to give rise to any claim against the Company or the
Investor for any brokerage, finder's or investment banker's commission, fee or
similar compensation.
3.6 Unregistered Shares. Such Securityholder (a) has received from
or on behalf of the Company and the Investor all information (financial and
otherwise) necessary for such Securityholder to have a material understanding of
the Company and its Subsidiaries, their respective businesses and the merits and
risks of consummating the transactions contemplated by this Agreement to be
consummated by such Securityholder, including, but not limited to, (i) a copy of
the Company's Registration Statement on Form S-1 (file no. 333-43225), as
amended by the Amendment No. 1 to Registration Statement on Form S-1 filed with
the Securities and Exchange Commission (the "SEC") on March 10, 1998 (the "Form
S-1"), and (ii) a copy of the Offer Notice, (b) is retaining his or her Rolled
Over Shares and Rolled Over Options for his or her account for investment and
not with a view to the distribution thereof, (c) has such knowledge and
experience in financial and business matters that he or she is capable of
evaluating the merits and risks of the retention of his or her Rolled Over
Shares and Rolled Over Options, (d) has had the opportunity to ask questions and
receive answers concerning the terms and conditions of the transactions
contemplated by this Agreement and to obtain any additional information which
the Company or the Investor possesses or can acquire without unreasonable effort
or expense that is necessary to verify the accuracy of the information furnished
to such Securityholder in connection with this Agreement and
19
(e) understands that neither his or her Rolled Over Shares nor Rolled Over
Options have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and therefore such Shares and Options cannot be resold unless
they are registered under the Securities Act or an exemption from such
registration is available.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
AS TO THE COMPANY AND ITS SUBSIDIARIES
The Participating Securityholders and the Company jointly and
severally represent and warrant to the Investor as follows:
4.1 Corporate Status, etc. (a) Organization. Schedule 4.1 lists all
of the Company's Subsidiaries and their respective jurisdictions of
incorporation. Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has full corporate power and authority to
own, lease and operate its properties and to carry on its business as presently
conducted.
(b) Qualification. Each of the Company and its Subsidiaries is duly
qualified to do business and in good standing as a foreign corporation in all
jurisdictions in which the failure to be so qualified would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(c) Organizational Documents. The Company has made available to the
Investor complete and correct copies of the Organizational Documents of the
Company and each of its Subsidiaries, as in effect on the date hereof.
(d) Corporate Records. The Investor has been given the opportunity
to inspect the corporate minutes and stock transfer books of the Company and
each of its Subsidiaries.
(e) Authorization, etc. The Company has full corporate power and
authority to enter into this Agreement and to perform its obligations hereunder.
The execution and delivery by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby have been duly authorized
by all requisite corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company and constitutes the legal, valid
and binding obligations of the Company enforceable against the Company in
accordance with its terms.
4.2 Capitalization. (a) The Company. The authorized capital stock of
the Company consists of (i) 2,000,000 shares of
20
Class A Common Stock, of which (A) as of the date hereof, there are issued and
outstanding 1,026,510 shares, (B) as of the Closing Date, there will be issued
and outstanding 1,026,510 shares plus the number of any New Shares issued
pursuant to Section 1.4(c), which shall not exceed 600, (C) as of the date
hereof, there are subject to issuance upon exercise of the outstanding Options
230,844 shares, (D) as of the Closing Date, there will be subject to issuance
upon exercise of the outstanding Options 230,844 shares plus the number of
shares issuable upon exercise of any New Options granted pursuant to Section
1.4(c), which shall not exceed 780, and (E) 1,290 shares are held by the Company
in its treasury, and (ii) 2,000,000 shares of Class B Common Stock, par value
$.01 per share, none of which shares are outstanding. The Shares constitute all
of the issued and outstanding capital stock of the Company, have been duly
authorized and validly issued and are fully paid and nonassessable. The Newly
Issued Shares to be issued and sold to the Investor have been duly authorized
and, when issued and sold to the Investor in accordance with the terms of this
Agreement, such shares will be validly issued, fully paid and nonassessable.
Schedule 1.1 lists all Persons owning of record any Shares and specifying for
each such Person the number of Shares owned by such Person.
(b) Subsidiaries. Schedule 4.2(b) lists for each Subsidiary of the
Company the shares of capital stock of such Subsidiary that are authorized, the
shares of capital stock of such Subsidiary that are issued and outstanding and
the Persons owning such issued and outstanding shares. All issued and
outstanding shares of capital stock of the Company's Subsidiaries have been duly
authorized and validly issued and are fully paid and nonassessable and are owned
by the Persons listed in Schedule 4.2(b), free and clear of any Liens. Except
for the shares of capital stock of the Company's Subsidiaries and except as
listed on Schedule 4.2(b), the Company does not own any capital stock or other
equity interest in any other Person.
(c) Options. As of the date hereof, there are outstanding options to
acquire 230,844 shares of Class A Common Stock. As of the Closing Date, there
will be outstanding options to acquire 230,844 shares plus the number of shares
issuable upon exercise of any New Options granted pursuant to Section 1.4(c),
which shall not exceed 780. The Options constitute all of the outstanding
options to acquire any shares of capital stock of the Company. Schedule 1.2
lists all Persons owning of record any Options, the number of shares of Class A
Common Stock issuable upon exercise of the Options owned by such Person and the
exercise price of the Options owned by such Person. There are no options
outstanding to acquire any shares of capital stock of any of the Company's
Subsidiaries. Except for the Rolled Over Options, no Options will be outstanding
after the Closing.
(d) Agreements with Respect to Securities of the Company and its
Subsidiaries. Except (i) as set forth in
21
Schedule 1.2 and Schedule 4.2(d) and (ii) as provided in this Agreement and the
Equity Agreements, there are no (A) preemptive or similar rights on the part of
any holders of any class of securities of the Company or any of its
Subsidiaries; (B) subscriptions, options, warrants, conversion, exchange or
other rights, agreements or commitments of any kind obligating the Company or
any of its Subsidiaries to issue or sell, or cause to be issued and sold, any
shares of capital stock of the Company or any of its Subsidiaries or any
securities convertible into or exchangeable for any such shares; (C) stockholder
agreements, voting trusts or other agreements or understandings to which the
Company or any of its Subsidiaries or any Securityholder is a party or to which
the Company or any of its Subsidiaries or any Securityholder is bound relating
to the voting, registration, transfer, purchase, redemption or other acquisition
of any shares of the capital stock of the Company or any of its Subsidiaries;
(D) outstanding dividends, whether current or accumulated, due or payable on any
of the capital stock of the Company or any of its Subsidiaries; or (E) issued
and outstanding bonds, debentures, notes or other indebtedness of the Company or
any of its Subsidiaries that have the right to vote (or are convertible into, or
exchangeable for, any securities that have the right to vote) on any matters on
which the stockholders of the Company or any of its Subsidiaries may vote.
4.3 Conflicts; Consents. (a) Conflicts. Except as set forth in
Schedule 4.3(a), the execution and delivery of this Agreement by the
Participating Securityholders and the Company, and the consummation by the
Participating Securityholders and the Company of the transactions contemplated
hereby, do not and will not conflict with, or result in any violation of, or
default under (or any event that, with notice or lapse of time or both, would
constitute a default under), or give rise to any right of termination,
cancellation or acceleration of any obligation or loss of material benefit
under, or result in the creation of a Lien on any property or assets of the
Company or any of its Subsidiaries pursuant to, any provision of (i) the
Organizational Documents of the Company or any of its Subsidiaries, (ii) any
mortgage, indenture, loan agreement, note, bond, deed of trust, other agreement,
commitment or obligation for the borrowing of money or the obtaining of credit,
lease (including the Leases) or other agreement, contract, license, franchise,
permit or instrument to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries may be bound, or (iii) any
judgment, order, decree, law, statute, rule or regulation applicable to the
Company or any of its Subsidiaries, other than, in the case of clause (ii) or
(iii), any conflicts, violations or defaults, terminations, cancellations,
accelerations, losses of benefits or Liens that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(b) Consents. Except (i) as set forth in Schedule 4.3(b), (ii) as
may be required under the HSR Act and
22
the Competition Act (Canada) and (iii) for any Consents where the failure to
obtain such Consents, either in any individual case or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect: no Consent of or
with any court, Governmental Entity or third person is required to be obtained
by the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby or the ownership and operation by the
Company and its Subsidiaries of their respective businesses and properties
subsequent to the Closing in substantially the same manner as previously owned
and operated by the Company and its Subsidiaries (assuming no circumstance
peculiar to the Investor unknown to the Participating Securityholders and not
applicable to the Securityholders).
4.4 Financial Statements. (a) The Company has delivered to the
Investor complete and correct copies of audited consolidated statements of
operations, changes in stockholders' equity and cash flows of the Company and
its Subsidiaries for the fiscal years ended December 31, 1995, December 31, 1996
and December 31, 1997 and audited consolidated balance sheets of the Company and
its Subsidiaries as at such dates (the "Financial Statements"), together with
the notes thereto, in each case audited by Coopers & Lybrand, the Company's
certified public accountants. The Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods indicated and present fairly in all material
respects the financial condition of the Company and its Subsidiaries on a
consolidated basis at the respective dates indicated and the results of
operations and cash flows of the Company and its Subsidiaries on a consolidated
basis for the respective periods indicated.
(b) The Company has delivered to the Investor a pro forma unaudited
consolidated balance sheet of the Company and its Subsidiaries as at December
31, 1997 (the "Pro Forma Balance Sheet"), giving effect as of such date to the
acquisitions of the electrical distribution business of Avon Electrical
Supplies, Inc. and its affiliates and Brown Wholesale Electric Company (the
"Acquired Companies"). The Pro Forma Balance Sheet (i) presents fairly in all
material respects the financial position of the Company and its Subsidiaries on
a consolidated basis at such date on such pro forma basis and (ii) has been
prepared on bases reflecting the best estimates and judgments of the Company, at
the time of preparation and delivery of the Pro Forma Balance Sheet, as to the
operations and financial condition of the Acquired Companies.
4.5 Events Subsequent to Latest Financial Statements. Except as set
forth in Schedule 4.5, since December 31, 1997, the business of the Company and
its Subsidiaries has been operated only in the ordinary course of business
consistent with past custom and practice (including,
23
without limitation, with respect to quantity and frequency) (the "Ordinary
Course of Business") and there has not been any (a) Material Adverse Change, (b)
damage, destruction or other casualty loss with respect to any asset or property
owned, leased or otherwise used by the Company or any of its Subsidiaries,
whether or not covered by insurance, which has had, or would reasonably be
expected to have, a Material Adverse Effect, (c) strike, lockout, work stoppage
or slowdown by employees of the Company or any of its Subsidiaries, in each
case, whether actual or, to the knowledge of the Company and the Participating
Securityholders, threatened, which has had, or would reasonably be expected to
have, a Material Adverse Effect or (d) action or event that would be prohibited
under clause (f), (i), (j), (k), (l), (m), (n), (o)(i) or (p) of Section 6.1 had
such action or event been taken by the Company or any of its Subsidiaries after
the date hereof.
4.6 Tax Matters. (a) Filing of Returns and Payment of Taxes. Except
as set forth in Schedule 4.6(a), all material Tax Returns required to be filed
on or before the Closing Date have (or by the Closing Date will have) been duly
filed or the time for filing such Tax Returns shall have been validly extended
to a date after the Closing Date. Except for Taxes set forth in Schedule 4.6(a)
or as reflected or reserved against in the Financial Statements (other than in
respect of deferred taxes), the following Taxes (collectively, "Company Taxes")
have (or by the Closing Date will have) been duly paid: (i) all material Taxes
shown to be due on such Tax Returns and (ii) all material Taxes due and payable
on or before the Closing Date that are or may become payable by the Company or
any of its Subsidiaries or chargeable as a Lien upon the assets thereof (whether
or not shown on any Tax Return). Except as set forth in Schedule 4.6(a), all
material Employment and Withholding Taxes required to be withheld and paid on or
before the Closing Date have (or by the Closing Date will have) been duly paid
to the proper Governmental Entity or properly set aside in accounts for such
purpose.
(b) Extensions, etc. Except as set forth in Schedule 4.6(b), no
written agreement or other document extending, or having the effect of
extending, the period of assessment or collection of any Company Taxes or
Employment and Withholding Taxes, and no power of attorney with respect to any
such Taxes, has been executed or filed with the IRS or any other taxing
authority.
(c) Tax Filing Groups; Income Tax Jurisdictions. Except as set forth
in Schedule 4.6(c), neither the Company nor any of its Subsidiaries is or has
been at any time a member of any affiliated, consolidated, combined or unitary
group for purposes of filing Income Tax Returns or paying Income Taxes. Set
forth in Schedule 4.6(c) are all countries, states, provinces, cities or other
jurisdictions in which the Company and its Subsidiaries currently file or have
filed within the last
24
year an Income Tax Return.
(d) Copies of Returns; Audits; etc. The Company has (or by the
Closing Date will have) made available to the Investor complete and accurate
copies of all Tax Returns with respect to all periods beginning on or after
February 28, 1994 that have been filed or will be required to be filed (after
giving effect to all valid extensions of time for filing) on or before the
Closing Date. Except as set forth in Schedule 4.6(d), (i) no material Company
Taxes or material Employment and Withholding Taxes have been asserted in writing
by any Governmental Entity since February 28, 1994 to be due, (ii) no revenue
agent's report or written assessment for Taxes has been issued by any
Governmental Entity in the course of any audit that has been completed since
February 28, 1994 with respect to material Company Taxes or material Employment
and Withholding Taxes, and (iii) no material issue has been raised by any
Governmental Entity in the course of any audit that has not been completed with
respect to material Company Taxes or material Employment and Withholding Taxes,
which issue has been raised in a writing that has been received by the Company.
Schedule 4.6(d) sets forth the Tax Returns with respect to U.S. federal Income
Taxes that have been audited or are currently under audit. Except as set forth
in Schedule 4.6(d), no other Tax Return is currently under audit by any other
taxing authority, and no Employment and Withholding Taxes are currently under
audit by any taxing authority. Except as set forth in Schedule 4.6(d), neither
the IRS nor any other taxing authority is now asserting in writing against the
Company or any of its Subsidiaries any material deficiency or claim for
additional Taxes or any material adjustment of Taxes.
(e) Section 1445(a) of the Code. Neither the Company nor the
Investor will be required to deduct and withhold any amount pursuant to section
1445(a) of the Code upon the transfer of the Repurchased Shares to the Company
or the Investor Purchased Shares to the Investor pursuant to this Agreement.
(f) Tax Sharing Agreements. Except as set forth in Schedule 4.6(f)
(all of which agreements or arrangements will be terminated as of the Closing
Date), neither the Company nor any of its Subsidiaries is a party to or bound by
or has any obligation under any Tax sharing agreement or arrangement.
(g) No closing agreement pursuant to section 7121 of the Code (or
any predecessor provision) or any similar provision of any state, local, or
foreign law has been entered into by or with respect to the Company or any of
its Subsidiaries and no ruling has been received by the Company or any of its
Subsidiaries from any taxing authority.
(h) No consent to the application of section 341(f)(2) of the Code
(or any predecessor provision) has been made or filed by or with respect to the
Company or any of its Subsidiaries or any of their assets or properties. None of
the assets or
25
properties of the Company or any of its Subsidiaries is an asset or property
that is or will be required to be treated (i) as described in section 168(f)(8)
of the Internal Revenue Code of 1954, as amended and in effect immediately
before the enactment of the Tax Reform Act of 1986, or (ii) tax-exempt use
property within the meaning of section 168(h)(1) of the Code.
(i) The Company and each of its Subsidiaries have not agreed to make
and are not required to make any adjustment under Section 481(a) of the Code, by
reason of a change in accounting method or otherwise.
(j) Neither the Company nor any of its Subsidiaries has issued or
assumed (i) any obligations described in Section 279(a) of the Code, (ii) any
applicable high yield discount obligations, as defined in Section 163(i) of the
Code, or (iii) any registration-required obligations, within the meaning of
Section 163(f)(2) of the Code, that is not in registered form.
(k) Without limiting the foregoing representations in any way, the
Company and each of its Subsidiaries have collected all material sales and use
Taxes required to be collected, and have remitted, or will remit on a timely
basis, such amounts to the appropriate governmental authorities, or have been
furnished properly completed exemption certificates.
4.7 Litigation. Except as set forth in Schedule 4.7, there is no
action, claim, suit, arbitration or proceeding pending or, to the knowledge of
the Company and the Participating Securityholders, threatened against the
Company or any of its Subsidiaries and there is no investigation pending or, to
the knowledge of the Company and the Participating Securityholders, threatened
against the Company or any of its Subsidiaries, in each case, before any court
or Governmental Entity, that would reasonably be expected to have a Material
Adverse Effect.
4.8 Compliance with Laws. Except (a) as set forth in Schedule 4.8,
and (b) as to matters relating to Environmental Law, the businesses of each of
the Company and its Subsidiaries have not been, and are not being, conducted in
violation of their internal policies and procedures or of any law, ordinance,
regulation, judgment, order, decree, license or permit of any Governmental
Entity, except for possible violations which individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect. Except (i)
as set forth in Schedule 4.8, and (ii) as to matters relating to Environmental
Law, no investigation or review by any Governmental Entity with respect to the
Company or any of its Subsidiaries is pending, or to the knowledge of the
Company and the Participating Securityholders, threatened, nor has any
Governmental Entity indicated an intention to conduct the same, in each case
other than those the outcome of which would not reasonably be expected to have a
Material Adverse Effect.
26
4.9 Employee Benefits. (a) Schedule 4.9(a) contains a complete and
accurate list of all material bonus, incentive or deferred compensation,
pension, retirement, profit-sharing, savings, stock purchase, stock option or
other equity-based, severance, welfare and fringe benefit plans, programs,
policies or arrangements, other than immaterial pay or similar policies,
sponsored by the Company or any of its Subsidiaries or to which the Company or
any of its Subsidiaries is required to contribute or under which any employee or
former employee of Company or any of its Subsidiaries has any present or future
benefits or under which the Company or any Subsidiary has any present or future
liability (the "Plans").
(b) Each Plan has been operated and administered in accordance with
its terms and with applicable law, including, but not limited to, the Employment
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code,
where applicable, except for any failure to so operate and administer any Plan
that would not reasonably be expected to have a Material Adverse Effect. Each
Plan which is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA (a "Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the IRS or an application is currently pending with the IRS, each Pension Plan
is so qualified and there are no circumstances likely to result in revocation of
any such favorable determination letter. With respect to Plans in Canada, each
such Plan, where applicable, is registered in compliance with all applicable
laws and the Company is not aware of any circumstances likely to result in a
revocation of the registration of any Plan in Canada. Except as set forth in
Schedule 4.9(b), there is no material pending or, to the knowledge of the
Company and the Participating Securityholders, threatened legal action, suit or
claim relating to the Plans. Neither the Company nor any of its Subsidiaries has
engaged in a transaction with respect to any Plan that, assuming the taxable
period of such transaction expired as of the date hereof, would reasonably be
expected to subject the Company or any of its Subsidiaries to a tax or penalty
imposed by either section 4975 of the Code or section 502(i) of ERISA in an
amount which would be material.
(c) No Plan is (i) subject to Title IV of ERISA or section 302 of
the Code or, with respect to Plans in Canada, subject to an order by any
regulatory authority to wind up the Plans, or (ii) a "multi-employer pension
plan" within the meaning of Section 1 of the Ontario Pension Benefits Act, or
any similar applicable statute, or a multiple employer plan, within the meaning
of Section 4063 of ERISA.
(d) All material contributions required to be made under the terms
of any Plan or applicable law have been timely made.
(e) With respect to each Plan, the Company has
27
provided or made available to the Investor true and complete copies of the
following documents, to the extent applicable: (i) all of the most recent Plan
documents and all amendments thereto; (ii) all of the most recent trust
instruments and insurance contracts; (iii) the three most recent Forms 5500
filed with the IRS or with respect to Plans in Canada, evidence that the Plan is
duly registered with all applicable regulatory authorities; (iv) the most recent
summary plan description; and (v) the most recent determination letter issued by
the IRS.
(f) No event has occurred and no condition exists that would subject
the Company or its Subsidiaries, either directly or by reason of their
affiliation with any member of their "Controlled Group" (defined as any
organization which is a member of a controlled group of organizations within the
meaning of Code sections 414(b), (c), (m) or (o)), to any tax, fine, lien,
penalty or other liability imposed by ERISA, the Code or other applicable laws,
rules and regulations.
(g) Except as contemplated by Section 1.2(b) or set forth in
Schedule 4.9(g), the consummation of the transactions contemplated by this
Agreement will not: (i) entitle any employee to any severance pay, unemployment
compensation or other similar payment or (ii) result in the acceleration of the
timing of payment of any compensation payable to any employee or the vesting of
any benefit of any such employee.
(h) With respect to any multiemployer plan (within the meaning of
ERISA section 4001(a)(3)) to which the Company, its Subsidiaries or any member
of their Controlled Group has any liability or contributes (or has at any time
contributed or had an obligation to contribute): (i) none of the Company, its
Subsidiaries or any member of their Controlled Group has incurred any material
withdrawal liability under Title IV of ERISA or would be subject to such
material liability if, as of the Closing, the Company, its Subsidiaries or any
member of their Controlled Group were to engage in a complete withdrawal (as
defined in ERISA section 4203) or partial withdrawal (as defined in ERISA
section 4205) from any such multiemployer plan; and (ii) no such multiemployer
plan is in reorganization or insolvent (as those terms are defined in ERISA
sections 4241 and 4245, respectively).
4.10 Permits. The Company and each of its Subsidiaries have all
permits, licenses, franchises, rights, waivers and authorizations that are
necessary for them to own, lease or operate their properties and assets and to
conduct their operations in the manner in which they are presently conducted
(collectively, "Permits"), other than any Permits where the failure to have such
Permit, in any individual case or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. No event has occurred or other fact
exists with respect to the Permits that allows, or after notice or lapse of time
or both would allow, revocation or termination of any of the
28
Permits or would result in any other impairment of the rights of the holder of
any of the Permits that individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect. There is not pending or, to the
knowledge of the Company and the Participating Securityholders, threatened, any
application, petition, objection or other pleading with any Governmental Entity
that challenges or questions the validity of or any rights of the holder under
any Permit, except for such applications, petitions, objections or other
pleadings that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.11 Owned Real Property. (a) Schedule 4.11(a) contains a complete
and correct list of all real property currently owned by the Company or any of
its Subsidiaries (the "Owned Real Property").
(b) The Company or one of its Subsidiaries, as the case may be, has
good and marketable fee simple title to the Owned Real Property free and clear
of any Liens, except (i) those Liens set forth in Schedule 4.11(b), (ii) Liens
reflected or reserved against in the Financial Statements, (iii) (A) Liens for
taxes and assessments not yet due and payable or that are being contested in
good faith and by appropriate proceeding and (B) Liens of warehousemen,
mechanics and materialmen and other similar statutory Liens incurred in the
Ordinary Course of Business, which Liens, in the case of clauses (A) and (B),
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect, and (iv) Liens (other than consensual Liens securing
indebtedness) that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect (such Liens described in the
preceding clauses (i), (ii), (iii) and (iv), the "Permitted Liens").
(c) Except as set forth in Schedule 4.11(c), there are no
outstanding options or rights of first refusal to purchase the Owned Real
Property, or any portion thereof or interest therein.
(d) The Owned Real Property and the Leased Real Property
(collectively, the "Real Property"), together with easements appurtenant
thereto, include all of the real property used or held for use in connection
with or otherwise required to carry on the business of the Company and its
Subsidiaries.
(e) There are no proceedings in eminent domain or other similar
proceedings pending, or to the knowledge of the Company and the Participating
Securityholders, threatened affecting any portion of the Owned Real Property
that would reasonably be expected to have a Material Adverse Effect.
(f) Except with respect to matters relating to Environmental Law,
the current use and operation of the Owned Real Property does not violate any
applicable building, zoning, subdivision and other land use or similar laws,
codes,
29
ordinances, rules, regulations and orders of Governmental Entities
(collectively, the "Real Property Laws"), other than those violations (i)
disclosed in Schedule 4.11(f) or (ii) that individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect, and neither
the Company nor any of its Subsidiaries has received any written notice of
violation or claimed violation of any Real Property Law relating to the Owned
Real Property, other than as disclosed in Schedule 4.11(f).
4.12 Leases. (a) Schedule 4.12 contains a complete and correct list
of all real property leases to which the Company or any of its Subsidiaries is a
party or is bound (the "Leases"). The Company has made available to Investor
correct and complete copies of the Leases. Pursuant to the Leases, the Company
or its Subsidiaries hold good and valid leasehold title to the Leased Real
Property, in each case in accordance with the provisions of the applicable
Lease, free and clear of all Liens, except for Permitted Liens, but subject to
Liens encumbering the fee title to the Leased Real Property. Except as disclosed
in Schedule 4.12, (i) each of the Leases is valid and legally binding,
enforceable and in full force and effect, and (ii) neither the Company nor any
of its Subsidiaries, and to the knowledge of the Company and the Participating
Securityholders no other party, is in default under any Lease, except (x) in the
case of clause (i), as such enforceability may be limited by bankruptcy,
insolvency, reorganization and similar laws affecting creditors generally and by
the availability of equitable remedies, and (y) in the cases of clauses (i) and
(ii), for such failures to be enforceable or such defaults as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries has received
written notice of a proceeding in eminent domain or other similar proceeding
affecting the Leased Real Property that would reasonably be expected to have a
Material Adverse Effect.
(c) The present use and operation of the Leased Real Property does
not violate any Real Property Laws, except to the extent such violations would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, and neither the Company nor any of its Subsidiaries has received
any notice of violation or claimed violation of any Real Property Law relating
to the Leases, except to the extent such violations would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
4.13 Personal Property; Condition of Assets. (a) Except as set forth
in Schedule 4.13 and except for intangible assets which are the subject of
Section 4.14, the Company or one of its Subsidiaries has good title to, or a
valid leasehold interest in, all personal properties and assets other than Real
Property that are material to the business and operations of the
30
Company and its Subsidiaries taken as a whole, free and clear of any Liens,
except for the Permitted Liens.
(b) All of the Company's and each of its Subsidiaries' equipment in
regular use has been well maintained and is in good and serviceable condition,
reasonable wear and tear excepted, except where the failure to be so maintained
or in such condition would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.14 Intellectual Property. (a) Schedule 4.14(a) sets forth a
complete and correct list, as of the date hereof, of all Intellectual Property
(as defined below). The term "Intellectual Property" means all trademarks,
service marks, trade names, copyrights, software (other than commercially
available software), proprietary technology, inventions and patents, including
registrations and applications to register or renew the registration of any of
the foregoing, that are owned by the Company or any of its Subsidiaries and are
material to the conduct of the business of the Company, but "Intellectual
Property" shall not include the name or mark "WESCO." To the knowledge of the
Company and the Participating Securityholders, except as set forth in Schedule
4.14(a), (i) the use of the Intellectual Property by the Company or any of its
Subsidiaries as currently used does not infringe on the rights of any third
party and (ii) there is no claim of any Person that challenges the rights of the
Company or any of its Subsidiaries in respect of any Intellectual Property;
except in each case for infringements or claims that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
The Company confirms that it and its Subsidiaries have been using and are using
the name and mark "WESCO" in commerce in the Ordinary Course of Business.
(b) Schedule 4.14(b) sets forth a complete and correct list, as of
the date hereof, of all Licenses (as defined below). The term "Licenses" means
all material written licenses to which the Company or any of its Subsidiaries is
a party, pursuant to which (i) the Company or such Subsidiary grants any Person
any royalty-bearing or exclusive right to use any of the Intellectual Property,
or (ii) any person or entity grants the Company or such Subsidiary the right to
use any trademarks, service marks, trade names, copyrights, software (other than
commercially available software), proprietary technology, inventions or patents
not owned by the Company or any of its Subsidiaries that are material to the
conduct of the business of the Company or any of its Subsidiaries as currently
conducted. The Company has furnished or made available to the Investor complete
and correct copies of the Licenses listed in Schedule 4.14(b). Neither the
Company nor any of its Subsidiaries, nor, to the knowledge of the Company and
the Participating Securityholders, any other party thereto, is in default under
any License, and each License is in full force and effect as to the Company or
Subsidiary thereof party thereto, and to the knowledge of the Company and the
Participating
31
Securityholders, as to each other party thereto, except for such defaults and
failures to be so in full force and effect as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.15 Contracts. (a) Schedule 4.15 contains a complete and correct
list, as of the date hereof, of all Contracts (as defined below). The term
"Contracts" means all of the following types of contracts and agreements to
which the Company or any of its Subsidiaries is a party, excluding any Leases,
Licenses and Plans:
(i) all contracts and agreements with current or former directors,
officers, other employees, consultants or advisors of the Company or a
Subsidiary thereof, which contract or agreements are in effect as of the
date hereof;
(ii) all contracts and agreements with sales representatives of the
Company or a Subsidiary thereof, other than (x) contracts and agreements
that by their terms may be terminated or canceled by the Company or a
Subsidiary thereof with notice of not more than 60 days, without penalty,
and (y) contracts and agreements that provide for payments based solely on
products sold and require no minimum payments;
(iii) all collective bargaining agreements with any labor union
currently representing employees of the Company or any of its
Subsidiaries;
(iv) all mortgages, pledges, conditional sales contracts,
indentures, security agreements, notes, loan agreements or guarantees of
the obligations of a third party (other than the Company or any of its
Subsidiaries);
(v) joint venture, limited partnership and limited liability company
agreements, shareholders agreements and other similar agreements;
(vi) contracts, agreements and other instruments and arrangements
(excluding individual purchase orders) for the purchase by the Company and
its Subsidiaries of materials, supplies, products or services, and
contracts, agreements and other instruments or arrangements (excluding
individual purchase orders) for the sale or provision by the Company and
its Subsidiaries of materials, supplies, products or services, in each
case, not terminable on notice of 60 days or less without penalty, and
under which the amount that would reasonably be expected to be paid or
received by the Company exceeds $500,000 per annum or $2,500,000 in the
aggregate;
(vii) all contracts, agreements or commitments relating to capital
expenditures in excess of $500,000;
32
(viii) all contracts or agreements with any Person containing any
provision or covenant prohibiting or materially limiting the ability of
the Company or any of its Subsidiaries to engage in any business activity
(or in any geographical area) or to compete with any Person;
(ix) all contracts or agreements that (A) limit or contain
restrictions on the ability of the Company or any of its Subsidiaries to
declare or pay dividends on, to make any other distributions in respect of
or to issue or purchase, redeem or otherwise acquire its capital stock; to
incur indebtedness, to incur or suffer to exist any Lien, to purchase any
properties or assets or (B) would be terminable by the other party
thereto, or result in any penalty or payment premium, upon consummation of
the transactions contemplated by this Agreement;
(x) all contracts or agreements (other than this Agreement and any
contract or agreement listed pursuant to clause (i) above) between the
Company or any of its Subsidiaries, on the one hand, and any director,
officer, stockholder or Affiliate of the Company or its Subsidiaries, on
the other hand; and
(xi) any contract or agreement entered into other than in the
ordinary course of business involving aggregate payments in excess of
$1,000,000, to be made by or to the Company or any of its Subsidiaries
after the date hereof, including, without limitation, any merger
agreement, stock or asset purchase agreement or other acquisition
agreement which contains "earn out", deferred payment or other delayed or
contingent payments to be made thereunder.
(b) The Company has furnished or made available to the Investor
complete and correct copies of the Contracts listed in Schedule 4.15, as in
effect on the date hereof. Neither the Company nor any of its Subsidiaries, nor,
to the knowledge of the Company and the Participating Securityholders, any other
party thereto, is in default under any Contract, and each Contract is in full
force and effect as to the Company or Subsidiary thereof party thereto, and to
the knowledge of the Company and the Participating Securityholders, as to each
other party thereto, except for such defaults and failures to be so in full
force and effect as would not reasonably be expected to have a Material Adverse
Effect.
4.16 Insurance. Schedule 4.16 sets forth a complete and correct list
and description of all of the policies of liability, property, workers'
compensation, life, employee fidelity, and other forms of insurance or bonds
carried by the Company or any of its Subsidiaries on the date of this Agreement
for the benefit of or in connection with the business of the Company and its
Subsidiaries and the applicable termination or renewal dates of such policies.
Each such policy is in full
33
force and effect and no notice of termination or cancellation of any such policy
has been received by the Company or any of its Subsidiaries. There is no breach
by the Company or any of its Subsidiaries or, to the knowledge of the Company
and the Participating Securityholders, by any other party of any term or
condition of any policy. All policy premiums due and payable prior to the
Closing have been or will be (on or prior to the Closing Date) paid up to and
through the Closing.
4.17 Environmental Matters. Except as disclosed in Schedule 4.17
(provided that any environmental assessments, audits or studies listed on
Schedule 4.17 shall qualify the representations and warranties in this Section
4.17 only to the extent that such assessment, audits and studies provide the
Investor with reasonable notice of the environmental condition upon which such
qualification is based), or as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect:
(a) The Company and its Subsidiaries are and have been in compliance
with all applicable Environmental Laws;
(b) The Company and its Subsidiaries have obtained, and are and have
been in compliance with, all permits and authorizations required under
applicable Environmental Laws;
(c) Neither the Company nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or potential
liability regarding Environmental Laws;
(d) No judicial proceeding or governmental or administrative action
or investigation is pending or, to the knowledge of the Company and the
Participating Securityholders, threatened, under or relating to any applicable
Environmental Law pursuant to which the Company or any of its Subsidiaries is or
will be named as a party or would otherwise incur liability;
(e) Neither the Company nor any of its Subsidiaries has entered into
any agreement with any Governmental Entity pursuant to which the Company or any
of its Subsidiaries has assumed or otherwise incurred responsibility for the
investigation, monitoring or remediation of any condition resulting from or
relating to the release, treatment, storage or disposal of Hazardous Substances
or any violation of Environmental Laws.
(f) There are no circumstances, conditions or events that could
result in claims or liability for the Company or any of its Subsidiaries
pursuant or relating to any Environmental Law;
(g) All environmental site assessments, compliance audits and
similar environmental studies relating to
34
environmental conditions at the Company or any of its Subsidiaries have been
made available to the Investor.
4.18 Labor Matters. Except as set forth in Schedule 4.18, (a) there
is no labor strike, dispute, or stoppage pending or, to the knowledge of the
Company and the Participating Securityholders, threatened against the Company or
its Subsidiaries, and, since February 28, 1994, neither the Company nor any of
its Subsidiaries has experienced any labor strike, dispute or stoppage or other
material labor difficulty; (b) the Company and its Subsidiaries have complied
with all applicable labor laws in connection with the employment of their
respective employees, except for any failure to comply that would not reasonably
be expected to have a Material Adverse Effect; and (c) except as set forth in
Schedule 4.18, neither the Company nor any of its Subsidiaries is a party to or
bound by any Contract or other agreement with any labor union or association
representing its respective employees.
4.19 Information in Form S-1. The Form S-1 (including any amendments
or supplements thereto) does not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
4.20 Brokers and Finders. Neither the Company nor any of its
Subsidiaries has employed any broker, finder or investment banker in connection
with the transactions contemplated herein so as to give rise to any claim
against the Investor for any brokerage, finder's or investment banker's
commission, fee or similar compensation, except that the Company has employed
Goldman, Sachs & Co. and Merrill Lynch & Co. as its financial advisers, the
arrangements with which have been disclosed in writing to the Investor prior to
the execution and delivery hereof, and the aggregate amount of fees to be paid
thereunder shall not exceed $12,000.000.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company and the
Participating Securityholders as follows:
5.1 Investor's Corporate Status. The Investor is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware.
5.2 Authorization, etc. The Investor has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and to perform its obligations hereunder. The
execution and
35
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of the Investor. This Agreement has been duly executed and delivered by the
Investor and constitutes the legal, valid and binding obligation of the Investor
enforceable against the Investor in accordance with its terms.
5.3 Conflicts, Consents. (a) Conflicts. The execution and delivery
of this Agreement by the Investor, and the consummation by the Investor of the
transactions contemplated hereby, do not and will not conflict with, or result
in any violation of or default under (or any event that, with notice or lapse of
time or both, would constitute a default under), or give rise to any right of
termination, cancellation or acceleration of any obligation or loss of material
benefit under, or result in the creation of a Lien on any property or assets of
the Investor pursuant to, any provision of (i) the Organizational Documents of
the Investor, (ii) any mortgage, indenture, loan agreement, note, bond, deed of
trust, other agreement, commitment or obligation for the borrowing of money or
the obtaining of credit, lease or other agreement, contract, license, franchise,
permit or instrument to which the Investor is a party or by which it may be
bound, or (iii) any judgment, order, decree, law, statute, rule or regulation
applicable to the Investor, other than, in the case of clauses (ii) or (iii),
any conflicts, violations, defaults, terminations, cancellations, accelerations,
losses of benefits or Liens that, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on the Investor's
ability to consummate the transactions contemplated by this Agreement.
(b) Consents. Except (i) as may be required under the HSR Act and
the Competition Act (Canada) or (ii) for any Consents where the failure to
obtain such Consents, either in any individual case or in the aggregate, would
not reasonably be expected to have a material adverse effect on the Investor's
ability to consummate the transactions contemplated by this Agreement: no
Consent of or with any court, Governmental Entity or third person is required to
be obtained by the Investor in connection with the execution and delivery by the
Investor of this Agreement or the consummation by the Investor of the
transactions contemplated hereby.
5.4 Litigation. There is no action, claim, suit, arbitration or
proceeding pending or, to the Investor's knowledge, threatened against the
Investor and there is no investigation pending or, to the Investor's knowledge,
threatened against the Investor, in each case, before any court or Governmental
Entity, that could have a material adverse effect on the Investor's ability to
consummate the transactions contemplated by this Agreement.
5.5 Purchase for Investment. The Investor is
36
acquiring the Shares for its own account for investment and not with a view to
any distribution thereof. The Investor acknowledges receipt of advice from the
Company to the effect that the Shares have not been registered under the
Securities Act or any state securities laws.
5.6 Financing. (a) The Investor has or will have at the Closing
available cash or existing borrowing facilities that together are sufficient to
enable it and the Company to consummate the transactions contemplated by this
Agreement (the "Financing").
(b) To the extent any portion of the Financing is to consist of
borrowed funds, the Investor has delivered to the Company complete and correct
copies of binding commitment letters received by the Investor with respect to
such Financing (the "Financing Commitments").
5.7 Brokers and Finders. The Investor has not employed any broker,
finder or investment banker in connection with the transactions contemplated
herein so as to give rise to any claim against any Participating Securityholder
for any brokerage, finder's or investment banker's commission, fee or similar
compensation.
5.8 Investment Canada Act. The Investor is a "WTO Investor" within
the meaning of that term under the Investment Canada Act.
ARTICLE VI
COVENANTS
6.1 Conduct of the Company and its Subsidiaries. Except as set forth
in Schedule 6.1 or with the prior written consent of the Investor, from the date
hereof to the Closing, the Company will, and will cause its Subsidiaries to:
(a) conduct their businesses only in the Ordinary Course of
Business;
(b) maintain and keep their properties and equipment in the same
manner as heretofore maintained and kept;
(c) keep in full force and effect insurance comparable in amount and
scope of coverage to that now maintained by them (to the extent available
on commercially reasonable terms in the case of any renewal or replacement
policies);
(d) perform in all material respects all of their obligations under
all contracts and commitments applicable to their businesses or
properties;
37
(e) use their best reasonable efforts to maintain and preserve their
business organizations intact, and maintain their relationships with their
suppliers and customers so that they will be preserved after the Closing;
(f) maintain their books of account and records in the usual and
regular manner;
(g) comply in all material respects with all laws and regulations
applicable to them and to the conduct of their businesses;
(h) not amend their certificates of incorporation or by-laws;
(i) not merge or consolidate with, or agree to merge or consolidate
with, or purchase or otherwise acquire, or agree to purchase or otherwise
acquire, substantially all of the assets of, any other Person;
(j) not sell, lease or otherwise dispose of, or mortgage or
otherwise subject to any consensual Lien, any of their assets having a
value in excess of $250,000 in any individual case or $2,500,000 in the
aggregate other than in the Ordinary Course of Business;
(k) not incur any indebtedness, or enter into any guarantee of any
indebtedness of any other Person, other than indebtedness incurred, and
guarantees entered into, in the Ordinary Course of Business and
indebtedness incurred pursuant to credit facilities in effect as of the
date hereof;
(l) not make any loans or advances to any other Person, other than
in the Ordinary Course of Business or to the Company or any of its wholly
owned Subsidiaries;
(m) not make capital expenditures, other than in accordance with the
Company's 1998 Capital Plan (as previously provided to the Investor), but
in no event shall such capital expenditures exceed $3,000,000 in the
aggregate;
(n) not (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, (iii) purchase, redeem or
otherwise acquire any shares of its capital stock or any other securities
thereof or any rights, warrants or options to acquire any such shares or
other securities, or (iv) except as provided in Section 1.4(c), authorize
for issuance, sell, deliver or agree or
38
commit to issue, sell or deliver any capital stock or any other
securities;
(o) not (i) increase the compensation or fringe benefits of any of
its current or former directors, officers or employees (except for
increases in salary or wages in the Ordinary Course of Business), (ii)
grant any severance or termination pay not currently required to be paid
under existing Plans, or (iii) establish, adopt, enter into or amend or
terminate any Plan (except as required by Law) or any plan, agreement,
program, policy, trust, fund or other arrangement that would be a Plan if
it were in existence as of the date of this Agreement;
(p) not propose or adopt any changes to the accounting methods,
principles or practices used by the Company or its Subsidiaries, except as
otherwise required by law or GAAP;
(q) not make any election with respect to any Taxes (or computation
thereof) affecting the Company or any of its Subsidiaries without the
consent of the Investor, which consent shall not be unreasonably withheld
or delayed; and
(r) promptly advise the Investor in writing of any change or effect
that results in or has, or would reasonably be expected to result in or
have, a Material Adverse Change or Material Adverse Effect.
6.2 Efforts to Consummate Transaction. The parties hereto shall use
their best reasonable efforts to take or cause to be taken all actions required
to consummate the transactions contemplated hereby. The parties hereto shall
file or supply, or cause to be filed or supplied, all material applications,
notifications and information required to be filed or supplied by them pursuant
to applicable law in connection with the transactions contemplated hereby,
including filings and reports pursuant to the HSR Act and the Competition Act
(Canada). Each party hereto shall use its best reasonable efforts to obtain all
consents and approvals from Governmental Entities and third parties required to
be obtained by such party for the consummation of the transactions contemplated
hereby, other than any Consents where the failure to obtain such Consent, either
in any individual case or in the aggregate, could not have a material adverse
effect on the transactions contemplated hereby. Each party hereto shall
cooperate in good faith with the other parties hereto in the obtaining of all
Consents from Governmental Entities and third parties required to be obtained
for the consummation of the transactions contemplated hereby.
6.3 Access and Information. Prior to the Closing, and subject to the
restrictions set forth in the Confidentiality Agreement, the Company shall
permit the Investor and its representatives after the date of execution of this
Agreement to have reasonable access, during regular business hours, to the
39
properties, books, records, contracts and agreements and officers, employees and
tax advisors of the Company and its Subsidiaries, and shall furnish, or cause to
be furnished, to the Investor and its representatives any financial and
operating data and other information (including, without limitation, tax returns
and accountants' work papers with respect to the Company or any of its
Subsidiaries) that is available with respect to the business, properties,
financial condition and operations of the Company and its Subsidiaries as the
Investor may reasonably request from time to time. All information provided or
obtained pursuant to the foregoing shall be held by Investor in accordance with
and subject to the terms of the Confidentiality Agreement, dated January 6,
1998, between the Company and The Cypress Group L.L.C. (the "Confidentiality
Agreement").
6.4 Non-Solicitation. The Company and the Participating
Securityholders agree that neither the Company nor any of its Subsidiaries nor
any Participating Securityholder nor any of their respective officers, directors
and employees shall, and the Participating Securityholders shall direct and use
their best efforts to cause the Company's employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its Subsidiaries) not to, (a) file any further
amendment to the Form S-1 or undertake any selling efforts, including, but not
limited to, initiating any "roadshow", in connection with any possible offering
of securities of the Company, or (b) initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to stockholders of the Company) with
respect to a merger, consolidation, recapitalization or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, the Company or any of its Subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal") or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. The Participating Securityholders will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing. The
Participating Securityholders will take the necessary steps to inform the
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 6.4. The Participating Securityholders
will notify the Investor immediately if any such inquiries or proposals are
received by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with the Company and will
immediately deliver to the Investor any written documentation relating thereto.
6.5 Publicity. Except as required by applicable law,
40
the Investor shall not, directly or indirectly, make or cause any public
announcement or issue any notice in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of the
Company and Fund IV, and none of the Participating Securityholders or the
Company shall, directly or indirectly, make or cause to be made any such public
announcement or issue any notice without the prior written consent of the
Investor. The Participating Securityholders, the Company and the Investor shall
consult with each other prior to issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby and prior
to making any filings with any Governmental Entity or with any national
securities exchange with respect thereto.
6.6 Employee Matters. (a) From and after the Closing Date, the
Investor shall cause the Company and its Subsidiaries to honor, pay, perform and
satisfy any and all liabilities, obligations and responsibilities to or in
respect to each current or former employee of the Company or any such Subsidiary
under the terms of (x) each Plan as in effect immediately prior to the Closing
and (y) each agreement or other written arrangement between the Company or any
such Subsidiary and any such employee, in each case, which has been disclosed to
the Investor on Schedule 4.9(a) or Schedule 4.15.
(b) Notwithstanding the foregoing provisions, nothing in this
Section 6.6 shall (i) prevent the Company or its Subsidiaries from terminating
or amending any Plan to the extent permitted by applicable law, (ii) obligate
the Investor, the Company or its Subsidiaries to offer or provide any benefit
related to the equity securities of the Investor, the Company or its
Subsidiaries or (iii) guarantee the continued employment of any person employed
by the Company or its Subsidiaries or interfere with their right to terminate
such employment at any time (except to the extent of any such person's agreement
with the Company or its Subsidiaries disclosed on Schedule 4.9(a) or Schedule
4.15).
6.7 Transfer Taxes. The Company shall be liable for all transfer
Taxes (including, without limitation, any real property transfer gains Taxes)
arising from the sale of the Repurchased Shares and the Newly Issued Shares.
6.8 Employment Agreements and Other Benefits. Upon the reasonable
request of the Investor, prior to the Closing Date, the Company shall seek
shareholder approval of, and the Participating Securityholders shall approve (if
permitted under applicable law), any compensation payments or acceleration of
benefits under any employment agreements, option plans, bonus plans or other
benefit arrangements in a manner sufficient to satisfy Section 28OG(b)(5)(A)(ii)
of the Code and not constitute "parachute payments" (within the meaning of
Section 280G of the Code) provided that, in the event such approval is not
obtained, notwithstanding any other provision of this Agreement, the Company
shall have no obligation to make such payments or
41
accelerate such benefits.
6.9 Financing. The Company agrees to provide, and will cause its
Subsidiaries and its and their respective officers and employees to provide, all
reasonable cooperation in connection with the arrangement of the Financing,
including, but not limited to, the preparation of audited financial statements
in a form meeting the requirements of Regulation S-X of the Securities Act, the
execution and delivery of any commitment letters, underwriting or placement
agreements, pledge and security documents, other definitive financing documents,
or other requested agreements, certificates or documents, including any
indemnity agreements or any certificates of officers of the Company with respect
to solvency matters, as may be reasonably requested by the Investor, in each
case, provided that neither the Company nor any Subsidiary shall thereby incur,
or become obligated to incur, any material obligation or liability to any Person
for which the Company or any of its Subsidiaries would be liable in the event
this Agreement is terminated pursuant to Section 9.1 (other than by reason of a
breach of this Agreement by the Company or any Participating Securityholder).
The Company agrees to use its best reasonable efforts to (i) cause Coopers &
Lybrand LLP to assist in the preparation of any financial statements required
with respect to the Financing and (ii) obtain from Coopers & Lybrand LLP its
consent to the inclusion of any statements or reports prepared by it in
documents that may be filed with the SEC pursuant to the Securities Act by any
of the parties hereto or their respective Affiliates. The Company shall
cooperate with any reasonable requests of the Investor or the SEC related to the
recording of the transactions contemplated hereby as a recapitalization for
financial reporting purposes. In conjunction with the obtaining of any such
Financing, the Company agrees, at the request of the Investor, to call for
prepayment or redemption, or to prepay, redeem and/or renegotiate, as the case
may be, any then existing indebtedness of the Company, provided that no such
prepayment or redemption shall themselves actually be made until
contemporaneously with the Closing.
6.10 Restrictions on Participating Securityholders. Each
Participating Securityholder hereby covenants and agrees that, prior to the
Closing, such Participating Securityholder shall not sell, transfer or otherwise
dispose of all or any part of the Repurchased Shares, Investor Purchased Shares
or Surrendered Options owned by such Participating Securityholder.
6.11 Waiver of Participation Rights. Each Participating
Securityholder agrees, with respect to any Shares owned by such Participating
Securityholder that are not Repurchased Shares or Investor Purchased Shares,
that such Shares shall not be repurchased by the Company or purchased by the
Investor pursuant to this Agreement and hereby waives all rights under Section 4
of the Registration and Participation Agreement with respect to such Shares in
connection with the consummation of the transaction contemplated by this
Agreement.
42
6.12 Actions with respect to Equity Agreements. (a) Fund IV hereby
waives, effective upon the Closing, its rights under Section 5 of the Management
Stock Subscription Agreements in connection with the consummation of the
transactions contemplated by this Agreement.
(b) Fund IV hereby assigns, effective upon the Closing, all of its
rights under each of the Stock Purchase Plan, the Management Stock Subscription
Agreements, the Stock Option Plans, the Management Stock Option Agreements and
the Registration and Participation Agreement to the Investor, and each of the
Company and the Participating Securityholders hereby agree and acknowledge that
the Investor shall be entitled to enforce all such rights to the full extent
provided thereunder. The Company, the Participating Securityholders and the
Investor agree, effective upon the Closing, (i) to the amendment of the Stock
Option Plans, the Management Stock Option Agreements, the Stock Purchase Plan
and the Management Stock Subscription Agreements to (A) replace each reference
therein to "The Clayton & Dubilier Private Equity Fund IV Limited Partnership"
or "Fund IV" to be a reference to the Investor, and to make such conforming
changes as are necessary to properly reflect the other transactions contemplated
by this Agreement, (B) subject to Section 6.8, terminate all conditions to
vesting of any Options granted to Management Option Holders under the Stock
Option Plan that are not yet vested and (C) terminate the right of the Company
and the Investor under the Management Stock Subscription Agreements, Stock
Option Agreements, Stock Purchase Plan and Option Plans to repurchase the shares
of Class A Common Stock and options to purchase shares of Class A Common Stock
issued thereunder from the holder thereof upon the termination of such holder's
employment with WESCO or the Company, and (ii) to the amendment and restatement
of the Registration and Participation Agreement to be in the form of Exhibit E
hereto. The Company and each Participating Securityholder agrees that, upon the
request of the Investor, he, she or it will execute and deliver a counterpart
signature page to any amendment (or amendment and restatement) of the agreements
referred to in the preceding sentence as necessary to effect the amendments
thereof contemplated by the preceding sentence.
(c) Each of the Company, Fund IV and each Participating
Securityholder consents (to the extent required) to the termination at the
Closing of each of the CBS Equity Agreements, the Fund IV Stock Subscription
Agreement and the CBS-Fund IV Governance Side Letter, dated as of February 28,
1994 and, effective upon the Closing (without any further action required), each
such agreement shall be terminated and no longer in force and effect.
6.13 Actions with respect to Management Loans. The Company shall
take such actions as are reasonably requested by any Management Borrower to
maintain payment of such Management Borrower's Management Loan on the terms, and
at the scheduled
43
maturities, that would apply absent the consummation of the transactions
contemplated hereby, and the Management Borrowers shall take all reasonable
actions necessary to have their Management Loan agreements amended to reflect
the substitution of references therein to Fund IV to be references to the
Investor. The term "Management Borrower" means any Management Participating
Securityholder that has incurred loans ("Management Loans") guaranteed by the
Company in connection with the initial acquisition of such Securityholder's
Shares.
6.14 Financing Commitments. The Investor will execute each of the
Financing Commitments not later than the next Business Day following the earlier
to occur of (a) the day on which the Participation Election Period expires and
(b) the day on which the Company delivers to the Investor written confirmation
that the Participating Securityholder Signing Date has occurred.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to the Obligation of the Investor. The obligation of
the Investor to consummate the transactions contemplated hereby shall be subject
to the satisfaction or waiver by the Investor on or prior to the Closing Date of
each of the following conditions:
(a) Each of the representations and warranties of the Participating
Securityholders and of the Company contained in Articles III and IV shall be
true, in the case of any representation or warranty that is qualified as to
materiality, in all respects, and in the case of any representation or warranty
that is not so qualified, in all material respects, in each case, when made and
as of the Closing Date, with the same effect as though those representations and
warranties had been made on and as of the Closing Date; each of the covenants
and agreements of the Participating Securityholders and the Company to be
performed on or prior to the Closing Date shall have been duly performed in all
material respects; and the Investor shall have received at the Closing
certificates to that effect dated as of the Closing Date and executed on behalf
of the Participating Securityholders and the Company.
(b) There shall not have been issued and be in effect any order,
decree or judgment of or in any court or tribune of competent jurisdiction
preventing the consummation of the transactions contemplated hereby.
(c) (i) All directors of the Company or any of its Subsidiaries
whose resignations shall have been requested in writing by the Investor not less
than 5 days prior to the Closing Date shall have submitted their resignations or
been removed from
44
office effective as of the Closing Date and (ii) the persons designated, in
writing not less than 5 days prior to the Closing Date, by the Investor to
become directors of the Company and any of its Subsidiaries shall be elected as
such directors effective as of the Closing Date.
(d) All corporate, partnership and other proceedings of each
Participating Securityholder and the Company in connection with the transactions
contemplated by this Agreement and all documents and instruments incident
thereto, shall be reasonably satisfactory in substance and form to the Investor,
and the Investor shall have received all such documents and instruments, or
copies thereof, certified if requested, as may be reasonably requested.
(e) The Consulting Agreement, dated as of February 28, 1994, by and
among the Company, WESCO and Clayton, Dubilier & Rice, Inc. shall have been
terminated.
(f) (i) The CBS Equity Agreements, the Fund IV Stock Subscription
Agreement and the CBS-Fund IV Governance Side Letter dated as of February 28,
1994 shall have been terminated, (ii) each of the Equity Agreements shall have
been amended in the manner contemplated by Section 6.12(b) and (iii) the
Compensation Committee of the Company's Board of Directors shall have duly
adopted (A) a resolution pursuant to and in accordance with Section 8 of the
Option Plans and the Management Stock Option Agreements, in which the
Compensation Committee has reasonably determined in good faith that, following
the Closing Date (and after giving effect to all the transactions contemplated
hereby), all of the Rolled Over Options shall be "Alternative Options", as
defined in the Option Plans and the Management Stock Agreements, (B) a
resolution providing that no further shares of Class A Common Stock may be
issued and sold pursuant to the Stock Purchase Plan and no further options to
acquire shares of Class A Common Stock may be granted under the Stock Option
Plan and (C) a resolution providing that there shall be no acceleration of the
vesting schedule for the Branch Options in connection with the consummation of
the transactions contemplated by this Agreement.
(g) (i) All Non-Management Securityholders shall be Non-Management
Participating Securityholders and (ii) and each Non-Management Participating
Securityholder shall have delivered to the Company (A) certificates evidencing
such Securityholder's Repurchased Shares, duly endorsed in blank or accompanied
by stock transfer powers duly executed in blank, if any, with all necessary
stock transfer tax stamps attached thereto, if any, and cancelled, and (B)
certificates meeting the requirements of Treasury Regulation ' 1.1445-2 to the
effect that (x) such Securityholder is not a foreign person within the meaning
of section 1445(b)(2) of the Code and the Treasury Regulations hereunder or (y)
such Securityholder's interest in the Company is not a "United States real
property interest" within the meaning of Section 897(c) of the Code and the
Treasury regulations
45
thereunder.
(h) Each Management Securityholder shall have delivered to the
Investor (i) certificates evidencing such Securityholder's Investor Purchased
Shares, duly endorsed in blank or accompanied by stock transfer powers duly
executed in blank, if any, with all necessary stock transfer tax stamps attached
thereto, if any, and cancelled, and (ii) certificates meeting the requirements
of Treasury Regulation ' 1.1445-2 to the effect that (x) such Securityholder is
not a foreign person within the meaning of section 1445(b)(2) of the Code and
the Treasury Regulations hereunder or (y) such Securityholder's interest in the
Company is not a "United States real property interest" within the meaning of
Section 897(c) of the Code and the Treasury regulations thereunder.
(i) Since the Participating Securityholder Signing Date, there shall
have been no material adverse change in the participation by Management
Securityholders in the transactions contemplated by this Agreement, either in
respect of the continued participation by Management Securityholders as
Management Participating Securityholders or in respect of the aggregate number
of the Participating Management Securityholders' Rolled Over Shares.
7.2 Conditions to the Obligation of the Participating
Securityholders and the Company. The obligation of the Participating
Securityholders and the Company to consummate the transactions contemplated
hereby shall be subject to the satisfaction or waiver by the Required
Participating Securityholders and the Company on or prior to the Closing Date of
each of the following conditions:
(a) Each of the representations and warranties of the Investor
contained in Article V shall be true, in the case of any representation or
warranty that is qualified as to materiality, in all respects, and in the case
of any representation or warranty that is not so qualified, in all material
respects, in each case, when made and as of the Closing Date, with the same
effect as though those representations and warranties had been made on and as of
the Closing Date; each of the covenants and agreements of the Investor to be
performed on or prior to the Closing Date shall have been duly performed in all
material respects; and the Participating Securityholders and the Company shall
have received at the Closing certificates to that effect dated as of the Closing
Date and executed on behalf of the Investor.
(b) There shall not have been issued and be in effect any order,
decree or judgment of or in any court or tribunal of competent jurisdiction
preventing the consummation of the transactions contemplated hereby.
(c) All corporate proceedings of the Investor in
46
connection with the transactions contemplated by this Agreement and all
documents and instruments incident thereto, shall be reasonably satisfactory in
substance and form to the Participating Securityholders and their counsel, and
the Participating Securityholders and their counsel shall have received all such
documents and instruments, or copies thereof, certified if requested, as may be
reasonably requested.
7.3 Conditions to the Obligations of All Parties. The obligations of
the parties to consummate the transactions contemplated hereby shall be subject
to the satisfaction or waiver by the Investor, the Company and the Required
Participating Securityholders on or prior to the Closing Date of the following
conditions:
(a) Each party shall have duly filed with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "Antitrust Division") the notification and report
form required under the HSR Act with respect to the consummation of the
transactions contemplated hereby. The waiting period required by the HSR Act
shall have expired or been terminated by the FTC and the Antitrust Division.
(b) Either (i) an advance ruling certificate pursuant to section 102
of the Competition Act (Canada) shall have been issued by the Director of
Investigation and Research appointed under such Act to the effect that such
Director is satisfied that he or she would not have sufficient grounds upon
which to apply to the Competition Tribunal for an order under section 92 of such
Act with respect to the transactions contemplated by this Agreement, or (ii) the
waiting period under section 123 of the Competition Act (Canada) shall have
expired.
(c) Subject to the provisions of Section 7.3(a) and (b), all
consents, authorizations, clearances, orders and approvals of, and filings and
registrations with, any federal, state or foreign Governmental Entity which are
required for or in connection with the execution and delivery of this Agreement
and the consummation by each party hereto of the transactions contemplated
hereby shall have been obtained or made.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
8.1 Survival of Representations and Warranties. (a) Except as set
forth in Section 8.1(b), the representations and warranties and the covenants to
be performed at or prior to Closing of the Participating Securityholders, the
Company and the Investor contained in this Agreement or in any certificate
delivered in connection with this Agreement shall not survive the Closing, and
any and all breaches of such representations and warranties and covenants shall
be deemed waived as of the
47
Closing.
(b) Notwithstanding Section 8.1(a), (i) the representations and
warranties of the Participating Securityholders contained in Sections 3.3 and
3.5 and the representations and warranties of the Participating Securityholders
and the Company contained in Sections 4.1 and 4.2 shall survive the Closing
without limitation as to time, and (ii) this Section 8.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Closing.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated (or, in the case
of clause (d) below, shall be terminated) at any time prior to the Closing Date:
(a) By the written agreement of the Investor and the Required
Participating Securityholders;
(b) By the Required Participating Securityholders on the one hand or
the Investor on the other hand by written notice to the other party after 5:00
p.m. New York City time on the date that is 74 days after the date of this
Agreement (or such later date up to 84 days after the date of this Agreement as
Fund IV may consent upon the request of the Investor, such consent not to be
unreasonably withheld), if the transactions contemplated hereby shall not have
been consummated pursuant hereto, unless such date is extended by the mutual
written consent of the Required Participating Securityholders;
(c) By either the Investor, on the one hand, or the Required
Participating Securityholders, on the other hand, by written notice to the other
party if:
(i) the other party has (and the terminating party shall not have)
failed to perform and comply with, in all material respects, all
agreements, covenants and conditions hereby required to have been
performed or complied with by such party prior to the time of such
termination, and such failure shall not have been cured within 30 days
following notice of such failure; or
(ii) any event shall occur after the date hereof that shall have
made it impossible to satisfy a condition precedent to the terminating
party's obligations to consummate the transactions contemplated by this
Agreement, unless the occurrence of such event shall be due to the failure
of the terminating party to perform or comply with any of the agreements,
covenants or conditions hereof to be
48
performed or complied with by such party prior to the Closing;
(d) At the expiration of the Participating Election Period unless
(i) Management Participating Securityholders hold Rolled Over Shares at least
equal to the sum of (A) 51,181 and (B) the number equal to 75% of any New Shares
issued pursuant to Section 1.4(c), or (ii) the Company, the Investor and Fund IV
shall otherwise agree in writing; or
(e) By the Required Participating Securityholders if the Investor
shall have failed to comply with Section 6.14.
9.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to the provisions of Section 9.1, this Agreement shall become
void and have no effect, without any liability to any Person in respect hereof
or of the transactions contemplated hereby on the part of any party hereto, or
any of its directors, officers, representatives, stockholders or Affiliates,
except as provided in Sections 6.5, Article X and this Section 9.2. Nothing in
this Section 9.2 shall relieve any party of any liability for willful breach of
this Agreement prior to the date of termination.
ARTICLE X
MISCELLANEOUS
10.1 Expenses. Except as otherwise specifically provided for in this
Agreement, each party hereto shall bear their respective expenses, costs and
fees (including attorneys', auditors' and financing fees, if any) in connection
with the transactions contemplated hereby, including the preparation, execution
and delivery of this Agreement and compliance herewith, whether or not the
transactions contemplated hereby shall be consummated.
10.2 Amendments to Schedules. Schedules 1.1 and 1.2 may be amended
only as provided in Section 1.4. The Participating Securityholders and the
Company may amend or supplement any other Schedule hereto (other than Schedule
6.1) by delivery of a written amendment or supplement thereto to the Investor at
any time or from time to time prior to the fifth business day before the
Closing, and any such amendment or supplement shall have the effect, subject to
the provisos below, of modifying the representations and warranties of the
Participating Securityholders and the Company made herein (and shall be deemed
to modify any such representation or warranty not previously qualified as to
exceptions contained in such Schedule to include such qualification), provided,
however, that no such supplement or amendment shall be delivered unless (i) (A)
such supplement or amendment is delivered because the information contained
therein, in the Participating Securityholders' or
49
Company's judgment, is necessary to make such Schedule complete and was
inadvertently omitted from the Schedule previously delivered or (B) such
supplement or amendment is being delivered because the information contained
therein results from events occurring subsequent to the date hereof and (ii) the
information contained in any such supplement or amendment either individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect, provided, further, that, unless and until the Investor consents thereto
(which consent will not be unreasonably withheld), the delivery of any such
amendment or supplement by the Participating Securityholders or the Company
shall not be deemed to be effective for purposes of Section 7.1 or 9.1
hereunder.
10.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid, (c)
sent by next-day or overnight mail or delivery or (d) sent by telecopy or
telegram, as follows:
(i) if to the Participating Securityholders,
Clayton, Dubilier & Rice, Inc.
As Attorney-in-Fact and Custodian
375 Park Avenue, 18th Floor
New York, New York 10152
Fax: (212) 407-5252
Telephone: (212) 407-5200
Attention: William A. Barbe
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Fax: (212) 909-6836
Telephone: (212) 909-6000
Attention: George E.B. Maguire, Esq.
(ii) if to the Company,
CDW Holding Corporation
c/o WESCO Distribution, Inc.
Commerce Court
4 Station Square, Suite 700
Pittsburgh, PA 15219
Fax: (412) 454-2505
Telephone: (412) 454-2200
Attention: Jeffrey B. Kramp, Esq.
50
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Fax: (212) 909-6836
Telephone: (212) 909-6000
Attention: George E.B. Maguire, Esq.
(iii) if to the Investor,
c/o The Cypress Group L.L.C.
65 East 55th Street, 19th Floor
New York, New York 10017
Fax: (212) 705-0199
Telephone: (212) 705-0150
Attention: James L. Singleton
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Telephone: (212) 455-2530
Attention: David B. Chapnick, Esq.
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by personal delivery
on the day after such delivery, (x) if by certified or registered mail, on the
seventh business day after the mailing thereof, (y) if by next-day or overnight
mail or delivery, on the day delivered or (z) if by telecopy or telegram, on the
next day following the day on which such telecopy or telegram was sent, provided
that a copy is also sent by personal delivery, overnight courier or certified or
registered mail.
10.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING AS TO VALIDITY, INTERPRETATION AND EFFECT, BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
RULES THEREOF.
10.5 Assignment; Successors; Binding Effect. This Agreement shall
not be assignable by any party hereto without the prior written consent of all
of the other parties and any attempt to assign this Agreement without such
consent shall be void and of no effect, except that the Investor may assign, at
least five days prior to the Closing, its entire interest in this Agreement,
including the right to purchase the Newly Issued Shares and the Investor
Purchased Shares, to any direct or indirect wholly-owned Subsidiary of the
Investor pursuant to an assignment under which
51
such assignee assumes and agrees to perform all of the obligations of the
Investor hereunder; provided, that, notwithstanding any such assignment, the
Investor shall remain liable to perform all obligations hereunder. This
Agreement shall become effective and binding upon the execution and delivery of
a counterpart hereof by each of the Company, the Investor and Fund IV and shall
become binding on each Participating Securityholder other than Fund IV on the
execution and delivery of a Securityholder Acceptance by such Securityholder.
This Agreement shall inure to the benefit of, and be binding on and enforceable
against, the successors and assigns of the respective parties hereto. Nothing in
this Agreement, expressed or implied, is intended or shall be construed to
confer upon any person other than the parties and successors and assigns
permitted by this Section 10.5 any right, remedy or claim under or by reason of
this Agreement.
10.6 Amendment; Waivers, etc. No amendment, modification or
discharge of this Agreement, and no waiver hereunder, shall be valid or binding
unless set forth in writing and duly executed by or on behalf of the Company,
the Investor and the Required Participating Securityholders, provided that,
notwithstanding the foregoing, no such amendment, modification, discharge or
waiver shall be effective to change the number of any Participating
Securityholder's Repurchased Shares, Investor Purchased Shares or Surrendered
Option or the amount of any Participating Securityholder's Purchased Price for
Repurchased Shares, Purchase Price for Investor Purchased Shares or Option
Cancellation Amount without the written consent of such Participating
Securityholder. Any such waiver shall constitute a waiver only with respect to
the specific matter described in such writing and shall in no way impair the
rights of the party granting such waiver in any other respect or at any other
time. Neither the waiver by any of the parties hereto of a breach of or a
default under any of the provisions of this Agreement or to exercise any right
or privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder. The rights and remedies herein provided are cumulative and
none is exclusive of any other, or of any rights or remedies that any party may
otherwise have at law or in equity.
10.7 Entire Agreement. This Agreement (including the Exhibits and
Schedules referred to herein or delivered hereunder), the Custody Agreements and
the Confidentiality Agreement constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof.
10.8 Severability. If any provision, including any phrase, sentence,
clause, section or subsection, of this Agreement is invalid, inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering
52
such provisions in question invalid, inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision herein contained
invalid, inoperative, or unenforceable to any extent whatsoever.
10.9 Headings. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
10.10 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
53
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
THOR ACQUISITIONS L.L.C.
By /s/ JAMES L. SINGLETON
---------------------------
Name: James L. Singleton
Title: Member
CDW HOLDING CORPORATION
By /s/ ROY W. HALEY
---------------------------
Name: Roy W. Haley
Title: President and CEO
Participating Securityholders
(and as parties to the Amended
and Restated Registration
Rights Agreement):
THE CLAYTON & DUBILIER PRIVATE
EQUITY FUND IV LIMITED
PARTNERSHIP
By: Clayton & Dubilier
Associates IV Limited
Partnership, the General
Partner
By /s/ WILLIAM A. BARBE
-----------------------------
Name: William A. Barbe
Title: A General Partner
For the Purposes of Accepting the
Appointments Under Each Custody
Agreement as such Custody Agreement
is Deemed to be Executed and
Delivered to Pursuant to
Section 1.4(b):
54
Accepted by
WILLIAM A. BARBE,
As Attorney-in-Fact
/s/ WILLIAM A. BARBE
---------------------------
Accepted by
DONALD J. GOGEL,
as Attorney-in-Fact
/s/ DONALD J. GOGEL
---------------------------
Accepted by
JOSEPH L. RICE, III,
as Attorney-in-Fact
/s/ JOSEPH L. RICE, III
---------------------------
Accepted on behalf of
CLAYTON, DUBILIER & RICE, INC.,
as Attorney-in-Fact
By: /s/ WILLIAM A. BARBE
-----------------------
Name: William A. Barbe
Title: Vice President,
Secretary and Treasurer
Accepted on behalf of
CLAYTON, DUBILIER & RICE, INC.,
as the Custodian
By: /s/ WILLIAM A. BARBE
-----------------------
Name: William A. Barbe
Title: Vice President,
Secretary and Treasurer
EXHIBIT 2.2
WESCO DISTRIBUTION, INC.
$300,000,000
9-1/8% Senior Subordinated Notes due 2008
WESCO INTERNATIONAL, INC.
$87,000,000
11-1/8% Senior Discount Notes due 2008
PURCHASE AGREEMENT
May 29, 1998
CHASE SECURITIES INC.
LEHMAN BROTHERS INC.
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
WESCO Distribution, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell $300,000,000 aggregate principal amount of its 9-1/8%
Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes"). WESCO
International, Inc., a Delaware corporation ("Holdings" and, together with the
Company, the "Issuers"), proposes to issue and sell $87,000,000 aggregate
principal amount at maturity of its 11-1/8% Senior Discount Notes due 2008 (the
"Senior Discount Notes" and, together with the Senior Subordinated Notes, the
"Securities"). The Senior Subordinated Notes will be issued pursuant to an
Indenture to be dated as of June 5, 1998 (the "Senior Subordinated Notes
Indenture"), among the Company, Holdings, as guarantor, and Bank One, N.A., as
trustee (the "Senior Subordinated Notes Trustee") and will be guaranteed on an
unsecured senior subordinated basis by Holdings. The Senior Discount Notes will
be issued pursuant to an Indenture to be dated as of June 5, 1998 (the "Senior
Discount Notes Indenture" and, together with the Senior Subordinated Notes
Indenture, the "Indentures"), between Holdings and Bank One, N.A., as trustee
(the "Senior Discount Notes Trustee" and, together with the Senior Subordinated
Notes Trustee, the "Trustees"). The Issuers hereby confirm their agreement with
Chase Securities Inc. ("CSI") and Lehman Brothers Inc. ("Lehman Brothers" and,
together with CSI, the "Initial Purchasers") concerning the purchase of the
Securities from the Issuers by the several Initial Purchasers.
The Securities will be offered and sold to the Initial Purchasers
without being registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon an exemption therefrom. The Issuers have
prepared a preliminary offering memorandum dated May 13, 1998 (the "Preliminary
Offering Memorandum"), and will prepare an offering memorandum dated the date
hereof (the "Offering Memorandum") setting forth information concerning the
Issuers and the Securities. Copies of the Preliminary Offering Memorandum have
been, and copies of the Offering Memorandum will be, delivered by the Issuers to
the Initial Purchasers pursuant to the terms of this
2
Agreement. Any references herein to the Preliminary Offering Memorandum and the
Offering Memorandum shall be deemed to include all amendments and supplements
thereto, unless otherwise noted. The Issuers hereby confirm that they have
authorized the use of the Preliminary Offering Memorandum and the Offering
Memorandum in connection with the offering and resale of the Securities by the
Initial Purchasers in accordance with Section 2.
Holders of the Senior Subordinated Notes (including the Initial
Purchasers and their direct and indirect transferees) will be entitled to the
benefits of an Exchange and Registration Rights Agreement, substantially in the
form attached hereto as Annex A (the "Senior Subordinated Notes Registration
Rights Agreement"), pursuant to which the Company will agree to file with the
Securities and Exchange Commission (the "Commission") (i) a registration
statement under the Securities Act (the "Senior Subordinated Notes Exchange
Offer Registration Statement") registering an issue of senior subordinated notes
of the Company (the "Senior Subordinated Exchange Securities") which are
identical in all material respects to the Senior Subordinated Notes (except that
the Senior Subordinated Exchange Securities will not contain terms with respect
to transfer restrictions) and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Securities Act (the
"Senior Subordinated Notes Shelf Registration Statement"). Holders of the Senior
Discount Notes (including the Initial Purchasers and their direct and indirect
transferees) will be entitled to the benefits of an Exchange and Registration
Rights Agreement, substantially in the form attached hereto as Annex B (the
"Senior Discount Notes Registration Rights Agreement" and, together with the
Senior Subordinated Notes Registration Rights Agreement, the "Registration
Rights Agreements"), pursuant to which Holdings will agree to file with the
Commission (i) a registration statement under the Securities Act (the "Senior
Discount Notes Exchange Offer Registration Statement" and, together with the
Senior Subordinated Notes Exchange Offer Registration Statement, the "Exchange
Offer Registration Statements") registering an issue of senior discount notes of
Holdings (the "Senior Discount Exchange Securities" and, together with the
Senior Subordinated Exchange Securities, the "Exchange Securities") which are
identical in all material respects to the Senior Discount Notes (except that the
Senior Discount Exchange Securities will not contain terms with respect to
transfer restrictions) and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Securities Act (the
"Senior Discount Notes Shelf Registration Statement" and, together with the
Senior Subordinated Notes Shelf Registration Statement, the "Shelf Registration
Statements").
The Securities are being offered in connection with the
Recapitalization (as defined in the Offering Memorandum) pursuant to which,
among other things, an investor group led by affiliates of The Cypress Group
L.L.C. will acquire approximately 88.7% of the outstanding common stock of
Holdings.
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum.
3
1. Representations, Warranties and Agreements of the Issuers. Each
of the Issuers represents and warrants to, and agrees with, the several Initial
Purchasers on and as of the date hereof and the Closing Date (as defined in
Section 3) that:
(a) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, did not, and on the Closing Date the
Offering Memorandum will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided that the Issuers make no
representation or warranty as to information contained in or omitted from the
Preliminary Offering Memorandum or the Offering Memorandum in reliance upon and
in conformity with written information relating to the Initial Purchasers
furnished to the Issuers by or on behalf of any Initial Purchaser specifically
for use therein (the "Initial Purchasers' Information").
(b) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its respective date, contains all of the information that, if
requested by a prospective purchaser of the Securities, would be required to be
provided to such prospective purchaser pursuant to Rule 144A(d)(4) under the
Securities Act.
(c) Assuming the accuracy of the representations and warranties of
the Initial Purchasers contained in Section 2 and their compliance with the
agreements set forth therein, it is not necessary, in connection with the
issuance and sale of the Securities to the Initial Purchasers and the offer,
resale and delivery of the Securities by the Initial Purchasers in the manner
contemplated by this Agreement and the Offering Memorandum, to register the
Securities under the Securities Act or to qualify the Indentures under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
(d) Each of the Issuers and each "significant subsidiary" (within
the meaning of Rule 1-02 of Regulation S-X) of the Issuers has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, is duly qualified to do business
and is in good standing as a foreign corporation in each jurisdiction in which
its ownership or lease of property or the conduct of its business requires such
qualification, and has all power and authority necessary to own or hold its
properties and to conduct the business in which it is engaged, except where the
failure to so qualify, be in good standing or have such power or authority would
not, singularly or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), results of operations, business or prospects
of the Issuers and their respective subsidiaries taken as a whole (a "Material
Adverse Effect").
(e) As of the Closing Date, each of the Issuers will have a pro
forma capitalization as set forth in the Offering Memorandum under the heading
"Capitalization". All of the outstanding shares of capital stock of each
"significant subsidiary" (within the meaning of Rule 1-02 of Regulation S-X) of
the Issuers (including, without limitation, the Company) have been duly and
validly authorized and issued, are fully paid and non-assessable and are owned
directly or indirectly by the applicable Issuer, free and clear of any lien,
charge, encumbrance, security interest, restriction upon voting or transfer or
any other claim of any third party, other than those incurred in connection with
the Credit Agreement. WESCO Distribution-Canada, Inc. is the only "significant
subsidiary" (within the meaning of Rule 1-02 of Regulation S-X) of
4
the Company on the date hereof. The Company is the only direct subsidiary of
Holdings on the date hereof.
(f) Each of the Issuers has full right, power and authority to
execute and deliver this Agreement, the Senior Subordinated Notes Indenture, the
Senior Subordinated Notes Registration Rights Agreement and the Senior
Subordinated Notes (in the case of the Company only) (collectively, the "Senior
Subordinated Notes Transaction Documents") and to perform its obligations
hereunder and thereunder; and all corporate action required to be taken for the
due and proper authorization, execution and delivery of each of the Senior
Subordinated Notes Transaction Documents and the consummation of the
transactions contemplated thereby has been duly and validly taken. Holdings has
full right, power and authority to execute and deliver the Senior Discount Notes
Indenture, the Senior Discount Notes Registration Rights Agreement and the
Senior Discount Notes (collectively, the "Senior Discount Notes Transaction
Documents" and, together with (i) the Senior Subordinated Notes Transaction
Documents, (ii) the Recapitalization Agreement, (iii) the Credit Agreement and
(iv) the U.S. Receivables Sale Agreement, the Canadian Receivables Sales
Agreement, the Pooling Agreement, the Series 1998-1 Supplement to the Pooling
Agreement and the Servicing Agreement, in each case to be entered into in
connection with the Receivables Facility (collectively, the "Receivables
Agreements"), the "Transaction Documents") and to perform its obligations
thereunder; and all corporate action required to be taken for the due and proper
authorization, execution and delivery of each of the Senior Discount Notes
Transaction Documents and the consummation of the transactions contemplated
thereby has been duly and validly taken.
(g) This Agreement has been duly authorized, executed and delivered
by each of the Issuers.
(h) The Senior Subordinated Notes Registration Rights Agreement has
been duly authorized by each of the Issuers and, when duly executed and
delivered in accordance with its terms by each of the parties thereto, will
constitute a valid and legally binding agreement of each of the Issuers
enforceable against each of the Issuers in accordance with its terms, except to
the extent that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law). The Senior Discount
Notes Registration Rights Agreement has been duly authorized by Holdings and,
when duly executed and delivered in accordance with its terms by each of the
parties thereto, will constitute a valid and legally binding agreement of
Holdings enforceable against Holdings in accordance with its terms, except to
the extent that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally and by general equitable principles
(whether considered in a proceeding in equity or at law).
(i) The Senior Subordinated Notes Indenture has been duly authorized
by each of the Issuers and, when duly executed and delivered in accordance with
its terms by each of the parties thereto, will constitute a valid and legally
binding agreement of each of the Issuers enforceable against each of the Issuers
in accordance with its terms, except to the extent that such enforceability may
be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether
5
considered in a proceeding in equity or at law). The Senior Discount Notes
Indenture has been duly authorized by Holdings and, when duly executed and
delivered in accordance with its terms by each of the parties thereto, will
constitute a valid and legally binding agreement of Holdings enforceable against
Holdings in accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
creditors' rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law). On the Closing Date, each of
the Indentures will conform in all material respects to the requirements of the
Trust Indenture Act and the rules and regulations of the Commission applicable
to an indenture which is qualified thereunder.
(j) The Senior Subordinated Notes have been duly authorized by each
of the Issuers and, when duly executed, authenticated, issued and delivered as
provided in the Senior Subordinated Notes Indenture and paid for as provided
herein, will be duly and validly issued and outstanding and will constitute
valid and legally binding obligations of the Company, as issuer, and Holdings,
as guarantor, entitled to the benefits of the Senior Subordinated Notes
Indenture and enforceable against the Company as issuer, and Holdings, as
guarantor, in accordance with their terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting
creditors' rights generally and by general equitable principles (whether
considered in a proceeding in equity or at law). The Senior Discount Notes have
been duly authorized by Holdings and, when duly executed, authenticated, issued
and delivered as provided in the Senior Discount Notes Indenture and paid for as
provided herein, will be duly and validly issued and outstanding and will
constitute valid and legally binding obligations of Holdings entitled to the
benefits of the Senior Discount Notes Indenture and enforceable against Holdings
in accordance with their terms, except to the extent that such enforceability
may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and by general equitable principles (whether considered in a
proceeding in equity or at law).
(k) The Recapitalization Agreement has been duly authorized,
executed and delivered by Holdings and constitutes a valid and legally binding
agreement of Holdings enforceable against Holdings in accordance with its terms,
except to the extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws affecting creditors' rights generally and by general
equitable principles (whether considered in a proceeding in equity or at law).
(l) Each Transaction Document conforms in all material respects to
the description thereof contained in the Offering Memorandum.
(m) The execution, delivery and performance by each of the Issuers
and each of their respective subsidiaries of each of the Transaction Documents
to which each is a party, the issuance, authentication, sale and delivery of the
Securities and compliance by the applicable Issuer with the terms thereof and
the consummation of the transactions contemplated by the Transaction Documents
will not conflict with or contravene, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of either of the
Issuers or any of their respective subsidiaries pursuant to, (i) the
6
charter or by-laws of either of the Issuers, (ii) any agreement or other
instrument binding upon either of the Issuers or any of their respective
subsidiaries or their respective assets or (iii) any provision of applicable law
or any judgment, order or decree of any governmental body, agency or court
having jurisdiction over either of the Issuers or any of their respective
subsidiaries or their respective assets, except, in the case of clause (ii) and
(iii), for conflicts, contraventions, liens, charges or encumbrances which would
not, singularly or in the aggregate, have a Material Adverse Effect. No consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the execution, delivery and performance by each
of the Issuers of each of the Transaction Documents to which each is a party,
the issuance, authentication, sale and delivery of the Securities and compliance
by the applicable Issuer with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents, except for such
consents, approvals, authorizations or qualifications (i) which shall have been
obtained or made prior to the Closing Date, (ii) as may be required to be
obtained or made under the Securities Act as provided in the Registration Rights
Agreements and under applicable state securities laws and (iii) the failure to
obtain would not, singularly or in the aggregate, have a Material Adverse
Effect.
(n) Coopers & Lybrand L.L.P. are independent certified public
accountants with respect to each of the Issuers and their respective
subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct
of the American Institute of Certified Public Accountants ("AICPA") and its
interpretations and rulings thereunder. The historical financial statements
(including the related notes) contained in the Offering Memorandum have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby and fairly present
the financial position of the entities purported to be covered thereby at the
respective dates indicated and the results of their operations and their cash
flows for the respective periods indicated; and the financial information
contained in the Offering Memorandum under the headings "Selected Historical
Consolidated Financial Data", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Management--Executive Compensation"
are derived from the accounting records of the Issuers and their respective
subsidiaries and fairly present the information purported to be shown thereby.
The pro forma financial information contained in the Offering Memorandum has
been prepared on a basis consistent with the historical financial statements
contained in the Offering Memorandum (except as specified therein), includes all
material adjustments to the historical financial information required by Rule
11-02 of Regulation S-X under the Securities Act and the Exchange Act to reflect
the transactions described in the Offering Memorandum, gives effect to
assumptions made on a reasonable basis and fairly presents the historical and
proposed transactions contemplated by the Offering Memorandum and the
Transaction Documents.
(o) There are no legal or governmental proceedings pending or, to
the knowledge of the Issuers, threatened to which either of the Issuers or any
of their respective subsidiaries is a party or to which any property or assets
of either of the Issuers or any of their respective subsidiaries is subject
other than proceedings that could not, singularly or in the aggregate,
reasonably be expected to have a Material Adverse Effect or have a material
adverse effect on the power or ability of either of the Issuers or any of their
respective subsidiaries to perform its obligations under the applicable
Transaction Documents or to consummate the transactions contemplated by the
applicable Transaction Documents or the Offering Memorandum.
7
(p) No action has been taken by either of the Issuers or their
respective subsidiaries and no statute, rule, regulation or order has been
enacted, adopted or issued by any governmental agency or body which prevents the
issuance of the Securities or suspends the sale of the Securities in any
jurisdiction; no injunction, restraining order or order of any nature by any
federal or state court of competent jurisdiction has been issued with respect to
either of the Issuers or any of their respective subsidiaries which would
prevent or suspend the issuance or sale of the Securities or the use of the
Preliminary Offering Memorandum or the Offering Memorandum in any jurisdiction;
no action, suit or proceeding is pending against or, to the knowledge of the
Issuers, threatened against or affecting either of the Issuers or any of their
respective subsidiaries before any court or arbitrator or any governmental
agency, body or official, domestic or foreign, which could reasonably be
expected to interfere with or adversely affect the issuance of the Securities or
in any manner draw into question the validity or enforceability of any of the
Transaction Documents or any action taken or to be taken pursuant thereto; and
each of the Issuers has complied with any and all requests by any securities
authority in any jurisdiction for additional information to be included in the
Preliminary Offering Memorandum and the Offering Memorandum.
(q) None of the Issuers or any of their respective "significant
subsidiaries" (within the meaning of Rule 1-02 of Regulation S-X) is (i) in
violation of its charter or by-laws, (ii) in default in any respect, and no
event has occurred which, with notice or lapse of time or both, would constitute
such a default, in the due performance or observance of any term, covenant or
condition contained in any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which it is a party or by which it is bound or
to which any of its property or assets is subject or (iii) in violation in any
respect of any law, ordinance, governmental rule, regulation or court decree to
which it or its property or assets may be subject, except, in the case of
clauses (ii) or (iii), as would not have a Material Adverse Effect.
(r) Except as would not, singularly or in the aggregate, have a
Material Adverse Effect, each of the Issuers and each of their respective
subsidiaries possesses all licenses, certificates, authorizations and permits
issued by, and has made all declarations and filings with, the appropriate
federal, state or foreign regulatory agencies or bodies which are necessary or
desirable for the ownership of its properties or the conduct of its business as
described in the Offering Memorandum, and none of the Issuers or any of their
respective subsidiaries has received notification of any revocation or
modification of any such license, certificate, authorization or permit or has
any reason to believe that any such license, certificate, authorization or
permit will not be renewed in the ordinary course.
(s) Each of the Issuers and each of their respective subsidiaries
has filed all federal, state, local and foreign income and franchise tax returns
required to be filed through the date hereof and has paid all taxes due thereon,
and no tax deficiency has been determined adversely to either of the Issuers or
any of their respective subsidiaries which has had (nor do the Issuers or any of
their respective subsidiaries have any knowledge of any tax deficiency which, if
determined adversely to either of the Issuers or any of their respective
subsidiaries, could reasonably be expected to have) a Material Adverse Effect.
(t) Neither of the Issuers is and, after giving effect to the
offering and sale of the applicable Securities and the application of the
proceeds thereof as described in the Offering Memorandum, will be an "investment
company" or an entity "controlled by" an
8
investment company within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and the rules and regulations of the
Commission thereunder.
(u) Each of the Issuers and each of their respective subsidiaries
has insurance covering its properties, operations, personnel and business, which
insurance is in amounts and insures against such losses and risks as are
adequate to protect each of the Issuers and each of their respective
subsidiaries and each of their respective businesses.
(v) Each of the Issuers and each of their respective subsidiaries
has good and marketable title in fee simple to, or has valid rights to lease or
otherwise use, all items of real and personal property which are material to the
business of each of the Issuers and their respective subsidiaries, in each case
free and clear of all liens, encumbrances, claims and defects and imperfections
of title except such as (i) do not materially interfere with the use made and
proposed to be made of such property by the applicable Issuer and its
subsidiaries or (ii) could not reasonably be expected to have a Material Adverse
Effect.
(w) No labor disturbance by or dispute with the employees of either
of the Issuers or any of their respective subsidiaries exists or, to the best
knowledge of the Issuers, is contemplated or threatened, except as would not
have a Material Adverse Effect.
(x) No "prohibited transaction" (as defined in Section 406 of the
Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"), or Section 4975
of the Internal Revenue Code of 1986, as amended from time to time (the "Code"))
or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any
of the events set forth in Section 4043(b) of ERISA (other than events with
respect to which the 30-day notice requirement under Section 4043 of ERISA has
been waived) has occurred with respect to any employee benefit plan of either of
the Issuers or any of their respective subsidiaries which could reasonably be
expected to have a Material Adverse Effect; each such employee benefit plan is
in compliance in all respects with applicable law, including ERISA and the Code,
except as would not have a Material Adverse Effect; each of the Issuers and each
of their respective subsidiaries has not incurred and does not expect to incur
liability under Title IV of ERISA with respect to the termination of, or
withdrawal from, any pension plan for which the applicable Issuer or any of its
subsidiaries would have any liability, except as would not have a Material
Adverse Effect; and each such pension plan that is intended to be qualified
under Section 401(a) of the Code is so qualified in all respects and nothing has
occurred, whether by action or by failure to act, which could reasonably be
expected to cause the loss of such qualification, except as would not have a
Material Adverse Effect.
(y) Except as described in the Offering Memorandum, there are no
costs or liabilities of either of the Issuers or any of their respective
subsidiaries associated with or arising from the application of any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws")
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with any Environmental Laws or
any permits, licenses or other approvals required of either of the
9
Issuers or any of their respective subsidiaries under applicable Environmental
Laws to conduct its business, any related constraints on operating activities
and any potential liabilities to third parties, including governmental
authorities) which would, singularly or in the aggregate, have a Material
Adverse Effect.
(z) On and immediately after the Closing Date, each of the Issuers
(after giving effect to the issuance of the applicable Securities and to the
other transactions related thereto as described in the Offering Memorandum) will
be Solvent. As used in this paragraph, the term "Solvent" means, with respect to
a particular date, that on such date (i) the present fair market value (or
present fair saleable value) of the assets of each of the Issuers is not less
than the total amount required to pay the probable liabilities of each of the
Issuers on its total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured, (ii) each of the Issuers is
able to realize upon its assets and pay its debts and other liabilities,
contingent obligations and commitments as they mature and become due in the
normal course of business, (iii) assuming the sale of the applicable Securities
as contemplated by this Agreement and the Offering Memorandum, each of the
Issuers is not incurring debts or liabilities beyond its ability to pay as such
debts and liabilities mature; and (iv) each of the Issuers is not engaged in any
business or transaction, and is not about to engage in any business or
transaction, for which its property would constitute unreasonably small capital
after giving due consideration to the prevailing practice in the industry in
which each of the Issuers is engaged. In computing the amount of such contingent
liabilities at any time, it is intended that such liabilities will be computed
at the amount that, in the light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
(aa) None of the Issuers or any of their respective subsidiaries
owns any "margin securities" as that term is defined in Regulation U of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
and none of the proceeds of the sale of the Securities will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security, for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Securities to be considered a "purpose credit" within the
meanings of Regulation T, U or X of the Federal Reserve Board.
(bb) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.
(cc) None of the Issuers, any of their respective affiliates or any
person acting on their behalf (other than the Initial Purchasers) has engaged or
will engage in any directed selling efforts (as such term is defined in
Regulation S under the Securities Act ("Regulation S")) with respect to the
Securities, and all such persons have complied and will comply with the offering
restrictions requirement of Regulation S to the extent applicable.
(dd) None of the Issuers or any of their respective affiliates has,
directly or through any agent, (i) sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any security (as such term is defined
in the Securities Act), which is or will be integrated with the sale of the
Securities in a manner that would require registration of the Securities under
the Securities Act or (ii) engaged, in
10
connection with the offering of the Securities, in any form of general
solicitation or general advertising within the meaning of Rule 502(c) under the
Securities Act or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act.
(ee) Neither of the Issuers has taken or will take, directly or
indirectly, any action prohibited by Regulation M under the Exchange Act in
connection with the offering of the applicable Securities.
(ff) No forward-looking statement (within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act) contained in the
Preliminary Offering Memorandum or the Offering Memorandum has been made or
reaffirmed without a reasonable basis or has been disclosed other than in good
faith.
(gg) Each of the Issuers and each of their respective subsidiaries
has complied with all provisions of Section 517.075, Florida Statutes (Chapter
92-198, Laws of Florida) relating to doing business with the Government of Cuba
or with any person or affiliate located in Cuba.
(hh) Since the date as of which information is given in the Offering
Memorandum, except as otherwise stated therein, there has been no material
adverse change or any development involving a prospective material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs, management or business prospects of either of the Issuers, whether or
not arising in the ordinary course of business.
2. Purchase and Resale of the Securities. (a) On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions set forth herein, the Issuers agree to issue and sell to
each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Issuers, the principal amount of Securities set forth opposite the name of such
Initial Purchaser on Schedule 1 hereto at a purchase price equal to (i) 96.175%
of the principal amount thereof for the Senior Subordinated Notes and (ii)
55.990% of the principal amount at maturity thereof for the Senior Discount
Notes. The Issuers shall not be obligated to deliver any of the Securities
except upon payment for all of the Securities to be purchased as provided
herein.
(b) The Initial Purchasers have advised the Issuers that they
propose to offer the Securities for resale upon the terms and subject to the
conditions set forth herein and in the Offering Memorandum. Each Initial
Purchaser, severally and not jointly, represents, warrants and agrees that (i)
it is a Qualified Institutional Buyer (as defined below), (ii) it is purchasing
the Securities pursuant to a private sale exempt from registration under the
Securities Act, (iii) it has not solicited offers for, or offered or sold, and
will not solicit offers for, or offer or sell, the Securities by means of any
form of general solicitation or general advertising within the meaning of Rule
502(c) of Regulation D under the Securities Act ("Regulation D") or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act and (iv) it has solicited and will solicit offers for the
Securities only from, and has offered or sold and will offer, sell or deliver
the Securities, as part of their initial offering, only (A) within the United
States to persons whom it reasonably believes to be qualified institutional
buyers ("Qualified Institutional Buyers"), as defined in Rule 144A under the
Securities
11
Act ("Rule 144A"), or if any such person is buying for one or more institutional
accounts for which such person is acting as fiduciary or agent, only when such
person has represented to it that each such account is a Qualified Institutional
Buyer to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A and in each case, in transactions in accordance with Rule
144A and (B) outside the United States to persons other than U.S. persons in
reliance on Regulation S under the Securities Act ("Regulation S").
(c) In connection with the offer and sale of Securities in reliance
on Regulation S, each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that:
(i) the Securities have not been registered under the Securities Act
and may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except pursuant to an exemption from,
or in transactions not subject to, the registration requirements of the
Securities Act.
(ii) such Initial Purchaser has offered and sold the Securities, and
will offer and sell the Securities, (A) as part of its distribution at any
time and (B) otherwise until 40 days after the later of the commencement
of the offering of the Securities and the Closing Date, only in accordance
with Regulation S or Rule 144A or any other available exemption from
registration under the Securities Act.
(iii) none of such Initial Purchaser or any of its affiliates or any
other person acting on its or their behalf has engaged or will engage in
any directed selling efforts with respect to the Securities, and all such
persons have complied and will comply with the offering restriction
requirements of Regulation S.
(iv) at or prior to the confirmation of sale of any Securities sold
in reliance on Regulation S, it will have sent to each distributor, dealer
or other person receiving a selling concession, fee or other remuneration
that purchases Securities from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and
may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons (i) as part of their
distribution at any time or (ii) otherwise until 40 days after the
later of the commencement of the offering of the Securities and the
date of original issuance of the Securities, except in accordance
with Regulation S or Rule 144A or any other available exemption from
registration under the Securities Act. Terms used above have the
meanings given to them by Regulation S."
(v) it has not and will not enter into any contractual arrangement
with any distributor with respect to the distribution of the Securities,
except with its affiliates or with the prior written consent of the
Issuers
Terms used in this Section 2(c) have the meanings given to them by
Regulation S.
12
(d) Each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that (i) it has not offered or sold and prior to the date
six months after the Closing Date will not offer or sell any Securities to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 and the Public Offers
of Securities Regulations 1995 with respect to anything done by it in relation
to the Securities in, from or otherwise involving the United Kingdom; and (iii)
it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
or is a person to whom such document may otherwise lawfully be issued or passed
on.
(e) Each Initial Purchaser, severally and not jointly, agrees that,
prior to or simultaneously with the confirmation of sale by such Initial
Purchaser to any purchaser of any of the Securities purchased by such Initial
Purchaser from the Issuers pursuant hereto, such Initial Purchaser shall furnish
to that purchaser a copy of the Offering Memorandum (and any amendment or
supplement thereto that the Issuers shall have furnished to such Initial
Purchaser prior to the date of such confirmation of sale). In addition to the
foregoing, each Initial Purchaser acknowledges and agrees that the Issuers and,
for purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Sections 5(d) and (e), counsel for the Issuers and for the Initial
Purchasers, respectively, may rely upon the accuracy of the representations and
warranties of the Initial Purchasers and their compliance with their agreements
contained in this Section 2, and each Initial Purchaser hereby consents to such
reliance.
(f) Each of the Issuers acknowledges and agrees that the Initial
Purchasers may sell Securities to any affiliate of an Initial Purchaser and that
any such affiliate may sell Securities purchased by it to an Initial Purchaser.
3. Delivery of and Payment for the Securities. (a) Delivery of and
payment for the Securities shall be made at the offices of Simpson Thacher &
Bartlett, New York, New York, or at such other place as shall be agreed upon by
the Initial Purchasers and the Issuers, at 10:00 A.M., New York City time, on
June 5, 1998, or at such other time or date, not later than seven full business
days thereafter, as shall be agreed upon by the Initial Purchasers and the
Issuers (such date and time of payment and delivery being referred to herein as
the "Closing Date").
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to the Issuers by wire or book-entry transfer of
same-day funds to such account or accounts as the Issuers shall specify prior to
the Closing Date or by such other means as the parties hereto shall agree prior
to the Closing Date against delivery to the Initial Purchasers of the
certificates evidencing the Securities. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligations of the Initial Purchasers hereunder. Upon delivery,
the Securities shall be in global form, registered in such names and in such
denominations as CSI on behalf of the Initial Purchasers shall have requested in
writing not less than two full business days prior to the Closing Date. The
Issuers agree to make
13
global certificates evidencing the Securities available for inspection by CSI on
behalf of the Initial Purchasers in New York, New York at least 24 hours prior
to the Closing Date.
4. Further Agreements of the Issuers. Each of the Issuers agrees
with each of the several Initial Purchasers:
(a) to advise the Initial Purchasers promptly and, if requested,
confirm such advice in writing, of the happening of any event which makes any
statement of a material fact made in the Offering Memorandum untrue or which
requires the making of any additions to or changes in the Offering Memorandum
(as amended or supplemented from time to time) in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; to advise the Initial Purchasers promptly of any order preventing or
suspending the use of the Preliminary Offering Memorandum or the Offering
Memorandum, of any suspension of the qualification of the Securities for
offering or sale in any jurisdiction and of the initiation or threatening of any
proceeding for any such purpose; and to use its reasonable best efforts to
prevent the issuance of any such order preventing or suspending the use of the
Preliminary Offering Memorandum or the Offering Memorandum or suspending any
such qualification and, if any such suspension is issued, to obtain the lifting
thereof at the earliest possible time;
(b) to furnish promptly to each of the Initial Purchasers and
counsel for the Initial Purchasers, without charge, as many copies of the
Offering Memorandum (and any amendments or supplements thereto) as may be
reasonably requested;
(c) prior to making any amendment or supplement to the Offering
Memorandum, to furnish a copy thereof to each of the Initial Purchasers and
counsel for the Initial Purchasers and not to effect any such amendment or
supplement to which the Initial Purchasers shall reasonably object by notice to
the Issuers after a reasonable period to review;
(d) if, at any time prior to completion of the resale of the
Securities by the Initial Purchasers, any event shall occur or condition exist
as a result of which it is necessary, in the opinion of counsel for the Initial
Purchasers or counsel for the Issuers, to amend or supplement the Offering
Memorandum in order that the Offering Memorandum will not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances existing at
the time it is delivered to a purchaser, not misleading, or if it is necessary
to amend or supplement the Offering Memorandum to comply with applicable law, to
promptly prepare such amendment or supplement as may be necessary to correct
such untrue statement or omission or so that the Offering Memorandum, as so
amended or supplemented, will comply with applicable law;
(e) for so long as the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Securities and prospective
purchasers of the Securities designated by such holders, upon request of such
holders or such prospective purchasers, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Securities Act, unless the Issuers are
then subject to and in compliance with Section 13 or 15(d) of the Exchange Act
(the foregoing agreement being for the benefit of the holders from time to time
of the Securities and prospective purchasers of the Securities designated by
such holders);
14
(f) to promptly take from time to time such actions as the Initial
Purchasers may reasonably request to qualify the Securities for offering and
sale under the securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may designate and to continue such qualifications in effect for so
long as required for the resale of the Securities; and to arrange for the
determination of the eligibility for investment of the Securities under the laws
of such jurisdictions as the Initial Purchasers may reasonably request; provided
that none of the Issuers or any of their respective subsidiaries shall be
obligated to qualify as foreign corporations in any jurisdiction in which they
are not so qualified or to file a general consent to service of process in any
jurisdiction or to take any action which would subject it to taxation in any
jurisdiction where it is not then so subject;
(g) to assist the Initial Purchasers in arranging for the Securities
to be designated Private Offerings, Resales and Trading through Automated
Linkages ("PORTAL") Market securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
("NASD") relating to trading in the PORTAL Market and for the Securities to be
eligible for clearance and settlement through The Depository Trust Company
("DTC");
(h) not to, and to cause its affiliates not to, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
such term is defined in the Securities Act) which could be integrated with the
sale of the Securities in a manner which would require registration of the
Securities under the Securities Act;
(i) except following the effectiveness of the applicable Exchange
Offer Registration Statement or the applicable Shelf Registration Statement, as
the case may be, not to, and to cause its affiliates not to, and not to
authorize or knowingly permit any person acting on their behalf to, solicit any
offer to buy or offer to sell the applicable Securities by means of any form of
general solicitation or general advertising within the meaning of Regulation D
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act; and not to offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any securities under circumstances where
such offer, sale, contract or disposition would cause the exemption afforded by
Section 4(2) of the Securities Act to cease to be applicable to the offering and
sale of the Securities as contemplated by this Agreement and the Offering
Memorandum;
(j) for a period of 90 days from the date of the Offering
Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose
of, directly or indirectly, or file a registration statement for, or announce
any offer, sale, contract for sale of or other disposition of any debt
securities issued or guaranteed by such Issuer or any of its subsidiaries (other
than the applicable Securities) without the prior written consent of the Initial
Purchasers;
(k) in connection with the offering of the Securities, until CSI on
behalf of the Initial Purchasers shall have notified the Issuers of the
completion of the resale of the Securities, not to, and to cause their
affiliated purchasers (as defined in Regulation M under the Exchange Act) not
to, either alone or with one or more other persons, bid for or purchase, for any
account in which they or any of their affiliated purchasers has a beneficial
interest, any Securities, or attempt to induce any person to purchase any
Securities; and not to, and to cause their affiliated purchasers not to, make
bids or
15
purchase for the purpose of creating actual, or apparent, active trading in or
of raising the price of the Securities;
(l) to apply the net proceeds from the sale of the applicable
Securities as set forth in the Offering Memorandum under the heading "Use of
Proceeds".
5. Conditions of Initial Purchasers' Obligations. The respective
obligations of the several Initial Purchasers hereunder are subject to the
accuracy, on and as of the date hereof and the Closing Date, of the
representations and warranties of each of the Issuers contained herein, to the
accuracy of the statements of each of the Issuers and their respective officers
made in any certificates delivered pursuant hereto, to the performance by each
of the Issuers of their respective obligations hereunder, and to each of the
following additional terms and conditions:
(a) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this Agreement
or at such other date and time as to which the Initial Purchasers may agree.
(b) None of the Initial Purchasers shall have discovered and
disclosed to either Issuer on or prior to the Closing Date that the Offering
Memorandum or any amendment or supplement thereto contains an untrue statement
of a fact which, in the opinion of counsel for the Initial Purchasers, is
material or omits to state any fact which, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of each of the Transaction Documents and
the Offering Memorandum, and all other legal matters relating to the Transaction
Documents and the transactions contemplated thereby, shall be satisfactory in
all material respects to the Initial Purchasers, and the Issuers shall have
furnished to the Initial Purchasers all documents and information that they or
their counsel may reasonably request to enable them to pass upon such matters.
(d) Simpson Thacher & Bartlett and Jeffrey B. Kramp shall have
furnished to the Initial Purchasers their written opinions, as counsel to the
Issuers, addressed to the Initial Purchasers and dated the Closing Date, in form
and substance reasonably satisfactory to the Initial Purchasers, substantially
to the effect set forth in Annex C-1 and Annex C-2 hereto.
(e) The Initial Purchasers shall have received from Cravath, Swaine
& Moore, counsel for the Initial Purchasers, such opinion or opinions, dated the
Closing Date, with respect to such matters as the Initial Purchasers may
reasonably require, and the Issuers shall have furnished to such counsel such
documents and information as they request for the purpose of enabling them to
pass upon such matters.
(f) The Issuers shall have furnished to the Initial Purchasers a
letter (the "Initial Letter") of Coopers & Lybrand L.L.P., addressed to the
Initial Purchasers and dated the date hereof, in form and substance satisfactory
to the Initial Purchasers, substantially to the effect set forth in Annex D
hereto.
16
(g) The Issuers shall have furnished to the Initial Purchasers a
letter (the "Bring-Down Letter") of Coopers & Lybrand L.L.P., addressed to the
Initial Purchasers and dated the Closing Date (i) confirming that they are
independent public accountants with respect to each of the Issuers and their
respective subsidiaries within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA and its interpretations and rulings
thereunder, (ii) stating, as of the date of the Bring-Down Letter (or, with
respect to matters involving changes or developments since the respective dates
as of which specified financial information is given in the Offering Memorandum,
as of a date not more than three business days prior to the date of the
Bring-Down Letter), that the conclusions and findings of such accountants with
respect to the financial information and other matters covered by the Initial
Letter are accurate and (iii) confirming in all material respects the
conclusions and findings set forth in the Initial Letter.
(h) Each of the Issuers shall have furnished to the Initial
Purchasers a certificate, dated the Closing Date, of its chief executive officer
and its chief financial officer stating that (A) such officers have carefully
examined the Offering Memorandum, (B) in their opinion, the Offering Memorandum,
as of its date, did not include any untrue statement of a material fact and did
not omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and since the date of the Offering
Memorandum, no event has occurred which should have been set forth in a
supplement or amendment to the Offering Memorandum so that the Offering
Memorandum (as so amended or supplemented) would not include any untrue
statement of a material fact and would not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, (C) as of the Closing Date, the representations and warranties of
each of the Issuers in this Agreement are true and correct in all material
respects, each of the Issuers has complied in all material respects with all
agreements and satisfied in all material respects all conditions on its part to
be performed or satisfied hereunder on or prior to the Closing Date, and (D)
subsequent to the date of the most recent financial statements contained in the
Offering Memorandum, there has been no material adverse change in the financial
position or results of operation of either of the Issuers or any of their
respective subsidiaries, or any change, or any development including a
prospective change, in or affecting the condition (financial or otherwise),
results of operations, business or prospects of the Issuers and their respective
subsidiaries taken as a whole.
(i) The Initial Purchasers shall have received a counterpart of each
of the Registration Rights Agreements which shall have been executed and
delivered by a duly authorized officer of the Issuers, as applicable.
(j) The Senior Subordinated Notes Indenture shall have been duly
executed and delivered by the Company, Holdings and the Senior Subordinated
Notes Trustee, and the Senior Subordinated Notes shall have been duly executed
and delivered by the Company and duly authenticated by the Senior Subordinated
Notes Trustee. The Senior Discount Notes Indenture shall have been duly executed
and delivered by Holdings and the Senior Discount Notes Trustee, and the Senior
Discount Notes shall have been duly executed and delivered by Holdings and duly
authenticated by the Senior Discount Notes Trustee.
17
(k) The Securities shall have been approved by the NASD for trading
in the PORTAL Market.
(l) If any event shall have occurred that requires the Issuers under
Section 4(d) to prepare an amendment or supplement to the Offering Memorandum,
such amendment or supplement shall have been prepared, the Initial Purchasers
shall have been given a reasonable opportunity to comment thereon, and copies
thereof shall have been delivered to the Initial Purchasers reasonably in
advance of the Closing Date.
(m) There shall not have occurred any invalidation of Rule 144A
under the Securities Act by any court or any withdrawal or proposed withdrawal
of any rule or regulation under the Securities Act or the Exchange Act by the
Commission or any amendment or proposed amendment thereof by the Commission
which in the judgment of the Initial Purchasers would materially impair the
ability of the Initial Purchasers to purchase, hold or effect resales of the
Securities as contemplated hereby.
(n) Subsequent to the execution and delivery of this Agreement or,
if earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there shall not
have been any change in the capital stock or long-term debt or any change, or
any development involving a prospective change, in or affecting the condition
(financial or otherwise), results of operations, business or prospects of the
Issuers and their respective subsidiaries taken as a whole, the effect of which,
in any such case described above, is, in the judgment of the Initial Purchasers,
so material and adverse as to make it impracticable or inadvisable to proceed
with the sale or delivery of the Securities on the terms and in the manner
contemplated by this Agreement and the Offering Memorandum (exclusive of any
amendment or supplement thereto).
(o) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
or body which would, as of the Closing Date, prevent the issuance or sale of the
Securities; and no injunction, restraining order or order of any other nature by
any federal or state court of competent jurisdiction shall have been issued as
of the Closing Date which would prevent the issuance or sale of the Securities.
(p) Subsequent to the execution and delivery of this Agreement (i)
no downgrading shall have occurred in the rating accorded the Securities or any
of the Issuers' other debt securities or preferred stock by any "nationally
recognized statistical rating organization", as such term is defined by the
Commission for purposes of Rule 436(g)(2) of the rules and regulations of the
Commission under the Securities Act and (ii) no such organization shall have
publicly announced that it has under surveillance or review (other than an
announcement with positive implications of a possible upgrading), its rating of
the Securities or any of the Issuers' other debt securities or preferred stock.
(q) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
over-the-counter market shall have been suspended or limited, or minimum prices
shall have been established on any such exchange or market by the Commission, by
any such exchange or by any other regulatory body or governmental authority
having jurisdiction, or trading in any securities of either of the Issuers on
any exchange or in the over-the-counter
18
market shall have been suspended or (ii) any moratorium on commercial banking
activities shall have been declared by federal or New York state authorities or
(iii) an outbreak or escalation of hostilities or a declaration by the United
States of a national emergency or war or (iv) a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States shall be
such) the effect of which, in the case of this clause (iv), is, in the judgment
of the Initial Purchasers, so material and adverse as to make it impracticable
or inadvisable to proceed with the sale or the delivery of the Securities on the
terms and in the manner contemplated by this Agreement and in the Offering
Memorandum (exclusive of any amendment or supplement thereto).
(r) All conditions to the consummation of the Recapitalization
(including, without limitation, the execution of the Credit Agreement and the
Receivables Agreements), other than the offering of the Securities, shall have
been satisfied and the Recapitalization shall be consummated substantially
concurrently with the sale of the Securities hereunder. The initial funding
under the Credit Agreement and the Receivables Agreements shall occur
substantially concurrently with the sale of the Securities hereunder and all
conditions thereto shall have been satisfied.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.
6. Termination. The obligations of the Initial Purchasers hereunder
may be terminated by the Initial Purchasers, in their absolute discretion, by
notice given to and received by the Issuers prior to delivery of and payment for
the Securities if, prior to that time, any of the events described in Section
5(m), (n), (o), (p) or (q) shall have occurred and be continuing.
7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any
Initial Purchaser defaults in the performance of its obligations under this
Agreement, the non-defaulting Initial Purchasers may make arrangements for the
purchase of the Securities which such defaulting Initial Purchaser agreed but
failed to purchase by other persons satisfactory to the Issuers and the
non-defaulting Initial Purchasers, but if no such arrangements are made within
36 hours after such default, this Agreement shall terminate without liability on
the part of the non-defaulting Initial Purchasers or the Issuers, except that
the Issuers will continue to be liable for the payment of expenses to the extent
set forth in Section 12 and except that the provisions of Sections 9 and 10
shall not terminate and shall remain in effect. As used in this Agreement, the
term "Initial Purchasers" includes, for all purposes of this Agreement unless
the context otherwise requires, any party not listed in Schedule 1 hereto that,
pursuant to this Section 7, purchases Securities which a defaulting Initial
Purchaser agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting Initial
Purchaser of any liability it may have to the Issuers or any non-defaulting
Initial Purchaser for damages caused by its default. If other persons are
obligated or agree to purchase the Securities of a defaulting Initial Purchaser,
either the non-defaulting Initial Purchasers or the Issuers may postpone the
Closing Date for up to seven full business days in order to effect any changes
that in the opinion of counsel for the Issuers or counsel for the Initial
Purchasers may be necessary in the Offering Memorandum or in any other document
or
19
arrangement, and the Issuers agree to promptly prepare any amendment or
supplement to the Offering Memorandum that effects any such changes.
8. Reimbursement of Initial Purchasers' Expenses. If this Agreement
shall have been terminated pursuant to Section 7 or as a result of the
occurrence of any event described in Sections 5(m) or 5(q), the Issuers shall
not be under any liability to pay the expenses of the Initial Purchasers, except
as provided in Sections 9, 10 and 12. If the sale of the Securities is not
consummated for any other reason, the Issuers shall jointly and severally
reimburse the Initial Purchasers for such out-of-pocket expenses (including
reasonable fees and disbursements of counsel) as shall have been reasonably
incurred by the Initial Purchasers in connection with this Agreement and the
proposed purchase and resale of the Securities. If this Agreement is terminated
pursuant to Section 7 by reason of the default of one or more of the Initial
Purchasers, the Issuers shall not be obligated to reimburse any Initial
Purchaser on account of such expenses.
9. Indemnification. (a) Each of the Issuers shall jointly and
severally indemnify and hold harmless each Initial Purchaser, its affiliates,
their respective officers, directors, employees, representatives and agents, and
each person, if any, who controls any Initial Purchaser within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 9(a) and Section 10 as an Initial Purchaser), from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, without limitation, any loss, claim, damage, liability or
action relating to purchases and sales of the Securities), to which that Initial
Purchaser may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or supplement
thereto or in any information provided by the Issuers pursuant to Section 4(e)
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Initial Purchaser promptly upon demand for
any legal or other expenses reasonably incurred by that Initial Purchaser in
connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that neither of the Issuers shall be liable in any such case to the extent that
any such loss, claim, damage, liability or action arises out of, or is based
upon, an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with any
Initial Purchasers' Information; and provided, further, that with respect to any
such untrue statement in or omission from the Preliminary Offering Memorandum,
the indemnity agreement contained in this Section 9(a) shall not inure to the
benefit of any such Initial Purchaser to the extent that the sale to the person
asserting any such loss, claim, damage, liability or action was an initial
resale by such Initial Purchaser and any such loss, claim, damage, liability or
action of or with respect to such Initial Purchaser results from the fact that
both (A) to the extent required by applicable law, a copy of the Offering
Memorandum was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities to such person and (B) the untrue
statement in or omission from the Preliminary Offering Memorandum was corrected
in the Offering
20
Memorandum unless, in either case, such failure to deliver the Offering
Memorandum was a result of non-compliance by either of the Issuers with Section
4(b).
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless each of the Issuers, its affiliates, their
respective officers, directors, employees, representatives and agents, and each
person, if any, who controls either of the Issuers within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 9(b) and Section 10 as the Issuers), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Issuers may become subject, whether commenced or threatened, under
the Securities Act, the Exchange Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum or in any amendment or supplement
thereto or (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with any Initial Purchasers' Information, and shall
reimburse the Issuers for any legal or other expenses reasonably incurred by the
Issuers in connection with investigating or defending or preparing to defend
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 9 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 9. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential
21
conflict exists (based upon advice of counsel to the indemnified party) between
the indemnified party and the indemnifying party (in which case the indemnifying
party will not have the right to direct the defense of such action on behalf of
the indemnified party) or (4) the indemnifying party has not in fact employed
counsel reasonably satisfactory to the indemnified party to assume the defense
of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm of attorneys (in addition to any
local counsel) at any one time for all such indemnified party or parties. Each
indemnified party, as a condition of the indemnity agreements contained in
Sections 9(a) and 9(b), shall use all reasonable efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No indemnifying
party shall be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
The obligations of each of the Issuers and the Initial Purchasers in
this Section 9 and in Section 10 are in addition to any other liability that
either of the Issuers or the Initial Purchasers, as the case may be, may
otherwise have, including in respect of any breaches of representations,
warranties and agreements made herein by any such party.
10. Contribution. If the indemnification provided for in Section 9
is unavailable or insufficient to hold harmless an indemnified party under
Section 9(a) or 9(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Issuers on the one hand and the
Initial Purchasers on the other from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuers on
the one hand and the Initial Purchasers on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Issuers on the one hand
and the Initial Purchasers on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities purchased under this Agreement (before deducting expenses)
received by or on behalf of the Issuers, on the one hand, and the total
discounts and commissions received by the Initial Purchasers with respect to the
Securities purchased under this
22
Agreement, on the other, bear to the total gross proceeds from the sale of the
Securities under this Agreement, in each case as set forth in the table on the
cover page of the Offering Memorandum. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to the Issuers or information supplied by Issuers on the one hand or to
any Initial Purchasers' Information on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. Each of the Issuers and the Initial
Purchasers agree that it would not be just and equitable if contributions
pursuant to this Section 10 were to be determined by pro rata allocation (even
if the Initial Purchasers were treated as one entity for such purpose) or by any
other method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 10 shall be deemed to include, for
purposes of this Section 10, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending or
preparing to defend any such action or claim. Notwithstanding the provisions of
this Section 10, no Initial Purchaser shall be required to contribute any amount
in excess of the amount by which the total discounts and commissions received by
such Initial Purchaser with respect to the Securities purchased by it under this
Agreement exceeds the amount of any damages which such Initial Purchaser has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
as provided in this Section 10 are several in proportion to their respective
purchase obligations and not joint.
11. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Issuers
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except as provided in
Sections 9 and 10 with respect to affiliates, officers, directors, employees,
representatives, agents and controlling persons of the Issuers and the Initial
Purchasers and in Section 4(e) with respect to holders and prospective
purchasers of the Securities. Nothing in this Agreement is intended or shall be
construed to give any person, other than the persons referred to in this Section
11, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.
12. Expenses. The Issuers jointly and severally agree with the
Initial Purchasers to pay (a) the costs incident to the authorization, issuance,
sale, preparation and delivery of the Securities and any taxes payable in that
connection; (b) the costs incident to the preparation, printing and distribution
of the Preliminary Offering Memorandum, the Offering Memorandum and any
amendments or supplements thereto; (c) the costs of reproducing and distributing
each of the Transaction Documents; (d) the costs incident to the preparation,
printing and delivery of the certificates evidencing the Securities, including
stamp duties and transfer taxes, stock exchange taxes, value added taxes,
withholding taxes or similar duties or taxes, if any, payable upon
authorization, issuance, sale or delivery of the Securities; (e) the fees and
expenses of the Issuers' counsel and independent accountants; (f) the fees and
expenses of qualifying the Securities under the securities laws of the several
jurisdictions as provided in Section 4(g) and of preparing, printing and
distributing Blue Sky Memoranda (including related
23
fees and expenses of counsel for the Initial Purchasers); (g) any fees charged
by rating agencies for rating the Securities; (h) the fees and expenses of the
Trustees and any paying agents (including related fees and expenses of any
counsel to such parties); (i) all expenses and application fees incurred in
connection with the application for the inclusion of the Securities on the
PORTAL Market and the approval of the Securities for book-entry transfer through
DTC, Euroclear and Cedel and any listing of the Securities on any securities
exchange; and (j) all other costs and expenses incident to the performance of
the obligations of the Issuers under this Agreement which are not otherwise
specifically provided for in this Section 12; provided, however, that except as
provided in this Section 12 and Section 8, the Initial Purchasers shall pay
their own costs and expenses.
13. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of each of the Issuers and the
Initial Purchasers contained in this Agreement or made by or on behalf of each
of the Issuers or the Initial Purchasers pursuant to this Agreement or any
certificate delivered pursuant hereto shall survive the delivery of and payment
for the Securities and shall remain in full force and effect, regardless of any
termination or cancelation of this Agreement or any investigation made by or on
behalf of any of them or any of their respective affiliates, officers,
directors, employees, representatives, agents or controlling persons.
14. Notices, etc.. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by mail
or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New York,
New York 10017, Attention: Mr. James P. Casey (telecopier no.: (212) 270-0994);
or
(b) if to the Issuers, shall be delivered or sent by mail or
telecopy transmission to the address of the Issuers set forth in the Offering
Memorandum, Attention: Mr. Jeffrey B. Kramp (telecopier no.:412-454-2515);
provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall
also be delivered or sent by mail to such Initial Purchaser at its address set
forth on the signature page hereof. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Issuers shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the Initial Purchasers by CSI.
15. Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
16. Initial Purchasers' Information. The parties hereto acknowledge
and agree that, for all purposes of this Agreement, the Initial Purchasers'
Information consists solely of the following information in the Preliminary
Offering Memorandum and the Offering Memorandum: (i) the last paragraph on the
front cover page concerning the terms of the offering by the Initial Purchasers;
(ii) the legend on page "i" concerning over-allotment and trading activities by
the Initial Purchasers; (iii) the statements concerning CSI contained in the
paragraph under the heading "Certain Relationships and
24
Related Transactions--Certain Relationships With Chase"; and (iv) the statements
concerning the Initial Purchasers contained in the third, twelfth, thirteenth
and fourteenth paragraphs under the heading "Plan of Distribution".
17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
18. Counterparts. This Agreement may be executed in one or more
counterparts (which may include counterparts delivered by telecopier) and, if
executed in more than one counterpart, the executed counterparts shall each be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
19. Amendments. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.
20. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among each of the Issuers and the
several Initial Purchasers in accordance with its terms.
Very truly yours,
WESCO DISTRIBUTION, INC.
By /s/ [ILLEGIBLE]
------------------
Name:
Title:
WESCO INTERNATIONAL, INC.
By /s/ [ILLEGIBLE]
------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
By
--------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
LEHMAN BROTHERS INC.
By
--------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
Three World Financial Center
New York, New York 10285
Attention:
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among each of the Issuers and the
several Initial Purchasers in accordance with its terms.
Very truly yours,
WESCO DISTRIBUTION, INC.
By
------------------
Name:
Title:
WESCO INTERNATIONAL, INC.
By
------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
By /s/ [ILLEGIBLE]
--------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
LEHMAN BROTHERS INC.
By
--------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
Three World Financial Center
New York, New York 10285
Attention:
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among each of the Issuers and the
several Initial Purchasers in accordance with its terms.
Very truly yours,
WESCO DISTRIBUTION, INC.
By
------------------
Name:
Title:
WESCO INTERNATIONAL, INC.
By
------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
By
--------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
1 Chase Plaza, 25th floor
New York, New York 10081
Attention: Legal Department
LEHMAN BROTHERS INC.
By /s/ [ILLEGIBLE]
--------------------------
Authorized Signatory
Address for notices pursuant to Section 9(c):
Three World Financial Center
New York, New York 10285
Attention:
SCHEDULE 1
- - - - --------------------------------------------------------------------------------
Principal Amount of Principal Amount
Senior at Maturity of Senior
Initial Purchasers Subordinated Notes Discount Notes
- - - - --------------------------------------------------------------------------------
Chase Securities Inc. $165,000,000 $47,850,000
- - - - --------------------------------------------------------------------------------
Lehman Brothers Inc. $135,000,000 $39,150,000
- - - - --------------------------------------------------------------------------------
Total $300,000,000 $87,000,000
- - - - --------------------------------------------------------------------------------
CERTIFICATE OF INCORPORATION
OF
CDW HOLDING CORPORATION
FIRST: The name of the Corporation is CDW HOLDING CORPORATION;
SECOND: The Corporation's registered office in the State of Delaware
is at Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business of the Corporation and its purpose
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 10,000,000 shares, consisting of
5,000,000 shares of Class A Common Stock, par value $.01 per share (herein
called "Class A Common Stock"), 5,000,000 shares of Class B Common Stock, par
value $.01 per share (herein called "Class B Common Stock").
(a) Rights and Privileges of the Common Stock
As used herein, the term "Common Stock" shall include the Class A
Common Stock and the Class B Common Stock. Except as otherwise provided herein,
all shares of Class A Common Stock and Class B Common Stock will be identical
and will entitle the holders thereof to the same rights and privileges.
1. VOTING RIGHTS.
Except as otherwise required by law or as otherwise provided herein,
on all matters submitted to the Corporation's stockholders, (i) the holders of
Class A Common Stock will be entitled to one vote per share and (ii) the holders
of Class B Common Stock will have no right to vote.
2. DIVIDENDS.
When and as dividends are declared thereon, whether payable in cash,
property or securities of the Corporation, the holders of Class A Common Stock
and the holders of Class B Common Stock will be entitled to share equally, share
for share, in such dividends, provided that if dividends are declared which are
payable in shares of Class A Common Stock or Class B Common Stock, dividends
will be declared which are payable at the same rate on each class of stock, and
the dividends payable in shares of Class A Common Stock will be payable to
holders of Class A Common Stock, and the dividends payable in shares of Class B
Common Stock will be payable to holders of Class B Common Stock.
3. CONVERSION AND EXCHANGE.
3A. Conversion of Class B Common Stock. Each record holder of Class
B Common Stock is entitled to convert any or all of the shares of such holder's
Class B Common Stock into the same number of shares of Class A Common Stock,
provided that no holder of Class B Common Stock is entitled to convert any share
or shares of Class B Common Stock to the extent that, as a result of such
conversion, such holder or its Affiliates would directly or indirectly own,
control or have power to vote a greater quantity of securities of any kind
issued by the Corporation than such holder and its Affiliates are permitted to
own, control or have power to vote under any law, regulation, order, rule or
other requirement of any governmental authority at any time applicable to such
holder and its Affiliates.
3B. Exchange of Class A Common Stock. Each record holder of Class
A Common Stock is entitled to exchange any or all of the shares of such holder's
Class A Common Stock for the same number of shares of Class B Common Stock,
provided that no holder of Class A Common Stock is entitled to exchange any
share or shares of Class A Common Stock unless such holder or its Affiliates
would directly or indirectly own, control or have power to vote a greater
quantity of securities of any kind issued by the Corporation than such holder
and its Affiliates are permitted to own, control or have power to vote under any
law, regulation, order, rule or other requirement of any governmental authority
at any time applicable to such holder and its Affiliates if such shares were not
exchanged.
2
3C. Certain Conversion and Exchange Procedures. (i) Each
conversion of shares of Class B Common Stock into shares of Class A Common Stock
and each exchange of shares of Class A Common Stock for shares of Class B Common
Stock will be effected by the surrender of the certificate or certificates
representing the shares to be converted or exchanged, as the case may be, at the
principal office of the Corporation or the transfer agent designated by the
Corporation, if any, at any time during normal business hours, together with a
written notice by the holder of such shares stating either (A) the number of
shares of Class B Common Stock that such holder desires to convert into Class A
Common Stock and that upon such conversion such holder, together with its
Affiliates, will not directly or indirectly own, control or have the power to
vote a greater quantity of securities of any kind issued by the Corporation than
such holder and its Affiliates are permitted to own, control or have the power
to vote under any applicable law, regulation, order, rule or other governmental
requirement (and such statement will obligate the Corporation to issue such
Class A Common Stock), or (B) the number of shares of Class A Common Stock that
such holder desires to exchange for Class B Common Stock and that such exchange
is required in order for such holder and its Affiliates to comply with
applicable laws, regulations, orders, rules or other governmental requirements
as contemplated by paragraph 3B (and such statement will obligate the
Corporation to issue such Class B Common Stock). Such conversion or exchange
will be deemed to have been effected as of the close of business on the date on
which such certificate or certificates have been surrendered and such notice has
been received, and at such time the rights of any such holder with respect to
the converted Class B Common Stock or exchanged Class A Common Stock, as the
case may be, will cease and the person or persons in whose name or names the
certificate or certificates for shares of Class A Common Stock or Class B Common
Stock, as the case may be, are to be issued upon such conversion or exchange
will be deemed to have become the holder or holders of record of the shares of
Class A Common Stock or Class B Common Stock, as the case may be, represented
thereby.
(ii) Promptly after such surrender and the receipt of the written
notice referred to in subparagraph (i) above, the Corporation will issue and
deliver in accordance with the surrendering holder's instructions the
certificate or certificates for the Class A Common Stock or Class B Common
Stock, as the case may be, issuable upon such conversion or
3
exchange and a certificate representing any Class A Common Stock or Class B
Common Stock, as the case may be, which was represented by the certificate or
certificates delivered to the Corporation in connection with such conversion or
exchange but which was not converted or exchanged. The Corporation shall be
entitled to rely upon any written notice delivered pursuant to subparagraph (i)
above and such notice shall, in the absence of fraud, be binding and conclusive
upon the Corporation.
4. MISCELLANEOUS PROVISIONS APPLICABLE TO COMMON STOCK.
4A. Transfers. The Corporation will not close its books against
the transfer of Class B Common Stock or Class A Common Stock in any manner that
would interfere with the timely conversion of Class B Common Stock or exchange
of Class A Common Stock.
4B. Subdivisions and Combinations of Shares. If the Corporation in
any manner subdivides or combines the outstanding shares of one class of Common
Stock, the outstanding shares of the other class of Common Stock will be
proportionately subdivided or combined.
4C. Issuance Costs. The issuance of certificates for Class A
Common Stock upon conversion of Class B Common Stock or for Class B Common Stock
upon exchange for Class A Common Stock will be made without charge to the holder
or holders of such shares for any issuance tax (except stock transfer taxes) in
respect thereof or other cost incurred by the Corporation in connection with
such conversion or exchange and the related issuance of Class A Common Stock or
Class B Common Stock, as the case may be.
5. DEFINITIONS.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person, provided that, for purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. Notwithstanding any
other provision herein, the
4
Board of Directors shall in its good faith determine whether any party shall be
deemed an "Affiliate" of any Person for purposes of this Certificate of
Incorporation and such determination shall be binding and conclusive upon the
Corporation.
"Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
FIFTH: The name and mailing address of the incorporator is as
follows:
Euphemia B. Warren
c/o Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
SIXTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation and for the
purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stockholders:
(a) The number of directors of the Corporation shall be fixed and
may be altered from time to time in the manner provided in the By-Laws,
and vacancies in the Board of Directors and newly created directorships
resulting from any increase in the authorized number of directors may be
filled, and directors may be removed, as provided in the By-Laws.
(b) The election of directors may be conducted in any manner
approved by the stockholders at the time when the election is held and
need not be by ballot.
(c) All corporate powers and authority of the Corporation (except as
at the time otherwise provided by law, by this Certificate of
Incorporation or by the By-Laws) shall be vested in and exercised by the
Board of Directors.
(d) No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of his or
her fiduciary duty as a director, provided that nothing contained in
5
this Certificate of Incorporation shall eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
the law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit.
(e) The Board of Directors shall have the power without the assent
or vote of the stockholders to adopt, amend, alter or repeal the By-Laws
of the Corporation, except to the extent that the By-Laws or this
Certificate of Incorporation otherwise provide.
SEVENTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by the law of the State of Delaware, and all rights herein
conferred upon stockholders or directors are granted subject to this
reservation.
IN WITNESS WHEREOF, I, the undersigned, being the incorporator
hereinabove named, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Delaware, do make and file this
Certificate of Incorporation, hereby declaring and certifying that the facts
herein stated are true, and accordingly have hereunto set my hand this 17th day
of September, 1993.
/s/ Euphemia B. Warren
------------------------------
Euphemia B. Warren
6
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on the 17th day of September, 1993,
personally appeared before me, Peter Demos , a notary public for the State of
New York, Eupheinia B. Warren, the party to the foregoing Certificate of
Incorporation, known to me personally to be such, and acknowledged said
Certificate of Incorporation to be their act and deed and that the facts therein
stated are true.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Peter Demos
--------------------------------------------
Notary Public
PETER DEMOS
Notary Public. State of New York [SEAL]
No. 4985115
Qualified In Orange County
My Commission Expires June 24, 1995
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CDW HOLDING CORPORATION
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
CDW Holding Corporation (the "Corporation"), a corporation organized under
the General Corporation Law of the State of Delaware (the "General Corporation
Law") hereby certifies as follows:
FIRST: That the Board of Directors of the Corporation, by written consent
in lieu of a meeting of its members in accordance with Section 141 (f) of the
General Corporation Law, duly adopted a resolution setting forth the following
proposed amendment to the Certificate of Incorporation of the Corporation and
declaring such amendment to be advisable:
1. Article FIRST of the Certificate of Incorporation of the
Corporation is hereby amended and restated in its entirety to read as
follows:
"First: The name of the Corporation is WESCO International,
Inc."
SECOND: That in lieu of a meeting and vote of the stockholders of
the Corporation, the stockholders have by written consent, dated May 28, 1998,
approved the adoption of the foregoing amendment in accordance with the
provision of Section 228 of the General Corporation Law, and that such consent
has been filed with the minutes of the proceedings of the stockholders of the
Corporation.
THIRD: That the foregoing amendment of the Certificate of
Incorporation was duly adopted pursuant to the applicable provisions of Sections
141, 228 and 242 of the General Corporation Law.
IN WITNESS WHEREOF, the undersigned, being the duly authorized
President of the Corporation, for the purpose of amending the Certificate of
Incorporation of the Corporation pursuant to Section 242 of the General
Corporation Law of the State of Delaware, does make and file this Certificate,
hereby declaring and certifying that the facts herein stated are true, and
accordingly has hereunto set his hand, this 28th day of May, 1998.
/s/ Roy W. Haley
--------------------------------------------
Roy W. Haley
President
Certificate of Amendment of the
Certificate of Incorporation of CDW Holding Corporation
Under Section 242 of the
Delaware General Corporation Law
CDW HOLDING CORPORATION, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies that:
1. The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of Delaware on September 17, 1993.
2. The Certificate of Incorporation of the Corporation is hereby
amended, as authorized by Section 242 of the General Corporation Law of the
State of Delaware, to reduce the total number of shares of all classes of stock
that the Corporation shall have authority to issue.
3. To effect such amendment, Article FOURTH of the Certificate of
Incorporation of the Corporation is hereby amended to read as follows:
"FOURTH: The total number of shares of all classes of stock
that the Corporation shall have authority to issue is 4,000,000
shares, consisting of 2,000,000 shares of Class A Common Stock, par
value $.0l per share (herein called "Class A Common Stock"), and
2,000,000 shares of Class B Common Stock, par value $.0l per share
(herein called "Class B Common Stock")."
4. The foregoing amendment of the Certificate of Incorporation of
the Corporation has been duly adopted in accordance with Sections 228 and 242 of
the General Corporation Law of the State of Delaware, by vote of the majority of
the Board of Directors and by written consent of the majority stockholder of the
Corporation. Written notice of the authorization of the foregoing amendment by
the majority stockholder has been given to all stockholders of the Corporation,
as provided in Section 228 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to
be executed by Roy W. Haley, its President, and attested by Jeffrey B. Kramp,
its Corporate Secretary, this 11th day of August, 1995.
/s/ Roy W. Haley
-----------------------------------
Roy W. Haley, President
Attest:
/s/ Jeffrey B. Kramp
- - - - ---------------------------------------
Jeffrey B. Kramp, Corporate Secretary
CERTIFICATE OF INCORPORATION
OF
CDW ACQUISITION CORPORATION
FIRST: The name of the Corporation is CDW Acquisition Corporation.
SECOND: The Corporation's registered office in the State of Delaware
is at Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business of the Corporation and its purpose
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 1,000 shares of Common Stock, par value $.01
per share.
FIFTH: The name and mailing address of the incorporator is as
follows:
Euphemia B. Warren
c/o Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
SIXTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation and for the
purpose of creating, defining, limiting and regulating the powers of the
Corporation and its directors and stockholders:
(a) The number of directors of the Corporation shall be fixed and
may be altered from time to time in the manner provided in the By-Laws,
and vacancies in the Board of Directors and newly created directorships
resulting from any increase in the authorized number of directors may be
filled, and directors may be removed, as provided in the By-Laws.
(b) The election of directors may be conducted in any manner
approved by the stockholders at the time when the election is held and
need not be by ballot.
(c) All corporate powers and authority of the Corporation (except
as at the time otherwise provided by law, by this Certificate of
Incorporation or by the By-Laws) shall be vested in and exercised by the
Board of Directors.
(d) The Board of Directors shall have the power without the assent
or vote of the stockholders to adopt, amend, alter or repeal the By-Laws
of the Corporation, except to the extent that the By-Laws or this
Certificate of Incorporation otherwise provide.
(e) No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of his or
her fiduciary duty as a director, provided that nothing contained in this
Certificate of Incorporation shall eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
the law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit.
SEVENTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by the laws of the State of Delaware, and all rights herein
conferred upon stockholders or directors are granted subject to this
reservation.
IN WITNESS WHEREOF, I, the undersigned, being the incorporator
hereinabove named, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Delaware, do make and file this
Certificate, hereby declaring and certifying that the facts herein stated are
true, and accordingly have hereunto set my hand this 16th day of August, 1993.
/s/ Euphemia B. Warren
------------------------------
Euphemia B. Warren
2
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on the 16th day of August, 1993 personally
appeared before me, JULIE A. FERGANG a notary public for the State of New York,
Euphemia B. Warren, the party to the foregoing Certificate of Incorporation,
known to me personally to be such, and acknowledged the said Certificate to be
her act and deed and that the facts therein stated are true.
GIVEN under my hand and seal of office the day and year aforesaid.
[NOTARY SEAL]
/s/ Julie A. Fergang
--------------------------
Notary Public
Julie A. Fergang
Notary Public, State of New York
No. 31-8002308
Qualified in New York County
Commission Expires Sep. 28, 1994
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CDW ACQUISITION CORPORATION
Under Section 242 of the
Delaware General Corporation Law
CDW Acquisition Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation") hereby certifies
that:
1. The Certificate of Incorporation of the Corporation was filed
with the Secretary of State of the State of Delaware on August 17, 1993.
2. The Certificate of Incorporation of the Corporation is hereby
amended, as authorized by Section 242 of the Delaware General Corporation Law,
to change the name of the Corporation to "WESCO Distribution, Inc."
3. To effect such amendment, Article FIRST of the Certificate of
Incorporation of the Corporation is hereby amended to read as follows:
"FIRST: The name of the Corporation is WESCO Distribution, Inc."
4. The foregoing amendment of the Certificate of Incorporation of
the Corporation has been duly adopted in accordance with Sections 228 and 242 of
the Delaware General Corporation Law, by unanimous written consent of the Board
of Directors and of the Sole Stockholder of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this certificate to
be executed by Alexander F. Brigham, its Vice President, and attested by William
A. Barbe, its Vice President and Secretary, this 28th day of February, 1994.
/s/ Alexander F. Brigham
------------------------------
Alexander F. Brigham
Vice President
Attest:
/s/ William A. Barbe
- - - - --------------------------
William A. Barbe
Vice President and Secretary
2
================================================================================
WESCO Distribution, Inc.
By-Laws
As amended and restated on February 28, 1994
================================================================================
WESCO Distribution, Inc.
BY-LAWS
TABLE OF CONTENTS
SECTION PAGE
----
ARTICLE I SHAREHOLDERS
1.01 Annual Meetings ............................................... 1
1.02 Special Meetings .............................................. 1
1.03 Notice of Meetings; Waiver .................................... 1
1.04 Quorum ........................................................ 2
1.05 Voting ........................................................ 2
1.06 Voting by Ballot .............................................. 3
1.07 Adjournment ................................................... 3
1.08 Proxies ....................................................... 3
1.09 Organization Procedure ........................................ 4
1.10 Consent of Stockholders in Lieu of Meeting .................... 4
ARTICLE II BOARD OF DIRECTORS
2.01 General Powers ................................................ 5
2.02 Number and Term of Office ..................................... 5
2.03 Election of Directors ......................................... 6
2.04 Annual and Regular Meetings ................................... 6
2.05 Special Meetings; Notice ...................................... 7
2.06 Quorum; Voting ................................................ 7
2.07 Adjournment ................................................... 7
2.08 Action Without a Meeting ...................................... 7
2.09 Regulations; Manner of Acting ................................. 8
2.10 Action by Telephonic Communications ........................... 8
2.11 Resignations .................................................. 8
2.12 Removal of Directors .......................................... 8
2.13 Vacancies and Newly Created Directorships ..................... 8
2.14 Compensation .................................................. 9
2.15 Reliance on Accounts and Reports, etc. ........................ 10
ARTICLE III EXECUTIVE COMMITTEE AND OTHER
COMMITTEES
3.01 How Constituted ............................................... 10
3.02 Powers ........................................................ 10
3.03 Proceedings ................................................... 12
3.04 Quorum and Manner of Acting ................................... 12
i
SECTION PAGE
----
3.05 Action by Telephonic Communications................................. 12
3.06 Absent or Disqualified Members...................................... 13
3.07 Resignations........................................................ 13
3.08 Removal............................................................. 13
3.09 Vacancies........................................................... 13
ARTICLE IV OFFICERS
4.01 Number.............................................................. 13
4.02 Election............................................................ 13
4.03 Salaries............................................................ 14
4.04 Removal and Resignation; Vacancies.................................. 14
4.05 Authority and Duties of Officers.................................... 14
4.06 The President....................................................... 14
4.07 The Vice Presidents................................................. 15
4.08 The Secretary....................................................... 15
4.09 The Treasurer....................................................... 16
4.10 Additional Officers................................................. 17
4.11 Security............................................................ 17
ARTICLE V CAPITAL STOCK
5.01 Certificates of Stock............................................... 18
5.02 Signatures; Facsimile............................................... 18
5.03 Lost, Stolen or Destroyed Certificates.............................. 18
5.04 Transfer of Stock................................................... 19
5.05 Record Date......................................................... 19
5.06 Registered Stockholders............................................. 20
5.07 Transfer Agent and Registrar........................................ 21
ARTICLE VI INDEMNIFICATION
6.01 Nature of Indemnity................................................. 21
6.02 Successful Defense.................................................. 22
6.03 Determination That Indemnification Is Proper........................ 22
6.04 Advance Payment of Expenses......................................... 23
6.05 Procedure for Indemnification of Directors and Officers............. 23
6.06 Survival; Preservation of Other Rights.............................. 24
6.07 Insurance........................................................... 24
6.08 Severability........................................................ 25
ii
SECTION PAGE
----
ARTICLE VII OFFICES
7.01 Registered Office .............................................. 25
7.02 Other Offices .................................................. 25
ARTICLE VIII GENERAL PROVISIONS
8.01 Dividends ...................................................... 25
8.02 Reserves ....................................................... 26
8.03 Execution of Instruments ....................................... 26
8.04 Corporate Indebtedness ......................................... 26
8.05 Deposits ....................................................... 27
8.06 Checks ......................................................... 27
8.07 Sale, Transfer, etc. of Securities ............................. 27
8.08 Voting as Stockholder .......................................... 27
8.09 Fiscal Year .................................................... 28
8.10 Seal ........................................................... 28
8.11 Books and Records; Inspection .................................. 28
ARTICLE IX AMENDMENT OF BY-LAWS
9.01 Amendment ...................................................... 28
ARTICLE X CONSTRUCTION
10.0l Construction ................................................... 29
iii
WESCO Distribution, Inc.
BY-LAWS
As amended and restated on February 28, 1994
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meetings. The annual meeting of the
stockholders of the Corporation for the election of directors and for the
transaction of such other business as properly may come before such meeting
shall be held at such place, either within or without the State of Delaware, and
at 10:00 a.m. local time on the first Tuesday in May (or, if such day is a
holiday, then on the next succeeding business day), or at such other date and
hour, as may be fixed from time to time by resolution of the Board of Directors
and set forth in the notice or waiver of notice of the meeting. [Sections
211(a), (b).](1)
Section 1.02. Special Meetings. Special meetings of the stockholders
may be called at any time by the President (or, in the event of his absence or
disability, by any Vice President), or by the Board of Directors. A special
meeting shall be called by the President (or, in the event of his absence or
disability, by any Vice President), or by the Secretary, immediately upon
receipt of a written request therefor by stockholders holding in the aggregate
not less than a majority of the outstanding shares of the Corporation at the
time entitled to vote at any meeting of the stockholders. If such officers or
the Board of Directors shall fail to call such meeting within 20 days after
receipt of such request, any stockholder executing such request may call such
meeting. Such special meetings of the stockholders shall be held at such places,
within or without the State of Delaware, as shall be specified in the respective
notices or waivers of notice thereof. [Section 211(d).]
Section 1.03. Notice of Meetings; Waiver. The Secretary or any
Assistant Secretary shall cause written notice of the place, date and hour of
each meeting of the stockholders, and, in the case of a special meeting, the
purpose or purposes for which such meeting is called, to be given personally or
by mail, not less than ten nor more than sixty days prior to the meeting, to
each stockholder of record entitled to vote at such meeting. If such notice is
mailed, it shall be deemed to have been given to a stockholder when deposited in
the United States mail, postage prepaid, directed to the stockholder at his
address
- - - - ----------
(1) Citations are to the General Corporation Law of the State of Delaware as
in effect on March 20, 1992 (the "GCL"), and are inserted for reference
only and do not constitute a part of the By-Laws.
as it appears on the record of stockholders of the Corporation, or, if he shall
have filed with the Secretary of the Corporation a written request that notices
to him be mailed to some other address, then directed to him at such other
address. Such further notice shall be given as may be required by law.
No notice of any meeting of stockholders need be given to any stockholder
who submits a signed waiver of notice, whether before or after the meeting.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the stockholders need be specified in a written waiver of
notice. The attendance of any stockholder at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened. [Sections 222, 229.]
Section 1.04. Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of a majority of the shares entitled to vote at a meeting of
stockholders shall constitute a quorum for the transaction of business at such
meeting. [Section 216.]
Section 1.05. Voting. If, pursuant to Section 5.05 of these By-Laws, a
record date has been fixed, every holder of record of shares entitled to vote at
a meeting of stockholders shall be entitled to one vote for each share
outstanding in his name on the books of the Corporation at the close of business
on such record date. If no record date has been fixed, then every holder of
record of shares entitled to vote at a meeting of stockholders shall be entitled
to one vote for each share of stock standing in his name on the books of the
Corporation at the close of business on the day next preceding the day on which
notice of the meeting is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. Except
as otherwise required by law or by the Certificate of Incorporation, the vote
of a majority of the shares represented in person or by proxy at any meeting at
which a quorum is present shall be sufficient for the transaction of any
business at such meeting. [Sections 212(a), 216.]
2
Section 1.06. Voting by Ballot. No vote of the stockholders need be
taken by written ballot or conducted by inspectors of Elections unless otherwise
required by law. Any vote which need not be taken by ballot may be conducted in
any manner approved by the meeting.
Section 1.07. Adjournment. If a quorum is not present at any meeting
of the stockholders, the stockholders present in person or by proxy shall have
the power to adjourn any such meeting from time to time until a quorum is
present. Notice of any adjourned meeting of the stockholders of the Corporation
need not be given if the place, date and hour thereof are announced at the
meeting at which the adjournment is taken, provided, however, that if the
adjournment is for more than thirty days, or if after the adjournment a new
record date for the adjourned meeting is fixed pursuant to Section 5.05 of these
By-Laws, a notice of the adjourned meeting, conforming to the requirements of
Section 1.03 hereof, shall be given to each stockholder of record entitled to
vote at such meeting. At any adjourned meeting at which a quorum is present, any
business may be transacted that might have been transacted on the original date
of the meeting. [Section 222(c).]
Section 1.08. Proxies. Any stockholder entitled to vote at any
meeting of the stockholders or to express consent to or dissent from corporate
action without a meeting may authorize another person or persons to vote at any
such meeting and express such consent or dissent for him by proxy. A stockholder
may authorize a valid proxy by executing a written instrument signed by such
stockholder, or by causing his or her signature to be affixed to such writing by
any reasonable means including, but not limited to, by facsimile signature, or
by transmitting or authorizing the transmission of a telegram, cablegram or
other means of electronic-transmission to the person designated as the holder of
the proxy, a proxy solicitation firm or a like authorized agent. No such proxy
shall be voted or acted upon after the expiration of three years from the date
of such proxy, unless such proxy provides for a longer period. Every proxy shall
be revocable at the pleasure of the stockholder executing it, except in those
cases where applicable law provides that a proxy shall be irrevocable. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by filing another duly executed proxy bearing a later date with the
Secretary. Proxies by telegram, cablegram or other electronic transmission must
3
either set forth or be submitted with information from which it can be
determined that the telegram, cablegram or other electronic transmission was
authorized by the stockholder. Any copy, facsimile telecommunication or other
reliable reproduction of a writing or transmission created pursuant to this
section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission. [Sections 212(b), (c).]
Section 1.09. Organization; Procedure. At every meeting of stockholders the
presiding officer shall be the President or, in the event of his absence or
disability, a presiding officer chosen by a majority of the stockholders present
in person or by proxy. The Secretary, or in the event of his absence or
disability, the Assistant Secretary, if any, or if there be no Assistant
Secretary, in the absence of the Secretary, an appointee of the presiding
officer, shall act as Secretary of the meeting. The order of business and all
other matters of procedure at every meeting of stockholders may be determined
by such presiding officer.
Section 1.10. Consent of Stockholders in Lieu of Meeting. To the fullest
extent permitted by law, whenever the vote of stockholders at a meeting thereof
is required or permitted to be taken for or in connection with any corporate
action, such action may be taken without a meeting, without prior notice and
without a vote of stockholders, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted and shall be delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
Every written consent shall bear the date of signature of each stockholder
or member who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered in the manner
4
required by law to the Corporation, written consents signed by a sufficient
number of holders or members to take action are delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. [Section 228.]
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers. Except as may otherwise be provided by
law, by the Certificate of Incorporation or by these By-Laws, the property,
affairs and business of the Corporation shall be managed by or under the
direction of the Board of Directors and the Board of Directors may exercise all
the powers of the Corporation. [Section 141(a).]
Section 2.02. Number and Term of Office. The number of Directors
constituting the entire Board of Directors shall be three, which number may be
modified from time to time by resolution of the Board of Directors, but in no
event shall the number of Directors be less than one; provided that the number
of Directors shall in any event be automatically increased or decreased in the
manner set forth below without any action on the part of the Board of Directors:
(1) If at any time any holder of the Corporation's Common Stock
issued and sold under the Stock Subscription, Stock Option and Shareholders
Agreement, dated as of February 28, 1994, between CDW Holding Corporation and
Westinghouse Electric Corporation ("Westinghouse"), entitled to the benefits of
Section 2 of the letter agreement, dated as of February 28, 1994 (the
"Governance Sideletter"), among the Corporation, The Clayton & Dubilier Private
Equity Fund IV Limited Partnership (the "C&D Fund") and Westinghouse delivers
notice to the Corporation that it is exercising the right granted therein to
nominate a person as Director of the Corporation, and such holder shall then be
entitled to exercise such right, then the number of Directors
5
constituting the entire Board of Directors shall automatically be increased by
one.
(2) If and to the extent permitted by applicable law, immediately upon any
termination of the aforesaid right of any holder of the Common Stock of the
Corporation referred to in the preceding paragraph to nominate a Director
(including any temporary termination attributable to the waiver for a specified
or unspecified period by such holder of its rights under such letter agreement),
the term of the office of the Director then in office so nominated shall
terminate and the number of Directors on the Board of Directors shall be
reduced correspondingly.
Each Director (whenever elected) shall hold office until his successor has been
duly elected and qualified, or until his earlier death, resignation or removal.
[Section 141(b).]
Section 2.03. Election of Directors. Except as otherwise provided in
Sections 2.12 and 2.13 of these By-Laws, the Directors shall be elected at each
annual meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated therefor, the Directors shall cause
the meeting to be held as soon thereafter as convenient. At each meeting of the
stockholders for the election of Directors, provided a quorum is present, the
Directors shall be elected by a plurality of the votes validly cast in such
election. [Sections 211(b), (c), 216.]
Section 2.04. Annual and Regular Meetings. The annual meeting of the Board
of Directors for the purpose of electing officers and for the transaction of
such other business as may come before the meeting shall be held as soon as
possible following adjournment of the annual meeting of the stockholders at the
place of such annual meeting of the stockholders. Notice of such annual meeting
of the Board of Directors need not be given. The Board of Directors from time to
time may by resolution provide for the holding of regular meetings and fix the
place (which may be within or without the State of Delaware) and the date and
hour of such meetings. Notice of regular meetings need not be given, provided,
however, that if the Board of Directors shall fix or change the time or place of
any regular meeting, notice of such action shall be sent by telegram or
facsimile, to each Director who shall not have been present at the meeting at
which such action was taken, addressed to him at his usual place of business, or
shall be delivered to him personally.
6
Notice of such action need not be given to any Director who attends the first
regular meeting after such action is taken without protesting the lack of notice
to him, prior to or at the commencement of such meeting, or to any Director who
submits a signed waiver of notice, whether before or after such meeting.
[Section 141(g).]
Section 2.05. Special Meetings; Notice. Special meetings of the
Board of Directors shall be held whenever called by the President or, in the
event of his absence or disability, by any Vice President, at such place (within
or without the State of Delaware), date and hour as may be specified in the
respective notices or waivers of notice of such meetings. Special meetings of
the Board of Directors may be called on 48 hours' notice, if notice is given to
each Director personally or by telephone, telegram, or on five days' notice, if
notice is mailed by overnight delivery service to each Director, addressed to
him at his usual place of business. Notice of any special meeting need not be
given to any Director who attends such meeting without protesting the lack of
notice to him, prior to or at the commencement of such meeting, or to any
Director who submits a signed waiver of notice, whether before or after such
meeting, and any business may be transacted thereat. [Sections 141(g), 229.]
Section 2.06. Quorum; Voting. At all meetings of the Board of
Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the vote of a majority of the Directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. [Section 141(b).]
Section 2.07. Adjournment. A majority of the Directors present,
whether or not a quorum is present, may adjourn any meeting of the Board of
Directors to another time or place. No notice need be given of any adjourned
meeting unless the time and place of the adjourned meeting are not announced at
the time of adjournment, in which case notice conforming to the requirements of
Section 2.05 shall be given to each Director.
Section 2.08. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors. [Section 141(f).]
7
Section 2.09. Regulations; Manner of Acting. To the extent consistent
with applicable law, the Certificate of Incorporation and these By-Laws, the
Board of Directors may adopt such rules and regulations for the conduct of
meetings of the Board of Directors and for the management of the property,
affairs and business of the Corporation as the Board of Directors may deem
appropriate. The Directors shall act only as a Board, and the individual
Directors shall have no power as such.
Section 2.10. Action by Telephonic Communications. Members of the Board
of Directors may participate in a meeting of the Board of Directors by means of
conference telephone or similar communications equipment by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this provision shall constitute presence in person at such meeting.
[Section 141(i).]
Section 2.11. Resignations. Any Director may resign at any time by
delivering a written notice of resignation, signed by such Director, to the
President or the Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery. [Section 141(b).]
Section 2.12. Removal of Directors. Any Director may be removed at any
time, either for or without cause, upon the affirmative vote of the holders of a
majority of the outstanding shares of stock of the Corporation entitled to vote
for the election of such Director, cast at a special meeting of the stockholders
called for the purpose. Any vacancy in the Board of Directors caused by any such
removal may be filled at such meeting by the stockholders entitled to vote for
the election of the Director so removed. If such stockholders do not fill such
vacancy at such meeting (or in the written instrument effecting such removal, if
such removal was effected by consent without a meeting), such vacancy may be
filled in the manner provided in Section 2.13 of these By-Laws. [Section
141(b).]
Section 2.13. Vacancies and Newly Created Directorships. (a) If any
vacancies shall occur in the Board of Directors, by reason of death,
resignation, removal or otherwise, or if the authorized number of Directors
shall be increased, the Directors then in office shall continue to act, and such
vacancies and newly created directorships may be filled by a majority of the
Directors then in office,
8
although less than a quorum. A Director elected to fill a vacancy or a newly
created directorship shall hold office until his successor has been elected and
qualified or until his earlier death, resignation or removal. Any such vacancy
or newly created directorship may also be filled at any time by vote of the
stockholders.
(b) Notwithstanding the provisions of paragraph (a) of this section,
prior to the termination of the Governance Sideletter, in the event that a
vacancy shall be created on the Board of Directors as a result of the death,
resignation or removal (with or without cause) of a director nominated by
Westinghouse, the Board of Directors shall within five business days of the
creation of such vacancy request Westinghouse to nominate a Qualified Nominee
(as defined in the Governance Sideletter) to be appointed by the Board of
Directors to fill such vacancy.
(c) Notwithstanding the provisions of paragraph (a) of this Section,
prior to the termination of the Registration and Participation Agreement, dated
as of February 28, 1994 (the "R&P Agreement"), among the Corporation and the
stockholders from time to time party thereto, in the event that a vacancy shall
be created on the Board of Directors as a result of the death, resignation or
removal (with or without cause) of a director nominated by the C&D Fund, the
Board of Directors shall within five business days of the creation of such
vacancy request the C&D Fund to nominate a candidate to be appointed by the
Board of Directors to fill such vacancy. [Section 223.]
Section 2.14. Compensation. The amount, if any, which each Director
shall be entitled to receive as compensation for his services as such shall be
fixed from time to time by resolution of the Board of Directors. [Section
141(h).]
9
Section 2.15. Reliance on Accounts and Reports, etc. A Director, or a
member of any Committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
records of the Corporation and upon information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or Committees designated by the Board of Directors, or by any other
person as to the matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation. [Section 141(e).]
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.01. How Constituted. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate on or more
Committees, including an Executive Committee, each such Committee to consist of
such number of Directors as from time to time may be fixed by the board of
Directors. The Board of Directors may designate one or more Directors as
alternate members of any such Committee, who may replace any absent or
disqualified member or members at any meeting of such Committee. Thereafter,
members (and alternate members, if any) of each such Committee may be designated
at the annual meeting of the Board of Directors. Any such Committee may be
abolished or re-designated from time to time by the Board of Directors.
Each member (and each alternate member) of any such Committee (whether
designated at an annual meeting of the Board of Directors or to fill a vacancy
or otherwise) shall hold office until his successor shall have been desingated
or until he shall cease to be a Director, or until his earlier death,
resignation or removal. [Section 141(c).]
Section 3.02. Powers. During the intervals between the meetings of the
Board of Directors, the Executive Committee, except as otherwise provided in
this section, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the property, affairs and business of
the Corporation. Each such other Committee, except as otherwise provided in
this section, shall have and may exercise such powers of the Board of Directors
as may be provided by resolution or resolutions of
10
the Board of Directors. Neither the Executive Committee nor any such Committee
shall have the power or authority:
(a) to amend the Certificate of Incorporation (except that a
Committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of
Directors as provided in Section 151(a) of the General Corporation Law,
fix the designations and any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets
of the Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same
or any other class or classes of stock of the Corporation or fix the
number of shares of any series of stock or authorize the increase or
decrease of the shares of any series),
(b) to adopt an agreement of merger or consolidation or a
certificate of ownership or merger,
(c) to recommend to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets,
(d) to recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or
(e) to declare a dividend;
(f) to authorize the issuance of stock;
(g) to remove the President of the Corporation or a Director;
(h) to authorize the borrowing of funds, other than under existing
facilities, that is material to the capital structure of the Corporation;
(i) to authorize any new compensation or benefit program;
(j) to appoint or discharge the Corporation's independent public
accountants;
(k) to authorize the annual operating plan, annual capital
expenditure plan and strategic plan;
11
(1) to abolish or usurp the authority of the Board of Directors; or
(m) to amend these By-Laws of the Corporation.
The Executive Committee shall have, and any such other Committee may be granted
by the Board of Directors, power to authorize the seal of the Corporation to
be affixed to any or all papers which may require it. [Section 141(c).]
Section 3.03 Proceedings. Each such Committee may fix its own rules of
procedure and may meet at such place (within or without the State of Delaware),
at such time and upon such notice, if any, as it shall determine from time to
time. Each such Committee shall keep minutes of its proceedings and shall report
such proceedings to the Board of Directors at the meeting to the Board of
Directors next following any such proceedings.
Section 3.04. Quorum and Manner of Acting. Except as may be otherwise
provided in the resolution creating such Committee, at all meetings of any
Committee the presence of members (or alternate members) constituting a majority
of the total authorized membership of such Committee shall constitute a quorum
for the transaction of business. The act of the majority of the members present
at any meeting at which a quorum is present shall be the act of such Committee.
Any action required or permitted to be taken at any meeting of any such
Committee may be taken without a meeting, if all members of such Committee shall
consent to such action in writing and such writing or writings are filed with
the minutes of the proceedings of the Committee. The members of any such
Committee shall act only as a Committee, and the individual members of such
Committee shall have no power as such. [Section 141(c).]
Section 3.05. Action by Telephonic Communications. Members of any
Committee designated by the Board of Directors may participate in a meeting of
such Committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting. [Section 141(i).]
12
Section 3.06. Absent or Disqualified Members. In the absence or
disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member or the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. [Section 141(c).]
Section 3.07. Resignations. Any member (and any alternate member) of
any Committee may resign at any time by delivering a written notice of
resignation, signed by such member, to the Chairman or the President. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Section 3.08. Removal. Any member (and any alternate member) of any
Committee may be removed at any timer either for or without cause, by resolution
adopted by a majority of the whole Board of Directors.
Section 3.09. Vacancies. If any vacancy shall occur in any
Committee, by reason of disqualification, death, resignation, removal or
otherwise, the remaining members (and any alternate members) shall continue to
act, and any such vacancy may be filled by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, one or more Vice
Presidents, a Secretary and a Treasurer. The Board of Directors also may elect
one or more Assistant Secretaries and Assistant Treasurers in such numbers as
the Board of Directors may determine. Any number of offices may be held by the
same person. No officer need be a Director of the Corporation. [Section 142(a),
(b).]
Section 4.02. Election. Unless otherwise determined by the Board of
Directors, the officers of the Corporation shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be elected
to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual meeting,
officers
13
may be elected at any regular or special meeting of the Board of Directors. Each
officer shall hold office until his successor has been elected and qualified,
or until his earlier death, resignation or removal [Section 142(b).]
Section 4.03 Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
Section 4.04. Removal and Resignation; Vacancies. Any officer may be
removed for or without cause at any time by the Board of Directors. Any officer
may resign at any time by delivering a written notice of resignation, signed by
such officer, to the Board of Directors or the President. Unless otherwise
specified therein, such resignation shall take effect upon delivery. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the Board of Directors. [Section
142(b), (e).]
Section 4.05. Authority and Duties of Officers. The officers of the
Corporation shall have such authority and shall exercise such powers and perform
such duties as may be specified in these By-Laws except that in any event each
officer shall exercise such powers and perform such duties as may be required by
law. [Section 142(a).]
Section 4.06. The President. The President shall preside at all
meetings of the stockholders and directors at which he is present, shall by the
chief executive officer and the chief operating officer of the Corporation,
shall have general control and supervision of the policies and operations of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall manage and administer the
Corporation's business and affairs and shall also perform all duties and
exercise all powers usually pertaining to the office of a chief executive
officer and a chief operating officer of a corporation. He shall have the
authority to sign, in the name and on behalf of the Corporation, checks, orders,
contracts, leases, notes, drafts and other documents and instruments in
connection with the business of the Corporation, and together with the Secretary
or an Assistant Secretary, conveyances of real estate and other documents and
instruments to which the seal of the Corporation is affixed. He shall have the
authority to cause the employment or appointment of such employees and agents of
the Corporation as the conduct of the business of the Corporation may
14
require, to fix their compensation, and to remove or suspend any employee or
agent elected or appointed by the President or the Board of Directors. The
President shall perform such other duties and have such other powers as the
Board of Directors or the Chairman may from time to time prescribe.
Section 4.07. The Vice Presidents. Each Vice President shall perform
such duties and exercise such powers as may be assigned to him from time to time
by the President. In the absence of the President, the duties of the President
shall be performed and his powers may be exercised by such Vice President as
shall be designated by the President, or failing such designation, such duties
shall be performed and such powers may be exercised by each Vice President in
the order of their earliest election to that office; subject in any case to
review and superseding action by the President.
Section 4.08. The Secretary. The Secretary shall have the following
powers and duties:
(a) He shall keep or cause to be kept a record of all the
proceedings of the meetings of the stockholders and of the Board of
Directors in books provided for that purpose.
(b) He shall cause all notices to be duly given in accordance with
the provisions of these By-Laws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a
resolution of the Board of Directors, he shall furnish a copy of such
resolution to the members of such Committee.
(d) He shall be the custodian of the records, and of the seal of the
Corporation and cause such seal (or a facsimile thereof) to be affixed to
all certificates representing shares of the Corporation prior to the
issuance thereof and to all instruments the execution of which on behalf
of the Corporation under its seal shall have been duly authorized in
accordance with these By-Laws, and when so affixed he may attest the same.
(e) He shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required by
law, the Certificate of Incorporation or these By-Laws.
15
(f) He shall have charge of the stock books and ledgers of the
Corporation and shall cause the stock and transfer books to be kept in
such manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names
(alphabetically arranged) and the addresses of the holders of record of
such shares, the number of shares held by each holder and the date as of
which each became such holder of record.
(g) He shall sign (unless the Treasurer, an Assistant Treasurer or
Assistant Secretary shall have signed) certificates representing shares of
the Corporation the issuance of which shall have been authorized by the
Board of Directors.
(h) He shall perform, in general, all duties incident to the office
of secretary and such other duties as may be specified in these By-Laws or
as may be assigned to him from time to time by the Board of Directors, or
the President.
Section 4.09. The Treasurer. The Treasurer shall be the chief
financial officer of the Corporation and shall have the following powers and
duties:
(a) He shall have charge and supervision over and be responsible for
the moneys, securities, receipts and disbursements of the Corporation, and
shall keep or cause to be kept full and accurate records of all receipts
of the Corporation.
(b) He shall cause the moneys and other valuable effects of the
Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or other
depositaries as shall be selected in accordance with Section 8.05 of these
By-Laws.
(c) He shall cause the moneys of the Corporation to be disbursed by
checks or drafts (signed as provided in section 8.06 of these By-Laws)
upon the authorized depositaries of the Corporation and cause to be taken
and preserved proper vouchers for all moneys disbursed.
(d) He shall render to the Board of Directors or the President,
whenever requested, a statement of the financial condition of the
Corporation and of all his
16
transactions as Treasurer, and render a full financial report at the
annual meeting of the stockholders, if called upon to do so.
(e) He shall be empowered from time to time to require from all
officers or agents of the Corporation reports or statements giving such
information as he may desire with respect to any and all financial
transactions of the Corporation.
(f) He may sign (unless an Assistant Treasurer or the Secretary or
the Assistant Secretary shall have signed) certificates representing stock
of the Corporation the issuance of which shall have been authorized by the
Board of Directors.
(g) He shall perform, in general, all duties incident to the office
of treasurer and such other duties as may be specified in these By-Laws or
as may be assigned to him from time to time by the Board of Directors, or
the President.
Section 4.10. Additional Officers. The Board of Directors may
appoint such other officers and agents as it may deem appropriate, and such
other officers and agents shall hold their offices for such terms and shall
exercise such powers and perform such duties as may be determined from time to
time by the Board of Directors. The Board of Directors from time to time may
delegate to any officer or agent the power to appoint subordinate officers or
agents and to prescribe their respective rights, terms of office, authorities
and duties. Any such officer or agent may remove any such subordinate officer or
agent appointed by him, for or without cause. [Section 142(a), (b).]
Section 4.11. Security. The Board of Directors may require any
officer, agent or employee of the Corporation to provide security for the
faithful performance of his duties, in such amount and of such character as may
be determined from time to time by the Board of Directors. [Section 142(c).]
17
ARTICLE V
CAPITAL STOCK
Section 5.01. Certificates of Stock. The shares of the Corporation shall be
represented by certificates, provided that the Board of Directors may provide by
resolution or resolutions that some or all of any or all classes or series of
stock of the Corporation shall be uncertificated shares. Any such resolution
shall not apply to shares represented by a certificate until each certificate is
surrendered to the Corporation. Notwithstanding the adoption of such a
resolution by the Board of Directors, every holder of stock in the Corporation
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
Corporation, by the President or a Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, representing
the number of shares registered in certificate form. Such certificate shall be
in such form as the Board of Directors may determine, to the extent consistent
with applicable law, the Certificate of Incorporation and these By-Laws.
[Section 158.]
Section 5.02. Signatures: Facsimile. All of such signatures on the
certificate may be a facsimile, engraved or printed, to the extent permitted by
law. In case any officer, transfer agent or registrar who has signed, or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue. [Section 158.]
Section 5.03. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation. The
Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or
18
destruction of any such certificate or the issuance of any such new
certificates. [Section 167.]
Section 5.04. Transfer of Stock. Upon surrender to the Corporation
or the transfer agent of the Corporation a certificate for shares, duly endorsed
or accompanied by appropriate evidence of succession, assignment for authority
to transfer, the Corporation shall issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books. Within a reasonable time after the transfer of uncertificated stock, the
Corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to Sections 151, 156, 202(a) or 218(a) of the General Corporation Law
of the State of Delaware. Subject to the provisions of the Certificate of
Incorporation and these By-Laws, the Board of Directors may prescribe such
additional rules and regulations as it may deem appropriate relating to the
issue, transfer and registration of shares of the Corporation. [Section 151.]
Section 5.05. Record Date. In order to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date on which the resolution fixing the
record date is adopted by the Board of Directors, and which shall not be more
than sixty nor less than ten days before the date of such meeting. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting, provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by law, shall be the first date on which a signed written consent
19
setting forth the action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
In order that the Corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights of the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto [Section 213.]
Section 5.06. Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall notice of such claims or interests.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer or uncertificated
shares are requested to be transferred, both the transferor and transferee
request the Corporation to do so. [Section 159.]
20
Section 5.07. Transfer Agent and Registrar. The Board of Directors
may appoint one or more transfer agents and one or more registrars, and may
require all certificates representing shares to bear the signature of any such
transfer agents or registrars.
ARTICLE VI
INDEMNIFTCATION
Section 6.O1. Nature of Indemnity. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
director or officer, of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he is or was or has agreed to become an employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (2) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon
21
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
The termination of any action, suit or proceeding by judgment, order
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 6.02. Successful Defense. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
6.01 hereof or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 6.03. Determination That Indemnification Is Proper. Any
indemnification of a director or officer of the Corporation under Section 6.01
hereof (unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 6.01 hereof. Any indemnification of an employee or
agent of the Corporation under Section 6.01 hereof (unless ordered by a court)
may be made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.01 hereof. Any such
determination shall be made (1) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
22
Section 6.04. Advance Payment of Expenses. Expenses (including
attorneys' fees) incurred by a director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate. The Board of Directors may authorize the Corporation's
counsel to represent such director, officer, employee or agent in any action,
suit or proceeding, whether or not the Corporation is a party to such action,
suit or proceeding.
Section 6.05. Procedure for Indemnification of Directors and
Officers. Any indemnification of a director or officer of the Corporation under
Sections 6.01 and 6.02, or advance of costs, charges and expenses to a director
or officer under Section 6.04 of this Article, shall be made promptly, and in
any event within 30 days, upon the written request of the director or officer.
If a determination by the Corporation that the director or officer is entitled
to indemnification pursuant to this Article is required, and the Corporation
fails to respond within sixty days to a written request for indemnity, the
Corporation shall be deemed to have approved such request. If the Corporation
denies a written request for indemnity or advancement of expenses, in whole or
in part, or if payment in full pursuant to such request is not made within 30
days, the right to indemnification or advances as granted by this Article shall
be enforceable by the director or officer in any court of competent
jurisdiction. Such person's costs and expenses incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such action shall also be indemnified by the Corporation. It shall be a
defense to any such action (other than an action brought to enforce a claim for
the advance of costs, charges and expenses under Section 6.04 of this Article
where the required undertaking, if any, has been received by the Corporation)
that the claimant has not met the standard of conduct set forth in Section 6.01
of this Article, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel, and its
23
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 6.01
of this Article, nor the fact that there has been an actual determination by
the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of conduct.
Section 6.06. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a "contract right" may not
be modified retroactively without the consent of such director, officer,
employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 6.07. Insurance. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions
24
of this Article, provided that such insurance is available on acceptable terms,
which determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 6.08. Severability. If this Article or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
ARTICLE VII
OFFICES
Section 7.01. Registered Office. The registered office of the
Corporation in the State of Delaware shall be located at Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle.
Section 7.02. Other Offices. The Corporation may maintain offices or
places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Dividends. Subject to any applicable provisions of law
and the Certificate of Incorporation, dividends upon the shares of the
Corporation may be declared by the Board of Directors at any regular or special
meeting of the Board of Directors and any such dividend may be paid in cash,
property, or shares of the Corporation's Capital Stock.
25
A member of the Board of Directors, or a member of any Committee
designated by the Board of Directors shall be fully protected in relying in
good faith upon the records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
officers or employees, or Committees of the Board of Directors, or by any other
person as to matters the Director reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation, as to the value and amount
of the assets, liabilities and/or net profits of the Corporation, or any other
facts pertinent to the existence and amount of surplus or other funds from
which dividends might properly be declared and paid. [Sections 172, 173.]
Section 8.02. Reserves. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, thinks proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation or for such other purpose as the
Board of Directors shall think conducive to the interest of the Corporation, and
the Board of Directors may similarly modify or abolish any such reserve.
[Section 171.]
Section 8.03. Execution of Instruments. The President, any Vice President,
the Secretary or the Treasurer may enter into any contract or execute and
deliver any instrument in the name and on behalf of the Corporation. The Board
of Directors or the President may authorize any other officer or agent to enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. Any such authorization may be general or limited to
specific contracts or instruments.
Section 8.04. Corporate Indebtedness. No loan shall be contracted on behalf
of the Corporation, and no evidence of indebtedness shall be issued in its name,
unless authorized by the Board of Directors or the President. Such authorization
may be general or confined to specific instances. Loans so authorized may be
effected at any time for the Corporation from any bank, trust company or other
institution, or from any firm, corporation or individual. All bonds, debentures,
notes and other obligations or evidences of indebtedness of the Corporation
issued for such loans shall be made, executed and delivered as the Board of
26
Directors or the President shall authorize. When so authorized by the Board of
Directors or the President, any part of or all the properties, including
contract rights, assets, business or good will of the Corporation, whether then
owned or thereafter acquired, may be mortgaged, pledged, hypothecated or
conveyed or assigned in trust as security for the payment of such bonds,
debentures, notes and other obligations or evidences of indebtedness of the
Corporation, and of the interest thereon, by instruments executed and delivered
in the name of the Corporation.
Section 8.05. Deposits. Any funds of the Corporation may be
deposited from time to time in such banks, trust companies or other depositaries
as may be determined by the Board of Directors or the President, or by such
officers or agents as may be authorized by the Board of Directors or the
President to make such determination.
Section 8.06. Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such agent or
agents of the Corporation, and in such manner, as the Board of Directors or the
President from time to time may determine.
Section 8.07. Sale, Transfer, etc. of Securities. To the extent
authorized by the Board of Directors or by the President, any Vice President,
the Secretary or the Treasurer or any other officers designated by the Board of
Directors or the President may sell, transfer, endorse, and assign any shares of
stock, bonds or other securities owned by or held in the name of the
Corporation, and may make, execute and deliver in the name of the Corporation,
under its corporate seal, any instruments that may be appropriate to effect any
such sale, transfer, endorsement or assignment.
Section 8.08. Voting as Stockholder. Unless otherwise determined by
resolution of the Board of Directors, the President or any Vice President shall
have full power and authority on behalf of the Corporation to attend any meeting
of stockholders of any corporation in which the Corporation may hold stock, and
to act, vote (or execute proxies to vote and exercise in person or by proxy all
other rights, powers and privileges incident to the ownership of such stock.
Such officers acting on behalf of the Corporation shall have full power and
authority to execute any instrument expressing consent to or dissent from any
action of any such corporation without a meeting. The Board of Directors may by
resolution
27
from time to time confer such power and authority upon any other person or
persons.
Section 8.09. Fiscal Year. The fiscal year of the Corporation shall
commence on the first day of January of each year (except for the Corporation's
first fiscal year which shall commence on the date of incorporation) and shall
terminate in each case on the last day of December.
Section 8.10. Seal. The seal of the Corporation shall be circular in form
and shall contain the name of the Corporation, the year of its incorporation
and the words "Corporate Seal" and "Delaware". The form of such seal shall be
subject to alteration by the Board of Directors. The seal may be used by
causing it or a facsimile thereof to be impressed, affixed or reproduced, or
may be used in any other lawful manner.
Section 8.11. Books and Records; Inspection. Except to the extent
otherwise required by law, the books and records of the Corporation shall be
kept at such place or places within or without the State of Delaware as may be
determined from time to time by the Board of Directors.
ARTICLE IV
AMENDMENT OF BY-LAWS
Section 9.01. Amendment. These By-Laws may be amended, altered or
repealed.
(a) by resolution adopted by majority of the Board of Directors at any
special or regular meeting of the Board if, in the case of such special meeting
only, notice of such amendment, alteration or repeal is contained in the notice
or waiver of notice of such meeting; or
(b) at any regular or special meeting of the stockholders if, in the case
of such special meeting only, notice of such amendment, alteration or repeal is
contained in the notice or waiver of notice of such meeting. [Section 109(a).]
28
ARTICLE X
CONSTRUCTION
Section 10.01. Construction. In the event of any conflict between
the provisions of these By-Laws as in effect from time to time and the
provisions of the certificate of incorporation of the Corporation as in effect
from time to time, the provisions of such certificate of incorporation shall be
controlling.
29
EXHIBIT 4.1
================================================================================
WESCO DISTRIBUTION, INC.
91/8% Senior Subordinated Notes due 2008
---------
INDENTURE
Dated as of June 5, 1998
---------
BANK ONE, N.A.,
Senior Subordinated Notes Trustee
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions..................................................1
SECTION 1.02. Other Definitions...........................................22
SECTION 1.03. Incorporation by Reference of Trust Indenture Act...........22
SECTION 1.04. Rules of Construction.......................................23
ARTICLE 2
The Senior Subordinated Notes
SECTION 2.01. Amount of Senior Subordinated Notes; Issuable in Series.....24
SECTION 2.02. Form and Dating.............................................25
SECTION 2.03. Execution and Authentication................................25
SECTION 2.04. Registrar and Paying Agent..................................26
SECTION 2.05. Paying Agent To Hold Money in Trust.........................27
SECTION 2.06. Senior Subordinated Noteholder Lists........................27
SECTION 2.07. Transfer and Exchange.......................................27
SECTION 2.08. Replacement Senior Subordinated Notes.......................28
SECTION 2.09. Outstanding Senior Subordinated Notes.......................29
SECTION 2.10. Temporary Senior Subordinated Notes.........................29
SECTION 2.11. Cancelation.................................................29
SECTION 2.12. Defaulted Interest..........................................30
SECTION 2.13. CUSIP Numbers...............................................30
ARTICLE 3
Redemption
SECTION 3.01. Notices to Senior Subordinated Notes Trustee................30
SECTION 3.02. Selection of Senior Subordinated Notes To Be Redeemed.......30
SECTION 3.03. Notice of Redemption........................................31
SECTION 3.04. Effect of Notice of Redemption..............................32
SECTION 3.05. Deposit of Redemption Price.................................32
SECTION 3.06. Senior Subordinated Notes Redeemed in Part..................32
ARTICLE 4
Covenants
SECTION 4.01. Payment of Senior Subordinated Notes........................32
SECTION 4.02. SEC Reports.................................................32
SECTION 4.03. Limitation on Indebtedness..................................33
SECTION 4.04. Limitation on Restricted Payments...........................35
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries..................................39
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock..........40
SECTION 4.07. Limitation on Transactions with Affiliates..................43
SECTION 4.08. Change of Control...........................................44
SECTION 4.09. Compliance Certificate......................................46
SECTION 4.10. Further Instruments and Acts................................46
SECTION 4.11. Limitation on the Sale or Issuance of Capital Stock
of Restricted Subsidiaries...............................46
SECTION 4.12. Limitation on Liens.........................................46
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets...................47
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default...........................................48
SECTION 6.02. Acceleration................................................50
SECTION 6.03. Other Remedies..............................................50
SECTION 6.04. Waiver of Past Defaults.....................................51
SECTION 6.05. Control by Majority.........................................51
SECTION 6.06. Limitation on Suits.........................................51
SECTION 6.07. Rights of Senior Subordinated Noteholders to Receive
Payment .................................................52
SECTION 6.08. Collection Suit by Senior Subordinated Notes Trustee........52
SECTION 6.09. Senior Subordinated Notes Trustee May File Proofs of Claim..52
SECTION 6.10. Priorities..................................................52
SECTION 6.11. Undertaking for Costs.......................................53
SECTION 6.12. Waiver of Stay or Extension Laws............................53
ARTICLE 7
Senior Subordinated Notes Trustee
SECTION 7.01. Duties of Senior Subordinated Notes Trustee.................53
SECTION 7.02. Rights of Senior Subordinated Notes Trustee.................55
SECTION 7.03. Individual Rights of Senior Subordinated Notes Trustee......55
SECTION 7.04. Senior Subordinated Notes Trustee's Disclaimer..............55
SECTION 7.05. Notice of Defaults..........................................56
SECTION 7.06. Reports by Senior Subordinated Notes Trustee to
Senior Subordinated Noteholders..........................56
SECTION 7.07. Compensation and Indemnity..................................56
SECTION 7.08. Replacement of Senior Subordinated Notes Trustee............57
SECTION 7.09. Successor Senior Subordinated Notes Trustee by Merger.......58
SECTION 7.10. Eligibility; Disqualification...............................59
SECTION 7.11. Preferential Collection of Claims Against Company...........59
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Senior Subordinated Notes;
Defeasance...............................................59
SECTION 8.02. Conditions to Defeasance....................................60
SECTION 8.03. Application of Trust Money..................................61
SECTION 8.04. Repayment to Company........................................61
SECTION 8.05. Indemnity for Government Obligations........................61
SECTION 8.06. Reinstatement...............................................61
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Senior Subordinated Noteholders..........62
SECTION 9.02. With Consent of Senior Subordinated Noteholders.............63
SECTION 9.03. Compliance with Trust Indenture Act.........................64
SECTION 9.04. Revocation and Effect of Consents and Waivers...............64
SECTION 9.05. Notation on or Exchange of Senior Subordinated Notes........64
SECTION 9.06. Senior Subordinated Notes Trustee To Sign Amendments........65
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate...................................65
SECTION 10.02. Liquidation, Dissolution, Bankruptcy.......................65
SECTION 10.03. Default on Senior Indebtedness.............................66
SECTION 10.04. Acceleration of Payment of Senior Subordinated Notes.......67
SECTION 10.05. When Distribution Must Be Paid Over........................67
SECTION 10.06. Subrogation................................................67
SECTION 10.07. Relative Rights............................................67
SECTION 10.08. Subordination May Not Be Impaired by the Company...........68
SECTION 10.09. Rights of Senior Subordinated Notes Trustee and
Paying Agent............................................68
SECTION 10.10. Distribution or Notice to Representative...................68
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right To Accelerate.....................................68
SECTION 10.12. Trust Moneys Not Subordinated..............................68
SECTION 10.13. Senior Subordinated Notes Trustee Entitled To Rely.........69
SECTION 10.14. Senior Subordinated Notes Trustee To Effectuate
Subordination ..........................................69
SECTION 10.15. Senior Subordinated Notes Trustee Not Fiduciary for
Holders of Senior Indebtedness .........................69
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions ...............................69
SECTION 10.17. Senior Subordinated Notes Trustee's Compensation
Not Prejudiced .........................................70
ARTICLE 11
Holdings Guarantee
SECTION 11.01. Holdings Guarantee.........................................70
SECTION 11.02. Limitation on Liability....................................72
SECTION 11.03. Successors and Assigns.....................................72
SECTION 11.04. No Waiver..................................................73
SECTION 11.05. Modification...............................................73
ARTICLE 12
Subordination of the Holdings Guarantee
SECTION 12.01. Agreement To Subordinate...................................73
SECTION 12.02. Liquidation, Dissolution, Bankruptcy.......................73
SECTION 12.03. Default on Designated Senior Indebtedness of Holdings......74
SECTION 12.04. Demand for Payment.........................................75
SECTION 12.05. When Distribution Must Be Paid Over........................75
SECTION 12.06. Subrogation................................................75
SECTION 12.07. Relative Rights............................................75
SECTION 12.08. Subordination May Not Be Impaired by Holdings..............75
SECTION 12.09. Rights of Senior Subordinated Notes Trustee and
Paying Agent ...........................................75
SECTION 12.10. Distribution or Notice to Representative...................76
SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit
Right To Accelerate ....................................76
SECTION 12.12. Senior Subordinated Notes Trustee Entitled To Rely.........76
SECTION 12.13. Senior Subordinated Notes Trustee To Effectuate
Subordination ..........................................77
SECTION 12.14. Senior Subordinated Notes Trustee Not Fiduciary for
Holders of Senior Indebtedness of Holdings .............77
SECTION 12.15. Reliance by Holders of Senior Indebtedness of
Holdings on Subordination Provisions ...................77
SECTION 12.16. Defeasance.................................................77
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls...............................77
SECTION 13.02. Notices....................................................78
SECTION 13.03. Communication by Senior Subordinated Noteholders
with Other Senior Subordinated Noteholders .............78
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.........78
SECTION 13.05. Statements Required in Certificate or Opinion..............79
SECTION 13.06. When Senior Subordinated Notes Disregarded.................79
SECTION 13.07. Rules by Senior Subordinated Notes Trustee, Paying
Agent and Registrar ....................................79
SECTION 13.08. Legal Holidays.............................................79
SECTION 13.09. GOVERNING LAW..............................................79
SECTION 13.10. No Recourse Against Others.................................80
SECTION 13.11. Successors.................................................80
SECTION 13.12. Multiple Originals.........................................80
SECTION 13.13. Table of Contents; Headings................................80
Appendix A - Provisions Relating to Original Senior Subordinated Notes,
Additional Senior Subordinated Notes, Private Senior
Subordinated Exchange Notes and Senior Subordinated Exchange
Notes
Exhibit A - Form of Initial Senior Subordinated Note
Exhibit B - Form of Senior Subordinated Exchange Note
Exhibit C - Form of Transferee Letter of Representation
1
INDENTURE dated as of June 5, 1998 , among WESCO
DISTRIBUTION, INC., a Delaware corporation (the "Company"),
WESCO INTERNATIONAL, INC., a Delaware corporation, as
guarantor ("Holdings"), and BANK ONE, N.A., a national banking
association, as trustee (the "Senior Subordinated Notes
Trustee").
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of (i) the Company's 91/8%
Senior Subordinated Notes due 2008 issued on the date hereof (the "Original
Senior Subordinated Notes"), (ii) any Additional Senior Subordinated Notes (as
defined herein) that may be issued on any Senior Subordinated Notes Issue Date
(all such Senior Subordinated Notes in clauses (i) and (ii) being referred to
collectively as the "Initial Senior Subordinated Notes"), (iii) if and when
issued as provided in a Senior Subordinated Notes Registration Agreement (as
defined in Appendix A hereto (the "Appendix")), the Company's 91/8% Senior
Subordinated Notes due 2008 issued in a Senior Subordinated Notes Registered
Exchange Offer (as defined in the Appendix) in exchange for any Initial Senior
Subordinated Notes (the "Senior Subordinated Exchange Notes") and (iv) if and
when issued as provided in a Senior Subordinated Notes Registration Agreement,
the Private Senior Subordinated Exchange Notes (as defined in the Appendix)
issued in a Senior Subordinated Notes Private Exchange (as defined in the
Appendix, and together with the Initial Senior Subordinated Notes and any Senior
Subordinated Exchange Notes issued hereunder, the "Senior Subordinated Notes").
Except as otherwise provided herein, the Senior Subordinated Notes will be
limited to $500 million in aggregate principal amount outstanding, of which $300
million in aggregate principal amount will be initially issued on the date
hereof. Subject to the conditions and in compliance with the covenants set forth
herein, the Company may issue up to $200 million aggregate principal amount of
Additional Senior Subordinated Notes.
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a Restricted
Subsidiary; provided, however, that any such Restricted Subsidiary described in
clause (ii) or (iii) above is primarily engaged in a Related Business.
"Additional Senior Subordinated Notes" means up to $200 million
aggregate principal amount of 91/8% Senior Subordinated Notes due 2008 issued
under the terms of this Indenture subsequent to the Closing Date.
2
"Adjusted Consolidated Assets" means at any time the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), after deducting
therefrom all current liabilities of the Company and its Restricted Subsidiaries
(excluding intercompany items), all as set forth on the Consolidated balance
sheet of the Company and its Restricted Subsidiaries as of the end of the most
recent fiscal quarter for which financial statements are available prior to the
date of determination.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Premium" means, with respect to a Senior Subordinated
Note at any redemption date, the greater of (i) 1.0% of the principal amount of
such Senior Subordinated Note and (ii) the excess of (A) the present value at
such time of (1) the redemption price of such Senior Subordinated Note at June
1, 2003 (such redemption price being set forth in the table in paragraph 5 of
the Senior Subordinated Notes) plus (2) all required interest payments due on
such Senior Subordinated Note through June 1, 2003 (excluding accrued but unpaid
interest), computed using a discount rate equal to the Treasury Rate plus 50
basis points, over (B) the then-outstanding principal amount of such Senior
Subordinated Note.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by means of
a merger, consolidation, or similar transaction (each referred to for the
purposes of this definition as a "disposition"), of (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares or
shares required by applicable law to be held by a Person other than the Company
or a Restricted Subsidiary), (ii) all or substantially all the assets of any
division or line of business of the Company or any Restricted Subsidiary or
(iii) any other assets of the Company or any Restricted Subsidiary outside the
ordinary course of business of the Company or such Restricted Subsidiary (other
than, in the case of (i), (ii) and (iii) above, (A) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (B) for purposes of the provisions
described in Section 4.06 only, a disposition subject to Section 4.04, (C) a
disposition of assets with a fair market value of less than $1,000,000, (D) a
sale of accounts receivable and related assets of the type specified in the
definition of "Qualified Receivables Transaction" to a Receivables Entity in a
Qualified Receivables Transaction, (E) a transfer of accounts receivables and
related assets of the type specified in the definition of "Qualified Receivables
Transaction" (or a fractional undivided interest therein) by a Receivables
Entity in a Qualified Receivables Transaction, (F) the disposition of all or
substantially all of the assets of the Company in a manner permitted pursuant to
the provisions of Section 5.01 or any disposition that constitutes a Change of
Control, (G) any exchange of like property pursuant to Section 1031 of the Code
for use in a Related Business, and (H) any sale of Capital Stock in, or
Indebtedness or other securities of, an Unrestricted Subsidiary).
3
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Senior Subordinated Notes, compounded annually) of
the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale/Leaseback Transaction (including any
period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Credit Agreement and any Refinancing Indebtedness with respect
thereto, as amended from time to time, including principal, premium (if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees, indemnities and all other
amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be prepaid by the lessee
without payment of a penalty.
"Change of Control" means the occurrence of any of the following
events:
(i) prior to the earlier to occur of (A) the first public offering
of common stock of Holdings or (B) the first public offering of common
stock of the Company, the Permitted Holders cease to be the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of a majority in the aggregate of the total voting
power of the Voting Stock of the Company or Holdings, whether as a result
of issuance of securities of Holdings or the Company, any merger,
consolidation, liquidation or dissolution of Holdings or the Company, any
direct or indirect transfer of securities by any Permitted Holder or
otherwise (for purposes of this clause (i) and clause (ii) below, the
4
Permitted Holders shall be deemed to beneficially own any Voting Stock of
an entity (the "specified entity") held by any other entity (the "parent
entity") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, in the aggregate a majority of the
voting power of the Voting Stock of the parent entity);
(ii) on or after any such public offering referred to in clause (i),
(A) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (i) above, except that for purposes
of this clause (ii) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of the Voting Stock of the Company or Holdings and (B) the Permitted
Holders "beneficially own" (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Voting Stock of the Company or Holdings than such other person and
do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the board of directors of
the Company or Holdings, as the case may be (for the purposes of this
clause (ii), such other person shall be deemed to beneficially own any
Voting Stock of a specified corporation held by a parent corporation, if
such other person is the beneficial owner (as defined in this clause
(ii)), directly or indirectly, of more than 35% of the voting power of the
Voting Stock of such parent corporation and the Permitted Holders
"beneficially own" (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the voting power of
the Voting Stock of such parent corporation and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of such parent corporation);
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the board of directors of the
Company or Holdings, as the case may be (together with any new directors
whose election by such board of directors of the Company or Holdings, as
the case may be, or whose nomination for election by the shareholders of
the Company or Holdings, as the case may be, was approved by a vote of 66
2/3% of the directors of the Company or Holdings, as the case may be, then
still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the board of directors of
the Company or Holdings, as the case may be, then in office; or
(iv) the merger or consolidation of the Company or Holdings with or
into another Person or the merger of another Person with or into the
Company or Holdings, or the sale of all or substantially all the assets of
the Company or Holdings to another Person (other than a Person that is
controlled by the Permitted Holders), and, in the case of any such merger
or consolidation, the securities of the Company or Holdings that are
outstanding immediately prior to such transaction and which represent 100%
of the aggregate voting power of the Voting Stock of the Company or
Holdings are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are
5
changed into or exchanged for, in addition to any other consideration,
securities of the surviving Person that represent immediately after such
transaction, at least a majority of the aggregate voting power of the
Voting Stock of the surviving Person; provided, however, that any sale of
accounts receivable in connection with a Qualified Receivables Transaction
shall not constitute a Change of Control.
"Closing Date" means the date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for which internal financial statements
are available prior to the date of such determination to (ii) Consolidated
Interest Expense for such four fiscal quarters; provided, however, that (A) if
the Company or any Restricted Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding on such date of determination
or if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period (except that, in making such computation, the amount of Indebtedness
under any revolving credit facility outstanding on the date of such calculation
shall be computed based on (1) the average daily balance of such Indebtedness
(and any Indebtedness under a revolving credit facility replaced by such
Indebtedness) during such four fiscal quarters or such shorter period when such
facility and any replaced facility was outstanding or (2) if such facility was
created after the end of such four fiscal quarters, the average daily balance of
such Indebtedness (and any Indebtedness under a revolving credit facility
replaced by such Indebtedness) during the period from the date of creation of
such facility to the date of the calculation), (B) if the Company or any
Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged
any Indebtedness since the beginning of such period or if any Indebtedness is to
be repaid, repurchased, defeased or otherwise discharged (in each case other
than Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the date
of the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall
be calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as if the Company or such
Restricted Subsidiary has not earned the interest income actually earned during
such period in respect of cash or Temporary Cash Investments used to repay,
repurchase, defease or otherwise discharge such Indebtedness, (C) if since the
beginning of such period the Company or any Restricted Subsidiary shall have
made any Asset Disposition, the EBITDA for such period shall be reduced by an
amount equal to the EBITDA (if positive) directly attributable to the assets
that are the subject of such Asset Disposition
6
for such period or increased by an amount equal to the EBITDA (if negative)
directly attributable thereto for such period and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in connection
with such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to the
extent the Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale), (D) if since the beginning of
such period the Company or any Restricted Subsidiary (by merger or otherwise)
shall have made an Investment in any Restricted Subsidiary (or any Person that
becomes a Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period and (E) if since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Asset Disposition or any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(C) or (D) above if made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto as if such Asset Disposition,
Investment or acquisition of assets occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company,
and such pro forma calculations shall include (A)(x) the savings in cost of
goods sold that would have resulted from using the Company's actual costs for
comparable goods and services during the comparable period and (y) other savings
in cost of goods sold or eliminations of selling, general and administrative
expenses as determined by a responsible financial or accounting Officer of the
Company in good faith in connection with the Company's consideration of such
acquisition and consistent with the Company's experience in acquisitions of
similar assets, less (B) the incremental expenses that would be included in cost
of goods sold and selling, general and administrative expenses that would have
been incurred by the Company in the operation of such acquired assets during
such period. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term as at the date of determination in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense (net of interest income) of the Company and its Consolidated
Restricted Subsidiaries, plus, to the extent Incurred by the Company and its
Restricted Subsidiaries in such period but not included in such interest
expense, (i) interest expense attributable to Capitalized Lease Obligations and
the interest expense attributable to leases
7
constituting part of a Sale/Leaseback Transaction, (ii) amortization of debt
discount, (iii) capitalized interest, (iv) non-cash interest expense, (v)
commissions, discounts and other fees and charges attributable to letters of
credit and bankers' acceptance financing, (vi) interest accruing on any
Indebtedness of any other Person to the extent such Indebtedness is Guaranteed
by the Company or any Restricted Subsidiary, (vii) net costs associated with
Hedging Obligations (including amortization of fees), (viii) dividends in
respect of all Preferred Stock of the Company and any of the Restricted
Subsidiaries of the Company (other than pay in kind dividends and accretions to
liquidation value) to the extent held by Persons other than the Company or a
Wholly Owned Subsidiary, (ix) interest Incurred in connection with investments
in discontinued operations and (x) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Indebtedness Incurred by such plan or trust, less,
to the extent included in such total interest expense, the amortization during
such period of capitalized financing costs. Notwithstanding anything to the
contrary contained herein, interest expense, commissions, discounts, yield and
other fees and charges Incurred in connection with any Qualified Receivables
Transaction pursuant to which the Company or any Subsidiary may sell, convey or
otherwise transfer or grant a security interest in any accounts receivable or
related assets of the type specified in the definition of "Qualified Receivables
Transaction" shall not be included in Consolidated Interest Expense; provided
that any interest expense, commissions, discounts, yield and other fees and
charges Incurred in connection with any receivables financing or securitization
that does not constitute a Qualified Receivables Transaction shall be included
in Consolidated Interest Expense.
"Consolidated Net Income" means, for any period, the net income of
the Company and its Consolidated Subsidiaries for such period; provided,
however, that there shall not be included in such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that (A) subject to the
limitations contained in clause (iv) below, the Company's equity in the
net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution made to a Restricted Subsidiary,
to the limitations contained in clause (iii) below) and (B) the Company's
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by the Company
or a Subsidiary in a pooling of interests transaction for any period prior
to the date of such acquisition;
(iii) any net income (or loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that
(A) subject to the limitations contained in clause (iv) below, the
Company's equity in the net income of any such Restricted Subsidiary for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash which could
8
have been distributed by such Restricted Subsidiary during such period to
the Company or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution
made to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(iv) any gain (or loss) realized upon the sale or other disposition
of any asset of the Company or its Consolidated Subsidiaries (including
pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise
disposed of in the ordinary course of business and any gain (or loss)
realized upon the sale or other disposition of any Capital Stock of any
Person;
(v) any extraordinary gain or loss;
(vi) the cumulative effect of a change in accounting principles; and
(vii) any expenses or charges paid to third parties related to any
Equity Offering, Permitted Investment, acquisition, recapitalization or
Indebtedness permitted to be Incurred by this Indenture (whether or not
successful) (including such fees, expenses, or charges related to the
Recapitalization).
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries to
the Company or a Restricted Subsidiary to the extent such dividends, repayments
or transfers increase the amount of Restricted Payments permitted under such
Section pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company for which internal financial statements are available, as (i) the par or
stated value of all outstanding Capital Stock of the Company plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Consolidation" means the consolidation of the amounts of each of
the Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary shall
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Agreement" means the credit agreement to be dated as of the
Closing Date, as amended, waived or otherwise modified from time to time, among
Holdings, the Company, WESCO Distribution -- Canada, Inc., certain financial
institutions to be party thereto, The Chase Manhattan Bank, as U.S.
administrative agent, syndication agent and U.S. collateral agent, The Chase
Manhattan Bank of Canada, as Canadian administrative agent and Canadian
collateral agent, and Lehman Commercial Paper Inc., as documentation agent.
9
"Credit Facilities" means, with respect to the Company, one or more
debt facilities, or commercial paper facilities with banks or other
institutional lenders or indentures providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against receivables), letters of credit or other long-term Indebtedness, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Currency Agreement" means with respect to any Person any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement to which such Person is a party or of which it is a beneficiary.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Designated Noncash Consideration" means the fair market value of
noncash consideration received by the Company or any of its Restricted
Subsidiaries in connection with an Asset Disposition that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate, setting
forth the basis of such valuation, less the amount of cash or cash equivalents
received in connection with a subsequent sale of such Designated Noncash
Consideration.
"Designated Senior Indebtedness" of the Company means (i) the Bank
Indebtedness and (ii) any other Senior Indebtedness of the Company that, at the
date of determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are committed to
lend up to at least $25.0 million and is specifically designated by the Company
in the instrument evidencing or governing such Senior Indebtedness as
"Designated Senior Indebtedness" for purposes of this Indenture. "Designated
Senior Indebtedness" of Holdings has a correlative meaning.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to the 91st day
following the Stated Maturity of the Senior Subordinated Notes; provided,
however, that any Capital Stock that would not constitute Disqualified Stock but
for provisions thereof giving holders thereof the right to require such Person
to repurchase or redeem such Capital Stock upon the occurrence of an "asset
sale" or "change of control" occurring prior to the first anniversary of the
Stated Maturity of the Securities shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the provisions
of Sections 4.06 and 4.08.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense of the Company and its
Consolidated Restricted Subsidiaries, (ii) Consolidated Interest Expense, (iii)
depreciation expense of the Company and its Consolidated Restricted
Subsidiaries, (iv) amortization expense of the
10
Company and its Consolidated Restricted Subsidiaries (excluding amortization
expense attributable to a prepaid cash item that was paid in a prior period),
(v) all other non-cash charges of the Company and its Consolidated Restricted
Subsidiaries (excluding any such non-cash charge to the extent it represents an
accrual of or reserve for cash expenditures in any future period) in each case
for such period and (vi) income attributable to discontinued operations.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and non-cash charges of, a
Restricted Subsidiary of the Company shall be added to Consolidated Net Income
to compute EBITDA only to the extent (and in the same proportion) that the net
income of such Restricted Subsidiary was included in calculating Consolidated
Net Income and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
"Equity Offering" means a private sale or public offering of Capital
Stock (other than Disqualified Stock) of the Company or Holdings.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Contribution" means the Net Cash Proceeds received by the
Company from (a) contributions to its common equity capital and (b) the sale
(other than to a Subsidiary or to any Company or Subsidiary management equity
plan or stock option plan or any other management or employee benefit plan or
agreement) of Capital Stock (other than Disqualified Stock) of the Company, in
each case designated as Excluded Contributions pursuant to an Officers'
Certificate executed by the principal executive officer and the principal
financial officer of the Company on the date such capital contributions are made
or the date such Capital Stock is sold.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, including those set forth
in (i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC. All ratios and
computations based on GAAP contained in this Indenture shall be computed in
conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the
11
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning. The
term "Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holdings Guarantee" means the Guarantee of the obligations with
respect to the Senior Subordinated Notes issued by Holdings pursuant to the
terms of this Indenture.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Person at the time it becomes a Subsidiary. The term "Incurrence" when used as a
noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication),
(i) the principal of and premium (if any) in respect of indebtedness
of such Person for borrowed money;
(ii) the principal of and premium (if any) in respect of obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments;
(iii) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with
respect thereto) (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i),
(ii), (iv) and (v) hereof) to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the 30th day following payment on the letter of credit so
long as such letter of credit is entered into in the ordinary course of
business);
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion
of such services;
(v) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
(vi) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock
or, with respect to any Subsidiary of such Person, any Preferred Stock
(but excluding, in each case, any accrued dividends);
12
(vii) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person
shall be the lesser of (A) the fair market value of such asset at such
date of determination and (B) the amount of such Indebtedness of such
other Persons;
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person; and
(ix) all obligations of the type referred to in clauses (i) through
(viii) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable, directly
or indirectly, as obligor, guarantor or otherwise, including by means of
any Guarantee.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; provided, however, that
the amount outstanding at any time of any Indebtedness Incurred with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP. Any "Qualified Receivables
Transaction", whether or not such transfer constitutes a sale for the purposes
of GAAP, shall not constitute Indebtedness hereunder; provided that any
receivables financing or securitization that does not constitute a Qualified
Receivables Transaction and does not qualify as a sale under GAAP shall
constitute Indebtedness hereunder.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Independent Financial Advisor" means an accounting, appraisal,
investment banking firm or consultant of nationally recognized standing that is,
in the good faith determination of the Company, qualified to perform the task
for which it has been engaged.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall include the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of any Subsidiary of the Company at the
time that such Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a
13
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received (including (a) any cash payments received upon the sale or other
disposition of any Designated Noncash Consideration received in any Asset
Disposition, (b) any cash proceeds received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and (c) any
cash proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to the properties or assets that are
the subject of such Asset Disposition or received in any other non-cash form)
therefrom, in each case net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred (including, without limitation,
all broker's and finder's fees and expenses, all investment banking fees and
expenses, employee severance and termination costs, and trade payable and
similar liabilities solely related to the assets sold or otherwise disposed of
and required to be paid by the seller as a result thereof), and all Federal,
state, provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
relocation expenses incurred as a result thereof, (iii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon or other security agreement of any
kind with respect to such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable law be
repaid out of the proceeds from such Asset Disposition, (iv) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Disposition and (v)
appropriate amounts to be provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the property or other assets
disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company.
14
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Senior Subordinated Notes Trustee. The counsel may be an
employee of or counsel to the Company or the Senior Subordinated Notes Trustee.
"Permitted Holders" means (i) The Cypress Group L.L.C., Cypress
Merchant Banking Partners L.P., Cypress Offshore Partners L.P., Chase Equity
Associates, L.P., Co-Investment Partners, L.P. and any Person who on the Senior
Subordinated Notes Issue Date is an Affiliate of any of the foregoing; (ii) any
Person who is a member of the senior management of the Company or Holdings and a
stockholder of Holdings on the Senior Subordinated Notes Issue Date; and (iii)
any Person acting in the capacity of an underwriter in connection with a public
or private offering of the Company's or Holdings' Capital Stock.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) the Company, a Restricted Subsidiary or a Person
that will, upon the making of such Investment, become a Restricted Subsidiary;
(ii) another Person if as a result of such Investment such other Person is
merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary; (iii)
Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary and
not exceeding $5.0 million in the aggregate outstanding at any one time; (vii)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (viii) any Person to the extent such
Investment represents the non-cash portion of the consideration received for an
Asset Disposition that was made pursuant to and in compliance with Section 4.06;
(ix) Investments made in connection with any Asset Disposition or other sale,
lease, transfer or other disposition permitted under this Indenture; (x) a
Receivables Entity or any Investment by a Receivables Entity in any other Person
in connection with a Qualified Receivables Transaction, including Investments of
funds held in accounts permitted or required by the arrangements governing such
Qualified Receivables Transaction or any related Indebtedness; provided that any
Investment in a Receivables Entity is in the form of a Purchase Money Note,
contribution of additional receivables or an equity interest; (xi) Investments
in a Related Business having an aggregate fair market value, taken together with
all other Investments made pursuant to this clause (xi) that are at that time
outstanding (and not including any Investments outstanding on the Closing Date),
not to exceed 5% of Adjusted Consolidated Assets at the time of such Investments
(with the fair market value of each Investment being measured at the time made
and without giving effect to subsequent changes in value); and (xii) additional
Investments in an aggregate amount which, together with all other Investments
made pursuant to this clause that are then outstanding, does not exceed $10.0
million.
15
"Permitted Liens" means (a) Liens of the Company and its Restricted
Subsidiaries securing Indebtedness of the Company or any of its Restricted
Subsidiaries Incurred under the Credit Agreement or other Credit Facilities to
the extent permitted to be Incurred under Section 4.03(b)(i) and (xiii); (b)
Liens in favor of the Company or its Wholly Owned Restricted Subsidiaries; (c)
Liens on property of a Person existing at the time such Person becomes a
Restricted Subsidiary of the Company or is merged into or consolidated with the
Company or any Restricted Subsidiary of the Company; provided that such Liens
were not Incurred in connection with, or in contemplation of, such merger or
consolidation and such Liens do not extend to or cover any property other than
such property, improvements thereon and any proceeds therefrom; (d) Liens of the
Company securing Indebtedness of the Company Incurred under Section 4.03(b)(v);
(e) Liens of the Company and its Restricted Subsidiaries securing Indebtedness
of the Company or any of its Restricted Subsidiaries (including under a
Sale/Leaseback Transaction) permitted to be Incurred under Section 4.03(b)(vi),
(vii) and (viii) so long as the Capital Stock, property (real or personal) or
equipment to which such Lien attaches solely consists of the Capital Stock,
property or equipment which is the subject of such acquisition, purchase, lease,
improvement, Sale/Leaseback Transaction and additions and improvements thereto
(and the proceeds therefrom); (f) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary of the Company;
provided that such Liens were not Incurred in connection with, or in
contemplation of, such acquisition and such Liens do not extend to or cover any
property other than such property, additions and improvements thereon and any
proceeds therefrom; (g) Liens Incurred or deposits made to secure the
performance of tenders, bids, leases, statutory obligations, surety or appeal
bonds, government contracts, performance and return of money bonds or other
obligations of a like nature Incurred in the ordinary course of business; (h)
Liens existing on the Senior Subordinated Notes Issue Date and any additional
Liens created under the terms of the agreements relating to such Liens existing
on the Senior Subordinated Notes Issue Date; (i) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings; provided that any reserve or
other appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (j) Liens Incurred in the ordinary course of business
of the Company or any Restricted Subsidiary with respect to obligations that do
not exceed $20.0 million in the aggregate at any one time outstanding and that
(1) are not Incurred in connection with or in contemplation of the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (2) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of the business by the Company or such Restricted Subsidiary; (k)
statutory Liens of landlords and warehousemen's, carrier's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens (including
contractual landlords' liens) arising in the ordinary course of business of the
Company and its Restricted Subsidiaries; (l) Liens Incurred or deposits made in
the ordinary course of business of the Company and its Restricted Subsidiaries
in connection with workers' compensation, unemployment insurance and other types
of social security; (m) easements, rights of way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Company or any of
its Restricted Subsidiaries; (n) Liens securing reimbursement obligations with
respect to letters of credit permitted under Section 4.03 which encumber only
cash and marketable securities and documents and other property relating to such
letters of credit and the products and proceeds thereof; (o) judgment and
attachment Liens not giving rise to an Event of Default; (p) any interest or
title of a lessor in the property subject to any
16
Capitalized Lease Obligation permitted under Section 4.03; (q) Liens on accounts
receivable and related assets of the type specified in the definition of
"Qualified Receivables Transaction" Incurred in connection with a Qualified
Receivables Transaction; (r) Liens securing Refinancing Indebtedness to the
extent such Liens do not extend to or cover any property of the Company not
previously subjected to Liens relating to the Indebtedness being refinanced; or
(s) Liens on pledges of the capital stock of any Unrestricted Subsidiary
securing any Indebtedness of such Unrestricted Subsidiary.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
"principal" of a Senior Subordinated Note means the principal of the
Senior Subordinated Note plus the premium, if any, payable on the Senior
Subordinated Note that is due or overdue or is to become due at the relevant
time.
"Purchase Money Note" means a promissory note of a Receivables
Entity evidencing a line of credit, which may be irrevocable, from the Company
or any Subsidiary of the Company in connection with a Qualified Receivables
Transaction to a Receivables Entity, which note (a) shall be repaid from cash
available to the Receivables Entity, other than (i) amounts required to be
established as reserves pursuant to agreements, (ii) amounts paid to investors
in respect of interest, (iii) principal and other amounts owing to such
investors and amounts owing to such investors, (iv) amounts required to pay
expenses in connection with such Qualified Receivables Transaction and (v)
amounts paid in connection with the purchase of newly generated receivables and
(b) may be subordinated to the payments described in (a).
"Qualified Receivables Transaction" means any financing by the
Company or any of its Subsidiaries of accounts receivable in any transaction or
series of transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which (a) the Company or any of its Subsidiaries sells,
conveys or otherwise transfers to a Receivables Entity and (b) a Receivables
Entity sells, conveys or otherwise transfers to any other Person or grants a
security interest to any Person in, any accounts receivable (whether now
existing or arising in the future) of the Company or any of its Subsidiaries,
and any assets related thereto including, without limitation, all collateral
securing such accounts receivable, all contracts and all Guarantees or other
obligations in respect of such accounts receivable, proceeds of such accounts
receivable and other assets which are customarily transferred or in respect of
which security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable; provided that (i) the
Board of Directors shall have determined in good faith that such Qualified
Receivables Transaction is economically fair and reasonable to the Company and
the Receivables Entity and (ii) all sales of accounts receivable and related
assets to the Receivables Entity are made at fair market value (as determined in
good
17
faith by the Company). The grant of a security interest in any accounts
receivable of the Company or any of its Restricted Subsidiaries to secure Bank
Indebtedness shall not be deemed a Qualified Receivables Transaction.
"Receivables Entity" means any Wholly Owned Subsidiary of the
Company (or another Person in which the Company or any Subsidiary of the Company
makes an Investment and to which the Company or any Subsidiary of the Company
transfers accounts receivable and related assets) (i) which engages in no
activities other than in connection with the financing of accounts receivable,
all proceeds thereof and all rights (contractual or other), collateral and other
assets relating thereto, and any business or activities incidental or related to
such business, (ii) which is designated by the Board of Directors (as provided
below) as a Receivables Entity and (iii) no portion of the Indebtedness or any
other obligations (contingent or otherwise) of which (A) is Guaranteed by the
Company or any other Subsidiary of the Company (excluding Guarantees of
obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings), (B) is recourse to or
obligates the Company or any other Subsidiary of the Company in any way other
than pursuant to Standard Securitization Undertakings or (C) subjects any
property or asset of the Company or any other Subsidiary of the Company,
directly or indirectly, contingently or otherwise, to the satisfaction thereof,
other than pursuant to Standard Securitization Undertakings. Any such
designation by the Board of Directors shall be evidenced to the Senior
Subordinated Notes Trustee by filing with the Senior Subordinated Notes Trustee
a certified copy of the resolution of the Board of Directors giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) any Indebtedness of the Company or any
Restricted Subsidiary existing on the date of this Indenture or Incurred in
compliance with this Indenture (including Indebtedness of the Company that
Refinances Refinancing Indebtedness); provided, however, that (i) the
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) the Refinancing Indebtedness
has an Average Life at the time such Refinancing Indebtedness is Incurred that
is equal to or greater than the Average Life of the Indebtedness being
refinanced and (iii) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal amount (or if
issued with original issue discount, the aggregate accreted value) then
outstanding of the Indebtedness being Refinanced (plus any accrued interest and
premium thereon and reasonable expenses Incurred in connection therewith);
provided further, however, that Refinancing Indebtedness shall not include (x)
Indebtedness of a Restricted Subsidiary that Refinances Indebtedness of the
Company or (y) Indebtedness of the Company or a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary.
18
"Related Business" means any businesses of the Company and the
Restricted Subsidiaries on the Closing Date and any business related, ancillary
or complementary thereto.
"Representative" means the trustee, agent or representative (if any)
for an issue of Senior Indebtedness of the Company.
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or a Restricted Subsidiary transfers such
property to a Person and the Company or such Restricted Subsidiary leases it
from such Person, other than leases between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien. "Secured Indebtedness" of Holdings has a correlative meaning.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Discount Notes" means the 111/8% senior discount notes due
2008 issued by Holdings under the indenture dated as of the Closing Date between
Holdings and Bank One, N.A., as trustee.
"Senior Indebtedness" of the Company means the principal of, premium
(if any) and accrued and unpaid interest on (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization of the
Company, regardless of whether or not a claim for post-filing interest is
allowed in such proceedings), and fees and all other amounts owing in respect
of, Bank Indebtedness and all other Indebtedness of the Company, whether
outstanding on the Closing Date or thereafter Incurred, unless in the instrument
creating or evidencing the same or pursuant to which the same is outstanding it
is provided that such obligations are not superior in right of payment to the
Senior Subordinated Notes; provided, however, that Senior Indebtedness shall not
include (i) any obligation of the Company to any Subsidiary, (ii) any liability
for Federal, state, local or other taxes owed or owing by the Company, (iii) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including Guarantees thereof or instruments evidencing such
liabilities), (iv) any Indebtedness or obligation of the Company (and any
accrued and unpaid interest in respect thereof) that by its terms is subordinate
or junior in any respect to any other Indebtedness or obligation of the Company,
including any Senior Subordinated Indebtedness of the Company and any
Subordinated Obligations of the Company, (v) any payment obligations with
respect to any Capital Stock or (vi) any Indebtedness Incurred in violation of
this Indenture. "Senior Indebtedness" of Holdings has a correlative meaning.
"Senior Subordinated Indebtedness" of the Company means the Senior
Subordinated Notes and any other Indebtedness of the Company that specifically
provides that such Indebtedness is to rank pari passu with the Senior
Subordinated Notes in right of payment and is not subordinated by its terms in
right of payment to any
19
Indebtedness or other obligation of the Company which is not Senior
Indebtedness. "Senior Subordinated Indebtedness" of Holdings has a correlative
meaning.
"Senior Subordinated Noteholder" or "Holder" means the Person in
whose name a Senior Subordinated Note is registered on the Registrar's books.
"Senior Subordinated Notes" means the Senior Subordinated Notes
issued under this Indenture.
"Senior Subordinated Notes Issue Date", with respect to any Initial
Senior Subordinated Notes, means the date on which the Initial Senior
Subordinated Notes are originally issued.
"Senior Subordinated Notes Trustee" means the party named as such in
this Indenture until a successor replaces it and, thereafter, means the
successor.
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the SEC, but shall in no event include a
Receivables Entity.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which the Company has determined in good faith to be
customary in an accounts receivable transaction including, without limitation,
those relating to the servicing of the assets of a Receivables Entity.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the Closing Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Senior Subordinated Notes
pursuant to a written agreement. "Subordinated Obligation" of Holdings has a
correlative meaning.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in 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, (ii) investments in time deposit accounts, certificates of deposit and
money market
20
deposits maturing within one year of the date of acquisition thereof issued by a
bank or trust company that is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America having capital, surplus and undivided profits aggregating in
excess of $100,000,000 (or the foreign currency equivalent thereof) and whose
long-term debt is rated "A" (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization (as defined in
Rule 436 under the Securities Act) or any money market fund sponsored by a
registered broker-dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a financial
institution meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than one year after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc.
("S&P"), and (v) investments in securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by S&P or "A" by
Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-
77bbbb), as amended, as in effect on the date of this Indenture.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled by, and published in, the most recent Federal Reserve Statistical
Release H.15 (519) which has become publicly available at least two Business
Days prior to the date fixed for redemption of the Senior Subordinated Notes
following a Change of Control (or, if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the period from the redemption date to June 1, 2003; provided, however,
that if the period from the redemption date to June 1, 2003 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the redemption date to June 1, 2003 is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Senior Subordinated Notes Trustee
assigned by the Senior Subordinated Notes Trustee to administer its corporate
trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
21
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below and (ii) any Subsidiary
of an Unrestricted Subsidiary. The Board of Directors may designate any
Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of,
or owns or holds any Lien on any property of, the Company or any other
Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so
designated; provided, however, that either (A) the Subsidiary to be so
designated has total Consolidated assets of $1,000 or less or (B) if such
Subsidiary has Consolidated assets greater than $1,000, then such designation
would be permitted under Section 4.04. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness under Section 4.03(a) and (y) no Default shall
have occurred and be continuing. Any such designation of a Subsidiary as a
Restricted Subsidiary or Unrestricted Subsidiary by the Board of Directors shall
be evidenced to the Senior Subordinated Notes Trustee by promptly filing with
the Senior Subordinated Notes Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the
Company all the Capital Stock of which (other than directors' qualifying shares)
is owned by the Company or another Wholly Owned Subsidiary.
SECTION 1.02. Other Definitions.
Defined in
Term Section
---- -------
"Affiliate Transaction"................................ 4.07
"Bankruptcy Law"....................................... 6.01
"Blockage Notice"...................................... 10.03
"Change of Control Offer".............................. 4.08(b)
"covenant defeasance option"........................... 8.01(b)
"Custodian"............................................ 6.01
"Event of Default"..................................... 6.01
"Guaranteed Obligations"............................... 11.01
"legal defeasance option".............................. 8.01(b)
"Legal Holiday"........................................ 13.08
22
"Offer"................................................ 4.06(b)
"Offer Amount"......................................... 4.06(c)(2)
"Offer Period"......................................... 4.06(c)(2)
"pay its Holdings Guarantee"........................... 12.03
"pay the Senior Subordinated Notes".................... 10.03
"Paying Agent"......................................... 2.04
"Payment Blockage Period".............................. 10.03
"protected purchaser".................................. 2.08
"Purchase Date"........................................ 4.06(c)(1)
"Registrar"............................................ 2.04
"Restricted Payment"................................... 4.04(b)
"Successor Company".................................... 5.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Senior Subordinated Notes and the
Holdings Guarantee.
"indenture security holder" means a Senior Subordinated Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Senior
Subordinated Notes Trustee.
"obligor" on the indenture securities means the Company, Holdings
and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
23
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2
The Senior Subordinated Notes
SECTION 2.01. Amount of Senior Subordinated Notes; Issuable in
Series. The aggregate principal amount of Senior Subordinated Notes which may be
authenticated and delivered under this Indenture is $500 million. The Senior
Subordinated Notes may be issued in one or more series. All Senior Subordinated
Notes of any one series shall be substantially identical except as to
denomination.
With respect to any Additional Senior Subordinated Notes issued
after the Closing Date (except for Senior Subordinated Notes authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Senior Subordinated Notes pursuant to Section 2.07, 2.08, 2.09, 2.10 or
3.06 or the Appendix), there shall be (i) established in or pursuant to a
resolution of the Board of Directors and (ii) (A) set forth or determined in the
manner provided in an Officers' Certificate or (B) established in one or more
indentures supplemental hereto, prior to the issuance of such Additional Senior
Subordinated Notes:
(1) whether such Additional Senior Subordinated Notes shall be
issued as part of a new or existing series of Senior Subordinated Notes
and the title of such Additional Senior Subordinated Notes (which shall
distinguish the Additional Senior Subordinated Notes of the series from
Senior Subordinated Notes of any other series);
(2) the aggregate principal amount of such Additional Senior
Subordinated Notes which may be authenticated and delivered under this
Indenture, which shall be in an aggregate principal amount not to exceed
$200 million (except for Senior Subordinated Notes authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Senior Subordinated Notes of the same series pursuant to Section
2.07, 2.08, 2.09, 2.10 or 3.06 or the Appendix and except for Senior
Subordinated Notes which,
24
pursuant to Section 2.03, are deemed never to have been authenticated and
delivered hereunder);
(3) the issue price and issuance date of such Additional Senior
Subordinated Notes, including the date from which interest on such
Additional Senior Subordinated Notes shall accrue; provided; however, that
no Additional Senior Subordinated Notes may be issued at a price that
would cause such Additional Senior Subordinated Notes to have "original
issue discount" within the meaning of Section 1273 of the Code;
(4) if applicable, that such Additional Senior Subordinated Notes
shall be issuable in whole or in part in the form of one or more Global
Senior Subordinated Notes (as defined in the Appendix) and, in such case,
the respective depositaries for such Global Senior Subordinated Notes, the
form of any legend or legends which shall be borne by such Global Senior
Subordinated Notes in addition to or in lieu of those set forth in Exhibit
A hereto and any circumstances in addition to or in lieu of those set
forth in Section 2.3 of the Appendix in which any such Global Senior
Subordinated Note may be exchanged in whole or in part for Additional
Senior Subordinated Notes registered, or any transfer of such Global
Senior Subordinated Note in whole or in part may be registered, in the
name or names of Persons other than the depositary for such Global Senior
Subordinated Note or a nominee thereof; and
(5) if applicable, that such Additional Senior Subordinated Notes
shall not be issued in the form of Initial Senior Subordinated Notes as
set forth in Exhibit A, but shall be issued in the form of Senior
Subordinated Exchange Notes as set forth in Exhibit B.
If any of the terms of any Additional Senior Subordinated Notes are
established by action taken pursuant to a resolution of the Board of Directors,
a copy of an appropriate record of such action shall be certified by the
Secretary or any Assistant Secretary of the Company and delivered to the Senior
Subordinated Notes Trustee at or prior to the delivery of the Officers'
Certificate or the indenture supplemental hereto setting forth the terms of the
Additional Senior Subordinated Notes.
SECTION 2.02. Form and Dating. Provisions relating to the Original
Senior Subordinated Notes, the Additional Senior Subordinated Notes, the Private
Senior Subordinated Exchange Notes and the Senior Subordinated Exchange Notes
are set forth in the Appendix, which is hereby incorporated in and expressly
made a part of this Indenture. The (i) Original Senior Subordinated Notes and
the Senior Subordinated Notes Trustee's certificate of authentication, (ii)
Private Senior Subordinated Exchange Notes and the Senior Subordinated Notes
Trustee's certificate of authentication and (iii) any Additional Senior
Subordinated Notes (if issued as Transfer Restricted Senior Subordinated Notes
(as defined in the Appendix)) and the Senior Subordinated Notes Trustee's
certificate of authentication shall each be substantially in the form of Exhibit
A hereto, which is hereby incorporated in and expressly made a part of this
Indenture. The Senior Subordinated Exchange Notes and any Additional Senior
Subordinated Notes issued other than as Transfer Restricted Senior Subordinated
Notes and the Senior Subordinated Notes Trustee's certificate of authentication
shall each be substantially in the form of Exhibit B hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Senior
Subordinated Notes may have notations, legends or
25
endorsements required by law, stock exchange rule, agreements to which the
Company or Holdings is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to the Company). Each
Senior Subordinated Note shall be dated the date of its authentication. The
Senior Subordinated Notes shall be issued only in registered form without
coupons and only in denominations of $1,000 and integral multiples thereof.
SECTION 2.03. Execution and Authentication. One or more Officers
shall sign the Senior Subordinated Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Senior Subordinated Note no
longer holds that office at the time the Senior Subordinated Notes Trustee
authenticates the Senior Subordinated Note, the Senior Subordinated Note shall
be valid nevertheless.
A Senior Subordinated Note shall not be valid until an authorized
signatory of the Senior Subordinated Notes Trustee manually signs the
certificate of authentication on the Senior Subordinated Note. The signature
shall be conclusive evidence that the Senior Subordinated Note has been
authenticated under this Indenture.
The Senior Subordinated Notes Trustee shall authenticate and make
available for delivery Senior Subordinated Notes as set forth in the Appendix.
The Senior Subordinated Notes Trustee may appoint an authenticating
agent reasonably acceptable to the Company to authenticate the Senior
Subordinated Notes. Any such appointment shall be evidenced by an instrument
signed by a Trust Officer, a copy of which shall be furnished to the Company.
Unless limited by the terms of such appointment, an authenticating agent may
authenticate Senior Subordinated Notes whenever the Senior Subordinated Notes
Trustee may do so. Each reference in this Indenture to authentication by the
Senior Subordinated Notes Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Registrar, Paying Agent or agent
for service of notices and demands.
SECTION 2.04. Registrar and Paying Agent. The Company shall maintain
an office or agency where Senior Subordinated Notes may be presented for
registration of transfer or for exchange (the "Registrar") and an office or
agency where Senior Subordinated Notes may be presented for payment (the "Paying
Agent"). The Registrar shall keep a register of the Senior Subordinated Notes
and of their transfer and exchange. The Company may have one or more
co-registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent, and the term "Registrar" includes any
co-registrars. The Company initially appoints the Senior Subordinated Notes
Trustee as (i) Registrar and Paying Agent in connection with the Senior
Subordinated Notes and (ii) the Senior Subordinated Notes Custodian (as defined
in the Appendix) with respect to the Global Senior Subordinated Notes.
The Company shall enter into an appropriate agency agreement with
any Registrar or Paying Agent not a party to this Indenture, which shall
incorporate the terms of the TIA. The agreement shall implement the provisions
of this Indenture that relate to such agent. The Company shall notify the Senior
Subordinated Notes Trustee of the name and address of any such agent. If the
Company fails to maintain a Registrar or Paying Agent, the Senior Subordinated
Notes Trustee shall act as such and shall be
26
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Company or any of its domestically organized Wholly Owned Subsidiaries may act
as Paying Agent or Registrar.
The Company may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Senior Subordinated Notes
Trustee; provided, however, that no such removal shall become effective until
(1) acceptance of an appointment by a successor as evidenced by an appropriate
agreement entered into by the Company and such successor Registrar or Paying
Agent, as the case may be, and delivered to the Senior Subordinated Notes
Trustee or (2) notification to the Senior Subordinated Notes Trustee that the
Senior Subordinated Notes Trustee shall serve as Registrar or Paying Agent until
the appointment of a successor in accordance with clause (1) above. The
Registrar or Paying Agent may resign at any time upon written notice; provided,
however, that the Senior Subordinated Notes Trustee may resign as Paying Agent
or Registrar only if the Senior Subordinated Notes Trustee also resigns as
Senior Subordinated Notes Trustee in accordance with Section 7.08.
SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to each due
date of the principal and interest on any Senior Subordinated Note, the Company
shall deposit with the Paying Agent (or if the Company or a Subsidiary is acting
as Paying Agent, segregate and hold in trust for the benefit of the Persons
entitled thereto) a sum sufficient to pay such principal and interest when so
becoming due. The Company shall require each Paying Agent (other than the Senior
Subordinated Notes Trustee) to agree in writing that the Paying Agent shall hold
in trust for the benefit of Senior Subordinated Noteholders or the Senior
Subordinated Notes Trustee all money held by the Paying Agent for the payment of
principal of or interest on the Senior Subordinated Notes and shall notify the
Senior Subordinated Notes Trustee of any default by the Company in making any
such payment. If the Company or a Subsidiary of the Company acts as Paying
Agent, it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund. The Company at any time may require a Paying Agent to pay
all money held by it to the Senior Subordinated Notes Trustee and to account for
any funds disbursed by the Paying Agent. Upon complying with this Section, the
Paying Agent shall have no further liability for the money delivered to the
Senior Subordinated Notes Trustee.
SECTION 2.06. Senior Subordinated Noteholder Lists. The Senior
Subordinated Notes Trustee shall preserve in as current a form as is reasonably
prac ticable the most recent list available to it of the names and addresses of
Senior Subordinated Noteholders. If the Senior Subordinated Notes Trustee is not
the Registrar, the Company shall furnish, or cause the Registrar to furnish, to
the Senior Subordinated Notes Trustee, in writing at least five Business Days
before each interest payment date and at such other times as the Senior
Subordinated Notes Trustee may request in writing, a list in such form and as of
such date as the Senior Subordinated Notes Trustee may reasonably require of the
names and addresses of Senior Subordinated Noteholders.
SECTION 2.07. Transfer and Exchange. The Senior Subordinated Notes
shall be issued in registered form and shall be transferable only upon the
surrender of a Senior Subordinated Note for registration of transfer and in
compliance with the Appendix. When a Senior Subordinated Note is presented to
the Registrar with a request to register a transfer, the Registrar shall
register the transfer as requested if the requirements of Section 8-401(a)(l) of
the Uniform Commercial Code are met. When
27
Senior Subordinated Notes are presented to the Registrar with a request to
exchange them for an equal principal amount of Senior Subordinated Notes of
other denominations, the Registrar shall make the exchange as requested if the
same requirements are met. To permit registration of transfers and exchanges,
the Company shall execute and the Senior Subordinated Notes Trustee shall
authenticate Senior Subordinated Notes at the Registrar's request. The Company
may require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section. The Company shall not be required to make and the Registrar need
not register transfers or exchanges of Senior Subordinated Notes selected for
redemption (except, in the case of Senior Subordinated Notes to be redeemed in
part, the portion thereof not to be redeemed) or any Senior Subordinated Notes
for a period of 15 days before a selection of Senior Subordinated Notes to be
redeemed.
Prior to the due presentation for registration of transfer of any
Senior Subordinated Note, the Company, Holdings, the Senior Subordinated Notes
Trustee, the Paying Agent, and the Registrar may deem and treat the Person in
whose name a Senior Subordinated Note is registered as the absolute owner of
such Senior Subordinated Note for the purpose of receiving payment of principal
of and interest, if any, on such Senior Subordinated Note and for all other
purposes whatsoever, whether or not such Senior Subordinated Note is overdue,
and none of the Company, Holdings, the Senior Subordinated Notes Trustee, the
Paying Agent, or the Registrar shall be affected by notice to the contrary.
Any Holder of a Global Senior Subordinated Note shall, by acceptance
of such Global Senior Subordinated Note, agree that transfers of beneficial
interest in such Global Senior Subordinated Note may be effected only through a
book-entry system maintained by (i) the Senior Subordinated Noteholder of such
Global Senior Subordinated Note (or its agent) or (ii) any Senior Subordinated
Noteholder of a beneficial interest in such Global Senior Subordinated Note, and
that ownership of a beneficial interest in such Global Senior Subordinated Note
shall be required to be reflected in a book entry.
All Senior Subordinated Notes issued upon any transfer or exchange
pursuant to the terms of this Indenture will evidence the same debt and will be
entitled to the same benefits under this Indenture as the Senior Subordinated
Notes surrendered upon such transfer or exchange.
SECTION 2.08. Replacement Senior Subordinated Notes. If a mutilated
Senior Subordinated Note is surrendered to the Registrar or if the Senior
Subordinated Noteholder of a Senior Subordinated Note claims that the Senior
Subordinated Note has been lost, destroyed or wrongfully taken, the Company
shall issue and the Senior Subordinated Notes Trustee shall authenticate a
replacement Senior Subordinated Note if the requirements of Section 8-405 of the
Uniform Commercial Code are met, such that the Senior Subordinated Noteholder
(i) satisfies the Company or the Senior Subordinated Notes Trustee within a
reasonable time after he has notice of such loss, destruction or wrongful taking
and the Registrar does not register a transfer prior to receiving such
notification, (ii) makes such request to the Company or the Senior Subordinated
Notes Trustee prior to the Senior Subordinated Note being acquired by a
protected purchaser as defined in Section 8-303 of the Uniform Commercial Code
(a "protected purchaser") and (iii) satisfies any other reasonable requirements
of the Senior Subordinated Notes Trustee. If required by the Senior Subordinated
Notes Trustee or the Company, such
28
Senior Subordinated Noteholder shall furnish an indemnity bond sufficient in the
judgment of the Senior Subordinated Notes Trustee to protect the Company, the
Senior Subordinated Notes Trustee, the Paying Agent and the Registrar from any
loss that any of them may suffer if a Senior Subordinated Note is replaced. The
Company and the Senior Subordinated Notes Trustee may charge the Senior
Subordinated Noteholder for their expenses in replacing a Senior Subordinated
Note. In the event any such mutilated, lost, destroyed or wrongfully taken
Senior Subordinated Note has become or is about to become due and payable, the
Company in its discretion may pay such Senior Subordinated Note instead of
issuing a new Senior Subordinated Note in replacement thereof.
Every replacement Senior Subordinated Note is an additional
obligation of the Company.
The provisions of this Section 2.08 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken Senior
Subordinated Notes.
SECTION 2.09. Outstanding Senior Subordinated Notes. Senior
Subordinated Notes outstanding at any time are all Senior Subordinated Notes
authenticated by the Senior Subordinated Notes Trustee except for those canceled
by it, those delivered to it for cancelation and those described in this Section
as not outstanding. A Senior Subordinated Note does not cease to be outstanding
because the Company or an Affiliate of the Company holds the Senior Subordinated
Note.
If a Senior Subordinated Note is replaced pursuant to Section 2.08,
it ceases to be outstanding unless the Senior Subordinated Notes Trustee and the
Company receive proof satisfactory to them that the replaced Senior Subordinated
Note is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the Senior
Subordinated Notes (or portions thereof) to be redeemed or maturing, as the case
may be, and the Paying Agent is not prohibited from paying such money to the
Senior Subordinated Noteholders on that date pursuant to the terms of this
Indenture, then on and after that date such Senior Subordinated Notes (or
portions thereof) cease to be outstanding and interest on them ceases to accrue.
SECTION 2.10. Temporary Senior Subordinated Notes. In the event that
Definitive Senior Subordinated Notes (as defined in the Appendix) are to be
issued under the terms of this Indenture, until such Definitive Senior
Subordinated Notes are ready for delivery, the Company may prepare and the
Senior Subordinated Notes Trustee shall authenticate temporary Senior
Subordinated Notes. Temporary Senior Subordinated Notes shall be substantially
in the form of Definitive Senior Subordinated Notes but may have variations that
the Company considers appropriate for temporary Senior Subordinated Notes.
Without unreasonable delay, the Company shall prepare and the Senior
Subordinated Notes Trustee shall authenticate Definitive Senior Subordinated
Notes and deliver them in exchange for temporary Senior Subordinated Notes upon
surrender of such temporary Senior Subordinated Notes at the office or agency of
the Company, without charge to the Senior Subordinated Noteholder.
29
SECTION 2.11. Cancelation. The Company at any time may deliver
Senior Subordinated Notes to the Senior Subordinated Notes Trustee for
cancelation. The Registrar and the Paying Agent shall forward to the Senior
Subordinated Notes Trustee any Senior Subordinated Notes surrendered to them for
registration of transfer, exchange or payment. The Senior Subordinated Notes
Trustee and no one else shall can cel all Senior Subordinated Notes surrendered
for registration of transfer, exchange, payment or cancelation and deliver
canceled Senior Subordinated Notes to the Company pursuant to written direction
by an Officer. The Company may not issue new Senior Subordinated Notes to
replace Senior Subordinated Notes it has redeemed, paid or delivered to the
Senior Subordinated Notes Trustee for cancelation. The Senior Subordinated Notes
Trustee shall not authenticate Senior Subordinated Notes in place of canceled
Senior Subordinated Notes other than pursuant to the terms of this Indenture.
SECTION 2.12. Defaulted Interest. If the Company defaults in a
payment of interest on the Senior Subordinated Notes, the Company shall pay the
defaulted interest (plus interest on such defaulted interest at the rate of
91/8% per annum to the extent lawful) in any lawful manner. The Company may pay
the defaulted interest to the Persons who are Senior Subordinated Noteholders on
a subsequent special record date. The Company shall fix or cause to be fixed any
such special record date and payment date to the reasonable satisfaction of the
Senior Subordinated Notes Trustee and shall promptly mail or cause to be mailed
to each Senior Subordinated Noteholder a notice that states the special record
date, the payment date and the amount of defaulted interest to be paid.
SECTION 2.13. CUSIP Numbers. The Company in issuing the Senior
Subordinated Notes may use "CUSIP" numbers (if then generally in use) and, if
so, the Senior Subordinated Notes Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Senior Subordinated Noteholders; provided,
however, that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Senior Subordinated Notes
or as contained in any notice of a redemption and that reliance may be placed
only on the other identification numbers printed on the Senior Subordinated
Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Senior Subordinated Notes Trustee. If the
Company elects to redeem Senior Subordinated Notes pursuant to paragraph 5 of
the Senior Subordinated Notes, it shall notify the Senior Subordinated Notes
Trustee in writing of the redemption date and the principal amount of Senior
Subordinated Notes to be redeemed.
The Company shall give each notice to the Senior Subordinated Notes
Trustee provided for in this Section at least 60 days before the redemption date
unless the Senior Subordinated Notes Trustee consents to a shorter period. Such
notice shall be accompanied by an Officers' Certificate and an Opinion of
Counsel from the Company to the effect that such redemption will comply with the
conditions herein. If fewer than all the Senior Subordinated Notes are to be
redeemed, the record date relating to such
30
redemption shall be selected by the Company and given to the Senior Subordinated
Notes Trustee, which record date shall be not fewer than 15 days after the date
of notice to the Senior Subordinated Notes Trustee. Any such notice may be
canceled at any time prior to notice of such redemption being mailed to any
Senior Subordinated Noteholder and shall thereby be void and of no effect.
SECTION 3.02. Selection of Senior Subordinated Notes To Be Redeemed.
If fewer than all the Senior Subordinated Notes are to be redeemed, the Senior
Subordinated Notes Trustee shall select the Senior Subordinated Notes to be
redeemed pro rata or by lot. The Senior Subordinated Notes Trustee shall make
the selection from outstanding Senior Subordinated Notes not previously called
for redemption. The Senior Subordinated Notes Trustee may select for redemption
portions of the principal of Senior Subordinated Notes that have denominations
larger than $1,000. Senior Subordinated Notes and portions of them the Senior
Subordinated Notes Trustee selects shall be in amounts of $1,000 or a whole
multiple of $1,000. Provisions of this Indenture that apply to Senior
Subordinated Notes called for redemption also apply to portions of Senior
Subordinated Notes called for redemption. The Senior Subordinated Notes Trustee
shall notify the Company promptly of the Senior Subordinated Notes or portions
of Senior Subordinated Notes to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Senior Subordinated Notes, the
Company shall mail a notice of redemption by first-class mail to each Senior
Subordinated Noteholder of Senior Subordinated Notes to be redeemed at such
Senior Subordinated Noteholder's registered address.
The notice shall identify the Senior Subordinated Notes to be
redeemed and shall state:
(1) the redemption date;
(2) the redemption price and the amount of accrued interest to the
redemption date;
(3) the name and address of the Paying Agent;
(4) that Senior Subordinated Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Senior Subordinated Notes are
to be redeemed, the certificate numbers and principal amounts of the
particular Senior Subordinated Notes to be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Senior Subordinated
Notes (or portion thereof) called for redemption ceases to accrue on and
after the redemption date;
(7) the CUSIP number, if any, printed on the Senior Subordinated
Notes being redeemed;
31
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Senior Subordinated Notes; and
(9) if applicable, that a Change of Control has occurred and the
circumstances and relevant facts regarding such Change of Control.
At the Company's request, the Senior Subordinated Notes Trustee
shall give the notice of redemption in the Company's name and at the Company's
expense. In such event, the Company shall provide the Senior Subordinated Notes
Trustee with the information required by this Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Senior Subordinated Notes called for redemption become due
and payable on the redemption date and at the redemption price stated in the
notice. Upon surrender to the Paying Agent, such Senior Subordinated Notes shall
be paid at the redemption price stated in the notice, plus accrued interest, if
any, to the redemption date; provided, however, that if the redemption date is
after a regular record date and on or prior to the interest payment date, the
accrued interest shall be payable to the Senior Subordinated Noteholder of the
redeemed Senior Subordinated Notes registered on the relevant record date.
Failure to give notice or any defect in the notice to any Senior Subordinated
Noteholder shall not affect the validity of the notice to any other Senior
Subordinated Noteholder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. on
the redemption date, the Company shall deposit with the Paying Agent (or, if the
Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Senior Subordinated Notes to be redeemed on that date other than Senior
Subordinated Notes or portions of Senior Subordinated Notes called for
redemption that have been delivered by the Company to the Senior Subordinated
Notes Trustee for cancelation.
SECTION 3.06. Senior Subordinated Notes Redeemed in Part. Upon
surrender of a Senior Subordinated Note that is redeemed in part, the Company
shall execute and the Senior Subordinated Notes Trustee shall authenticate for
the Senior Subordinated Noteholder (at the Company's expense) a new Senior
Subordinated Note equal in principal amount to the unredeemed portion of the
Senior Subordinated Note surrendered.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Senior Subordinated Notes. The Company
shall promptly pay the principal of and interest on the Senior Subordinated
Notes on the dates and in the manner provided in the Senior Subordinated Notes
and in this Indenture. Principal and interest shall be considered paid on the
date due if on such date the Senior Subordinated Notes Trustee or the Paying
Agent holds in accordance with this Indenture money sufficient to pay all
principal and interest then due and the Senior Subordinated Notes Trustee or the
Paying Agent, as the case may be, is not prohibited from paying
32
such money to the Senior Subordinated Noteholders on that date pursuant to the
terms of this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Senior Subordinated Notes, and it shall pay interest
on overdue installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that the Company may not
be subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC and provide the Senior Subordinated
Notes Trustee and any Senior Subordinated Noteholder or prospective Senior
Subordinated Noteholder (upon the request of such Senior Subordinated Noteholder
or prospective Senior Subordinated Noteholder) with such annual reports and such
information, documents and other reports as are specified in Sections 13 and
15(d) of the Exchange Act and applicable to a U.S. corporation subject to such
Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filing of such information, documents
and reports under such Sections.
SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness; provided, however, that the Company may Incur
Indebtedness if on the date of such Incurrence and after giving effect thereto
the Consolidated Coverage Ratio would be greater than 2.00:1.00.
(b) Notwithstanding Section 4.03(a), the Company and its Restricted
Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Credit Agreement or any
other Credit Facility in an aggregate principal amount at any time
outstanding not to exceed $400 million;
(ii) Indebtedness of the Company owed to and held by any Wholly
Owned Subsidiary or Indebtedness of a Restricted Subsidiary owed to and
held by the Company or any Wholly Owned Subsidiary; provided, however,
that (A) any subsequent issuance or transfer of any Capital Stock or any
other event that results in any such Wholly Owned Subsidiary ceasing to be
a Wholly Owned Subsidiary or any subsequent transfer of any such
Indebtedness (except to the Company or a Wholly Owned Subsidiary) shall be
deemed, in each case, to constitute the Incurrence of such Indebtedness by
the issuer thereof and (B) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations with respect to the Senior
Subordinated Notes;
(iii) Indebtedness (A) represented by the Senior Subordinated Notes
(not including any Additional Senior Subordinated Notes), (B) outstanding
on the Closing Date (other than the Indebtedness described in clauses (i)
and (ii) above), (C) consisting of Refinancing Indebtedness Incurred in
respect of any Indebtedness described in this clause (iii) (including
Indebtedness Refinancing Refinancing Indebtedness) or Section 4.03(a) and
(D) consisting of Guarantees of any Indebtedness permitted under clauses
(i) and (ii) of this paragraph (b);
33
(iv) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary
was acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Subsidiary of or was otherwise acquired by the Company); provided,
however, if the aggregate amount of all such Indebtedness of all such
Restricted Subsidiaries would exceed $20 million, that on the date that
such Restricted Subsidiary is acquired by the Company, the Company would
have been able to Incur $1.00 of additional Indebtedness pursuant to
Section 4.03(a) after giving effect to the Incurrence of such Indebtedness
pursuant to this clause (iv) and (B) Refinancing Indebtedness Incurred by
a Restricted Subsidiary in respect of Indebtedness Incurred by such
Restricted Subsidiary pursuant to this clause (iv);
(v) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by the
Company and the Restricted Subsidiaries in the ordinary course of their
business, and (B) under Hedging Obligations consisting of Interest Rate
Agreements directly related (as determined in good faith by the Company)
to Indebtedness permitted to be Incurred by the Company and its Restricted
Subsidiaries pursuant to this Indenture and Currency Agreements Incurred
in the ordinary course of business;
(vi) Indebtedness Incurred by the Company or any Restricted
Subsidiary (including Capitalized Lease Obligations) financing the
purchase, lease or improvement of property (real or personal) or equipment
(whether through the direct purchase of assets or the Capital Stock of the
Person owning such assets), in each case Incurred no more than 180 days
after such purchase, lease or improvement of such property and any
Refinancing Indebtedness in respect of such Indebtedness; provided,
however, that at the time of the Incurrence of such Indebtedness and after
giving effect thereto, the aggregate principal amount of all Indebtedness
incurred pursuant to this clause (vi) and then outstanding shall not
exceed the greater of $25.0 million and 5% of Adjusted Consolidated
Assets;
(vii) Indebtedness Incurred by the Company in connection with the
acquisition of a Related Business and any Refinancing Indebtedness in
respect of such Indebtedness; provided, however, that the aggregate amount
of Indebtedness Incurred and outstanding pursuant to this clause (vii)
shall not exceed $50.0 million at any one time;
(viii) Attributable Debt Incurred by the Company in respect of
Sale/Leaseback Transactions; provided, however, that the aggregate amount
of Attributable Debt Incurred and outstanding pursuant to this clause
(viii) shall not exceed $75.0 million at any one time;
(ix) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, purchase price
adjustment or similar obligations, in each case, Incurred or assumed in
connection with the disposition of any business, assets or a Subsidiary,
other than Guarantees of Indebtedness Incurred by any Person acquiring all
or any portion of such business, assets or a
34
Subsidiary for the purpose of financing such acquisition; provided,
however, that the maximum assumable liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds actually received
by the Company and its Restricted Subsidiaries in connection with such
disposition;
(x) any Guarantee by the Company of Indebtedness or other
obligations of any of its Restricted Subsidiaries so long as the
Incurrence of such Indebtedness Incurred by such Restricted Subsidiary is
permitted under the terms of this Indenture;
(xi) Indebtedness arising from Guarantees to suppliers, lessors,
licensees, contractors, franchisees or customers Incurred in the ordinary
course of business;
(xii) Indebtedness Incurred by a Receivables Entity in a Qualified
Receivables Transaction that is not recourse to the Company or any other
Restricted Subsidiary of the Company (except for Standard Securitization
Undertakings); and
(xiii) Indebtedness (other than Indebtedness permitted to be
Incurred pursuant to Section 4.03(a) or any other clause of this Section
4.03(b)) in an aggregate principal amount on the date of Incurrence that,
when added to all other Indebtedness Incurred pursuant to this clause
(xiii) and then outstanding, shall not exceed $50.0 million.
(c) The Company shall not Incur any Indebtedness if such
Indebtedness is subordinate or junior in ranking in any respect to any Senior
Indebtedness of the Company unless such Indebtedness is Senior Subordinated
Indebtedness of the Company or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness of the Company.
(d) Notwithstanding any other provision of this Section 4.03, the
maximum amount of Indebtedness that the Company or any Restricted Subsidiary may
Incur pursuant to this Section shall not be deemed to be exceeded solely as a
result of fluctuations in the exchange rates of currencies. For purposes of
determining the outstanding principal amount of any particular Indebtedness
Incurred pursuant to this Section 4.03, (i) Indebtedness permitted by this
Section 4.03 need not be permitted solely by reference to one provision
permitting such Indebtedness but may be permitted in part by one such provision
and in part by one or more other provisions of this Section permitting such
Indebtedness and (ii) in the event that Indebtedness meets the criteria of more
than one of the types of Indebtedness described in this Section, the Company, in
its sole discretion, shall classify or reclassify such Indebtedness and only be
required to include the amount of such Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to (i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Company) or similar payment to the direct
or indirect holders of its Capital Stock except dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and except
dividends or distributions payable to the Company or another Restricted
Subsidiary (and, if such Restricted Subsidiary has equity holders other
35
than the Company or other Restricted Subsidiaries, to its other equity holders
on a pro rata basis), (ii) purchase, redeem, retire or otherwise acquire for
value any Capital Stock of Holdings, the Company or any Restricted Subsidiary
held by Persons other than the Company or another Restricted Subsidiary, (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment any Subordinated Obligations of the Company (other than the purchase,
repurchase or other acquisition of Subordinated Obligations of the Company
purchased in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition) or (iv) make any Investment (other than a Permitted Investment) in
any Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment being herein referred to
as a "Restricted Payment") if at the time the Company or such Restricted
Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company could not Incur at least $1.00 of additional
Indebtedness under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a resolution of the Board of
Directors) declared or made subsequent to the Closing Date would exceed
the sum of:
(A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the beginning of the
fiscal quarter immediately following the fiscal quarter during which
the Closing Date occurs to the end of the most recent fiscal quarter
for which internal financial statements are available prior to the
date of such Restricted Payment (or, in case such Consolidated Net
Income will be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds or fair market value of
assets or property received by the Company as a contribution to its
equity capital or from the issue or sale of its Capital Stock (in
each case other than Disqualified Stock and Excluded Contributions)
subsequent to the Closing Date (other than an issuance or sale to
(x) a Subsidiary of the Company or (y) an employee stock ownership
plan or other trust established by the Company or any of its
Subsidiaries);
(C) the amount by which Indebtedness or Disqualified Stock of
the Company or its Restricted Subsidiaries is reduced on the
Company's balance sheet upon the conversion or exchange (other than
by a Subsidiary of the Company) subsequent to the Closing Date of
any Indebtedness or Disqualified Stock of the Company or its
Restricted Subsidiaries issued after the Closing Date for Capital
Stock (other than Disqualified Stock) of the Company (less the
amount of any cash or the fair market value of other property
distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange); and
36
(D) the amount equal to the net reduction in Investments in
any Person (other than a Restricted Subsidiary) resulting from (i)
payments of dividends, repayments of the principal of loans or
advances or other transfers of assets to the Company or any
Restricted Subsidiary from such Person, (ii) the sale or liquidation
for cash of such Investment or (iii) the redesignation of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each
case as provided in the definition of "Investment") not to exceed,
in the case of any Unrestricted Subsidiary, the amount of
Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary, which amount was
included in the calculation of the amount of Restricted Payments.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any Restricted Payment made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital Stock issued
or sold to a Subsidiary of the Company or an employee stock ownership plan
or other trust established by the Company or any of its Subsidiaries);
provided, however, that (A) such Restricted Payment shall be excluded in
the calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale applied in the manner set forth in this clause (i)
shall be excluded from the calculation of amounts under Section
4.04(a)(3)(B);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of the Company that is permitted to be
Incurred pursuant to Section 4.03(b); provided, however, that such
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount of
Restricted Payments;
(iii) any purchase or redemption of Subordinated Obligations of the
Company from Net Available Cash to the extent permitted by Section 4.06;
provided, however, that such purchase or redemption shall be excluded in
the cal culation of the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.04(a); provided, however, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
(v) any Restricted Payment made for the repurchase, redemption or
other acquisition or retirement for value of any Capital Stock of
Holdings, the Company or any of their respective Subsidiaries held by any
employee, former employee, director or former director of Holdings, the
Company or any of their respective Subsidiaries (and any permitted
transferees thereof) pursuant to any equity subscription agreement, stock
option agreement or plan or other similar agreement; provided, however,
that the aggregate amount of such Restricted Payments shall not exceed
$5.0 million in any calendar year and $20.0 million in
37
the aggregate; provided further, however, that such Restricted Payments
shall be included in the calculation of the amount of Restricted Payments;
(vi) payment of dividends, other distributions or other amounts by
the Company for the purposes set forth in clauses (A) through (E) below;
provided, however, that such dividend, distribution or amount shall be
excluded in the calculation of the amount of Restricted Payments:
(A) to Holdings in amounts equal to the amounts required for
Holdings to pay franchise taxes and other fees required to maintain
its corporate existence and provide for other operating costs of up
to $2.0 million per calendar year;
(B) to Holdings in amounts equal to amounts required for
Holdings to pay Federal, state and local income taxes that are then
actually due and owing by Holdings to the extent such items relate
to the Company and its Subsidiaries;
(C) to Holdings to permit Holdings to pay financial advisory,
financing, underwriting or placement fees to Cypress and its
Affiliates;
(D) to Holdings to permit Holdings to pay any employment,
noncompetition, compensation or confidentiality arrangements entered
into with its employees in the ordinary course of business to the
extent such employees are primarily engaged in activities which
relate to the Company and its Subsidiaries; and
(E) to Holdings to permit Holdings to pay customary fees and
indemnities to directors and officers of Holdings to the extent such
directors and officers are primarily engaged in activities which
relate to the Company and its Subsidiaries;
(vii) following the initial Equity Offering by the Company or
Holdings, any payment of dividends or common stock buybacks by the Company
in an aggregate amount in any year not to exceed 6% of the aggregate Net
Cash Proceeds actually received by the Company in connection with such
initial Equity Offering and any subsequent Equity Offering by the Company
or Holdings; provided, however, that no Default or Event of Default shall
have occurred and be continuing immediately before or after any such
payment; provided further, however, that such dividends or common stock
buybacks shall be included in the calculation of the amount of Restricted
Payments;
(viii) any repurchase of Capital Stock deemed to occur upon exercise
of stock options if such Capital Stock represents a portion of the
exercise price of such option; provided, however, that such repurchase
shall be included in the calculation of the amount of Restricted Payments;
(ix) the payment of any dividend or the making of any distribution
to Holdings in amounts sufficient to permit Holdings (A) to pay interest
when due on the Senior Discount Notes and (B) to make any mandatory
redemptions, repurchases or principal or accreted value payments in
respect of the Senior
38
Discount Notes; provided, however, that such payments, dividends and
distributions shall be excluded in the calculation of the amount of
Restricted Payments;
(x) the declaration and payment of dividends to holders of any class
or series of Disqualified Stock of the Company issued in accordance with
Section 4.03(b) to the extent such dividends are included in the
definition of Consolidated Interest Expense; provided, however, that such
dividends shall be included in the calculation of the amount of Restricted
Payments;
(xi) Investments made with Excluded Contributions; provided,
however, that such Investments shall be excluded in the calculation of the
amount of Restricted Payments;
(xii) any Restricted Payment made to fund the Recapitalization
(including fees and expenses); provided, however, that such Restricted
Payment shall be excluded in the calculation of the amount of Restricted
Payments; or
(xiii) other Restricted Payments in an aggregate amount not to
exceed $10.0 million; provided, however, that such payments shall be
included in the calculation of the amount of Restricted Payments.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness or other obligations owed to the
Company, (ii) make any loans or advances to the Company or (iii) transfer any of
its property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Closing Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
Incurred as consideration in, in contemplation of, or to provide all or
any portion of the funds or credit support utilized to consummate the
transaction or series of related transactions pursuant to which such
Restricted Subsidiary became a Restricted Subsidiary or was otherwise
acquired by the Company) and outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (1) or (2) of this Section 4.05 or this clause (3)
or contained in any amendment to an agreement referred to in clause (1) or
(2) of this Section 4.05 or this clause (3); provided, however, that the
encumbrances and restrictions contained in any such Refinancing agreement
or amendment are no less favorable to the Senior Subordinated Noteholders
than the encumbrances and restrictions contained in such predecessor
agreements;
39
(4) in the case of clause (iii), any encumbrance or restriction (A)
that restricts in a customary manner the subletting, assignment or
transfer of any property or asset that is subject to a lease, license or
similar contract, (B) contained in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent such
encumbrance or restriction restricts the transfer of the property subject
to such security agreements or mortgages or (C) in connection with
purchase money obligations for property acquired in the ordinary course of
business;
(5) with respect to a Restricted Subsidiary, any restriction imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition;
(6) any encumbrance or restriction of a Receivables Entity effected
in connection with a Qualified Receivables Transaction; provided, however,
that such restrictions apply only to such Receivables Entity; and
(7) any encumbrance or restriction existing pursuant to other
Indebtedness permitted to be Incurred subsequent to the Senior
Subordinated Notes Issue Date pursuant to Section 4.03; provided, however,
that any such encumbrance or restrictions are ordinary and customary with
respect to the type of Indebtedness being Incurred (under the relevant
circumstances).
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
make any Asset Disposition unless (i) the Company or such Restricted Subsidiary
receives consideration (including by way of relief from, or by any other Person
assuming sole responsibility for, any liabilities, contingent or otherwise) at
the time of such Asset Disposition at least equal to the fair market value (as
determined in good faith by the Company) of the shares and assets subject to
such Asset Disposition, (ii) at least 75% of the consideration thereof received
by the Company or such Restricted Subsidiary is in the form of cash or cash
equivalents (provided that the amount of (w) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Senior Subordinated
Notes) that are assumed by the transferee of any such assets without recourse to
the Company or any of the Restricted Subsidiaries, (x) any notes or other
obligations received by the Company or such Restricted Subsidiary from such
transferee that are converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received) within 180 days following the closing
of such Asset Disposition, (y) any Designated Noncash Consideration received by
the Company or any of its Restricted Subsidiaries in such Asset Disposition
having an aggregate fair market value, taken together with all other Designated
Noncash Consideration received pursuant to this clause (y) that is at that time
outstanding, not to exceed 5% of Adjusted Consolidated Assets at the time of the
receipt of such Designated Noncash Consideration (with the fair market value of
each item of Designated Noncash Consideration being measured at the time
received and without giving effect to subsequent changes in value) and (z) any
assets received in exchange for assets related to a Related Business of
comparable market value in the good faith determination of the Board of
Directors shall be deemed to be cash for purposes of this provision) and (iii)
an amount equal to 100% of the Net Available Cash from such Asset
40
Disposition is applied by the Company (or such Restricted Subsidiary, as the
case may be) (A) first, to the extent the Company elects (or is required by the
terms of any Indebtedness), to prepay, repay, redeem or purchase Senior
Indebtedness of the Company or Indebtedness (other than any Disqualified Stock
and other than any Preferred Stock) of a Wholly Owned Subsidiary (in each case
other than Indebtedness owed to the Company or an Affiliate of the Company)
within 365 days after the later of the date of such Asset Disposition or the
receipt of such Net Available Cash; (B) second, to the extent of the balance of
Net Available Cash after application in accordance with clause (A), to the
extent the Company or such Restricted Subsidiary elects, to reinvest in
Additional Assets (including by means of an Investment in Additional Assets by a
Restricted Subsidiary with Net Available Cash received by the Company or another
Restricted Subsidiary) within 365 days from the later of such Asset Disposition
or the receipt of such Net Available Cash; and (C) third, to the extent of the
balance of such Net Available Cash after application in accordance with clauses
(A) and (B), to make an Offer (as defined below) to purchase Senior Subordinated
Notes pursuant to and subject to the conditions of Section 4.06(b); provided,
however, that if the Company elects (or is required by the terms of any other
Senior Subordinated Indebtedness of the Company), such Offer may be made ratably
to purchase the Senior Subordinated Notes and other Senior Subordinated
Indebtedness of the Company; provided, however, that in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to clause (A) or (C)
above, the Company or such Restricted Subsidiary shall retire such Indebtedness
and shall cause the related loan commitment (if any) to be permanently reduced
in an amount equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this Section 4.06, the Company and
the Restricted Subsidiaries shall not be required to apply any Net Available
Cash in accordance with this Section 4.06(a) except to the extent that the
aggregate Net Available Cash from all Asset Dispositions that is not applied in
accordance with this Section 4.06 (a) exceeds $20.0 million.
(b) In the event of an Asset Disposition that requires the purchase
of Senior Subordinated Notes (and other Senior Subordinated Indebtedness of the
Company) pursuant to Section 4.06(a)(iii)(C), the Company shall be required to
purchase Senior Subordinated Notes (and other Senior Subordinated Indebtedness
of the Company) tendered pursuant to an offer by the Company for the Senior
Subordinated Notes (and other Senior Subordinated Indebtedness of the Company)
(the "Offer") at a purchase price of 100% of their principal amount plus accrued
and unpaid interest and liquidated damages, if any, to the date of purchase in
accordance with the procedures (including prorating in the event of
oversubscription), set forth in Section 4.06(c). If the aggregate purchase price
of Senior Subordinated Notes (and other Senior Subordinated Indebtedness of the
Company) tendered pursuant to the Offer is less than the Net Available Cash
allotted to the purchase of the Senior Subordinated Notes (and other Senior
Subordinated Indebtedness of the Company), the Company may apply the remaining
Net Available Cash for any purpose permitted by the terms of this Indenture. The
Company shall not be required to make an Offer for Senior Subordinated Notes
(and other Senior Subordinated Indebtedness of the Company) pursuant to this
Section 4.06 if the Net Available Cash available therefor (after application of
the proceeds as provided in clauses (A) and (B) of Section 4.06(a)(iii)) is less
than $10.0 million for any particular Asset Disposition (which lesser amount
shall be carried forward for purposes of determining whether an Offer is
required with respect to the Net Available Cash from any subsequent Asset
Disposition).
41
(c) (1) Promptly, and in any event within 30 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Senior Subordinated Notes Trustee and send, by first-class mail to each
Senior Subordinated Noteholder, a written notice stating that the Senior
Subordinated Noteholder may elect to have his Senior Subordinated Notes
purchased by the Company either in whole or in part (subject to prorating as
hereinafter described in the event the Offer is oversubscribed) in integral
multiples of $1,000 of principal amount, at the applicable purchase price. The
notice shall specify a purchase date not less than 30 days nor more than 60 days
after the date of such notice (the "Purchase Date") and shall contain or
incorporate by reference such information concerning the business of the Company
which the Company in good faith believes will enable such Senior Subordinated
Noteholders to make an informed decision and all instructions and materials
necessary to tender Senior Subordinated Notes pursuant to the Offer, together
with the address referred to in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Senior Subordinated Notes Trustee as provided above, the
Company shall deliver to the Senior Subordinated Notes Trustee an Officers'
Certificate as to (i) the amount of the Offer (the "Offer Amount"), (ii) the
allocation of the Net Available Cash from the Asset Dispositions pursuant to
which such Offer is being made and (iii) the compliance of such allocation with
the provisions of Section 4.06(a). On such date, the Company shall also
irrevocably deposit with the Senior Subordinated Notes Trustee or with a paying
agent (or, if the Company is acting as its own paying agent, segregate and hold
in trust) an amount equal to the Offer Amount to be invested in Temporary Cash
Investments and to be held for payment in accordance with the provisions of this
Section. Upon the expiration of the period for which the Offer remains open (the
"Offer Period"), the Company shall deliver to the Senior Subordinated Notes
Trustee for cancelation the Senior Subordinated Notes or portions thereof that
have been properly tendered to and are to be accepted by the Company. The Senior
Subordinated Notes Trustee (or the Paying Agent, if not the Senior Subordinated
Notes Trustee) shall, on the date of purchase, mail or deliver payment to each
tendering Senior Subordinated Noteholder in the amount of the purchase price. In
the event that the aggregate purchase price of the Senior Subordinated Notes
(and other Senior Subordinated Indebtedness of the Company) delivered by the
Company to the Senior Subordinated Notes Trustee is less than the Offer Amount
applicable to the Senior Subordinated Notes (and other Senior Subordinated
Indebtedness of the Company), the Senior Subordinated Notes Trustee shall
deliver the excess to the Company immediately after the expiration of the Offer
Period for application in accordance with this Section 4.06.
(3) Senior Subordinated Noteholders electing to have a Senior
Subordinated Note purchased shall be required to surrender the Senior
Subordinated Note, with an appropriate form duly completed, to the Company at
the address specified in the notice at least three Business Days prior to the
Purchase Date. Senior Subordinated Noteholders shall be entitled to withdraw
their election if the Senior Subordinated Notes Trustee or the Company receives
not later than one Business Day prior to the Purchase Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Senior
Subordinated Noteholder, the principal amount of the Senior Subordinated Note
which was delivered by the Senior Subordinated Noteholder for purchase and a
statement that such Senior Subordinated Noteholder is withdrawing his election
to have such Senior Subordinated Note purchased. If at the expiration of the
Offer Period the aggregate principal amount of Senior Subordinated Notes and any
other
42
Senior Subordinated Indebtedness of the Company included in the Offer
surrendered by holders thereof exceeds the Offer Amount, the Company shall
select the Senior Subordinated Notes and other Senior Subordinated Indebtedness
of the Company to be purchased on a pro rata basis (with such adjustments as may
be deemed appropriate by the Company so that only Senior Subordinated Notes and
other Senior Subordinated Indebtedness of the Company in denominations of
$1,000, or integral multiples thereof, shall be purchased). Senior Subordinated
Noteholders whose Senior Subordinated Notes are purchased only in part will be
issued new Senior Subordinated Notes equal in princi pal amount to the
unpurchased portion of the Senior Subordinated Notes surrendered.
(4) At the time the Company delivers Senior Subordinated Notes to
the Senior Subordinated Notes Trustee which are to be accepted for purchase, the
Company shall also deliver an Officers' Certificate stating that such Senior
Subordinated Notes are to be accepted by the Company pursuant to and in
accordance with the terms of this Sec tion. A Senior Subordinated Note shall be
deemed to have been accepted for purchase at the time the Senior Subordinated
Notes Trustee, directly or through an agent, mails or delivers payment therefor
to the surrendering Senior Subordinated Noteholder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Senior Subordinated Notes
pursuant to this Section. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue thereof.
SECTION 4.07. Limitation on Transactions with Affiliates. (a) The
Company shall not, and shall not cause or permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or Guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction") involving
aggregate consideration in excess of $5.0 million, unless (i) such Affiliate
Transaction is on terms that are not materially less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, the Company delivers to the Senior Subordinated Notes Trustee a
resolution adopted by the majority of the Board of Directors, approving such
Affiliate Transaction and set forth in an Officers' Certificate certifying that
such Affiliate Transaction complies with clause (i) above.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or other payments, Guarantees, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements,
stock options and stock ownership plans approved by the Board of Directors,
(iii) the grant of stock options or similar rights to employees and directors of
the Company pursuant to plans approved by the Board of Directors, (iv) loans or
advances to employees in the ordinary course of business in accordance with past
practices of the Company, but in any event not to exceed $5.0 million in the
aggregate outstanding at any one time, (v) the payment of reasonable fees
43
to directors of the Company and its Restricted Subsidiaries who are not
employees of the Company or its Subsidiaries, (vi) any transaction between the
Company and a Restricted Subsidiary or between Restricted Subsidiaries, (vii)
any transaction effected as part of a Qualified Receivables Transaction, (viii)
any payment by the Company to Holdings to permit Holdings to pay any Federal,
state, local or other taxes that are then actually due and owing by Holdings,
(ix) indemnification agreements with, and the payment of fees and indemnities
to, directors, officers and employees of the Company and its Restricted
Subsidiaries, in each case, in the ordinary course of business, (x) any
employment, compensation, noncompetition or confidentiality agreement entered
into by the Company and its Restricted Subsidiaries with its employees in the
ordinary course of business, (xi) the payment by the Company of fees, expenses
and other amounts to Cypress and its Affiliates in connection with the
Recapitalization, (xii) payments by the Company or any of its Restricted
Subsidiaries to Cypress and its Affiliates made pursuant to any financial
advisory, financing, underwriting or placement agreement, or in respect of other
investment banking activities, in each case, as determined by the Board of
Directors in good faith, (xiii) any issuance of Capital Stock of the Company
(other than Disqualified Stock), (xiv) any agreement as in effect as of the date
of this Indenture or any amendment or replacement hereto so long as any such
amendment or replacement agreement is not more disadvantageous to the Senior
Subordinated Noteholders of the Senior Subordinated Notes in any material
respect than the original agreement as in effect on the Closing Date and (xv)
transactions in which the Company or any of its Restricted Subsidiaries, as the
case may be, delivers to the Senior Subordinated Notes Trustee a letter from an
Independent Financial Advisor stating that such transaction is fair to the
Company or such Restricted Subsidiary from a financial point of view or meets
the requirements of Section 4.07(a).
SECTION 4.08. Change of Control. (a) Upon the occurrence of a Change
of Control, unless all Senior Subordinated Notes have been called for redemption
pursuant to paragraph 5 of the Senior Subordinated Notes, each Senior
Subordinated Noteholder shall have the right to require the Company to
repurchase all or any part of such Senior Subordinated Noteholder's Senior
Subordinated Notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest and liquidated damages, if any,
to the date of repurchase (subject to the right of Senior Subordinated
Noteholders of record on the relevant record date to receive interest due on the
relevant interest payment date), in accordance with Section 4.08(b). Prior to
the mailing of the notice referred to below, but in any event within 30 days
following the date on which the Company becomes aware that a Change of Control
has occurred, if the purchase of the Senior Subordinated Notes would violate or
constitute a default under any other Indebtedness of the Company, then the
Company shall, to the extent needed to permit such purchase of Senior
Subordinated Notes, either (i) repay all such Indebtedness and terminate all
commitments outstanding thereunder or (ii) request the holders of such
Indebtedness to give the requisite consents to permit the purchase of the Senior
Subordinated Notes as provided below. Until such time as the Company is able to
repay all such Indebtedness and terminate all commitments outstanding thereunder
or such time as such requisite consents are obtained, the Company shall not be
required to make the Change of Control Offer or purchase the Senior Subordinated
Notes pursuant to the provisions described below.
(b) Within 30 days following any Change of Control, unless all
Senior Subordinated Notes have been called for redemption pursuant to paragraph
5 of the Senior Subordinated Notes, the Company shall mail a notice to each
Senior Subordinated
44
Noteholder with a copy to the Senior Subordinated Notes Trustee (the "Change of
Control Offer") stating:
(1) that a Change of Control has occurred and that such Senior
Subordinated Noteholder has the right to require the Company to purchase
such Senior Subordinated Noteholder's Senior Subordinated Notes at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest and liquidated damages, if any, to the date of
repurchase (subject to the right of Senior Subordinated Noteholders of
record on the relevant record date to receive interest on the relevant
interest payment date);
(2) the circumstances and relevant facts regarding such Change of
Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with this
Section, that a Senior Subordinated Noteholder must follow in order to
have its Senior Subordinated Notes repurchased.
(c) Senior Subordinated Noteholders electing to have a Senior
Subordinated Note repurchased shall be required to surrender the Senior
Subordinated Note, with an appropriate form duly completed, to the Company at
the address specified in the notice at least three Business Days prior to the
repurchase date. Senior Subordinated Noteholders shall be entitled to withdraw
their election if the Senior Subordinated Notes Trustee or the Company receives
not later than one Business Day prior to the repurchase date a telegram, telex,
facsimile transmission or letter setting forth the name of the Senior
Subordinated Noteholder, the principal amount of the Senior Subordinated Note
which was delivered for repurchase by the Senior Subordinated Noteholder and a
statement that such Senior Subordinated Noteholder is withdrawing his election
to have such Senior Subordinated Note repurchased.
(d) On the repurchase date, all Senior Subordinated Notes
repurchased by the Company under this Section shall be delivered to the Senior
Subordinated Notes Trustee for cancelation, and the Company shall pay the
purchase price plus accrued and unpaid interest and liquidated damages, if any,
to the Senior Subordinated Noteholders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section, the
Company will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in Section
4.08(b) applicable to a Change of Control Offer made by the Company and
purchases all Senior Subordinated Notes validly tendered and not withdrawn under
such Change of Control Offer.
(f) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Senior Subordinated Notes
pursuant to this Section. To the extent that the provisions of any securities
laws or regulations
45
conflict with provisions of this Section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.09. Compliance Certificate. The Company shall deliver to
the Senior Subordinated Notes Trustee within 120 days after the end of each
fiscal year of the Company an Officers' Certificate stating that a review of the
Company's activities during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing such certificate,
whether to the best of such Officer's knowledge the Company during such
preceding fiscal year has kept, observed, performed and fulfilled each and every
such covenant contained in this Indenture and that in the course of the
performance by the signers of their duties as Officers of the Company they would
normally have knowledge of any Default and whether or not the signers know of
any Default that occurred during such period. If they do know of any Default,
the certificate shall describe the Default, its status and what action the
Company is taking or proposes to take with respect thereto. The Company also
shall comply with Section 314(a)(4) of the TIA.
SECTION 4.10. Further Instruments and Acts. Upon request of the
Senior Subordinated Notes Trustee, the Company shall execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
SECTION 4.11. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. The Company shall not sell or otherwise dispose of any
shares of Capital Stock of a Restricted Subsidiary, and shall not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock except: (i) to the Company or a
Wholly Owned Subsidiary or to any director of a Restricted Subsidiary to the
extent required as director's qualifying shares; (ii) if, immediately after
giving effect to such issuance, sale or other disposition, neither the Company
nor any of its Subsidiaries own any Capital Stock of such Restricted Subsidiary
or (iii) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any
Investment in such Person remaining after giving effect thereto would have been
permitted to be made under Section 4.04 if made on the date of such issuance,
sale or other disposition. The provisions of this Section 4.11 shall not
prohibit any transaction effected as part of a Qualified Receivables
Transaction. The proceeds of any sale of such Capital Stock permitted hereby
shall be treated as Net Available Cash from an Asset Disposition and shall be
applied in accordance with Section 4.06.
SECTION 4.12. Limitation on Liens. The Company shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit
to exist any Lien of any nature whatsoever that secures Senior Subordinated
Indebtedness of the Company or Subordinated Obligations of the Company on any of
its property or assets (including Capital Stock of a Restricted Subsidiary),
whether owned at the Closing Date or thereafter acquired, other than Permitted
Liens, without effectively providing that the Senior Subordinated Notes shall be
secured equally and ratably with (or on a senior basis to in the case of
Subordinated Obligations of the Company) the obligations so secured for so long
as such obligations are so secured.
46
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. The Company
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Senior Subordinated Notes Trustee, in form satisfactory to the Senior
Subordinated Notes Trustee, all the obligations of the Company under the
Senior Subordinated Notes and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transac tion), no Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, (A) the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a) or (B) the Consolidated Coverage
Ratio for the Successor Company and its Restricted Subsidiaries would be
greater than such ratio for the Company and its Restricted Subsidiaries
immediately prior to such transaction;
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
(v) the Company shall have delivered to the Senior Subordinated
Notes Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with this Indenture.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture, but the
predecessor Company in the case of a conveyance, transfer or lease of all or
substantially all its assets shall not be released from the obligation to pay
the principal of and interest on the Senior Subordinated Notes.
Notwithstanding clause (iii) above, a Wholly Owned Subsidiary may be
consolidated with or merged into the Company and the Company may consolidate
with or merge with or into (A) another Person, if such Person is a single
purpose corporation that has not conducted any business or Incurred any
Indebtedness or other liabilities and such transaction is being consummated
solely to change the state of incorporation of the
47
Company and (B) Holdings; provided, however, that, in the case of clause (B),
(x) Holdings shall not have owned any assets other than the Capital Stock of the
Company (and other immaterial assets incidental to its ownership of such Capital
Stock) or conducted any business other than owning the Capital Stock of the
Company, (y) Holdings shall not have any Indebtedness or other liabilities
(other than ordinary course liabilities incidental to its ownership of the
Capital Stock of the Company) and (z) immediately after giving effect to such
consolidation or merger, the Successor Company shall have a pro forma
Consolidated Coverage Ratio that is not less than the Consolidated Coverage
Ratio of the Company immediately prior to such consolidation or merger.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Senior
Subordinated Note when the same becomes due and payable, whether or not
such payment shall be prohibited by Article 10, and such default continues
for a period of 30 days;
(2) the Company (i) defaults in the payment of the principal of any
Senior Subordinated Note when the same becomes due and payable at its
Stated Maturity, upon redemption, upon declaration or otherwise, whether
or not such payment shall be prohibited by Article 10 or (ii) fails to
redeem or purchase Senior Subordinated Notes when required pursuant to
this Indenture or the Senior Subordinated Notes, whether or not such
redemption or purchase shall be prohibited by Article 10;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08, 4.11 or 4.12 (other than a failure to purchase Senior
Subordinated Notes when required under Section 4.06 or 4.08) and such
failure continues for 30 days after the notice specified below;
(5) the Company fails to comply with any of its agreements in the
Senior Subordinated Notes or this Indenture (other than those referred to
in (1), (2), (3) or (4) above) and such failure continues for 60 days
after the notice specified below;
(6) Indebtedness of the Company or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or the
acceleration of any such Indebtedness by the holders thereof because of a
default and the total amount of such Indebtedness unpaid or accelerated
exceeds $25 million or its foreign currency equivalent at the time and
such failure continues for 10 days after the notice specified below;
48
(7) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
(9) any judgment or decree for the payment of money in excess of $25
million or its foreign currency equivalent at the time is entered against
the Company or any Significant Subsidiary and is not discharged, waived or
stayed and either (A) an enforcement proceeding has been commenced by any
creditor upon such judgment or decree or (B) there is a period of 60 days
following the entry of such judgment or decree during which such judgment
or decree is not discharged, waived or the execution thereof stayed and
such judgment or decree is not discharged, waived or the execution thereof
stayed within 10 days after the notice specified below.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
49
A Default under clause (4), (5), (6) or (9) above is not an Event of
Default until the Senior Subordinated Notes Trustee or the Senior Subordinated
Noteholders of at least 25% in principal amount of the outstanding Senior
Subordinated Notes notify the Company of the Default and the Company does not
cure such Default within the time specified after receipt of such notice. Such
notice must specify the Default, demand that it be remedied and state that such
notice is a "Notice of Default".
The Company shall deliver to the Senior Subordinated Notes Trustee,
within 30 days after the occurrence thereof, written notice in the form of an
Officers' Certificate of any event which with the giving of notice or the lapse
of time would become an Event of Default under clause (4), (5) or (9), its
status and what action the Company is taking or proposes to take with respect
thereto.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Senior Subordinated Notes Trustee by
notice to the Company, or the Senior Subordinated Noteholders of at least 25% in
principal amount of the outstanding Senior Subordinated Notes by notice to the
Company, may declare the principal of and accrued but unpaid interest on all the
Senior Subordinated Notes to be due and payable. Upon such a declaration, such
principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 6.01(7) or (8) with respect to the Company occurs,
the principal of and interest on all the Senior Subordinated Notes shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Senior Subordinated Notes Trustee or any Senior
Subordinated Noteholders. The Senior Subordinated Noteholders of a majority in
principal amount of the Senior Subordinated Notes by notice to the Senior
Subordinated Notes Trustee may rescind an acceleration and its consequences if
the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of acceleration. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Senior Subordinated Notes Trustee may pursue any available
remedy to collect the payment of principal of or interest on the Senior
Subordinated Notes or to enforce the performance of any provision of the Senior
Subordinated Notes or this Indenture.
The Senior Subordinated Notes Trustee may maintain a proceeding even
if it does not possess any of the Senior Subordinated Notes or does not produce
any of them in the proceeding. A delay or omission by the Senior Subordinated
Notes Trustee or any Senior Subordinated Noteholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Senior Subordinated Notes by notice to the Senior
Subordinated Notes Trustee may waive an existing Default and its consequences
except (i) a Default in the payment of the principal of or interest on a Senior
Subordinated Note, (ii) a Default arising from the failure to redeem or purchase
any Senior Subordinated Note when
50
required pursuant to the terms of this Indenture or (iii) a Default in respect
of a provision that under Section 9.02 cannot be amended without the consent of
each Senior Subordinated Noteholder affected. When a Default is waived, it is
deemed cured, but no such waiver shall extend to any subsequent or other Default
or impair any consequent right.
SECTION 6.05. Control by Majority. The Senior Subordinated
Noteholders of a majority in principal amount of the Senior Subordinated Notes
may direct the time, method and place of conducting any proceeding for any
remedy available to the Senior Subordinated Notes Trustee or of exercising any
trust or power conferred on the Senior Subordinated Notes Trustee. However, the
Senior Subordinated Notes Trustee may refuse to follow any direction that
conflicts with law or this Indenture or, subject to Section 7.01, that the
Senior Subordinated Notes Trustee determines is unduly prejudicial to the rights
of other Senior Subordinated Noteholders or would involve the Senior
Subordinated Notes Trustee in personal liability; provided, however, that the
Senior Subordinated Notes Trustee may take any other action deemed proper by the
Senior Subordinated Notes Trustee that is not inconsistent with such direction.
Prior to taking any action hereunder, the Senior Subordinated Notes Trustee
shall be entitled to indemnification satisfactory to it in its sole discretion
against all losses and expenses caused by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no Senior
Subordinated Noteholder may pursue any remedy with respect to this Indenture or
the Senior Subordinated Notes unless:
(1) the Senior Subordinated Noteholder gives to the Senior
Subordinated Notes Trustee written notice stating that an Event of Default
is continuing;
(2) the Senior Subordinated Noteholders of at least 25% in principal
amount of the Senior Subordinated Notes make a written request to the
Senior Subordinated Notes Trustee to pursue the remedy;
(3) such Senior Subordinated Noteholder or Senior Subordinated
Noteholders offer to the Senior Subordinated Notes Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Senior Subordinated Notes Trustee does not comply with the
request within 60 days after receipt of the request and the offer of
security or indemnity; and
(5) the Senior Subordinated Noteholders of a majority in principal
amount of the Senior Subordinated Notes do not give the Senior
Subordinated Notes Trustee a direction inconsistent with the request
during such 60-day period.
A Senior Subordinated Noteholder may not use this Indenture to
prejudice the rights of another Senior Subordinated Noteholder or to obtain a
preference or priority over another Senior Subordinated Noteholder.
SECTION 6.07. Rights of Senior Subordinated Noteholders to Receive
Payment. Notwithstanding any other provision of this Indenture, the right of any
Senior
51
Subordinated Noteholder to receive payment of principal of and liquidated
damages and interest on the Senior Subordinated Notes held by such Senior
Subordinated Noteholder, on or after the respective due dates expressed in the
Senior Subordinated Notes, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Senior Subordinated Noteholder.
SECTION 6.08. Collection Suit by Senior Subordinated Notes Trustee.
If an Event of Default specified in Section 6.01(1) or (2) occurs and is
continuing, the Senior Subordinated Notes Trustee may recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount then due and owing (together with interest on any unpaid interest to the
extent lawful) and the amounts provided for in Section 7.07.
SECTION 6.09. Senior Subordinated Notes Trustee May File Proofs of
Claim. The Senior Subordinated Notes Trustee may file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Senior Subordinated Notes Trustee and the Senior Subordinated
Noteholders allowed in any judicial proceedings relative to the Company,
Holdings, their creditors or their property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Senior Subordinated
Noteholders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Senior Subordinated Noteholder to make payments to
the Senior Subordinated Notes Trustee and, in the event that the Senior
Subordinated Notes Trustee shall consent to the making of such payments directly
to the Senior Subordinated Noteholders, to pay to the Senior Subordinated Notes
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Senior Subordinated Notes Trustee, its agents
and its counsel, and any other amounts due the Senior Subordinated Notes Trustee
under Section 7.07.
SECTION 6.10. Priorities. If the Senior Subordinated Notes Trustee
col lects any money or property pursuant to this Article 6, it shall pay out the
money or property in the following order:
FIRST: to the Senior Subordinated Notes Trustee for amounts due
under Section 7.07;
SECOND: to holders of Senior Indebtedness of the Company to the
extent required by Article 10;
THIRD: to Senior Subordinated Noteholders for amounts due and unpaid
on the Senior Subordinated Notes for principal and interest, ratably, and
any liquidated damages without preference or priority of any kind,
according to the amounts due and payable on the Senior Subordinated Notes
for principal, any liquidated damages and interest, respectively; and
FOURTH: to the Company.
The Senior Subordinated Notes Trustee may fix a record date and
payment date for any payment to Senior Subordinated Noteholders pursuant to this
Section. At least 15 days before such record date, the Senior Subordinated Notes
Trustee
52
shall mail to each Senior Subordinated Noteholder and the Company a notice that
states the record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Senior
Subordinated Notes Trustee for any action taken or omitted by it as Senior
Subordinated Notes Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Senior Subordinated Notes
Trustee, a suit by a Senior Subordinated Noteholder pursuant to Section 6.07 or
a suit by Senior Subordinated Noteholders of more than 10% in principal amount
of the Senior Subordinated Notes.
SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Company
nor Holdings (to the extent it may lawfully do so) shall at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and the Company and Holdings (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and shall
not hinder, delay or impede the execution of any power herein granted to the
Senior Subordinated Notes Trustee, but shall suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE 7
Senior Subordinated Notes Trustee
SECTION 7.01. Duties of Senior Subordinated Notes Trustee. (a) If an
Event of Default has occurred and is continuing, the Senior Subordinated Notes
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent Person
would exercise or use under the circumstances in the conduct of such Person's
own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Senior Subordinated Notes Trustee need only perform such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Senior Subordinated Notes Trustee; and
(2) in the absence of bad faith on its part, the Senior Subordinated
Notes Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Senior Subordinated Notes Trustee and conforming
to the requirements of this Indenture. However, the Senior Subordinated
Notes Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
53
(c) The Senior Subordinated Notes Trustee may not be relieved from
liability for its own negligent action, its own negligent failure to act or its
own wilful misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Senior Subordinated Notes Trustee shall not be liable for
any error of judgment made in good faith by a Trust Officer unless it is
proved that the Senior Subordinated Notes Trustee was negligent in
ascertaining the pertinent facts; and
(3) the Senior Subordinated Notes Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Senior Subordinated Notes Trustee is subject to paragraphs (a), (b) and (c) of
this Section.
(e) The Senior Subordinated Notes Trustee shall not be liable for
interest on any money received by it except as the Senior Subordinated Notes
Trustee may agree in writing with the Company.
(f) Money held in trust by the Senior Subordinated Notes Trustee
need not be segregated from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Senior
Subordinated Notes Trustee to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable grounds to
believe that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Senior Subordinated
Notes Trustee shall be subject to the provisions of this Section and to the
provisions of the TIA.
SECTION 7.02. Rights of Senior Subordinated Notes Trustee. (a) The
Senior Subordinated Notes Trustee may rely on any document believed by it to be
genu ine and to have been signed or presented by the proper person. The Senior
Subordinated Notes Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Senior Subordinated Notes Trustee acts or refrains
from acting, it may require an Officers' Certificate or an Opinion of Counsel.
The Senior Subordinated Notes Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on the Officers' Certificate or
Opinion of Counsel.
(c) The Senior Subordinated Notes Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
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(d) The Senior Subordinated Notes Trustee shall not be liable for
any action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
(e) The Senior Subordinated Notes Trustee may consult with counsel,
and the advice or opinion of counsel with respect to legal matters relating to
this Indenture and the Senior Subordinated Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it here under in good faith and in accordance with the
advice or opinion of such counsel.
(f) The Senior Subordinated Notes Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval, bond, debenture, note or other paper or document, but the
Senior Subordinated Notes Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(g) The Senior Subordinated Notes Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Indenture at the request, order or direction of any of the Senior Subordinated
Noteholders pursuant to the provisions of this Indenture, unless such Senior
Subordinated Noteholders shall have offered to the Senior Subordinated Notes
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
SECTION 7.03. Individual Rights of Senior Subordinated Notes
Trustee. The Senior Subordinated Notes Trustee in its individual or any other
capacity may become the owner or pledgee of Senior Subordinated Notes and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not Senior Subordinated Notes Trustee. Any Paying Agent,
Registrar or co-paying agent may do the same with like rights. However, the
Senior Subordinated Notes Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Senior Subordinated Notes Trustee's Disclaimer. The
Senior Subordinated Notes Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Senior
Subordinated Notes, it shall not be accountable for the Company's use of the
proceeds from the Senior Subordinated Notes, and it shall not be responsible for
any statement of the Company in this Indenture or in any document issued in
connection with the sale of the Senior Subordinated Notes or in the Senior
Subordinated Notes other than the Senior Subordinated Notes Trustee's
certificate of authentication.
SECTION 7.05. Notice of Defaults. (a) The Senior Subordinated Notes
Trustee shall not be deemed to have notice of any Default, other than a payment
default, unless a Trust Officer shall have been advised in writing that a
Default has occurred. No duty imposed upon the Senior Subordinated Notes Trustee
in this Indenture shall be applicable with respect to any Default of which the
Trustee is not deemed to have notice.
(b) If a Default occurs and is continuing and if it is known to the
Senior Subordinated Notes Trustee, the Senior Subordinated Notes Trustee shall
mail to each Senior Subordinated Noteholder notice of the Default within the
earlier of 90 days after it occurs or 30 days after it is known to a Trust
Officer or written notice of it is received by the Senior Subordinated Notes
Trustee. Except in the case of a Default in payment of
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principal, premium (if any) or interest on any Senior Subordinated Note
(including payments pursuant to the redemption provisions of such Senior
Subordinated Note), the Senior Subordinated Notes Trustee may withhold notice if
and so long as a committee of its Trust Officers in good faith determines that
withholding notice is in the interests of the Senior Subordinated Noteholders.
SECTION 7.06. Reports by Senior Subordinated Notes Trustee to Senior
Subordinated Noteholders. As promptly as practicable after each June 30
beginning with the June 30 following the first anniversary of the date of this
Indenture, and in any event prior to August 31 in each subsequent year, the
Senior Subordinated Notes Trustee shall, to the extent that any of the events
described in TIA ss. 313(a) occurred within the previous twelve months, but not
otherwise, mail to each Senior Subordinated Noteholder a brief report dated as
of June 30 that complies with Section 313(a) of the TIA. The Senior Subordinated
Notes Trustee shall also comply with Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Senior
Subordinated Noteholders shall be filed with the SEC and each stock exchange (if
any) on which the Senior Subordinated Notes are listed. The Company agrees to
notify promptly the Senior Subordinated Notes Trustee whenever the Senior
Subordinated Notes become listed on any stock exchange and of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity. The Company shall pay to
the Senior Subordinated Notes Trustee from time to time such compensation as the
Company and the Senior Subordinated Notes Trustee shall from time to time agree
in writing. The Senior Subordinated Notes Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Senior Subordinated Notes Trustee upon request for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Senior Subordinated Notes Trustee's agents, counsel, accountants
and experts. The Company and Holdings, jointly and severally shall indemnify the
Senior Subordinated Notes Trustee, and hold it harmless, against any and all
loss, liability or expense (including reasonable attorneys' fees) incurred by or
in connection with the offer and sale of the Senior Subordinated Notes or the
administration of this trust and the performance of its duties hereunder. The
Senior Subordinated Notes Trustee shall notify the Company of any claim for
which it may seek indemnity promptly upon obtaining actual knowledge thereof;
provided, however, that any failure so to notify the Company shall not relieve
the Company or Holdings of its indemnity obligations hereunder. The Company
shall defend the claim and the indemnified party shall provide reasonable
cooperation at the Company's expense in the defense. Such indemnified parties
may have separate counsel and the Company and Holdings, as applicable, shall pay
the fees and expenses of such counsel; provided, however, that the Company shall
not be required to pay such fees and expenses if it assumes such indemnified
parties' defense and, in such indemnified parties' reasonable judgment, there is
no conflict of interest between the Company and Holdings, as applicable, and
such parties in connection with such defense. The Company need not reimburse any
expense or indemnify against any loss, liability or expense incurred by an
indemnified party through such party's own wilful misconduct and negligence.
To secure the Company's payment obligations in this Section, the
Senior Subordinated Notes Trustee shall have a lien prior to the Senior
Subordinated Notes on
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all money or property held or collected by the Senior Subordinated Notes Trustee
other than money or property held in trust to pay principal of and interest and
any liquidated damages on particular Senior Subordinated Notes.
The Company's payment obligations pursuant to this Section shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Senior Subordinated Notes Trustee. When the Senior Subordinated
Notes Trustee incurs expenses after the occurrence of a Default specified in
Section 6.01(7) or (8) with respect to the Company, the expenses are intended to
constitute expenses of administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Senior Subordinated Notes Trustee. The
Senior Subordinated Notes Trustee may resign at any time by so notifying the
Company. The Holders of a majority in principal amount of the Senior
Subordinated Notes may remove the Senior Subordinated Notes Trustee by so
notifying the Senior Subordinated Notes Trustee and may appoint a successor
Senior Subordinated Notes Trustee. The Company shall remove the Senior
Subordinated Notes Trustee if:
(1) the Senior Subordinated Notes Trustee fails to comply with
Section 7.10;
(2) the Senior Subordinated Notes Trustee is adjudged bankrupt or
insol vent;
(3) a receiver or other public officer takes charge of the Senior
Subordinated Notes Trustee or its property; or
(4) the Senior Subordinated Notes Trustee otherwise becomes
incapable of acting.
If the Senior Subordinated Notes Trustee resigns, is removed by the
Company or by the Holders of a majority in principal amount of the Senior
Subordinated Notes and such Senior Subordinated Noteholders do not reasonably
promptly appoint a successor Senior Subordinated Notes Trustee, or if a vacancy
exists in the office of Senior Subordinated Notes Trustee for any reason (the
Senior Subordinated Notes Trustee in such event being referred to herein as the
retiring Senior Subordinated Notes Trustee), the Company shall promptly appoint
a successor Senior Subordinated Notes Trustee.
A successor Senior Subordinated Notes Trustee shall deliver a
written acceptance of its appointment to the retiring Senior Subordinated Notes
Trustee and to the Company. Thereupon the resignation or removal of the retiring
Senior Subordinated Notes Trustee shall become effective, and the successor
Senior Subordinated Notes Trustee shall have all the rights, powers and duties
of the Senior Subordinated Notes Trustee under this Indenture. The successor
Senior Subordinated Notes Trustee shall mail a notice of its succession to
Senior Subordinated Noteholders. The retiring Senior Subordinated Notes Trustee
shall promptly transfer all property held by it as Senior Subordinated Notes
Trustee to the successor Senior Subordinated Notes Trustee, subject to the lien
provided for in Section 7.07.
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If a successor Senior Subordinated Notes Trustee does not take
office within 60 days after the retiring Senior Subordinated Notes Trustee
resigns or is removed, the retiring Senior Subordinated Notes Trustee or the
Holders of 10% in principal amount of the Senior Subordinated Notes may petition
any court of competent jurisdiction for the appointment of a successor Senior
Subordinated Notes Trustee.
If the Senior Subordinated Notes Trustee fails to comply with
Section 7.10, any Senior Subordinated Noteholder may petition any court of
competent jurisdiction for the removal of the Senior Subordinated Notes Trustee
and the appoint ment of a successor Senior Subordinated Notes Trustee.
Notwithstanding the replacement of the Senior Subordinated Notes
Trustee pursuant to this Section, the Company's obligations under Section 7.07
shall continue for the benefit of the retiring Senior Subordinated Notes
Trustee.
SECTION 7.09. Successor Senior Subordinated Notes Trustee by Merger.
If the Senior Subordinated Notes Trustee consolidates with, merges or converts
into, or transfers all or substantially all its corporate trust business or
assets to, another corporation or banking association, the resulting, surviving
or transferee corporation without any further act shall be the successor Senior
Subordinated Notes Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Senior Subordinated Notes Trustee shall
succeed to the trusts created by this Indenture any of the Senior Subordinated
Notes shall have been authenticated but not delivered, any such successor to the
Senior Subordinated Notes Trustee may adopt the certificate of authentication of
any predecessor trustee, and deliver such Senior Subordinated Notes so
authenticated; and in case at that time any of the Senior Subordinated Notes
shall not have been authenticated, any successor to the Senior Subordinated
Notes Trustee may authenticate such Senior Subordinated Notes either in the name
of any predecessor hereunder or in the name of the successor to the Senior
Subordinated Notes Trustee; and in all such cases such certificates shall have
the full force which it is anywhere in the Senior Subordinated Notes or in this
Indenture provided that the certificate of the Senior Subordinated Notes Trustee
shall have.
SECTION 7.10. Eligibility; Disqualification. The Senior Subordinated
Notes Trustee shall at all times satisfy the requirements of TIA ss. 310(a). The
Senior Subordinated Notes Trustee shall have a combined capital and surplus of
at least $100,000,000 as set forth in its most recent published annual report of
condition. The Senior Subordinated Notes Trustee shall comply with TIA ss.
310(b); provided, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Company are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company. The
Senior Subordinated Notes Trustee shall comply with TIA ss. 311(a), excluding
any creditor relationship listed in TIA ss. 311(b). A Senior Subordinated Notes
Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to
the extent indicated.
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ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Senior Subordinated Notes;
Defeasance. (a) When (i) the Company delivers to the Senior Subordinated Notes
Trustee all outstanding Senior Subordinated Notes (other than Senior
Subordinated Notes replaced pursuant to Section 2.08) for cancelation or (ii)
all outstanding Senior Subordinated Notes have become due and payable, whether
at maturity or as a result of the mailing of a notice of redemption pursuant to
Article 3 hereof, and the Company irrevocably deposits with the Senior
Subordinated Notes Trustee funds or U.S. Government Obligations on which payment
of principal and interest when due will be sufficient to pay at maturity or upon
redemption all outstanding Senior Subordinated Notes, including interest thereon
to maturity or such redemption date (other than Senior Subordinated Notes
replaced pursuant to Section 2.08), and if in either case the Company pays all
other sums payable hereunder by the Company, then this Indenture shall, subject
to Section 8.01(c), cease to be of further effect. The Senior Subordinated Notes
Trustee shall acknowledge satisfaction and discharge of this Indenture on demand
of the Company accompanied by an Officers' Certificate and an Opinion of Counsel
and at the cost and expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time
may terminate (i) all of its obligations under the Senior Subordinated Notes and
this Indenture ("legal defeasance option") or (ii) its obligations under
Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 and 4.12 and
the operation of Section 5.01(iii), 5.01(iv), 6.01(4), 6.01(6), 6.01(7) (with
respect to Significant Subsidiaries of the Company only), 6.01(8) (with respect
to Significant Subsidiaries of the Company only) and 6.01(9) ("covenant
defeasance option"). The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance option. In the
event that the Company terminates all of its obligations under the Senior
Subordinated Notes and this Indenture by exercising its legal defeasance option,
the obligations under the Holdings Guarantee shall be terminated simultaneously
with the termination of such obligations.
If the Company exercises its legal defeasance option, payment of the
Senior Subordinated Notes may not be accelerated because of an Event of Default.
If the Company exercises its covenant defeasance option, payment of the Senior
Subordinated Notes may not be accelerated because of an Event of Default
specified in Section 6.01(4), 6.01(6), 6.01(7) (with respect to Significant
Subsidiaries of the Company only) or 6.01(8) (with respect to Significant
Subsidiaries of the Company only) or because of the failure of the Company to
comply with clauses (iii) and (iv) of Section 5.01.
Upon satisfaction of the conditions set forth herein and upon
request of the Company, the Senior Subordinated Notes Trustee shall acknowledge
in writing the discharge of those obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 7.07, 7.08 and in
this Article 8 shall survive until the Senior Subordinated Notes have been paid
in full. Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05
shall survive.
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SECTION 8.02. Conditions to Defeasance. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Senior
Subordinated Notes Trustee money or U.S. Government Obligations for the
payment of principal, premium (if any) and interest on the Senior
Subordinated Notes to maturity or redemption, as the case may be;
(2) the Company delivers to the Senior Subordinated Notes Trustee a
cer tificate from a nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and interest when
due and without reinvestment on the deposited U.S. Government Obligations
plus any deposited money without investment will provide cash at such
times and in such amounts as will be sufficient to pay principal and
interest when due on all the Senior Subordinated Notes to maturity or
redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(7) or (8) with respect to the
Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by Article 10;
(5) the Company delivers to the Senior Subordinated Notes Trustee an
Opinion of Counsel to the effect that the trust resulting from the deposit
does not constitute, or is qualified as, a regulated investment company
under the Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Senior Subordinated Notes Trustee an Opinion of
Counsel stating that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (ii) since the
date of this Indenture there has been a change in the applicable Federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Senior Subordinated Noteholders
will not recognize income, gain or loss for Federal income tax purposes as
a result of such deposit and defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if such deposit and defeasance had not
occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Senior Subordinated Notes Trustee an Opinion of
Counsel to the effect that the Senior Subordinated Noteholders will not
recognize income, gain or loss for Federal income tax purposes as a result
of such deposit and defeasance and will be subject to Federal income tax
on the same amounts, in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred; and
(8) the Company delivers to the Senior Subordinated Notes Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions
60
precedent to the defeasance and discharge of the Senior Subordinated Notes
as contemplated by this Article 8 have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Senior Subordinated Notes Trustee for the redemption of
Senior Subordinated Notes at a future date in accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Senior Subordinated
Notes Trustee shall hold in trust money or U.S. Government Obligations deposited
with it pursuant to this Article 8. It shall apply the deposited money and the
money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of and interest on
the Senior Subordinated Notes. Money and securities so held in trust are not
subject to Article 10.
SECTION 8.04. Repayment to Company. The Senior Subordinated Notes
Trustee and the Paying Agent shall promptly turn over to the Company upon
request any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Senior
Subordinated Notes Trustee and the Paying Agent shall pay to the Company upon
written request any money held by them for the payment of principal or interest
that remains unclaimed for two years, and, thereafter, Senior Subordinated
Noteholders entitled to the money must look to the Company for payment as
general creditors.
SECTION 8.05. Indemnity for Government Obligations. The Company
shall pay and shall indemnify the Senior Subordinated Notes Trustee against any
tax, fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or the principal and interest received on such U.S.
Government Obligations.
SECTION 8.06. Reinstatement. If the Senior Subordinated Notes
Trustee or Paying Agent is unable to apply any money or U.S. Government
Obligations in accordance with this Article 8 by reason of any legal proceeding
or by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Senior Subordinated Notes shall be
revived and reinstated as though no deposit had occurred pursuant to this
Article 8 until such time as the Senior Subordinated Notes Trustee or Paying
Agent is permitted to apply all such money or U.S. Government Obligations in
accordance with this Article 8; provided, however, that, if the Company has made
any payment of interest on or principal of any Senior Subordinated Notes because
of the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Senior Subordinated Noteholders of such Senior Subordinated Notes
to receive such payment from the money or U.S. Government Obligations held by
the Senior Subordinated Notes Trustee or Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Senior Subordinated Noteholders.
The Company, Holdings and the Senior Subordinated Notes Trustee may amend this
61
Indenture or the Senior Subordinated Notes without notice to or consent of any
Senior Subordinated Noteholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Senior Subordinated Notes in
addition to or in place of certificated Senior Subordinated Notes;
provided, however, that the uncertificated Senior Subordinated Notes are
issued in registered form for purposes of Section 163(f) of the Code or in
a manner such that the uncertificated Senior Subordinated Notes are
described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article 10 or Article 12 that would limit
or terminate the benefits available to any holder of Senior Indebtedness
(or Representatives therefor) under Article 10 or Article 12;
(5) to add additional Guarantees with respect to the Senior
Subordinated Notes or to secure the Senior Subordinated Notes;
(6) to add to the covenants of the Company for the benefit of the
Senior Subordinated Noteholders or to surrender any right or power herein
conferred upon the Company;
(7) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA;
(8) to make any change that does not adversely affect the rights of
any Senior Subordinated Noteholder; or
(9) to provide for the issuance of the Senior Subordinated Exchange
Notes, Private Senior Subordinated Exchange Notes or Additional Senior
Subordinated Notes, which shall have terms substantially identical in all
material respects to the Original Senior Subordinated Notes (except that
the transfer restrictions contained in the Original Senior Subordinated
Notes shall be modified or eliminated, as appropriate), and which shall be
treated, together with any outstanding Original Senior Subordinated Notes,
as a single issue of securities.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 or Article 12 of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Senior Subordinated Noteholders a notice briefly describing such
amendment. The failure to give such notice to all Senior Subordinated
Noteholders, or any defect therein, shall not impair or affect the validity of
an amendment under this Section.
SECTION 9.02. With Consent of Senior Subordinated Noteholders. The
Company, Holdings and the Senior Subordinated Notes Trustee may amend this
62
Indenture or the Senior Subordinated Notes with the written consent of the
Holders of at least a majority in principal amount of the Senior Subordinated
Notes then outstanding (including consents obtained in connection with a tender
offer or exchange offer for the Senior Subordinated Notes), without notice to
any other Senior Subordinated Noteholder. However, without the consent of each
Holder of an outstanding Senior Subordinated Note affected, an amendment may
not:
(1) reduce the principal amount of Senior Subordinated Notes whose
Senior Subordinated Noteholders must consent to an amendment;
(2) reduce the rate of or extend the time for payment of interest or
any liquidated damages on any Senior Subordinated Note;
(3) reduce the principal of or extend the Stated Maturity of any
Senior Subordinated Note;
(4) reduce the premium payable upon the redemption of any Senior
Subordinated Note or change the time at which any Senior Subordinated Note
may be redeemed in accordance with Article 3;
(5) make any Senior Subordinated Note payable in money other than
that stated in the Senior Subordinated Note;
(6) make any change in Article 10 or Article 12 that adversely
affects the rights of any Senior Subordinated Noteholder under Article 10
or Article 12; or
(7) make any change in Section 6.04 or 6.07 or the second sentence
of this Section 9.02.
It shall not be necessary for the consent of the Senior Subordinated
Noteholders under this Section to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent approves the substance
thereof.
An amendment under this Section 9.02 may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness of the Company then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Senior Subordinated Noteholders a notice briefly describing such
amendment. The failure to give such notice to all Senior Subordinated
Noteholders, or any defect therein, shall not impair or affect the validity of
an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Senior Subordinated Notes shall comply with the TIA as
then in effect.
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Senior Subordinated Noteholder of a
Senior Subordinated Note shall bind the Senior Subordinated Noteholder and every
subsequent
63
Senior Subordinated Noteholder of that Senior Subordinated Note or portion of
the Senior Subordinated Note that evidences the same debt as the consenting
Senior Subordinated Noteholder's Senior Subordinated Note, even if notation of
the consent or waiver is not made on the Senior Subordinated Note. However, any
such Senior Subordinated Noteholder or subsequent Senior Subordinated Noteholder
may revoke the consent or waiver as to such Senior Subordinated Noteholder's
Senior Subordinated Note or portion of the Senior Subordinated Note if the
Senior Subordinated Notes Trustee receives the notice of revocation before the
date the amendment or waiver becomes effective. After an amendment or waiver
becomes effective, it shall bind every Senior Subordinated Noteholder. An
amendment or waiver becomes effective once both (i) the requisite number of
consents have been received by the Company or the Senior Subordinated Notes
Trustee and (ii) such amendment or waiver has been executed by the Company and
the Senior Subordinated Notes Trustee.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Senior Subordinated Noteholders entitled to
give their consent or take any other action described above or required or
permitted to be taken pursuant to this Indenture. If a record date is fixed,
then notwithstanding the immediately preceding paragraph, those Persons who were
Senior Subordinated Noteholders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to give such consent or to
revoke any consent previously given or to take any such action, whether or not
such Persons continue to be Senior Subordinated Noteholders after such record
date. No such consent shall be valid or effective for more than 120 days after
such record date.
SECTION 9.05. Notation on or Exchange of Senior Subordinated Notes.
If an amendment changes the terms of a Senior Subordinated Note, the Senior
Subordinated Notes Trustee may require the Senior Subordinated Noteholder of the
Senior Subordinated Note to deliver it to the Senior Subordinated Notes Trustee.
The Senior Subordinated Notes Trustee may place an appropriate notation on the
Senior Subordinated Note regarding the changed terms and return it to the Senior
Subordinated Noteholder. Alternatively, if the Company or the Senior
Subordinated Notes Trustee so determines, the Company in exchange for the Senior
Subordinated Note shall issue and the Senior Subordinated Notes Trustee shall
authenticate a new Senior Subordinated Note that reflects the changed terms.
Failure to make the appropriate notation or to issue a new Senior Subordinated
Note shall not affect the validity of such amendment.
SECTION 9.06. Senior Subordinated Notes Trustee To Sign Amendments.
The Senior Subordinated Notes Trustee shall sign any amendment authorized
pursuant to this Article 9 if the amendment does not adversely affect the
rights, duties, liabilities or immunities of the Senior Subordinated Notes
Trustee. If it does, the Senior Subordinated Notes Trustee may but need not sign
it. In signing such amendment the Senior Subordinated Notes Trustee shall be
entitled to receive indemnity reasonably satisfactory to it and to receive, and
(subject to Section 7.01) shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel stating that such amendment is authorized
or permitted by this Indenture and that such amendment is the legal, valid and
binding obligation of the Company and Holdings enforceable against them in
accordance with its terms, subject to customary exceptions, and complies with
the provisions hereof (including Section 9.03).
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ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate. The Company agrees, and
each Senior Subordinated Noteholder by accepting a Senior Subordinated Note
agrees, that the Indebtedness evidenced by the Senior Subordinated Notes is
subordinated in right of payment, to the extent and in the manner provided in
this Article 10, to the prior payment in full in cash or cash equivalents of all
Senior Indebtedness of the Company and that the subordination is for the benefit
of and enforceable by the holders of such Senior Indebtedness. The Senior
Subordinated Notes shall in all respects rank pari passu with all other Senior
Subordinated Indebtedness of the Company and only Indebtedness of the Company
that is Senior Indebtedness of the Company shall rank senior to the Senior
Subordinated Notes in accordance with the provisions set forth herein. For
purposes of this Article 10, the Indebtedness evidenced by the Senior
Subordinated Notes shall be deemed to include the liquidated damages payable
pursuant to the provisions set forth in the Senior Subordinated Notes and the
Senior Subordinated Notes Registration Agreement. All provisions of this Article
10 shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness of the Company shall be entitled
to receive payment in full in cash or cash equivalents of such Senior
Indebtedness before the Senior Subordinated Noteholders shall be entitled
to receive any payment of principal of, interest, premium (if any) or
liquidated damages on the Senior Subordinated Notes; and
(2) until the Senior Indebtedness of the Company is paid in full in
cash or cash equivalents, any payment or distribution to which Senior
Subordinated Noteholders would be entitled but for this Article 10 shall
be made to holders of such Senior Indebtedness as their interests may
appear.
SECTION 10.03. Default on Senior Indebtedness. The Company may not
pay the principal of, premium (if any) or interest on the Senior Subordinated
Notes, or any liquidated damages payable pursuant to the provisions set forth in
the Senior Subordinated Notes Registration Agreement (as defined in the
Appendix), or make any deposit pursuant to Section 8.01 and may not repurchase,
redeem or otherwise retire any Senior Subordinated Notes (collectively, "pay the
Senior Subordinated Notes") if (i) any Designated Senior Indebtedness of the
Company is not paid in cash or cash equivalents when due or (ii) any other
default on Designated Senior Indebtedness of the Company occurs and the maturity
of such Designated Senior Indebtedness is accelerated in accordance with its
terms unless, in either case, (x) the default has been cured or waived and any
such acceleration has been rescinded or (y) such Designated Senior Indebtedness
has been paid in full in cash or cash equivalents; provided, however, that the
Company may pay the Senior Subordinated Notes without regard to the foregoing if
the Company and the Senior Subordinated Notes Trustee receive written notice
approving such payment from the Representative of the Designated Senior
Indebtedness with respect to
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which either of the events set forth in clause (i) or (ii) of this sentence has
occurred and is continuing. During the continuance of any default (other than a
default described in clause (i) or (ii) of the immediately preceding sentence)
with respect to any Designated Senior Indebtedness of the Company pursuant to
which the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Company may not pay the Senior
Subordinated Notes for a period (a "Payment Blockage Period") commencing upon
the receipt by the Senior Subordinated Notes Trustee (with a copy to the
Company) of written notice (a "Blockage Notice") of such default from the
Represen tative of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Senior
Subordinated Notes Trustee and the Company from the Person or Persons who gave
such Blockage Notice, (ii) by repayment in full in cash or cash equivalents of
such Designated Senior Indebtedness or (iii) because the default giving rise to
such Blockage Notice is no longer continuing). Notwithstanding the provisions
described in the immediately preceding sentence (but subject to the provisions
contained in the first sentence of this Section), unless the holders of such
Designated Senior Indebtedness or the Representative of such holders shall have
accelerated the maturity of such Designated Senior Indebtedness, the Company may
resume payments on the Senior Subordinated Notes after the end of such Payment
Blockage Period. Not more than one Blockage Notice may be given in any
consecutive 360-day period, irrespective of the number of defaults with respect
to Designated Senior Indebtedness of the Company during such period; provided,
however, that if any Blockage Notice within such 360-day period is given by or
on behalf of any holders of Designated Senior Indebtedness of the Company other
than the Bank Indebtedness, the Representative of the Bank Indebtedness may give
another Blockage Notice within such period; provided further, however, that in
no event may the total number of days during which any Payment Blockage Period
or Periods is in effect exceed 179 days in the aggregate during any
360-consecutive day period. For purposes of this Section, no default or event of
default that existed or was continuing on the date of the commencement of any
Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period shall be, or be made, the basis of the
commencement of a subsequent Payment Blockage Period by the Representative of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such default or event of default shall have been cured
or waived for a period of not less than 90 consecutive days.
SECTION 10.04. Acceleration of Payment of Senior Subordinated Notes.
If payment of the Senior Subordinated Notes is accelerated because of an Event
of Default, the Company or the Senior Subordinated Notes Trustee shall promptly
notify the holders of the Designated Senior Indebtedness of the Company (or
their Representative) of the acceleration. If any Designated Senior Indebtedness
of the Company is outstanding, the Company may not pay the Senior Subordinated
Notes until five Business Days after such holders or the Representative of the
Designated Senior Indebtedness receive notice of such acceleration and,
thereafter, may pay the Senior Subordinated Notes only if this Article 10
otherwise permits payment at that time.
SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Senior Subordinated Noteholders that because of this
Article 10 should not have been made to them, the Senior Subordinated
Noteholders who receive
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the distribution shall hold it in trust for holders of Senior Indebtedness of
the Company and pay it over to them as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness of the
Company is paid in full and until the Senior Subordinated Notes are paid in
full, Senior Subordinated Noteholders shall be subrogated to the rights of
holders of such Senior Indebtedness to receive distributions applicable to
Senior Indebtedness. A distribution made under this Article 10 to holders of
such Senior Indebtedness which otherwise would have been made to Senior
Subordinated Noteholders is not, as between the Company and Senior Subordinated
Noteholders, a payment by the Company on such Senior Indebtedness.
SECTION 10.07. Relative Rights. This Article 10 defines the relative
rights of Senior Subordinated Noteholders and holders of Senior Indebtedness of
the Company. Nothing in this Indenture shall:
(1) impair, as between the Company and Senior Subordinated
Noteholders, the obligation of the Company, which is absolute and
unconditional, to pay principal of and interest on and liquidated damages
in respect of, the Senior Subordinated Notes in accordance with their
terms; or
(2) prevent the Senior Subordinated Notes Trustee or any Senior
Subordinated Noteholder from exercising its available remedies upon a
Default, subject to the rights of holders of Senior Indebtedness of the
Company to receive distributions otherwise payable to Senior Subordinated
Noteholders.
SECTION 10.08. Subordination May Not Be Impaired by the Company. No
right of any holder of Senior Indebtedness of the Company to enforce the
subordination of the Indebtedness evidenced by the Senior Subordinated Notes
shall be impaired by any act or failure to act by the Company or by its failure
to comply with this Indenture.
SECTION 10.09. Rights of Senior Subordinated Notes Trustee and
Paying Agent. Notwithstanding Section 10.03, the Senior Subordinated Notes
Trustee or Paying Agent may continue to make payments on the Senior Subordinated
Notes and shall not be charged with knowledge of the existence of facts that
would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Senior
Subordinated Notes Trustee receives notice satisfactory to it that payments may
not be made under this Article 10. The Company, the Registrar, the Paying Agent,
a Representative or a holder of Senior Indebtedness of the Company may give the
notice; provided, however, that, if an issue of Senior Indebtedness of the
Company has a Representative, only the Representative may give the notice.
The Senior Subordinated Notes Trustee in its individual or any other
capa city may hold Senior Indebtedness of the Company with the same rights it
would have if it were not Senior Subordinated Notes Trustee. The Registrar and
the Paying Agent may do the same with like rights. The Senior Subordinated Notes
Trustee shall be entitled to all the rights set forth in this Article 10 with
respect to any Senior Indebtedness of the Company which may at any time be held
by it, to the same extent as any other holder of such Senior Indebtedness; and
nothing in Article 7 shall deprive the Senior Subordinated
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Notes Trustee of any of its rights as such holder. Nothing in this Article 10
shall apply to claims of, or payments to, the Senior Subordinated Notes Trustee
under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Company, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment pursuant to the Senior
Subordinated Notes by reason of any provision in this Article 10 shall not be
construed as preventing the occurrence of a Default. Nothing in this Article 10
shall have any effect on the right of the Senior Subordinated Noteholders or the
Senior Subordinated Notes Trustee to accelerate the maturity of the Senior
Subordinated Notes.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Senior
Subordinated Notes Trustee for the payment of principal of and interest on the
Senior Subordinated Notes shall not be subordinated to the prior payment of any
Senior Indebtedness of the Company or subject to the restrictions set forth in
this Article 10, and none of the Senior Subordinated Noteholders shall be
obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness of the Company or any other creditor of the Company.
SECTION 10.13. Senior Subordinated Notes Trustee Entitled To Rely.
Upon any payment or distribution pursuant to this Article 10, the Senior
Subordinated Notes Trustee and the Senior Subordinated Noteholders shall be
entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Senior Subordinated
Notes Trustee or to the Senior Subordinated Noteholders or (iii) upon the
Representatives for the holders of Senior Indebtedness of the Company for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of such Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
10. In the event that the Senior Subordinated Notes Trustee determines, in good
faith, that evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness of the Company to participate in any payment or
distribution pursuant to this Article 10, the Senior Subordinated Notes Trustee
may request such Person to furnish evidence to the reasonable satisfaction of
the Senior Subordinated Notes Trustee as to the amount of such Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and other facts pertinent to the
rights of such Person under this Article 10, and, if such evidence is not
furnished, the Senior Subordinated Notes Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to
all actions or omissions of actions by the Senior Subordinated Notes Trustee
pursuant to this Article 10.
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SECTION 10.14. Senior Subordinated Notes Trustee To Effectuate
Subordination. Each Senior Subordinated Noteholder by accepting a Senior
Subordinated Note authorizes and directs the Senior Subordinated Notes Trustee
on his or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Senior Subordinated
Noteholders and the holders of Senior Indebtedness of the Company as provided in
this Article 10 and appoints the Senior Subordinated Notes Trustee as
attorney-in-fact for any and all such purposes.
SECTION 10.15. Senior Subordinated Notes Trustee Not Fiduciary for
Holders of Senior Indebtedness. The Senior Subordinated Notes Trustee shall not
be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the
Company and shall not be liable to any such holders if it shall mistakenly pay
over or distribute to Senior Subordinated Noteholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness of the
Company shall be entitled by virtue of this Article 10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Senior Subordinated Noteholder by accepting a
Senior Subordinated Note acknowledges and agrees that the foregoing
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Indebtedness of the Company, whether
such Senior Indebtedness was created or acquired before or after the issuance of
the Senior Subordinated Notes, to acquire and continue to hold, or to continue
to hold, such Senior Indebtedness and such holder of such Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior
Indebtedness.
SECTION 10.17. Senior Subordinated Notes Trustee's Compensation Not
Prejudiced. Nothing in this Article shall apply to amounts due to the Senior
Subordinated Notes Trustee pursuant to other sections of this Indenture.
ARTICLE 11
Holdings Guarantee
SECTION 11.01. Holdings Guarantee. Holdings hereby unconditionally
and irrevocably guarantees, as a primary obligor and not merely as a surety, to
each Senior Subordinated Noteholder and to the Senior Subordinated Notes Trustee
and its successors and assigns (a) the full and punctual payment of principal of
and interest on and liquidated damages in respect of the Senior Subordinated
Notes when due, whether at Stated Maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of the Company under this
Indenture (including obligations to the Senior Subordinated Notes Trustee) and
the Senior Subordinated Notes and (b) the full and punctual performance within
applicable grace periods of all other obligations of the Company whether for
expenses, indemnification or otherwise under this Indenture and the Senior
Subordinated Notes (all the foregoing being hereinafter collectively called the
"Guaranteed Obligations"). Holdings further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from
69
Holdings, and that Holdings shall remain bound under this Article 11
notwithstanding any extension or renewal of any Guaranteed Obligation.
Holdings waives presentation to, demand of, payment from and protest
to the Company of any of the Guaranteed Obligations and also waives notice of
protest for nonpayment. Holdings waives notice of any default under the Senior
Subordinated Notes or the Guaranteed Obligations. The obligations of Holdings
hereunder shall not be affected by (a) the failure of any Senior Subordinated
Noteholder or the Senior Subordinated Notes Trustee to assert any claim or
demand or to enforce any right or remedy against the Company or any other Person
under this Indenture, the Senior Subordinated Notes or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Indenture, the Senior Subordinated Notes or any other agreement; (d) the release
of any security held by any Senior Subordinated Noteholder or the Senior
Subordinated Notes Trustee for the Guaranteed Obligations or any of them; (e)
the failure of any Senior Subordinated Noteholder or Senior Subordinated Notes
Trustee to exercise any right or remedy against any other guarantor of the
Guaranteed Obligations; or (f) any change in the ownership of Holdings, except
as provided in Section 11.02(b).
Holdings hereby waives any right to which it may be entitled to have
the assets of the Company first be used and depleted as payment of the Company's
or Holdings obligations hereunder prior to any amounts being claimed from or
paid by Holdings hereunder. Holdings hereby waives any right to which it may be
entitled to require that the Company be sued prior to an action being initiated
against Holdings.
Holdings further agrees that its Holdings Guarantee herein
constitutes a guarantee of payment, performance and compliance when due (and not
a guarantee of collection) and waives any right to require that any resort be
had by any Senior Subordinated Noteholder or the Senior Subordinated Notes
Trustee to any security held for payment of the Guaranteed Obligations.
The Holdings Guarantee is, to the extent and in the manner set forth
in Article 12, subordinated and subject in right of payment to the prior payment
in full of the principal of and premium, if any, and interest on all Senior
Indebtedness of Holdings and is made subject to such provisions of this
Indenture.
Except as expressly set forth in Sections 8.01(b) and 11.02, the
obligations of Holdings hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of Holdings herein shall not be discharged or impaired or otherwise
affected by the failure of any Senior Subordinated Noteholder or the Senior
Subordinated Notes Trustee to assert any claim or demand or to enforce any
remedy under this Indenture, the Senior Subordinated Notes or any other
agreement, by any waiver or modification of any thereof, by any default, failure
or delay, wilful or otherwise, in the performance of the obligations, or by any
other act or thing or omission or delay to do any other act or thing which may
or might in any manner or to any extent vary the risk of Holdings or would
otherwise operate as a discharge of Holdings as a matter of law or equity.
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Holdings agrees that its Holdings Guarantee shall remain in full
force and effect until payment in full of all the Guaranteed Obligations.
Holdings further agrees that its Holdings Guarantee herein shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Guaranteed Obligation is
rescinded or must otherwise be restored by any Senior Subordinated Noteholder or
the Senior Subordinated Notes Trustee upon the bankruptcy or reorganization of
the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Senior Subordinated Noteholder or the Senior Subordinated Notes
Trustee has at law or in equity against Holdings by virtue hereof, upon the
failure of the Company to pay the principal of or interest on any Guaranteed
Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any other
Guaranteed Obligation, Holdings hereby promises to and shall, upon receipt of
written demand by the Senior Subordinated Notes Trustee, forthwith pay, or cause
to be paid, in cash, to the Senior Subordinated Noteholders or the Senior
Subordinated Notes Trustee an amount equal to the sum of (i) the unpaid
principal amount of such Guaranteed Obligations, (ii) accrued and unpaid
interest on such Guaranteed Obligations (but only to the extent not prohibited
by law) and (iii) all other monetary obligations of the Company to the Senior
Subordinated Noteholders and the Senior Subordinated Notes Trustee.
Holdings agrees that it shall not be entitled to any right of
subrogation in relation to the Senior Subordinated Noteholders in respect of any
Guaranteed Obligations guaranteed hereby until payment in full of all Guaranteed
Obligations and all obligations to which the Guaranteed Obligations are
subordinated as provided in Article 12. Holdings further agrees that, as between
it, on the one hand, and the Senior Subordinated Noteholders and the Senior
Subordinated Notes Trustee, on the other hand, (x) the maturity of the
Guaranteed Obligations guaranteed hereby may be accelerated as provided in
Article 6 for the purposes of the Holdings Guarantee herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Guaranteed Obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such Guaranteed Obligations as provided in
Article 6, such Guaranteed Obligations (whether or not due and payable) shall
forthwith become due and payable by Holdings for the purposes of this Section
11.01.
Holdings also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Senior
Subordinated Notes Trustee or any Senior Subordinated Noteholder in enforcing
any rights under this Section 11.01.
Upon request of the Senior Subordinated Notes Trustee, Holdings
shall execute and deliver such further instruments and do such further acts as
may be reasonably necessary or proper to carry out more effectively the purpose
of this Indenture.
SECTION 11.02. Limitation on Liability. (a) Any term or provision of
this Indenture to the contrary notwithstanding, the maximum, aggregate amount of
the Guaranteed Obligations guaranteed hereunder by Holdings shall not exceed the
maximum amount that can be hereby guaranteed without rendering this Indenture,
as it
71
relates to Holdings, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
(b) This Holdings Guarantee shall terminate and be of no further
force or effect and Holdings shall be deemed to be released from all obligations
under this Article 11 upon the merger or consolidation of Holdings with or into
any Person other than the Company or a Subsidiary or Affiliate of the Company
where Holdings is not the surviving entity of such consolidation or merger;
provided, however, that each such merger or consolidation shall comply with
Section 5.01. At the request of the Company, the Senior Subordinated Notes
Trustee shall execute and deliver an appropriate instrument evidencing such
release.
SECTION 11.03. Successors and Assigns. This Article 11 shall be
binding upon Holdings and its successors and assigns and shall inure to the
benefit of the successors and assigns of the Senior Subordinated Notes Trustee
and the Senior Subordinated Noteholders and, in the event of any transfer or
assignment of rights by any Senior Subordinated Noteholder or the Senior
Subordinated Notes Trustee, the rights and privileges conferred upon that party
in this Indenture and in the Senior Subordinated Notes shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions of this Indenture.
SECTION 11.04. No Waiver. Neither a failure nor a delay on the part
of either the Senior Subordinated Notes Trustee or the Senior Subordinated
Noteholders in exercising any right, power or privilege under this Article 11
shall operate as a waiver thereof, nor shall a single or partial exercise
thereof preclude any other or further exercise of any right, power or privilege.
The rights, remedies and benefits of the Senior Subordinated Notes Trustee and
the Senior Subordinated Noteholders herein expressly specified are cumulative
and not exclusive of any other rights, remedies or benefits which either may
have under this Article 11 at law, in equity, by statute or otherwise.
SECTION 11.05. Modification. No modification, amendment or waiver of
any provision of this Article 11, nor the consent to any departure by Holdings
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Senior Subordinated Notes Trustee, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on Holdings in any case shall entitle
Holdings to any other or further notice or demand in the same, similar or other
circumstances.
ARTICLE 12
Subordination of the Holdings Guarantee
SECTION 12.01. Agreement To Subordinate. Holdings agrees, and each
Senior Subordinated Noteholder by accepting a Senior Subordinated Note agrees,
that the obligations of Holdings hereunder are subordinated in right of payment,
to the extent and in the manner provided in this Article 12, to the prior
payment in full in cash or cash equivalents of all Senior Indebtedness of
Holdings (including all Indebtedness evidenced by the Senior Discount Notes) and
that the subordination is for the benefit of and enforceable by the holders of
such Senior Indebtedness of Holdings. The obligations hereunder with respect to
Holdings shall in all respects rank pari passu with all other
72
Senior Subordinated Indebtedness of Holdings and shall rank senior to all
existing and future Subordinated Obligations of Holdings; and only Indebtedness
of Holdings that is Senior Indebtedness of Holdings shall rank senior to the
obligations of Holdings in accordance with the provisions set forth herein.
SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any
payment or distribution of the assets of Holdings to creditors upon a total or
partial liquidation or a total or partial dissolution of Holdings or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to Holdings and its properties:
(1) holders of Senior Indebtedness of Holdings shall be entitled to
receive payment in full in cash or cash equivalents of such Senior
Indebtedness before the Senior Subordinated Noteholders shall be entitled
to receive any payment pursuant to any Guaranteed Obligations from
Holdings; and
(2) until the Senior Indebtedness of Holdings is paid in full in
cash or cash equivalents, any payment or distribution to which Senior
Subordinated Noteholders would be entitled but for this Article 12 shall
be made to holders of such Senior Indebtedness as their interests may
appear.
SECTION 12.03. Default on Designated Senior Indebtedness of
Holdings. Holdings may not make any payment pursuant to any of the Guaranteed
Obligations or repurchase, redeem or otherwise retire any Senior Subordinated
Notes (collectively, "pay its Holdings Guarantee") if (i) any Designated Senior
Indebtedness of Holdings is not paid in cash or cash equivalents when due or
(ii) any other default on Designated Senior Indebtedness of Holdings occurs and
the maturity of such Designated Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, (x) the default has been cured or waived
and any such acceleration has been rescinded or (y) such Designated Senior
Indebtedness has been paid in full in cash or cash equivalents; provided,
however, that Holdings may pay its Holdings Guarantee without regard to the
foregoing if Holdings and the Senior Subordinated Notes Trustee receive written
notice approving such payment from the Representative of such Designated Senior
Indebtedness with respect to which either of the events set forth in clause (i)
or (ii) of this sentence has occurred and is continuing. During the continuance
of any default (other than a default described in clause (i) or (ii) of the
immediately preceding sentence) with respect to any Designated Senior
Indebtedness of Holdings pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, Holdings may not pay its Holdings Guarantee for a period (a "Payment
Blockage Period") commencing upon the receipt by the Senior Subordinated Notes
Trustee (with a copy to Holdings and the Company) of written notice (a "Blockage
Notice") of such default from the Representative of such Designated Senior
Indebtedness of Holdings specifying an election to effect a Payment Blockage
Period and ending 179 days thereafter (or earlier if such Payment Blockage
Period is terminated (i) by written notice to the Senior Subordinated Notes
Trustee (with a copy to Holdings and the Company) from the Person or Persons who
gave such Blockage Notice, (ii) by repayment in full in cash or cash equivalents
of such Designated Senior Indebtedness or (iii) because the default giving rise
to such Blockage Notice is no longer continuing). Notwithstanding the provisions
described in the immediately preceding sentence (but subject to the provisions
contained in the first sentence of this Section), unless the holders of such
Designated Senior Indebtedness or the Representative of such holders shall have
accelerated the maturity of
73
such Designated Senior Indebtedness, Holdings may resume to paying its Holdings
Guarantee after the end of such Payment Blockage Period, including any missed
payments. Not more than one Blockage Notice may be given with respect to
Holdings in any consecutive 360-day period, irrespective of the number of
defaults with respect to Designated Senior Indebtedness of Holdings during such
period; provided, however, that if any Blockage Notice within such 360-day
period is given by or on behalf of any holders of Designated Senior Indebtedness
of Holdings other than the Bank Indebtedness, the Representative of the Bank
Indebtedness may give another Blockage Notice within such period; provided
further, however, that in no event may the total number of days during which any
Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate
during any 360-consecutive day period. For purposes of this Section, no default
or event of default that existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period shall be, or be
made, the basis of the commencement of a subsequent Payment Blockage Period by
the Representative of such Designated Senior Indebtedness, whether or not within
a period of 360 consecutive days, unless such default or event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
SECTION 12.04. Demand for Payment. If payment of the Senior
Subordinated Notes is accelerated because of an Event of Default and a demand
for payment is made on Holdings pursuant to Article 11, the Senior Subordinated
Notes Trustee shall promptly notify the holders of the Designated Senior
Indebtedness of Holdings (or the Representative of such holders) of such demand.
If any Designated Senior Indebtedness of Holdings is outstanding, Holdings may
not pay its Holdings Guarantee until five Business Days after such holders or
the Representative of the holders of the Designated Senior Indebtedness of
Holdings receive notice of such demand and, thereafter, may pay its Holdings
Guarantee only if this Article 12 otherwise permits payment at that time.
SECTION 12.05. When Distribution Must Be Paid Over. If a payment or
distribution is made to Senior Subordinated Noteholders that because of this
Article 12 should not have been made to them, the Senior Subordinated
Noteholders who receive the payment or distribution shall hold such payment or
distribution in trust for holders of the Senior Indebtedness of Holdings and pay
it over to them as their respective interests may appear.
SECTION 12.06. Subrogation. After all Senior Indebtedness of
Holdings is paid in full and until the Senior Subordinated Notes are paid in
full, Senior Subordinated Noteholders shall be subrogated to the rights of
holders of such Senior Indebtedness of Holdings to receive distributions
applicable to Senior Indebtedness of Holdings. A distribution made under this
Article 12 to holders of Designated Senior Indebtedness of Holdings which
otherwise would have been made to Senior Subordinated Noteholders is not, as
between Holdings and Senior Subordinated Noteholders, a payment by Holdings on
such Senior Indebtedness of Holdings.
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SECTION 12.07. Relative Rights. This Article 12 defines the relative
rights of Senior Subordinated Noteholders and holders of Senior Indebtedness of
Holdings. Nothing in this Indenture shall:
(1) impair, as between Holdings and Senior Subordinated Noteholders,
the obligation of Holdings which is absolute and unconditional, to make
payments with respect to the Guaranteed Obligations to the extent set
forth in Article 11; or
(2) prevent the Senior Subordinated Notes Trustee or any Senior
Subordinated Noteholder from exercising its available remedies upon a
default by Holdings under its obligations with respect to the Guaranteed
Obligations, subject to the rights of holders of Senior Indebtedness of
Holdings to receive distributions otherwise payable to Senior Subordinated
Noteholders.
SECTION 12.08. Subordination May Not Be Impaired by Holdings. No
right of any holder of Senior Indebtedness of Holdings to enforce the
subordination of the obligations of Holdings hereunder shall be impaired by any
act or failure to act by Holdings or by its failure to comply with this
Indenture.
SECTION 12.09. Rights of Senior Subordinated Notes Trustee and
Paying Agent. Notwithstanding Section 12.03, the Senior Subordinated Notes
Trustee or the Paying Agent may continue to make payments on the Senior
Subordinated Notes and shall not be charged with knowledge of the existence of
facts that would prohibit the making of any such payments unless, not less than
two Business Days prior to the date of such payment, a Trust Officer of the
Senior Subordinated Notes Trustee receives notice satisfactory to it that
payments may not be made under this Article 12. Holdings, the Registrar or
co-registrar, the Paying Agent, a Representative or a holder of Senior
Indebtedness of Holdings give the notice; provided, however, that if an issue of
Senior Indebtedness of Holdings has a Representative, only the Representative
may give the notice.
The Senior Subordinated Notes Trustee in its individual or any other
capacity may hold Senior Indebtedness of Holdings with the same rights it would
have if it were not Senior Subordinated Notes Trustee. The Registrar and
co-registrar and the Paying Agent may do the same with like rights. The Senior
Subordinated Notes Trustee shall be entitled to all the rights set forth in this
Article 12 with respect to any Senior Indebtedness of Holdings which may at any
time be held by it, to the same extent as any other holder of Senior
Indebtedness of Holdings; and nothing in Article 7 shall deprive the Senior
Subordinated Notes Trustee of any of its rights as such holder. Nothing in this
Article 12 shall apply to claims of, or payments to, the Senior Subordinated
Notes Trustee under or pursuant to Section 7.07.
SECTION 12.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of Holdings, the distribution may be made and the notice given to their
Representative (if any).
SECTION 12.11. Article 12 Not To Prevent Events of Default or Limit
Right To Accelerate. The failure of Holdings to make a payment on any of its
obligations by reason of any provision in this Article 12 shall not be construed
as preventing the occurrence of a default by Holdings under such obligations.
Nothing in
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this Article 12 shall have any effect on the right of the Senior Subordinated
Noteholders or the Senior Subordinated Notes Trustee to make a demand for
payment on Holdings pursuant to Article 11.
SECTION 12.12. Senior Subordinated Notes Trustee Entitled To Rely.
Upon any payment or distribution pursuant to this Article 12, the Senior
Subordinated Notes Trustee and the Senior Subordinated Noteholders shall be
entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Senior Subordinated
Notes Trustee or to the Senior Subordinated Noteholders or (iii) upon the
Representatives for the holders of Senior Indebtedness of Holdings for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of such Senior Indebtedness of Holdings and other
Indebtedness of Holdings, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article 12. In the event that the Senior Subordinated Notes Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of Holdings to participate in
any payment or distribution pursuant to this Article 12, the Senior Subordinated
Notes Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Senior Subordinated Notes Trustee as to the amount of such
Senior Indebtedness of Holdings held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and other
facts pertinent to the rights of such Person under this Article 12, and, if such
evidence is not furnished, the Senior Subordinated Notes Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall
be applicable to all actions or omissions of actions by the Senior Subordinated
Notes Trustee pursuant to this Article 12.
SECTION 12.13. Senior Subordinated Notes Trustee To Effectuate
Subordination. Each Senior Subordinated Noteholder by accepting a Senior
Subordinated Note authorizes and directs the Senior Subordinated Notes Trustee
on his or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination between the Senior Subordinated
Noteholders and the holders of Senior Indebtedness of Holdings as provided in
this Article 12 and appoints the Senior Subordinated Notes Trustee as
attorney-in-fact for any and all such purposes.
SECTION 12.14. Senior Subordinated Notes Trustee Not Fiduciary for
Holders of Senior Indebtedness of Holdings. The Senior Subordinated Notes
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness of Holdings and shall not be liable to any such holders if it shall
mistakenly pay over or distribute to Senior Subordinated Noteholders or Holdings
or any other Person, money or assets to which any holders of Senior Indebtedness
of Holdings shall be entitled by virtue of this Article 12 or otherwise.
SECTION 12.15. Reliance by Holders of Senior Indebtedness of
Holdings on Subordination Provisions. Each Senior Subordinated Noteholder by
accepting a Senior Subordinated Note acknowledges and agrees that the foregoing
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Indebtedness of Holdings, whether
such Senior Indebtedness was created or acquired before or after the issuance of
the Senior Subordinated Notes, to
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acquire and continue to hold, or to continue to hold, such Senior Indebtedness
and such holder of Senior Indebtedness shall be deemed conclusively to have
relied on such subordination provisions in acquiring and continuing to hold, or
in continuing to hold, such Senior Indebtedness.
SECTION 12.16. Defeasance. The terms of this Article 12 shall not
apply to payments from money or the proceeds of U.S. Government Obligations held
in trust by the Senior Subordinated Notes Trustee for the payment of principal
of and interest on the Senior Subordinated Notes pursuant to the provisions
described in Section 8.03.
ARTICLE 13
Miscellaneous
SECTION 13.01. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
WESCO Distribution, Inc.
Commerce Court, Suite 700
Four Station Square
Pittsburgh, PA 15219
Attention: General Counsel
if to the Senior Subordinated Notes Trustee:
Bank One, N.A.
100 East Broad Street, 8th Floor
Columbus, OH 43215
Attention: Corporate Trust Department
The Company or the Senior Subordinated Notes Trustee by notice to
the other may designate additional or different addresses for subsequent notices
or communications.
Any notice or communication mailed to a Senior Subordinated
Noteholder shall be mailed to the Senior Subordinated Noteholder at the Senior
Subordinated Noteholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Senior Subordinated
Noteholder or any defect in it shall not affect its sufficiency with respect to
other Senior
77
Subordinated Noteholders. If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communication by Senior Subordinated Noteholders with
Other Senior Subordinated Noteholders. Senior Subordinated Noteholders may
communicate pursuant to TIA ss. 312(b) with other Senior Subordinated
Noteholders with respect to their rights under this Indenture or the Senior
Subordinated Notes. The Company, the Senior Subordinated Notes Trustee, the
Registrar and anyone else shall have the protection of TIA ss. 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Senior Subordinated Notes
Trustee to take or refrain from taking any action under this Indenture, the
Company shall furnish to the Senior Subordinated Notes Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Senior Subordinated Notes Trustee stating that, in the
opinion of the signers, all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied with;
and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Senior Subordinated Notes Trustee stating that, in the
opinion of such counsel, all such conditions precedent have been complied
with.
SECTION 13.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. When Senior Subordinated Notes Disregarded. In
determining whether the Senior Subordinated Noteholders of the required
principal amount of Senior Subordinated Notes have concurred in any direction,
waiver or consent, Senior Subordinated Notes owned by the Company, Holdings or
by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or Holdings shall be
disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Senior Subordinated Notes Trustee shall be protected in
relying on any such direction, waiver or consent, only
78
Senior Subordinated Notes which the Senior Subordinated Notes Trustee knows are
so owned shall be so disregarded. Subject to the foregoing, only Senior
Subordinated Notes outstanding at the time shall be considered in any such
determination.
SECTION 13.07. Rules by Senior Subordinated Notes Trustee, Paying
Agent and Registrar. The Senior Subordinated Notes Trustee may make reasonable
rules for action by or a meeting of Senior Subordinated Noteholders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York or the State of Ohio. If a payment date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period. If a regular record
date is a Legal Holiday, the record date shall not be affected.
SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE SENIOR
SUBORDINATED NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 13.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Senior Subordinated Notes or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Senior Subordinated Note, each
Senior Subordinated Noteholder shall waive and release all such liability. The
waiver and release shall be part of the consideration for the issue of the
Senior Subordinated Notes.
SECTION 13.11. Successors. All agreements of the Company and
Holdings in this Indenture and the Senior Subordinated Notes shall bind its
successors. All agreements of the Senior Subordinated Notes Trustee in this
Indenture shall bind its successors.
SECTION 13.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 13.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
79
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
WESCO DISTRIBUTION, INC.,
by /s/ [Illegible]
------------------------------------
Name:
Title:
WESCO INTERNATIONAL, INC.,
by /s/ [Illegible]
------------------------------------
Name:
Title:
BANK ONE, N.A., as Senior Subordinated
Notes Trustee
by /s/ Ruth H. Fussell
------------------------------------
Name: Ruth H. Fussell
Title: Vice President, Corporate
Trust Department
APPENDIX A
PROVISIONS RELATING TO ORIGINAL SENIOR SUBORDINATED NOTES,
ADDITIONAL SENIOR SUBORDINATED NOTES, PRIVATE SENIOR
SUBORDINATED EXCHANGE NOTES AND
SENIOR SUBORDINATED EXCHANGE NOTES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Regulation S Global Senior Subordinated Note or
beneficial interest therein, the rules and procedures of the Depositary for such
Global Senior Subordinated Note, Euroclear and Cedel, in each case to the extent
applicable to such transaction and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities clearing
agency.
"Definitive Senior Subordinated Note" means a certificated Initial
Senior Subordinated Note or Senior Subordinated Exchange Note (bearing the
Restricted Senior Subordinated Notes Legend if the transfer of such Senior
Subordinated Note is restricted by applicable law) that does not include the
Global Senior Subordinated Notes Legend.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Euroclear" means the Euroclear Clearance System or any successor
securities clearing agency.
"Global Senior Subordinated Notes Legend" means the legend set forth
under that caption in Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Chase Securities Inc. and Lehman Brothers
Inc.
"Private Senior Subordinated Exchange Notes" means the Senior
Subordinated Notes of the Company issued in exchange for Initial Senior
Subordinated Notes pursuant to this Indenture in connection with a Senior
Subordinated Notes Private Exchange pursuant to a Senior Subordinated Notes
Registration Agreement.
"Purchase Agreement" means (i) the Purchase Agreement dated May 29,
1998, among the Company, Holdings and the Initial Purchasers and (ii) any other
similar Purchase Agreement relating to Additional Senior Subordinated Notes.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
2
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Senior Subordinated Notes" means all Initial Senior
Subordinated Notes offered and sold outside the United States in reliance on
Regulation S.
"Restricted Period", with respect to any Senior Subordinated Notes,
means the period of 40 consecutive days beginning on and including the later of
(i) the day on which such Senior Subordinated Notes are first offered to persons
other than distributors (as defined in Regulation S under the Securities Act) in
reliance on Regulation S and (ii) the Senior Subordinated Notes Issue Date with
respect to such Senior Subordinated Notes.
"Restricted Senior Subordinated Notes Legend" means the legend set
forth in Section 2.3(e)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Senior Subordinated Notes" means all Initial Senior
Subordinated Notes offered and sold to QIBs in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Subordinated Notes Custodian" means the custodian with
respect to a Global Senior Subordinated Note (as appointed by the Depositary) or
any successor person thereto, who shall initially be the Senior Subordinated
Notes Trustee.
"Senior Subordinated Notes Private Exchange" means an offer by the
Company, pursuant to a Senior Subordinated Notes Registration Agreement, to
issue and deliver to certain purchasers, in exchange for the Initial Senior
Subordinated Notes held by such purchasers as part of their initial
distribution, a like aggregate principal amount of Private Senior Subordinated
Exchange Notes.
"Senior Subordinated Notes Registered Exchange Offer" means an offer
by the Company, pursuant to a Senior Subordinated Notes Registration Agreement,
to certain Holders of Initial Senior Subordinated Notes, to issue and deliver to
such Holders, in exchange for their Initial Senior Subordinated Notes, a like
aggregate principal amount of Senior Subordinated Exchange Notes registered
under the Securities Act.
"Senior Subordinated Notes Registration Agreement" means (i) the
Exchange and Registration Rights Agreement dated June 5, 1998, among the
Company, Holdings and the Initial Purchasers and (ii) any other similar Exchange
and Registration Rights Agreement relating to Additional Senior Subordinated
Notes.
"Senior Subordinated Notes Shelf Registration Statement" means a
registration statement filed by the Company in connection with the offer and
sale of Initial Senior Subordinated Notes pursuant to a Senior Subordinated
Notes Registration Agreement.
3
"Transfer Restricted Senior Subordinated Notes" means Definitive
Senior Subordinated Notes and any other Senior Subordinated Notes that bear or
are required to bear the Restricted Senior Subordinated Notes Legend.
1.2 Other Definitions
Term: Defined in Section:
----- -------------------
"Agent Members".......................................................2.1(b)
"IAI Global Senior Subordinated Note..................................2.1(a)
"Global Senior Subordinated Note".....................................2.1(a)
"Regulation S Global Senior Subordinated Note"........................2.1(a)
"Rule 144A Global Senior Subordinated Note"...........................2.1(a)
2. The Senior Subordinated Notes
2.1 Form and Dating
The Initial Senior Subordinated Notes issued on the date hereof will
be (i) offered and sold by the Company pursuant to a Purchase Agreement and (ii)
resold, initially only to (A) QIBs in reliance on Rule 144A and (B) Persons
other than U.S. Persons (as defined in Regulation S) in reliance on Regulation
S. Such Initial Senior Subordinated Notes may thereafter be transferred to,
among others, QIBs, purchasers in reliance on Regulation S and, except as set
forth below, IAIs in accordance with Rule 501. Additional Senior Subordinated
Notes offered after the date hereof may be offered and sold by the Company from
time to time pursuant to one or more Purchase Agreements in accordance with
applicable law.
(a) Global Senior Subordinated Notes. Rule 144A Senior Subordinated
Notes shall be issued initially in the form of one or more permanent global
Senior Subordinated Notes in definitive, fully registered form (collectively,
the "Rule 144A Global Senior Subordinated Note") and Regulation S Senior
Subordinated Notes shall be issued initially in the form of one or more global
Senior Subordinated Notes (collectively, the "Regulation S Global Senior
Subordinated Note"), in each case without interest coupons and bearing the
Global Senior Subordinated Notes Legend and Restricted Senior Subordinated Notes
Legend, which shall be deposited on behalf of the purchasers of the Senior
Subordinated Notes represented thereby with the Senior Subordinated Notes
Custodian, and registered in the name of the Depositary or a nominee of the
Depositary, duly executed by the Company and authenticated by the Senior
Subordinated Notes Trustee as provided in this Indenture. One or more global
securities in definitive, fully registered form without interest coupons and
bearing the Global Senior Subordinated Notes Legend and the Restricted Senior
Subordinated Notes Legend (collectively, the "IAI Global Senior Subordinated
Note") shall also be issued on the Closing Date, deposited with the Senior
Subordinated Notes Custodian, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and authenticated by the
Senior Subordinated Notes Trustee as provided in this Indenture to accommodate
transfers of beneficial interests in the Senior Subordinated Notes to IAIs
subsequent to the initial distribution. Beneficial ownership interests in the
Regulation S Global Senior Subordinated Note will not be exchangeable for
interests in the Rule 144A Global Senior Subordinated Note, the IAI Global
Senior Subordinated Note or any other Senior Subordinated Note without a
Restricted Senior Subordinated Notes Legend
4
until the expiration of the Restricted Period. The Rule 144A Global Senior
Subordinated Note, the IAI Global Senior Subordinated Note and the Regulation S
Global Senior Subordinated Note are each referred to herein as a "Global Senior
Subordinated Note" and are collectively referred to herein as "Global Senior
Subordinated Notes." The aggregate principal amount of the Global Senior
Subordinated Notes may from time to time be increased or decreased by
adjustments made on the records of the Senior Subordinated Notes Trustee and the
Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Senior Subordinated Note deposited with or on behalf of the Depositary.
The Company shall execute and the Senior Subordinated Notes Trustee
shall, in accordance with this Section 2.1(b) and pursuant to an order of the
Company, authenticate and deliver initially one or more Global Senior
Subordinated Notes that (a) shall be registered in the name of the Depositary
for such Global Senior Subordinated Note or Global Senior Subordinated Notes or
the nominee of such Depositary and (b) shall be delivered by the Senior
Subordinated Notes Trustee to such Depositary or pursuant to such Depositary's
instructions or held by the Senior Subordinated Notes Trustee as Senior
Subordinated Notes Custodian.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Senior
Subordinated Note held on their behalf by the Depositary or by the Senior
Subordinated Notes Trustee as Senior Subordinated Notes Custodian or under such
Global Senior Subordinated Note, and the Depositary may be treated by the
Company, the Senior Subordinated Notes Trustee and any agent of the Company or
the Senior Subordinated Notes Trustee as the absolute owner of such Global
Senior Subordinated Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Senior Subordinated
Notes Trustee or any agent of the Company or the Senior Subordinated Notes
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices of such Depositary
governing the exercise of the rights of a holder of a beneficial interest in any
Global Senior Subordinated Note.
(c) Definitive Senior Subordinated Notes. Except as provided in
Section 2.3 or 2.4, owners of beneficial interests in Global Senior Subordinated
Notes will not be entitled to receive physical delivery of certificated Senior
Subordinated Notes.
2.2 Authentication. The Senior Subordinated Notes Trustee shall
authenticate and make available for delivery upon a written order of the Company
signed by two Officers (1) Original Senior Subordinated Notes for original issue
on the date hereof in an aggregate principal amount of $300 million, (2) subject
to the terms of this Indenture, Additional Senior Subordinated Notes in an
aggregate principal amount of up to $200 million and (3) the (A) Senior
Subordinated Exchange Notes for issue only in a Senior Subordinated Notes
Registered Exchange Offer and (B) Private Senior Subordinated Exchange Notes for
issue only in a Senior Subordinated Notes Private Exchange, in the case of each
of (A) and (B) pursuant to a Senior Subordinated Notes Registration Agreement
and for a like principal amount of Initial Senior Subordinated Notes exchanged
pursuant thereto. Such order shall specify the amount of the Senior Subordinated
Notes to be authenticated, the date on which the original issue of Senior
Subordinated Notes is to be authenticated and whether the Senior Subordinated
Notes are to be Initial Senior Subordinated Notes, Senior Subordinated
5
Exchange Notes or Private Senior Subordinated Exchange Notes. The aggregate
principal amount of Senior Subordinated Notes outstanding at any time may not
exceed $500 million, except as provided in Section 2.08 of this Indenture.
Notwithstanding anything to the contrary in this Appendix or otherwise in this
Indenture, any issuance of Additional Senior Subordinated Notes after the
Closing Date shall be in a principal amount of at least $50 million, whether
such Additional Senior Subordinated Notes are of the same or a different series
than the Original Senior Subordinated Notes.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive Senior
Subordinated Notes. When Definitive Senior Subordinated Notes are presented to
the Registrar with a request:
(x) to register the transfer of such Definitive Senior Subordinated
Notes; or
(y) to exchange such Definitive Senior Subordinated Notes for an
equal principal amount of Definitive Senior Subordinated Notes of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Definitive Senior Subordinated Notes surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar,
duly executed by the Senior Subordinated Noteholder thereof or his
attorney duly authorized in writing; and
(ii) are accompanied by the following additional information and
documents, as applicable:
(A) if such Definitive Senior Subordinated Notes are being
delivered to the Registrar by a Senior Subordinated Noteholder for
registration in the name of such Senior Subordinated Noteholder,
without transfer, a certification from such Senior Subordinated
Noteholder to that effect (in the form set forth on the reverse side
of the Initial Senior Subordinated Note); or
(B) if such Definitive Senior Subordinated Notes are being
transferred to the Company, a certification to that effect (in the
form set forth on the reverse side of the Initial Senior
Subordinated Note); or
(C) if such Definitive Senior Subordinated Notes are being
transferred pursuant to an exemption from registration in accordance
with Rule 144 under the Securities Act or in reliance upon another
exemption from the registration requirements of the Securities Act,
(i) a certification to that effect (in the form set forth on the
reverse side of the Initial Senior Subordinated Note) and (ii) if
the Company so requests, an opinion of counsel or other evidence
reasonably satisfactory to it as to the compliance with the
restrictions set forth in the legend set forth in Section 2.3(e)(i).
(b) Restrictions on Transfer of a Definitive Senior Subordinated
Note for a Beneficial Interest in a Global Senior Subordinated Note. A
Definitive Senior Subordinated
6
Note may not be exchanged for a beneficial interest in a Global Senior
Subordinated Note except upon satisfaction of the requirements set forth below.
Upon receipt by the Senior Subordinated Notes Trustee of a Definitive Senior
Subordinated Note, duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar,
together with:
(i) certification (in the form set forth on the reverse side of the
Initial Senior Subordinated Note) that such Definitive Senior Subordinated
Note is being transferred (A) to a QIB in accordance with Rule 144A, (B)
to an IAI that has furnished to the Senior Subordinated Notes Trustee a
signed letter substantially in the form of Exhibit D or (C) outside the
United States in an offshore transaction within the meaning of Regulation
S and in compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Senior Subordinated Notes
Trustee to make, or to direct the Senior Subordinated Notes Custodian to
make, an adjustment on its books and records with respect to such Global
Senior Subordinated Note to reflect an increase in the aggregate principal
amount of the Senior Subordinated Notes represented by the Global Senior
Subordinated Note, such instructions to contain information regarding the
Depositary account to be credited with such increase,
then the Senior Subordinated Notes Trustee shall cancel such Definitive Senior
Subordinated Note and cause, or direct the Senior Subordinated Notes Custodian
to cause, in accordance with the standing instructions and procedures existing
between the Depositary and the Senior Subordinated Notes Custodian, the
aggregate principal amount of Senior Subordinated Notes represented by the
Global Senior Subordinated Note to be increased by the aggregate principal
amount of the Definitive Senior Subordinated Note to be exchanged and shall
credit or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the Global Senior Subordinated Note equal
to the principal amount of the Definitive Senior Subordinated Note so canceled.
If no Global Senior Subordinated Notes are then outstanding and the Global
Senior Subordinated Note has not been previously exchanged for certificated
securities pursuant to Section 2.4, the Company shall issue and the Senior
Subordinated Notes Trustee shall authenticate, upon written order of the Company
in the form of an Officers' Certificate, a new Global Senior Subordinated Note
in the appropriate principal amount.
(c) Transfer and Exchange of Global Senior Subordinated Notes. (i)
The transfer and exchange of Global Senior Subordinated Notes or beneficial
interests therein shall be effected through the Depositary, in accordance with
this Indenture (including applicable restrictions on transfer set forth herein,
if any) and the procedures of the Depositary therefor. A transferor of a
beneficial interest in a Global Senior Subordinated Note shall deliver a written
order given in accordance with the Depositary's procedures containing
information regarding the participant account of the Depositary to be credited
with a beneficial interest in such Global Senior Subordinated Note or another
Global Senior Subordinated Note and such account shall be credited in accordance
with such order with a beneficial interest in the applicable Global Senior
Subordinated Note and the account of the Person making the transfer shall be
debited by an amount equal to the beneficial interest in the Global Senior
Subordinated Note being transferred. Transfers by an owner of a beneficial
interest in the Rule 144A Global Senior Subordinated Note or the IAI Global
Senior Subordinated Note to a transferee who takes delivery of such interest
through the
7
Regulation S Global Senior Subordinated Note, whether before or after the
expiration of the Restricted Period, will be made only upon receipt by the
Senior Subordinated Notes Trustee of a certification from the transferor to the
effect that such transfer is being made in accordance with Regulation S or (if
available) Rule 144 under the Securities Act and that, if such transfer is being
made prior to the expiration of the Restricted Period, the interest transferred
will be held immediately thereafter through Euroclear or Cedel. In the case of a
transfer of a beneficial interest in either the Regulation S Global Senior
Subordinated Note or the Rule 144A Global Senior Subordinated Note for an
interest in the IAI Global Senior Subordinated Note, the transferee must furnish
a signed letter substantially in the form of Exhibit D to the Senior
Subordinated Notes Trustee.
(ii) If the proposed transfer is a transfer of a beneficial interest
in one Global Senior Subordinated Note to a beneficial interest in another
Global Senior Subordinated Note, the Registrar shall reflect on its books
and records the date and an increase in the principal amount of the Global
Senior Subordinated Note to which such interest is being transferred in an
amount equal to the principal amount of the interest to be so transferred,
and the Registrar shall reflect on its books and records the date and a
corresponding decrease in the principal amount of Global Senior
Subordinated Note from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4), a Global Senior
Subordinated Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by
the Depositary or any such nominee to a successor Depositary or a nominee
of such successor Depositary.
(iv) In the event that a Global Senior Subordinated Note is
exchanged for Definitive Senior Subordinated Notes pursuant to Section 2.4
prior to the consummation of a Senior Subordinated Notes Registered
Exchange Offer or the effectiveness of a Senior Subordinated Notes Shelf
Registration Statement with respect to such Senior Subordinated Notes,
such Senior Subordinated Notes may be exchanged only in accordance with
such procedures as are substantially consistent with the provisions of
this Section 2.3 (including the certification requirements set forth on
the reverse of the Initial Senior Subordinated Notes intended to ensure
that such transfers comply with Rule 144A, Regulation S or such other
applicable exemption from registration under the Securities Act, as the
case may be) and such other procedures as may from time to time be adopted
by the Company.
(d) Restrictions on Transfer of Regulation S Global Senior
Subordinated Note. (i) Prior to the expiration of the Restricted Period,
interests in the Regulation S Global Senior Subordinated Note may only be held
through Euroclear or Cedel. During the Restricted Period, beneficial ownership
interests in the Regulation S Global Senior Subordinated Note may only be sold,
pledged or transferred through Euroclear or Cedel in accordance with the
Applicable Procedures and only (A) to the Company, (B) so long as such security
is eligible for resale pursuant to Rule 144A, to a person whom the selling
holder reasonably believes is a QIB that purchases for its own account or for
the account of a QIB to whom notice is given that the resale, pledge or transfer
is being made in reliance on Rule 144A, (C) in an offshore transaction in
accordance with Regulation S, (D) pursuant to an exemption from registration
under the Securities Act provided by Rule 144 (if applicable) under the
Securities Act, (E) to an IAI purchasing for its own account, or for the account
of
8
such an IAI, in a minimum principal amount of Senior Subordinated Notes of
$250,000 or (F) pursuant to an effective registration statement under the
Securities Act, in each case in accordance with any applicable securities laws
of any state of the United States. Prior to the expiration of the Restricted
Period, transfers by an owner of a beneficial interest in the Regulation S
Global Senior Subordinated Note to a transferee who takes delivery of such
interest through the Rule 144A Global Senior Subordinated Note or the IAI Global
Senior Subordinated Note will be made only in accordance with Applicable
Procedures and upon receipt by the Senior Subordinated Notes Trustee of a
written certification from the transferor of the beneficial interest in the form
provided on the reverse of the Initial Senior Subordinated Note to the effect
that such transfer is being made to (i) a person whom the transferor reasonably
believes is a QIB within the meaning of Rule 144A in a transaction meeting the
requirements of Rule 144A or (ii) an IAI purchasing for its own account, or for
the account of such an IAI, in a minimum principal amount of the Senior
Subordinated Notes of $250,000. Such written certification will no longer be
required after the expiration of the Restricted Period. In the case of a
transfer of a beneficial interest in the Regulation S Global Senior Subordinated
Note for an interest in the IAI Global Senior Subordinated Note, the transferee
must furnish a signed letter substantially in the form of Exhibit D to the
Senior Subordinated Notes Trustee.
(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Regulation S Global Senior Subordinated Note
will be transferable in accordance with applicable law and the other terms
of this Indenture.
(e) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) or
(iv), each Senior Subordinated Note certificate evidencing the Global
Senior Subordinated Notes and the Definitive Senior Subordinated Notes
(and all Senior Subordinated Notes issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the following
form (each defined term in the legend being defined as such for purposes
of the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE
9
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO
AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL
AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Definitive Senior Subordinated Note will also bear the following additional
legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION
AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Senior
Subordinated Note that is a Definitive Senior Subordinated Note, the
Registrar shall permit the Senior Subordinated Noteholder thereof to
exchange such Transfer Restricted Senior Subordinated Note for a
Definitive Senior Subordinated Note that does not bear the legends set
forth above and rescind any restriction on the transfer of such Transfer
Restricted Senior Subordinated Note if the Senior Subordinated Noteholder
certifies in writing to the Registrar that its request for such exchange
was made in reliance on Rule 144 (such certification to be in the form set
forth on the reverse of the Initial Senior Subordinated Note).
(iii) After a transfer of any Initial Senior Subordinated Notes or
Private Exchange Senior Subordinated Notes during the period of the
effectiveness of a Senior Subordinated Notes Shelf Registration Statement
with respect to such Initial Senior Subordinated Notes or Private Senior
Subordinated Exchange Notes, as the case may be, all requirements
pertaining to the Restricted Senior Subordinated Notes Legend on such
Initial Senior Subordinated Notes or such Private Senior
10
Subordinated Exchange Notes will cease to apply and the requirements that
any such Initial Senior Subordinated Notes or such Private Senior
Subordinated Exchange Notes be issued in global form will continue to
apply.
(iv) Upon the consummation of a Senior Subordinated Notes Registered
Exchange Offer with respect to the Initial Senior Subordinated Notes
pursuant to which Senior Subordinated Noteholders of such Initial Senior
Subordinated Notes are offered Senior Subordinated Exchange Notes in
exchange for their Initial Senior Subordinated Notes, all requirements
pertaining to Initial Senior Subordinated Notes that Initial Senior
Subordinated Notes be issued in global form will continue to apply, and
Senior Subordinated Exchange Notes in global form without the Restricted
Senior Subordinated Notes Legend will be available to Senior Subordinated
Noteholders that exchange such Initial Senior Subordinated Notes in such
Senior Subordinated Notes Registered Exchange Offer.
(v) Upon the consummation of a Senior Subordinated Notes Private
Exchange with respect to the Initial Senior Subordinated Notes pursuant to
which Holders of such Initial Senior Subordinated Notes are offered
Private Senior Subordinated Exchange Notes in exchange for their Initial
Senior Subordinated Notes, all requirements pertaining to such Initial
Senior Subordinated Notes that Initial Senior Subordinated Notes be issued
in global form will continue to apply, and Private Senior Subordinated
Exchange Notes in global form with the Restricted Senior Subordinated
Notes Legend will be available to Senior Subordinated Noteholders that
exchange such Initial Senior Subordinated Notes in such Senior
Subordinated Notes Private Exchange.
(vi) Upon a sale or transfer after the expiration of the Restricted
Period of any Initial Senior Subordinated Note acquired pursuant to
Regulation S, all requirements that such Initial Senior Subordinated Note
bear the Restricted Senior Subordinated Notes Legend will cease to apply
and the requirements requiring any such Initial Senior Subordinated Note
be issued in global form will continue to apply.
(vii) Any Additional Senior Subordinated Notes sold in a registered
offering shall not be required to bear the Restricted Senior Subordinated
Notes Legend.
(f) Cancelation or Adjustment of Global Senior Subordinated Note. At
such time as all beneficial interests in a Global Senior Subordinated Note have
either been exchanged for Definitive Senior Subordinated Notes, transferred,
redeemed, repurchased or canceled, such Global Senior Subordinated Note shall be
returned by the Depositary to the Senior Subordinated Notes Trustee for
cancelation or retained and canceled by the Senior Subordinated Notes Trustee.
At any time prior to such cancelation, if any beneficial interest in a Global
Senior Subordinated Note is exchanged for Definitive Senior Subordinated Notes,
transferred in exchange for an interest in another Global Senior Subordinated
Note, redeemed, repurchased or canceled, the principal amount of Senior
Subordinated Notes represented by such Global Senior Subordinated Note shall be
reduced and an adjustment shall be made on the books and records of the Senior
Subordinated Notes Trustee (if it is then the Senior Subordinated Notes
Custodian for such Global Senior Subordinated Note) with respect to such Global
Senior Subordinated Note, by the Senior Subordinated Notes Trustee or the Senior
Subordinated Notes Custodian, to reflect such reduction.
11
(g) Obligations with Respect to Transfers and Exchanges of Senior
Subordinated Notes.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Senior Subordinated Notes Trustee shall
authenticate, Definitive Senior Subordinated Notes and Global Senior
Subordinated Notes at the Registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum
sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith (other than any such transfer
taxes, assessments or similar governmental charge payable upon exchange or
transfer pursuant to Section 3.06, 4.06, 4.08 and 9.05).
(iii) Prior to the due presentation for registration of transfer of
any Senior Subordinated Note, the Company, the Senior Subordinated Notes
Trustee, the Paying Agent or the Registrar may deem and treat the person
in whose name a Senior Subordinated Note is registered as the absolute
owner of such Senior Subordinated Note for the purpose of receiving
payment of principal of and interest on such Senior Subordinated Note and
for all other purposes whatsoever, whether or not such Senior Subordinated
Note is overdue, and none of the Company, the Senior Subordinated Notes
Trustee, the Paying Agent or the Registrar shall be affected by notice to
the contrary.
(iv) All Senior Subordinated Notes issued upon any transfer or
exchange pursuant to the terms of this Indenture shall evidence the same
debt and shall be entitled to the same benefits under this Indenture as
the Senior Subordinated Notes surrendered upon such transfer or exchange.
(h) No Obligation of the Senior Subordinated Notes Trustee.
(i) The Senior Subordinated Notes Trustee shall have no
responsibility or obligation to any beneficial owner of a Global Senior
Subordinated Note, a member of, or a participant in the Depositary or any
other Person with respect to the accuracy of the records of the Depositary
or its nominee or of any participant or member thereof, with respect to
any ownership interest in the Senior Subordinated Notes or with respect to
the delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption or repurchase) or the payment of any amount, under or with
respect to such Senior Subordinated Notes. All notices and communications
to be given to the Senior Subordinated Noteholders and all payments to be
made to Senior Subordinated Noteholders under the Senior Subordinated
Notes shall be given or made only to the registered Senior Subordinated
Noteholders (which shall be the Depositary or its nominee in the case of a
Global Senior Subordinated Note). The rights of beneficial owners in any
Global Senior Subordinated Note shall be exercised only through the
Depositary subject to the applicable rules and procedures of the
Depositary. The Senior Subordinated Notes Trustee may rely and shall be
fully protected in relying upon information furnished by the Depositary
with respect to its members, participants and any beneficial owners.
12
(ii) The Senior Subordinated Notes Trustee shall have no obligation
or duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under applicable
law with respect to any transfer of any interest in any Senior
Subordinated Note (including any transfers between or among Depositary
participants, members or beneficial owners in any Global Senior
Subordinated Note) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by, the terms of this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Definitive Senior Subordinated Notes
(a) A Global Senior Subordinated Note deposited with the Depositary
or with the Senior Subordinated Notes Trustee as Senior Subordinated Notes
Custodian pursuant to Section 2.1 shall be transferred to the beneficial owners
thereof in the form of Definitive Senior Subordinated Notes in an aggregate
principal amount equal to the principal amount of such Global Senior
Subordinated Note, in exchange for such Global Senior Subordinated Note, only if
such transfer complies with Section 2.3 and (i) the Depositary notifies the
Company that it is unwilling or unable to continue as a Depositary for such
Global Senior Subordinated Note or if at any time the Depositary ceases to be a
"clearing agency" registered under the Exchange Act, and a successor depositary
is not appointed by the Company within 90 days of such notice, or (ii) an Event
of Default has occurred and is continuing or (iii) the Company, in its sole
discretion, notifies the Senior Subordinated Notes Trustee in writing that it
elects to cause the issuance of certificated Senior Subordinated Notes under
this Indenture.
(b) Any Global Senior Subordinated Note that is transferable to the
beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by
the Depositary to the Senior Subordinated Notes Trustee, to be so transferred,
in whole or from time to time in part, without charge, and the Senior
Subordinated Notes Trustee shall authenticate and deliver, upon such transfer of
each portion of such Global Senior Subordinated Note, an equal aggregate
principal amount of Definitive Senior Subordinated Notes of authorized
denominations. Any portion of a Global Senior Subordinated Note transferred
pursuant to this Section shall be executed, authenticated and delivered only in
denominations of $1,000 and any integral multiple thereof and registered in such
names as the Depositary shall direct. Any certificated Initial Senior
Subordinated Note in the form of a Definitive Senior Subordinated Note delivered
in exchange for an interest in the Global Senior Subordinated Note shall, except
as otherwise provided by Section 2.3(e), bear the Restricted Senior Subordinated
Notes Legend.
(c) Subject to the provisions of Section 2.4(b), the registered
Senior Subordinated Noteholder of a Global Senior Subordinated Note may grant
proxies and otherwise authorize any Person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action which a Senior
Subordinated Noteholder is entitled to take under this Indenture or the Senior
Subordinated Notes.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to
the Senior Subordinated Notes Trustee a reasonable supply of Definitive Senior
Subordinated Notes in fully registered form without interest coupons.
EXHIBIT A
[FORM OF FACE OF INITIAL SENIOR SUBORDINATED NOTE]
[Global Senior Subordinated Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Senior Subordinated Notes Legend]
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL
2
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE
ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Definitive Senior Subordinated Note will also bear the following additional
legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.
No. $__________
9 1/8% Senior Subordinated Note due 2008
CUSIP No. ______
WESCO Distribution, Inc., a Delaware corporation, promises to pay to
Cede & Co., or registered assigns, the principal sum [of Dollars]
[listed on the Schedule of Increases or Decreases in Global Senior Subordinated
Note attached hereto](1) on June 1, 2008.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
- - - - --------
(1) Use the Schedule of Increases and Decreases language if Note is in Global
Form.
2
Additional provisions of this Senior Subordinated Note are set forth
on the other side of this Senior Subordinated Note.
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed.
WESCO DISTRIBUTION, INC.,
by
----------------------------
Name:
Title:
by
----------------------------
Name:
Title:
Dated:
SENIOR SUBORDINATED NOTES TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
BANK ONE, N.A.,
as Senior Subordinated Notes Trustee, certifies
that this is one of
the Senior Subordinated Notes referred
to in the Indenture.
By:
-------------------------
Authorized Signatory
[FORM OF REVERSE SIDE OF SENIOR SUBORDINATED NOTE]
9 1/8% Senior Subordinated Note due 2008
1. Interest
(a) WESCO DISTRIBUTION, INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Senior Subordinated Note at the rate per annum shown
above. The Company will pay interest semiannually on June 1 and December 1 of
each year. Interest on the Senior Subordinated Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from June 5, 1998. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
(b) Liquidated Damages. The holder of this Senior Subordinated Note
is entitled to the benefits of an Exchange and Registration Rights Agreement,
dated as of June 5, 1998, among the Company, WESCO International, Inc.
("Holdings") and the Initial Purchasers named therein (the "Senior Subordinated
Notes Registration Agreement"). Capitalized terms used in this paragraph (b) but
not defined herein have the meanings assigned to them in the Senior Subordinated
Notes Registration Agreement. If (i) the Senior Subordinated Notes Shelf
Registration Statement or Senior Subordinated Notes Exchange Offer Registration
Statement, as applicable under the Senior Subordinated Notes Registration
Agreement, is not filed with the Commission on or prior to 90 days after the
Senior Subordinated Notes Issue Date (or, in the case of a Senior Subordinated
Notes Shelf Registration Statement required to be filed in response to a change
in law or applicable interpretations of the Commission's staff, if later, within
45 days after publication of the change in law or interpretations, but in no
event before 90 days after the Senior Subordinated Notes Issue Date), (ii) the
Senior Subordinated Notes Exchange Offer Registration Statement or the Senior
Subordinated Notes Shelf Registration Statement, as the case may be, is not
declared effective within 200 days after the Senior Subordinated Notes Issue
Date (or in the case of a Senior Subordinated Notes Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 90 days after
publication of the change in law or interpretation, but in no event before 200
days after the Senior Subordinated Notes Issue Date), (iii) the Senior
Subordinated Notes Registered Exchange Offer is not consummated on or prior to
230 days after the Senior Subordinated Notes Issue Date (other than in the event
the Company files a Senior Subordinated Notes Shelf Registration Statement), or
(iv) the Senior Subordinated Notes Shelf Registration Statement is filed and
declared effective within 200 days after the Senior Subordinated Notes Issue
Date but shall thereafter cease to be effective (at any time that the Company is
obligated to maintain the effectiveness thereof) without being succeeded within
90 days by an additional Senior Subordinated Notes Registration Statement filed
and declared effective (each such event referred to in clauses (i) through (iv),
a "Registration Default"), the Company shall pay liquidated damages to each
holder of Transfer Restricted Senior Subordinated Notes, during the period of
such Registration Default, in an amount equal to $0.192 per week per $1,000
principal amount of the Senior Subordinated Notes constituting Transfer
Restricted Senior Subordinated Notes held by such holder until (i) the
applicable Senior Subordinated Notes Registration Statement is filed, (ii) the
Senior Subordinated Notes Exchange Offer Registration Statement is declared
effective and the Senior Subordinated Notes Registered Exchange Offer is
consummated, (iii) the Senior
2
Subordinated Notes Shelf Registration Statement is declared effective or (iv)
the Senior Subordinated Notes Shelf Registration Statement again becomes
effective, as the case may be. All accrued liquidated damages shall be paid to
holders in the same manner as interest payments on the Senior Subordinated Notes
on semi-annual payment dates which correspond to interest payment dates for the
Senior Subordinated Notes. Following the cure of all Registration Defaults, the
accrual of liquidated damages will cease. The Senior Subordinated Notes Trustee
shall have no responsibility with respect to the determination of the amount of
any such liquidated damages. For purposes of the foregoing, "Transfer Restricted
Senior Subordinated Notes" means (i) each Initial Senior Subordinated Note until
the date on which such Initial Senior Subordinated Note has been exchanged for a
freely transferable Senior Subordinated Exchange Note in the Senior Subordinated
Notes Registered Exchange Offer, (ii) each Initial Senior Subordinated Note or
Private Senior Subordinated Exchange Note until the date on which such Initial
Senior Subordinated Note or Private Senior Subordinated Exchange Note has been
effectively registered under the Securities Act and disposed of in accordance
with a Senior Subordinated Notes Shelf Registration Statement or (iii) each
Initial Senior Subordinated Note or Private Senior Subordinated Exchange Note
until the date on which such Initial Senior Subordinated Note or Private Senior
Subordinated Exchange Note is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act.
2. Method of Payment
The Company will pay interest on the Senior Subordinated Notes
(except defaulted interest) to the Persons who are registered holders of Senior
Subordinated Notes at the close of business on the May 15 or November 15 next
preceding the interest payment date even if Senior Subordinated Notes are
canceled after the record date and on or before the interest payment date.
Holders must surrender Senior Subordinated Notes to a Paying Agent to collect
principal payments. The Company will pay principal and interest in money of the
United States of America that at the time of payment is legal tender for payment
of public and private debts. Payments in respect of the Senior Subordinated
Notes represented by a Global Senior Subordinated Note (including principal,
premium and interest) will be made by wire transfer of immediately available
funds to the accounts specified by The Depository Trust Company. The Company
will make all payments in respect of a certificated Senior Subordinated Note
(including principal, premium and interest), by mailing a check to the
registered address of each Senior Subordinated Noteholder thereof; provided,
however, that payments on the Senior Subordinated Notes may also be made, in the
case of a Senior Subordinated Noteholder of at least $1,000,000 aggregate
principal amount of Senior Subordinated Notes, by wire transfer to a U.S. dollar
account maintained by the payee with a bank in the United States if such Senior
Subordinated Noteholder elects payment by wire transfer by giving written notice
to the Senior Subordinated Notes Trustee or the Paying Agent to such effect
designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Senior Subordinated
Notes Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, Bank One, N.A., a national banking association (the
"Senior Subordinated Notes Trustee"), will act as Paying Agent and Registrar.
The Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
3
4. Indenture
The Company issued the Senior Subordinated Notes under an Indenture
dated as of June 5, 1998 (the "Indenture"), among the Company, Holdings and the
Senior Subordinated Notes Trustee. The terms of the Senior Subordinated Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as
in effect on the date of the Indenture (the "TIA"). Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Senior Subordinated Notes are subject to all such terms, and
Senior Subordinated Noteholders are referred to the Indenture and the TIA for a
statement of those terms.
The Senior Subordinated Notes are senior subordinated unsecured
obligations of the Company limited to $500 million aggregate principal amount at
any one time outstanding (subject to Sections 2.01 and 2.08 of the Indenture).
This Senior Subordinated Note is one of the Original Senior Subordinated Notes
referred to in the Indenture issued in an aggregate principal amount of $300
million. The Senior Subordinated Notes include the Initial Senior Subordinated
Notes and any Senior Subordinated Exchange Notes issued in exchange for Initial
Senior Subordinated Notes. The Initial Senior Subordinated Notes and the Senior
Subordinated Exchange Notes are treated as a single class of securities under
the Indenture. The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
issue or sell shares of capital stock of such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates, create or incur Liens and
make asset sales. The Indenture also imposes limitations on the ability of the
Company to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of the property of the Company.
To guarantee the due and punctual payment of the principal and
interest on the Senior Subordinated Notes and all other amounts payable by the
Company under the Indenture and the Senior Subordinated Notes when and as the
same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Senior Subordinated Notes and the
Indenture, Holdings has unconditionally guaranteed the Guaranteed Obligations on
a senior subordinated basis pursuant to the terms of the Indenture.
5. Optional Redemption
Except as set forth in the following two paragraphs, the Senior
Subordinated Notes will not be redeemable at the option of the Company prior to
June 1, 2003. Thereafter, the Senior Subordinated Notes will be redeemable at
the option of the Company, in whole or in part, on not less than 30 nor more
than 60 days' prior notice, at the following redemption prices (expressed as
percentages of principal amount), plus accrued and unpaid interest and
liquidated damages (if any) to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on June 1 of the years set forth below:
Redemption
Year Price
- - - - ---- ----------
2003............................................................. 104.563%
2004............................................................. 103.042%
2005............................................................. 101.521%
2006 and thereafter.............................................. 100.000%
4
In addition, at any time and from time to time prior to June 1,
2001, the Company may redeem up to a maximum of 35% of the original aggregate
principal amount of the Senior Subordinated Notes (calculated giving effect to
any issuance of Additional Senior Subordinated Notes) with the Net Cash Proceeds
of one or more Equity Offerings by (i) the Company or (ii) Holdings to the
extent the Net Cash Proceeds thereof are (a) contributed to the Company as a
capital contribution to the common equity of the Company or (b) used to purchase
Capital Stock of the Company (in either case, other than Disqualified Stock), at
a redemption price equal to 109.125% of the principal amount thereof, plus
accrued and unpaid interest and liquidated damages thereon, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that after giving effect to any such redemption, at least 65%
of the original aggregate principal amount of the Senior Subordinated Notes
(calculated giving effect to any issuance of Additional Senior Subordinated
Notes) remains outstanding. Any such redemption shall be made within 120 days of
such Equity Offering upon not less than 30 nor more than 60 days' notice mailed
to each holder of Senior Subordinated Notes being redeemed and otherwise in
accordance with the procedures set forth in the Indenture.
At any time prior to June 1, 2003, the Senior Subordinated Notes may
be redeemed, in whole but not in part, at the option of the Company at any time
within 180 days after a Change of Control, at a redemption price equal to the
sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest
and liquidated damages, if any, to the redemption date (subject to the right of
Senior Subordinated Noteholders of record on the relevant record date to receive
interest due on the relevant interest payment date that is on or prior to the
date of redemption) plus (iii) the Applicable Premium.
6. Sinking Fund
The Senior Subordinated Notes are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Senior
Subordinated Noteholder of Senior Subordinated Notes to be redeemed at his or
her registered address. Senior Subordinated Notes in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all Senior
Subordinated Notes (or portions thereof) to be redeemed on the redemption date
is deposited with the Paying Agent on or before the redemption date and certain
other conditions are satisfied, on and after such date interest ceases to accrue
on such Senior Subordinated Notes (or such portions thereof) called for
redemption.
5
8. Repurchase of Senior Subordinated Notes at the Option of Senior
Subordinated Noteholders upon Change of Control
Upon a Change of Control, any Senior Subordinated Noteholder of
Senior Subordinated Notes will have the right, subject to certain conditions
specified in the Indenture, to cause the Company to repurchase all or any part
of the Senior Subordinated Notes of such Senior Subordinated Noteholder at a
purchase price equal to 101% of the principal amount of the Senior Subordinated
Notes to be repurchased plus accrued and unpaid interest and liquidated damages,
if any, to the date of repurchase (subject to the right of Senior Subordinated
Noteholders of record on the relevant record date to receive interest due on the
relevant interest payment date) as provided in, and subject to the terms of, the
Indenture.
9. Subordination
The Senior Subordinated Notes are subordinated to Senior
Indebtedness of the Company, as defined in the Indenture. To the extent provided
in the Indenture, Senior Indebtedness of the Company must be paid before the
Senior Subordinated Notes may be paid. The Company and Holdings agrees, and each
Senior Subordinated Noteholder by accepting a Senior Subordinated Note agrees,
to the subordination provisions contained in the Indenture and authorizes the
Senior Subordinated Notes Trustee to give it effect and appoints the Senior
Subordinated Notes Trustee as attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
The Senior Subordinated Notes are in registered form without coupons
in denominations of $1,000 and whole multiples of $1,000. A Senior Subordinated
Noteholder may transfer or exchange Senior Subordinated Notes in accordance with
the Indenture. Upon any transfer or exchange, the Registrar and the Senior
Subordinated Notes Trustee may require a Senior Subordinated Noteholder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay any taxes required by law or permitted by the Indenture. The Registrar need
not register the transfer of or exchange any Senior Subordinated Notes selected
for redemption (except, in the case of a Senior Subordinated Note to be redeemed
in part, the portion of the Senior Subordinated Note not to be redeemed) or to
transfer or exchange any Senior Subordinated Notes for a period of 15 days prior
to a selection of Senior Subordinated Notes to be redeemed.
11. Persons Deemed Owners
The registered Senior Subordinated Noteholder of this Senior
Subordinated Note may be treated as the owner of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Senior Subordinated Notes Trustee or Paying Agent shall pay
the money back to the Company at its written request unless an abandoned
property law designates another Person. After any such payment, Senior
Subordinated Noteholders entitled to the money must look only to the Company and
not to the Senior Subordinated Notes Trustee for payment.
6
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Senior Subordinated Notes and the
Indenture if the Company deposits with the Senior Subordinated Notes Trustee
money or U.S. Government Obligations for the payment of principal and interest
on the Senior Subordinated Notes to redemption or maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Senior Subordinated Notes may be amended without prior notice
to any Senior Subordinated Noteholder but with the written consent of the Senior
Subordinated Noteholders of at least a majority in aggregate principal amount of
the outstanding Senior Subordinated Notes and (ii) any default or noncompliance
with any provision may be waived with the written consent of the Senior
Subordinated Noteholders of at least a majority in principal amount of the
outstanding Senior Subordinated Notes. Subject to certain exceptions set forth
in the Indenture, without the consent of any Senior Subordinated Noteholder of
Senior Subordinated Notes, the Company and the Senior Subordinated Notes Trustee
may amend the Indenture or the Senior Subordinated Notes (i) to cure any
ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5 of
the Indenture; (iii) to provide for uncertificated Senior Subordinated Notes in
addition to or in place of certificated Senior Subordinated Notes; (iv) to add
additional Guarantees with respect to the Senior Subordinated Notes; (v) to
secure the Senior Subordinated Notes; (vi) to add additional covenants of the
Company for the benefit of the Senior Subordinated Noteholders or to surrender
rights and powers conferred on the Company; (vii) to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the TIA; (viii) to make any change that does not adversely
affect the rights of any Senior Subordinated Noteholder; (ix) to make any change
in the subordination provisions of the Indenture that would limit or terminate
the benefits available to any holder of Senior Indebtedness of the Company (or
any representative thereof) under such subordination provisions; or (x) to
provide for the issuance of the Senior Subordinated Exchange Notes, Private
Senior Subordinated Exchange Notes, or Additional Senior Subordinated Notes.
15. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company) and is continuing, the Senior Subordinated Notes Trustee or the Senior
Subordinated Noteholders of at least 25% in principal amount of the outstanding
Senior Subordinated Notes may declare the principal of and accrued but unpaid
interest on all the Senior Subordinated Notes to be due and payable. If an Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs, the principal of and interest on all the
Senior Subordinated Notes will become immediately due and payable without any
declaration or other act on the part of the Senior Subordinated Notes Trustee or
any Senior Subordinated Noteholders. Under certain circumstances, the Senior
Subordinated Noteholders of a majority in principal amount of the outstanding
Senior Subordinated Notes may rescind any such acceleration with respect to the
Senior Subordinated Notes and its consequences.
7
If an Event of Default occurs and is continuing, the Senior
Subordinated Notes Trustee will be under no obligation to exercise any of the
rights or powers under the Indenture at the request or direction of any of the
Senior Subordinated Noteholders unless such Senior Subordinated Noteholders have
offered to the Senior Subordinated Notes Trustee reasonable indemnity or
security against any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no Senior
Subordinated Noteholder may pursue any remedy with respect to the Indenture or
the Senior Subordinated Notes unless (i) such Senior Subordinated Noteholder has
previously given the Senior Subordinated Notes Trustee notice that an Event of
Default is continuing, (ii) Senior Subordinated Noteholders of at least 25% in
principal amount of the outstanding Senior Subordinated Notes have requested the
Senior Subordinated Notes Trustee in writing to pursue the remedy, (iii) such
Senior Subordinated Noteholders have offered the Senior Subordinated Notes
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Senior Subordinated Notes Trustee has not complied with such request
within 60 days after the receipt of the request and the offer of security or
indemnity and (v) the Senior Subordinated Noteholders of a majority in principal
amount of the outstanding Senior Subordinated Notes have not given the Senior
Subordinated Notes Trustee a direction inconsistent with such request within
such 60-day period. Subject to certain restrictions, the Senior Subordinated
Noteholders of a majority in principal amount of the outstanding Senior
Subordinated Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Senior Subordinated
Notes Trustee or of exercising any trust or power conferred on the Senior
Subordinated Notes Trustee. The Senior Subordinated Notes Trustee, however, may
refuse to follow any direction that conflicts with law or the Indenture or that
the Senior Subordinated Notes Trustee determines is unduly prejudicial to the
rights of any other Senior Subordinated Noteholder or that would involve the
Senior Subordinated Notes Trustee in personal liability. Prior to taking any
action under the Indenture, the Senior Subordinated Notes Trustee will be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
16. Senior Subordinated Notes Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Senior
Subordinated Notes Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Senior Subordinated Notes and may
otherwise deal with and collect obligations owed to it by the Company or its
Affiliates and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not Senior Subordinated Notes Trustee.
17. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or Holdings shall not have any liability for any obligations of the
Company under the Senior Subordinated Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. By
accepting a Senior Subordinated Note, each Senior Subordinated Noteholder waives
and releases all such liability. The waiver and release are part of the
consideration for the issue of the Senior Subordinated Notes.
8
18. Authentication
This Senior Subordinated Note shall not be valid until an authorized
signatory of the Senior Subordinated Notes Trustee (or an authenticating agent)
manually signs the certificate of authentication on the other side of this
Senior Subordinated Note.
19. Abbreviations
Customary abbreviations may be used in the name of a Senior
Subordinated Noteholder or an assignee, such as TEN COM (=tenants in common),
TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of
survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A
(=Uniform Gift to Minors Act).
20. GOVERNING LAW
THIS SENIOR SUBORDINATED NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Senior Subordinated Notes and has directed the Senior
Subordinated Notes Trustee to use CUSIP numbers in notices of redemption as a
convenience to Senior Subordinated Noteholders. No representation is made as to
the accuracy of such numbers either as printed on the Senior Subordinated Notes
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
The Company will furnish to any Senior Subordinated Noteholder of
Senior Subordinated Notes upon written request and without charge to the Senior
Subordinated Noteholder a copy of the Indenture which has in it the text of this
Senior Subordinated Note.
ASSIGNMENT FORM
To assign this Senior Subordinated Note, fill in the form below:
I or we assign and transfer this Senior Subordinated Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Senior
Subordinated Note on the books of the Company. The agent may substitute another
to act for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
____________________________________________________________
Sign exactly as your name appears on the other side of this Senior Subordinated
Note.
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SENIOR SUBORDINATED NOTES
This certificate relates to $_________ principal amount of Senior Subordinated
Notes held in (check applicable space) ____ book-entry or _____ definitive form
by the undersigned.
The undersigned (check one box below):
|_| has requested the Senior Subordinated Notes Trustee by written order to
deliver in exchange for its beneficial interest in the Global Senior
Subordinated Note held by the Depositary a Senior Subordinated Note or
Senior Subordinated Notes in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Senior Subordinated Note (or the portion thereof
indicated above);
|_| has requested the Senior Subordinated Notes Trustee by written order to
exchange or register the transfer of a Senior Subordinated Note or Senior
Subordinated Notes.
In connection with any transfer of any of the Senior Subordinated Notes
evidenced by this certificate occurring prior to the expiration of the period
referred to in Rule 144(k) under the Securities Act, the undersigned confirms
that such Senior Subordinated Notes are being transferred in accordance with its
terms:
CHECK ONE BOX BELOW
(1) |_| to the Company; or
(2) |_| pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) |_| inside the United States to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities Act of 1933)
that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that
such transfer is being made in reliance on Rule 144A, in each
case pursuant to and in compliance with Rule 144A under the
Securities Act of 1933; or
(4) |_| outside the United States in an offshore transaction within
the meaning of Regulation S under the Securities Act in
compliance with Rule 904 under the Securities Act of 1933; or
(5) |_| to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933)
that has furnished to the Senior Subordinated Notes Trustee a
signed letter containing certain representations and
agreements; or
(6) |_| pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
2
Unless one of the boxes is checked, the Senior Subordinated Notes Trustee
will refuse to register any of the Senior Subordinated Notes evidenced by
this certificate in the name of any Person other than the registered
holder thereof; provided, however, that if box (4), (5) or (6) is checked,
the Senior Subordinated Notes Trustee may require, prior to registering
any such transfer of the Senior Subordinated Notes, such legal opinions,
certifications and other information as the Company has reasonably
requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act of 1933.
________________________
Your Signature
Signature Guarantee:
Date: ___________________ ________________________
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Senior Subordinated Notes Trustee
____________________________________________________________
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Senior Subordinated Note for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ ______________________________
NOTICE: To be executed by
an executive officer
[TO BE ATTACHED TO GLOBAL SENIOR SUBORDINATED NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SENIOR
SUBORDINATED NOTE
The initial principal amount of this Global Senior Subordinated Note
is $[ ]. The following increases or decreases in this Global Senior
Subordinated Note have been made:
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Exchange Principal Amount of this Principal Amount of this Global Senior Subordinated signatory of Senior
Global Senior Subordinated Global Senior Subordinated Note following such Subordinated Notes Trustee
Note Note decrease or increase or Senior Subordinated
Notes Custodian
OPTION OF SENIOR SUBORDINATED NOTEHOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Subordinated Note purchased
by the Company pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control)
of the Indenture, check the box:
Asset Sale |_| Change of Control |_|
If you want to elect to have only part of this Senior Subordinated
Note purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture,
state the amount:
$
Date: __________________ Your Signature: __________________
(Sign exactly as your name appears on the other side of the Senior Subordinated
Note)
Signature Guarantee:_______________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Senior
Subordinated Notes Trustee
EXHIBIT B
[FORM OF FACE OF SENIOR SUBORDINATED EXCHANGE NOTE]
No. $__________
9 1/8% Senior Subordinated Note due 2008
CUSIP No. ______
WESCO Distribution, Inc., a Delaware corporation, promises to pay to
Cede & Co., or registered assigns, the principal sum [of Dollars]
[listed on the Schedule of Increases or Decreases in Global Senior Subordinated
Note attached hereto](2) on June 1, 2008.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
- - - - --------
(2) Use the Schedule of Increases and Decreases language if Note is in Global
Form.
2
Additional provisions of this Senior Subordinated Note are set forth
on the other side of this Senior Subordinated Note.
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed.
WESCO DISTRIBUTION, INC.,
by
--------------------------
Name:
Title:
by
--------------------------
Name:
Title:
Dated:
SENIOR SUBORDINATED NOTES TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
BANK ONE, N.A.,
as Senior Subordinated Notes Trustee, certifies
that this is one of
the Senior Subordinated Notes referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
- - - - ----------
*/ If the Senior Subordinated Note is to be issued in global form, add the
Global Senior Subordinated Notes Legend and the attachment from Exhibit A
captioned "TO BE ATTACHED TO GLOBAL SENIOR SUBORDINATED NOTES - SCHEDULE OF
INCREASES OR DECREASES IN GLOBAL SENIOR SUBORDINATED NOTE".
[FORM OF REVERSE SIDE OF SENIOR SUBORDINATED EXCHANGE NOTE]
9 1/8% Senior Subordinated Note due 2008
1. Interest.
WESCO DISTRIBUTION, INC., a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Company"), promises to pay interest on the principal
amount of this Senior Subordinated Note at the rate per annum shown above. The
Company will pay interest semiannually on June 1 and December 1 of each year.
Interest on the Senior Subordinated Notes will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from June 5,
1998. Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment
The Company will pay interest on the Senior Subordinated Notes
(except defaulted interest) to the Persons who are registered holders of Senior
Subordinated Notes at the close of business on the May 15 or November 15 next
preceding the interest payment date even if Senior Subordinated Notes are
canceled after the record date and on or before the interest payment date.
Senior Subordinated Noteholders must surrender Senior Subordinated Notes to a
Paying Agent to collect principal payments. The Company will pay principal and
interest in money of the United States of America that at the time of payment is
legal tender for payment of public and private debts. Payments in respect of the
Senior Subordinated Notes represented by a Global Senior Subordinated Note
(including principal, premium and interest) will be made by wire transfer of
immediately available funds to the accounts specified by The Depository Trust
Company. The Company will make all payments in respect of a certificated Senior
Subordinated Note (including principal, premium and interest), by mailing a
check to the registered address of each Senior Subordinated Noteholder thereof;
provided, however, that payments on the Senior Subordinated Notes may also be
made, in the case of a Senior Subordinated Noteholder of at least $1,000,000
aggregate principal amount of Senior Subordinated Notes, by wire transfer to a
U.S. dollar account maintained by the payee with a bank in the United States if
such Senior Subordinated Noteholder elects payment by wire transfer by giving
written notice to the Senior Subordinated Notes Trustee or the Paying Agent to
such effect designating such account no later than 30 days immediately preceding
the relevant due date for payment (or such other date as the Senior Subordinated
Notes Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, Bank One, N.A., a national banking association (the
"Senior Subordinated Notes Trustee"), will act as Paying Agent and Registrar.
The Company may appoint and change any Paying Agent, Registrar or co-registrar
without notice. The Company or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
2
4. Indenture
The Company issued the Senior Subordinated Notes under an Indenture
dated as of June 5, 1998 (the "Indenture"), among the Company, Holdings and the
Senior Subordinated Notes Trustee. The terms of the Senior Subordinated Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as
in effect on the date of the Indenture (the "TIA"). Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Senior Subordinated Notes are subject to all such terms, and
Senior Subordinated Noteholders are referred to the Indenture and the TIA for a
statement of those terms.
The Senior Subordinated Notes are senior subordinated unsecured
obligations of the Company limited to $500 million aggregate principal amount at
any one time outstanding, of which $300 million in aggregate principal amount
will be initially issued on the Closing Date. Subject to the conditions set
forth in the Indenture, the Company may issue up to an additional $200 million
aggregate principal amount of Additional Senior Subordinated Notes. This Senior
Subordinated Note is one of the Initial Senior Subordinated Notes referred to in
the Indenture. The Senior Subordinated Notes include the Original Senior
Subordinated Notes, the Additional Senior Subordinated Notes and any Senior
Subordinated Exchange Notes and Private Senior Subordinated Exchange Notes
issued in exchange for the Initial Senior Subordinated Notes pursuant to the
Indenture. The Original Senior Subordinated Notes, the Additional Senior
Subordinated Notes, the Senior Subordinated Exchange Notes and the Private
Senior Subordinated Exchange Notes are treated as a single class of securities
under the Indenture. The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
issue or sell shares of capital stock of such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates, create or incur Liens and
make Asset Sales. The Indenture also imposes limitations on the ability of the
Company to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of the property of the Company.
To guarantee the due and punctual payment of the principal and
interest, if any, on the Senior Subordinated Notes and all other amounts payable
by the Company under the Indenture and the Senior Subordinated Notes when and as
the same shall be due and payable, whether at maturity, by acceleration or
otherwise, according to the terms of the Senior Subordinated Notes and the
Indenture, Holdings has unconditionally guaranteed the Guaranteed Obligations on
a senior subordinated basis pursuant to the terms of the Indenture.
5. Optional Redemption
Except as set forth in the following two paragraphs, the Senior
Subordinated Notes will not be redeemable at the option of the Company prior to
June 1, 2003. Thereafter, the Senior Subordinated Notes will be redeemable at
the option of the Company, in whole or in part, on not less than 30 nor more
than 60 days' prior notice, at the following redemption prices (expressed as
percentages of principal amount), plus accrued and unpaid interest and
liquidated damages (if any) to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest
3
payment date), if redeemed during the 12-month period commencing on June 1 of
the years set forth below:
Redemption
Year Price
- - - - ---- ----------
2003................................................................ 104.563%
2004................................................................ 103.042%
2005................................................................ 101.521%
2006 and thereafter................................................. 100.000%
In addition, at any time and from time to time prior to June 1,
2001, the Company may redeem up to a maximum of 35% of the original aggregate
principal amount of the Senior Subordinated Notes (calculated giving effect to
any issuance of Additional Senior Subordinated Notes) with the Net Cash Proceeds
of one or more Equity Offerings by (i) the Company or (ii) Holdings to the
extent the Net Cash Proceeds thereof are (a) contributed to the Company as a
capital contribution to the common equity of the Company or (b) used to purchase
Capital Stock of the Company (in either case, other than Disqualified Stock), at
a redemption price equal to 109.125% of the principal amount thereof, plus
accrued and unpaid interest and liquidated damages thereon, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date);
provided, however, that after giving effect to any such redemption, at least 65%
of the original aggregate principal amount of the Senior Subordinated Notes
(calculated giving effect to any issuance of Additional Senior Subordinated
Notes) remains outstanding. Any such redemption shall be made within 120 days of
such Equity Offering upon not less than 30 nor more than 60 days' notice mailed
to each holder of Senior Subordinated Notes being redeemed and otherwise in
accordance with the procedures set forth in the Indenture.
At any time prior to June 1, 2003, the Senior Subordinated Notes may
be redeemed, in whole but not in part, at the option of the Company at any time
within 180 days after a Change of Control, at a redemption price equal to the
sum of (i) the principal amount thereof plus (ii) accrued and unpaid interest
and liquidated damages, if any, to the redemption date (subject to the right of
Senior Subordinated Noteholders of record on the relevant record date to receive
interest due on the relevant interest payment date that is on or prior to the
date of redemption) plus (iii) the Applicable Premium.
6. Sinking Fund
The Senior Subordinated Notes are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Senior
Subordinated Noteholder of Senior Subordinated Notes to be redeemed at his or
her registered address. Senior Subordinated Notes in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all Senior
Subordinated Notes (or portions thereof) to be redeemed on the redemption date
is deposited with the Paying Agent on or before the redemption date and
4
certain other conditions are satisfied, on and after such date interest ceases
to accrue on such Senior Subordinated Notes (or such portions thereof) called
for redemption.
8. Repurchase of Senior Subordinated Notes at the Option of Senior
Subordinated Noteholders upon Change of Control
Upon a Change of Control, any Senior Subordinated Noteholder of
Senior Subordinated Notes will have the right, subject to certain conditions
specified in the Indenture, to cause the Company to repurchase all or any part
of the Senior Subordinated Notes of such Senior Subordinated Noteholder at a
purchase price equal to 101% of the principal amount of the Senior Subordinated
Notes to be repurchased plus accrued and unpaid interest and liquidated damages,
if any, to the date of repurchase (subject to the right of Senior Subordinated
Noteholders of record on the relevant record date to receive interest due on the
relevant interest payment date) as provided in, and subject to the terms of, the
Indenture.
9. Subordination
The Senior Subordinated Notes are subordinated to Senior
Indebtedness of the Company, as defined in the Indenture. To the extent provided
in the Indenture, Senior Indebtedness of the Company must be paid before the
Senior Subordinated Notes may be paid. The Company and Holdings agrees, and each
Senior Subordinated Noteholder by accepting a Senior Subordinated Note agrees,
to the subordination provisions contained in the Indenture and authorizes the
Senior Subordinated Notes Trustee to give it effect and appoints the Senior
Subordinated Notes Trustee as attorney-in-fact for such purpose.
10. Denominations; Transfer; Exchange
The Senior Subordinated Notes are in registered form without coupons
in denominations of $1,000 and whole multiples of $1,000. A Senior Subordinated
Noteholder may transfer or exchange Senior Subordinated Notes in accordance with
the Indenture. Upon any transfer or exchange, the Registrar and the Senior
Subordinated Notes Trustee may require a Senior Subordinated Noteholder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay any taxes required by law or permitted by the Indenture. The Registrar need
not register the transfer of or exchange any Senior Subordinated Notes selected
for redemption (except, in the case of a Senior Subordinated Note to be redeemed
in part, the portion of the Senior Subordinated Note not to be redeemed) or to
transfer or exchange any Senior Subordinated Notes for a period of 15 days prior
to a selection of Senior Subordinated Notes to be redeemed or 15 days before an
interest payment date.
11. Persons Deemed Owners
The registered Senior Subordinated Noteholder of this Senior
Subordinated Note may be treated as the owner of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Senior Subordinated Notes Trustee or Paying Agent shall pay
the money back to
5
the Company at its written request unless an abandoned property law designates
another Person. After any such payment, Senior Subordinated Noteholders entitled
to the money must look only to the Company and not to the Senior Subordinated
Notes Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Senior Subordinated Notes and the
Indenture if the Company deposits with the Senior Subordinated Notes Trustee
money or U.S. Government Obligations for the payment of principal and interest
on the Senior Subordinated Notes to redemption or maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Senior Subordinated Notes may be amended without prior notice
to any Senior Subordinated Noteholder but with the written consent of the Senior
Subordinated Noteholders of at least a majority in aggregate principal amount of
the outstanding Senior Subordinated Notes and (ii) any default or noncompliance
with any provision may be waived with the written consent of the Senior
Subordinated Noteholders of at least a majority in principal amount of the
outstanding Senior Subordinated Notes. Subject to certain exceptions set forth
in the Indenture, without the consent of any Senior Subordinated Noteholder of
Senior Subordinated Notes, the Company and the Senior Subordinated Notes Trustee
may amend the Indenture or the Senior Subordinated Notes (i) to cure any
ambiguity, omission, defect or inconsistency; (ii) to comply with Article 5 of
the Indenture; (iii) to provide for uncertificated Senior Subordinated Notes in
addition to or in place of certificated Senior Subordinated Notes; (iv) to add
additional Guarantees with respect to the Senior Subordinated Notes; (v) to
secure the Senior Subordinated Notes; (vi) to add additional covenants of the
Company for the benefit of the Senior Subordinated Noteholders or to surrender
rights and powers conferred on the Company; (vii) to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the TIA; (viii) to make any change that does not adversely
affect the rights of any Senior Subordinated Noteholder; (ix) to make any change
in the subordination provisions of the Indenture that would limit or terminate
the benefits available to any holder of Senior Indebtedness of the Company (or
any representative thereof) under such subordination provisions; or (x) to
provide for the issuance of the Senior Subordinated Exchange Notes, Private
Senior Subordinated Exchange Notes, or Additional Senior Subordinated Notes.
15. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company) and is continuing, the Senior Subordinated Notes Trustee or the Senior
Subordinated Noteholders of at least 25% in principal amount of the outstanding
Senior Subordinated Notes may declare the principal of and accrued but unpaid
interest on all the Senior Subordinated Notes to be due and payable. If an Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs, the principal of and interest on all the
Senior Subordinated Notes will become immediately due and payable without any
declaration or other act on the part of the Senior Subordinated Notes Trustee or
any Senior Subordinated Noteholders. Under certain circumstances, the Senior
Subordinated
6
Noteholders of a majority in principal amount of the outstanding Senior
Subordinated Notes may rescind any such acceleration with respect to the Senior
Subordinated Notes and its consequences.
If an Event of Default occurs and is continuing, the Senior
Subordinated Notes Trustee will be under no obligation to exercise any of the
rights or powers under the Indenture at the request or direction of any of the
Senior Subordinated Noteholders unless such Senior Subordinated Noteholders have
offered to the Senior Subordinated Notes Trustee reasonable indemnity or
security against any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no Senior
Subordinated Noteholder may pursue any remedy with respect to the Indenture or
the Senior Subordinated Notes unless (i) such Senior Subordinated Noteholder has
previously given the Senior Subordinated Notes Trustee notice that an Event of
Default is continuing, (ii) Senior Subordinated Noteholders of at least 25% in
principal amount of the outstanding Senior Subordinated Notes have requested the
Senior Subordinated Notes Trustee in writing to pursue the remedy, (iii) such
Senior Subordinated Noteholders have offered the Senior Subordinated Notes
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Senior Subordinated Notes Trustee has not complied with such request
within 60 days after the receipt of the request and the offer of security or
indemnity and (v) the Senior Subordinated Noteholders of a majority in principal
amount of the outstanding Senior Subordinated Notes have not given the Senior
Subordinated Notes Trustee a direction inconsistent with such request within
such 60-day period. Subject to certain restrictions, the Senior Subordinated
Noteholders of a majority in principal amount of the outstanding Senior
Subordinated Notes are given the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Senior Subordinated
Notes Trustee or of exercising any trust or power conferred on the Senior
Subordinated Notes Trustee. The Senior Subordinated Notes Trustee, however, may
refuse to follow any direction that conflicts with law or the Indenture or that
the Senior Subordinated Notes Trustee determines is unduly prejudicial to the
rights of any other Senior Subordinated Noteholder or that would involve the
Senior Subordinated Notes Trustee in personal liability. Prior to taking any
action under the Indenture, the Senior Subordinated Notes Trustee will be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.
16. Senior Subordinated Notes Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Senior
Subordinated Notes Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Senior Subordinated Notes and may
otherwise deal with and collect obligations owed to it by the Company or its
Affiliates and may otherwise deal with the Company or its Affiliates with the
same rights it would have if it were not Senior Subordinated Notes Trustee.
7
17. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or Holdings shall not have any liability for any obligations of the
Company under the Senior Subordinated Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation. By
accepting a Senior Subordinated Note, each Senior Subordinated Noteholder waives
and releases all such liability. The waiver and release are part of the
consideration for the issue of the Senior Subordinated Notes.
18. Authentication
This Senior Subordinated Note shall not be valid until an authorized
signatory of the Senior Subordinated Notes Trustee (or an authenticating agent)
manually signs the certificate of authentication on the other side of this
Senior Subordinated Note.
19. Abbreviations
Customary abbreviations may be used in the name of a Senior
Subordinated Noteholder or an assignee, such as TEN COM (=tenants in common),
TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of
survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A
(=Uniform Gift to Minors Act).
20. GOVERNING LAW
THIS SENIOR SUBORDINATED NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Senior Subordinated Notes and has directed the Senior
Subordinated Notes Trustee to use CUSIP numbers in notices of redemption as a
convenience to Senior Subordinated Noteholders. No representation is made as to
the accuracy of such numbers either as printed on the Senior Subordinated Notes
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
The Company will furnish to any Senior Subordinated Noteholder of
Senior Subordinated Notes upon written request and without charge to the Senior
Subordinated Noteholder a copy of the Indenture which has in it the text of this
Senior Subordinated Note.
ASSIGNMENT FORM
To assign this Senior Subordinated Note, fill in the form below:
I or we assign and transfer this Senior Subordinated Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Senior Subordinated Note
on the books of the Company. The agent may substitute another to act for him.
________________________________________________________________________________
Date: ________________ Your Signature: _________________________________________
________________________________________________________________________________
Sign exactly as your name appears on the other side of this Senior Subordinated
Note. Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the Senior
Subordinated Notes Trustee.
OPTION OF SENIOR SUBORDINATED NOTEHOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Subordinated Note purchased
by the Company pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control)
of the Indenture, check the box:
Asset Sale |_| Change of Control |_|
If you want to elect to have only part of this Senior Subordinated
Note purchased by the Company pursuant to Section 4.06 or 4.08 of the Indenture,
state the amount:
$
Date: __________________ Your Signature: _______________________________________
(Sign exactly as your name appears on
the other side of the Senior
Subordinated Note)
Signature Guarantee:____________________________________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Senior Subordinated
Notes Trustee.
EXHIBIT C
Form of
Transferee Letter of Representation
WESCO Distribution, Inc.
In care of
Bank One, N.A.
Bank One Trust Company, N.A.
c/o First Chicago Trust Company
14 Wall Street
8th Floor, Suite 4607
New York, NY 10002
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $
principal amount of the 9 1/8% Senior Subordinated Notes due 2008 (the "Senior
Subordinated Notes") of WESCO Distribution, Inc. (the "Company").
Upon transfer, the Senior Subordinated Notes would be registered in
the name of the new beneficial owner as follows:
Name:________________________
Address:_____________________
Taxpayer ID Number:__________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Senior Subordinated Notes, and we are acquiring the Senior Subordinated Notes
not with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act. We have such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of our investment in the Senior Subordinated Notes, and we invest in or
purchase Senior Subordinated Notes similar to the Senior Subordinated Notes in
the normal course of our business. We, and any accounts for which we are acting,
are each able to bear the economic risk of our or its investment.
2. We understand that the Senior Subordinated Notes have not been
registered under the Securities Act and, unless so registered, may not be sold
except as permitted in the following sentence. We agree on our own behalf and on
behalf of any investor account for which we are purchasing Senior Subordinated
Notes to offer, sell or otherwise transfer such Senior Subordinated Notes prior
to the date that is two years after the
2
later of the date of original issue and the last date on which the Company or
any affiliate of the Company was the owner of such Senior Subordinated Notes (or
any predecessor thereto) (the "Resale Restriction Termination Date") only (a) to
the Company, (b) pursuant to a registration statement that has been declared
effective under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act ("Rule 144A"), to a person we
reasonably believe is a qualified institutional investor under Rule 144A (a
"QIB") that purchases for its own account or for the account of a QIB and to
whom notice is given that the transfer is being made in reliance on Rule 144A,
(d) pursuant to offers and sales that occur outside the United States within the
meaning of Regulation S under the Securities Act, (e) to an institutional
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act that is purchasing for its own account or for the
account of such an institutional "accredited investor," in each case in a
minimum principal amount of Notes of $250,000, or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to the
Company and the Senior Subordinated Notes Trustee, which shall provide, among
other things, that the transferee is an institutional "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act
and that it is acquiring such Senior Subordinated Notes for investment purposes
and not for distribution in violation of the Securities Act. Each purchaser
acknowledges that the Company and the Senior Subordinated Notes Trustee reserve
the right prior to the offer, sale or other transfer prior to the Resale
Termination Date of the Senior Subordinated Notes pursuant to clause (d), (e) or
(f) above to require the delivery of an opinion of counsel, certifications or
other information satisfactory to the Company and the Senior Subordinated Notes
Trustee.
TRANSFEREE:_________________,
by:_______________________
EXHIBIT 4.4
WESCO DISTRIBUTION, INC.
$300,000,000
9-1/8% Senior Subordinated Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
June 5, 1998
CHASE SECURITIES INC.
LEHMAN BROTHERS INC.
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
WESCO Distribution, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to Chase Securities Inc. ("CSI") and Lehman Brothers
Inc. (together with CSI, the "Initial Purchasers"), upon the terms and subject
to the conditions set forth in a purchase agreement dated May 29, 1998 (the
"Purchase Agreement"), $300,000,000 aggregate principal amount of its 9-1/8%
Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes") to be
guaranteed on an unsecured senior subordinated basis by WESCO International,
Inc. ("Holdings"). Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Initial Purchasers thereunder, the Company and Holdings agree with the Initial
Purchasers, for the benefit of the holders (including the Initial Purchasers) of
the Senior Subordinated Notes, the Senior Subordinated Exchange Notes (as
defined herein) and the Private Senior Subordinated Exchange Notes (as defined
herein) (collectively, the "Holders"), as follows:
1. Senior Subordinated Notes Registered Exchange Offer. The Company
and Holdings shall (i) prepare and, not later than 90 days following the date of
original issuance of the Senior Subordinated Notes (the "Senior Subordinated
Notes Issue Date"), file with the Commission a registration statement (the
"Senior Subordinated Notes Exchange Offer Registration Statement") on an
appropriate form under the Securities Act with respect to a proposed offer to
the Holders of the Senior Subordinated Notes (the "Senior Subordinated Notes
Registered Exchange Offer") to issue and deliver to such Holders, in exchange
for the Senior Subordinated Notes, a like aggregate principal amount of debt
securities of the Company (the "Senior Subordinated Exchange Notes") that are
identical in all material respects to the Senior Subordinated Notes, except for
the transfer restrictions relating to the Senior Subordinated Notes, (ii) use
their reasonable best efforts to cause the Senior Subordinated Notes Exchange
Offer Registration Statement to become effective under the Securities Act no
later than 200 days after the Senior Subordinated Notes Issue Date and the
Senior Subordinated Notes Registered Exchange Offer to be consummated no later
than 230 days after the Senior Subordinated Notes Issue Date and (iii) keep the
Senior Subordinated Notes Exchange Offer Registration Statement effective for
not less than 20 business days (or longer, if required by applicable law) after
the date on which notice of the Senior Subordinated Notes Registered Exchange
Offer is mailed to the Holders (such period being called the "Senior
Subordinated Notes Exchange Offer Registration Period"). The Senior Subordinated
Exchange Notes will be issued under the Senior Subordinated Notes Indenture or
an indenture (the "Senior Subordinated Exchange Notes Indenture") among the
Company, Holdings and the Senior Subordinated Notes Trustee or such other bank
or trust company that is reasonably satisfactory to the Initial Purchasers, as
trustee (the "Senior Subordinated Exchange Notes Trustee"), such
2
indenture to be identical in all material respects to the Senior Subordinated
Notes Indenture, except for the transfer restrictions relating to the Senior
Subordinated Notes (as described above).
Upon the effectiveness of the Senior Subordinated Notes Exchange
Offer Registration Statement, the Company shall promptly commence the Senior
Subordinated Notes Registered Exchange Offer, it being the objective of such
Senior Subordinated Notes Registered Exchange Offer to enable each Holder
electing to exchange Senior Subordinated Notes for Senior Subordinated Exchange
Notes (assuming that such Holder (a) is not an affiliate of the Company or a
Senior Subordinated Notes Exchanging Dealer (as defined herein) not complying
with the requirements of the next sentence, (b) is not an Initial Purchaser
holding Senior Subordinated Notes that have, or that are reasonably likely to
have, the status of an unsold allotment in an initial distribution, (c) acquires
the Senior Subordinated Exchange Notes in the ordinary course of such Holder's
business and (d) has no arrangements or understandings with any person to
participate in the distribution of the Senior Subordinated Exchange Notes) and
to trade such Senior Subordinated Exchange Notes from and after their receipt
without any limitations or restrictions under the Securities Act and without
material restrictions under the securities laws of the several states of the
United States. The Company, Holdings, the Initial Purchasers and each Senior
Subordinated Notes Exchanging Dealer acknowledge that, pursuant to current
interpretations by the Commission's staff of Section 5 of the Securities Act,
each Holder that is a broker-dealer electing to exchange Senior Subordinated
Notes, acquired for its own account as a result of market-making activities or
other trading activities, for Senior Subordinated Exchange Notes (a "Senior
Subordinated Notes Exchanging Dealer"), is required to deliver a prospectus
containing substantially the information set forth in Annex A hereto on the
cover, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Senior Subordinated Exchange Notes received by such Senior Subordinated Notes
Exchanging Dealer pursuant to the Senior Subordinated Notes Registered Exchange
Offer.
If, prior to the consummation of the Senior Subordinated Notes
Registered Exchange Offer, any Holder holds any Senior Subordinated Notes
acquired by it that have, or that are reasonably likely to be determined to
have, the status of an unsold allotment in an initial distribution, or any
Holder is not entitled to participate in the Senior Subordinated Notes
Registered Exchange Offer, the Company shall, upon the request of any such
Holder, simultaneously with the delivery of the Senior Subordinated Exchange
Notes in the Senior Subordinated Notes Registered Exchange Offer, issue and
deliver to any such Holder, in exchange for the Senior Subordinated Notes held
by such Holder (the "Senior Subordinated Notes Private Exchange"), a like
aggregate principal amount of debt securities of the Company (the "Private
Senior Subordinated Exchange Notes") that are identical in all material respects
to the Senior Subordinated Exchange Notes, except for the transfer restrictions
relating to such Private Senior Subordinated Exchange Notes. The Private Senior
Subordinated Exchange Notes will be issued under the same indenture as the
Senior Subordinated Exchange Notes, and the Company shall use its reasonable
best efforts to cause the Private Senior Subordinated Exchange Notes to bear the
same CUSIP number as the Senior Subordinated Exchange Notes.
In connection with the Senior Subordinated Notes Registered Exchange
Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Senior Subordinated Notes Exchange Offer Registration Statement, together
with an appropriate letter of transmittal and related documents;
(b) keep the Senior Subordinated Notes Registered Exchange Offer
open for not less than 20 business days (or longer, if required by
applicable law) after the date on which notice of the Senior Subordinated
Notes Registered Exchange Offer is mailed to the Holders;
3
(c) utilize the services of a depositary for the Senior Subordinated
Notes Registered Exchange Offer with an address in the Borough of
Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Senior Subordinated Notes at
any time prior to the close of business, New York City time, on the last
business day on which the Senior Subordinated Notes Registered Exchange
Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are
applicable to the Senior Subordinated Notes Registered Exchange Offer.
As soon as practicable after the close of the Senior Subordinated
Notes Registered Exchange Offer and any Senior Subordinated Notes Private
Exchange, as the case may be, the Company shall:
(a) accept for exchange all Senior Subordinated Notes tendered and
not validly withdrawn pursuant to the Senior Subordinated Notes Registered
Exchange Offer and the Senior Subordinated Notes Private Exchange;
(b) deliver to the Senior Subordinated Notes Trustee for cancelation
all Senior Subordinated Notes so accepted for exchange; and
(c) cause the Senior Subordinated Notes Trustee or the Senior
Subordinated Exchange Notes Trustee, as the case may be, promptly to
authenticate and deliver to each Holder, Senior Subordinated Exchange Notes or
Private Senior Subordinated Exchange Notes, as the case may be, equal in
principal amount to the Senior Subordinated Notes of such Holder so accepted for
exchange.
The Company shall use its reasonable best efforts to keep the Senior
Subordinated Notes Exchange Offer Registration Statement effective and to amend
and supplement the prospectus contained therein in order to permit such
prospectus to be used by all persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such persons must
comply with such requirements in order to resell the Senior Subordinated
Exchange Notes; provided that (i) in the case where such prospectus and any
amendment or supplement thereto must be delivered by a Senior Subordinated Notes
Exchanging Dealer, such period shall be the lesser of 180 days and the date on
which all Senior Subordinated Notes Exchanging Dealers have sold all Senior
Subordinated Exchange Notes held by them and (ii) the Company shall make such
prospectus and any amendment or supplement thereto available to any
broker-dealer for use in connection with any resale of any Senior Subordinated
Exchange Notes for a period of not less than 180 days after the consummation of
the Senior Subordinated Notes Registered Exchange Offer.
The Senior Subordinated Notes Indenture or the Senior Subordinated
Exchange Notes Indenture, as the case may be, shall provide that the Senior
Subordinated Notes, the Senior Subordinated Exchange Notes and the Private
Senior Subordinated Exchange Notes shall vote and consent together on all
matters as one class and that none of the Senior Subordinated Notes, the Senior
Subordinated Exchange Notes or the Private Senior Subordinated Exchange Notes
will have the right to vote or consent as a separate class on any matter.
Interest on each Senior Subordinated Exchange Note and Private
Senior Subordinated Exchange Note issued pursuant to the Senior Subordinated
Notes Registered Exchange Offer and in the Senior Subordinated Notes Private
Exchange will accrue from the last interest payment date on which interest was
paid on the Senior Subordinated Notes surrendered in exchange therefor or, if no
interest has been paid on the Senior Subordinated Notes, from the Senior
Subordinated Notes Issue Date.
4
Each Holder participating in the Senior Subordinated Notes
Registered Exchange Offer shall be required to represent to the Company that at
the time of the consummation of the Senior Subordinated Notes Registered
Exchange Offer (i) any Senior Subordinated Exchange Notes received by such
Holder will be acquired in the ordinary course of business, (ii) such Holder
will have no arrangements or understandings with any person to participate in
the distribution of the Senior Subordinated Notes or the Senior Subordinated
Exchange Notes within the meaning of the Securities Act and (iii) such Holder is
not an affiliate of the Company or, if it is such an affiliate, such Holder will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company and
Holdings will ensure that (i) any Senior Subordinated Notes Exchange Offer
Registration Statement and any amendment thereto and any prospectus forming part
thereof and any supplement thereto complies in all material respects with the
Securities Act and the rules and regulations of the Commission thereunder, (ii)
any Senior Subordinated Notes Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Senior Subordinated Notes Exchange
Offer Registration Statement, and any supplement to such prospectus, does not,
as of the consummation of the Senior Subordinated Notes Registered Exchange
Offer, include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Senior Subordinated Notes Registered Exchange Offer as
contemplated by Section 1 hereof, or (ii) any Senior Subordinated Notes validly
tendered pursuant to the Senior Subordinated Notes Registered Exchange Offer are
not exchanged for Senior Subordinated Exchange Notes within 230 days after the
Senior Subordinated Notes Issue Date, or (iii) any Initial Purchaser so requests
with respect to Senior Subordinated Notes or Private Senior Subordinated
Exchange Notes not eligible to be exchanged for Senior Subordinated Exchange
Notes in the Senior Subordinated Notes Registered Exchange Offer and held by it
following the consummation of the Senior Subordinated Notes Registered Exchange
Offer, or (iv) any applicable law or interpretations do not permit any Holder to
participate in the Senior Subordinated Notes Registered Exchange Offer, or (v)
any Holder that participates in the Senior Subordinated Notes Registered
Exchange Offer does not receive freely transferable Senior Subordinated Exchange
Notes in exchange for tendered Senior Subordinated Notes, or (vi) the Company so
elects, then the following provisions shall apply:
(a) The Company and Holdings shall use their reasonable best efforts
to file as promptly as practicable with the Commission, and thereafter
shall use their reasonable best efforts to cause to be declared effective,
a shelf registration statement on an appropriate form under the Securities
Act relating to the offer and sale of the Transfer Restricted Securities
(as defined below) by the Holders thereof from time to time in accordance
with the methods of distribution set forth in such registration statement
(hereafter, a "Senior Subordinated Notes Shelf Registration Statement"
and, together with any Senior Subordinated Notes Exchange Offer
Registration Statement, a "Senior Subordinated Notes Registration
Statement").
(b) The Company and Holdings shall use their reasonable best efforts
to keep the Senior Subordinated Notes Shelf Registration Statement
continuously effective in order to permit the prospectus forming part
thereof to be used by Holders of Transfer Restricted Securities for a
period ending on the earlier of (i) two years from the Senior Subordinated
Notes Issue Date or such shorter period that will terminate when all the
Transfer Restricted Securities covered by the Senior Subordinated Notes
Shelf Registration Statement have been sold pursuant thereto and (ii) the
date on which the Senior Subordinated Notes become eligible for resale
without volume restrictions pursuant to Rule 144 under the Securities Act
(in any such case, such period being called the "Shelf
5
Registration Period"). The Company and Holdings shall be deemed not to
have used their reasonable best efforts to keep the Senior Subordinated
Notes Shelf Registration Statement effective during the requisite period
if any of them voluntarily take any action that would result in Holders of
Transfer Restricted Securities covered thereby not being able to offer and
sell such Transfer Restricted Securities during that period, unless (A)
such action is required by applicable law or (B) such action was permitted
by Section 3(b).
(c) Notwithstanding any other provisions hereof, the Company and
Holdings will ensure that (i) any Senior Subordinated Notes Shelf
Registration Statement and any amendment thereto and any prospectus
forming part thereof and any supplement thereto complies in all material
respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Senior Subordinated Notes Shelf
Registration Statement and any amendment thereto (in either case, other
than with respect to information included therein in reliance upon or in
conformity with written information furnished to the Company by or on
behalf of any Holder specifically for use therein (the "Holders'
Information")) does not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (iii) any prospectus
forming part of any Senior Subordinated Notes Shelf Registration
Statement, and any supplement to such prospectus (in either case, other
than with respect to Holders' Information), does not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders
of Transfer Restricted Securities will suffer damages if the Company and
Holdings fail to fulfill their obligations under Section 1 or Section 2, as
applicable, and that it would not be feasible to ascertain the extent of such
damages. Accordingly, if (i) the applicable Senior Subordinated Notes
Registration Statement is not filed with the Commission on or prior to 90 days
after the Senior Subordinated Notes Issue Date (or, in the case of a Senior
Subordinated Notes Shelf Registration Statement required to be filed in response
to a change in law or applicable interpretations of the Commission's staff, if
later, within 45 days after publication of the change in law or interpretations,
but in no event before 90 days after the Senior Subordinated Notes Issue Date),
(ii) the Senior Subordinated Notes Exchange Offer Registration Statement or the
Senior Subordinated Notes Shelf Registration Statement, as the case may be, is
not declared effective within 200 days after the Senior Subordinated Notes Issue
Date (or in the case of a Senior Subordinated Notes Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 90 days after
publication of the change in law or interpretation, but in no event before 200
days after the Senior Subordinated Notes Issue Date), (iii) the Senior
Subordinated Notes Registered Exchange Offer is not consummated on or prior to
230 days after the Senior Subordinated Notes Issue Date (other than in the event
the Company files a Senior Subordinated Notes Shelf Registration Statement), or
(iv) the Senior Subordinated Notes Shelf Registration Statement is filed and
declared effective within 200 days after the Senior Subordinated Notes Issue
Date (or in the case of a Senior Subordinated Notes Shelf Registration Statement
required to be filed in response to a change in law or the applicable
interpretations of Commission's staff, if later, within 90 days after
publication of the change in law or interpretation, but in no event before 200
days after the Senior Subordinated Notes Issue Date) but shall thereafter cease
to be effective (at any time that the Company is obligated to maintain the
effectiveness thereof) without being succeeded within 90 days by an additional
Senior Subordinated Notes Registration Statement filed and declared effective
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), the Company and Holdings will be jointly and severally obligated to
pay liquidated damages to each Holder of Transfer Restricted Securities, during
the period of one or more such Registration Defaults, in an amount equal to $
0.192 per week per $1,000 principal amount of Transfer Restricted Securities
held by such Holder until (i) the applicable Senior Subordinated Notes
Registration Statement is filed, (ii) the Senior Subordinated Notes Exchange
Offer Registration Statement is declared effective and the Senior Subordinated
Notes Registered Exchange Offer is consummated, (iii) the Senior Subordinated
Notes Shelf Registration Statement is declared effective or (iv) the Senior
Subordinated Notes Shelf
6
Registration Statement again becomes effective, as the case may be. Following
the cure of all Registration Defaults, the accrual of liquidated damages will
cease. As used herein, the term "Transfer Restricted Securities" means (i) each
Senior Subordinated Note until the date on which such Senior Subordinated Note
has been exchanged for a freely transferable Senior Subordinated Exchange Note
in the Senior Subordinated Notes Registered Exchange Offer, (ii) each Senior
Subordinated Note or Private Senior Subordinated Exchange Note until the date on
which it has been effectively registered under the Securities Act and disposed
of in accordance with the Senior Subordinated Notes Shelf Registration Statement
or (iii) each Senior Subordinated Note or Private Senior Subordinated Exchange
Note until the date on which it is distributed to the public pursuant to Rule
144 under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act. Notwithstanding anything to the contrary in this Section 3(a),
the Company shall not be required to pay liquidated damages to a Holder of
Transfer Restricted Securities if such Holder failed to comply with its
obligations to make the representations set forth in the second to last
paragraph of Section 1 or failed to provide the information required to be
provided by it, if any, pursuant to Section 4(n).
(b) Notwithstanding the foregoing provisions of Section 3(a), the
Company may issue a notice that the Senior Subordinated Notes Shelf Registration
Statement is unusable pending the announcement of a material development or
event and may issue any notice suspending use of the Senior Subordinated Notes
Shelf Registration Statement required under applicable securities laws to be
issued and, in the event that the aggregate number of days in any consecutive
twelve-month period for which all such notices are issued and effective exceeds
45 days in the aggregate, then the Company will be obligated to pay liquidated
damages to each Holder of Transfer Restricted Securities in an amount equal to
$0.192 per week per $1,000 principal amount of Transfer Restricted Securities
held by such Holder. Upon the Company declaring that the Senior Subordinated
Notes Shelf Registration Statement is usable after the period of time described
in the preceding sentence the accrual of liquidated damages shall cease;
provided, however, that if after any such cessation of the accrual of liquidated
damages the Senior Subordinated Notes Shelf Registration Statement again ceases
to be usable beyond the period permitted above, liquidated damages will again
accrue pursuant to the foregoing provisions.
(c) The Company shall notify the Senior Subordinated Notes Trustee
and the Paying Agent under the Senior Subordinated Notes Indenture immediately
upon the happening of each and every Registration Default. The Company and
Holdings shall pay the liquidated damages due on the Transfer Restricted
Securities by depositing with the Paying Agent (which may not be the Company for
these purposes), in trust, for the benefit of the Holders thereof, prior to
10:00 a.m., New York City time, on the next interest payment date specified by
the Senior Subordinated Notes Indenture and the Senior Subordinated Notes, sums
sufficient to pay the liquidated damages then due. The liquidated damages due
shall be payable on each interest payment date specified by the Senior
Subordinated Notes Indenture and the Senior Subordinated Notes to the record
holder entitled to receive the interest payment to be made on such date. Each
obligation to pay liquidated damages shall be deemed to accrue from and
including the date of the applicable Registration Default.
(d) The parties hereto agree that the liquidated damages provided
for in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Senior Subordinated
Notes Shelf Registration Statement or the Senior Subordinated Notes Exchange
Offer Registration Statement to be filed, (ii) the Senior Subordinated Notes
Shelf Registration Statement to remain effective or (iii) the Senior
Subordinated Notes Exchange Offer Registration Statement to be declared
effective and the Senior Subordinated Notes Registered Exchange Offer to be
consummated, in each case to the extent required by this Agreement.
7
4. Registration Procedures. In connection with any Senior
Subordinated Notes Registration Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior
to the filing thereof with the Commission, a copy of the Senior
Subordinated Notes Registration Statement and each amendment thereof and
each supplement, if any, to the prospectus included therein; (ii) include
the information set forth in Annex A hereto on the cover, in Annex B
hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of the prospectus forming a part of the Senior
Subordinated Notes Exchange Offer Registration Statement, and include the
information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Senior Subordinated Notes Registered Exchange
Offer; and (iii) if requested by any Initial Purchaser, include the
information required by Items 507 or 508 of Regulation S-K, as applicable,
in the prospectus forming a part of the Senior Subordinated Notes Exchange
Offer Registration Statement.
(b) The Company shall advise each Initial Purchaser, each Senior
Subordinated Notes Exchanging Dealer and the Holders (if applicable) and,
if requested by any such person, confirm such advice in writing (which
advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite
changes have been made):
(i) when any Senior Subordinated Notes Registration Statement
and any amendment thereto has been filed with the Commission and
when such Senior Subordinated Notes Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Senior Subordinated Notes Registration Statement
or the prospectus included therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Senior Subordinated Notes
Registration Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Senior
Subordinated Notes, the Senior Subordinated Exchange Notes or the
Private Senior Subordinated Exchange Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(v) of the happening of any event that requires the making of
any changes in any Senior Subordinated Notes Registration Statement
or the prospectus included therein in order that the statements
therein are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.
(c) The Company and Holdings will make every reasonable effort to
obtain the withdrawal at the earliest possible time of any order
suspending the effectiveness of any Senior Subordinated Notes Registration
Statement.
(d) The Company will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Senior Subordinated Notes
Shelf Registration Statement, without charge, at least one conformed copy
of such Senior Subordinated Notes Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules and, if any such Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).
8
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within
the coverage of any Senior Subordinated Notes Shelf Registration
Statement, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in such Senior Subordinated Notes
Shelf Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request; and the Company consents to the use of
such prospectus or any amendment or supplement thereto by each of the
selling Holders of Transfer Restricted Securities in connection with the
offer and sale of the Transfer Restricted Securities covered by such
prospectus or any amendment or supplement thereto.
(f) The Company will, during the period not exceeding 180 days
following the expiration of the Senior Subordinated Notes Registered
Exchange Offer, furnish to each Initial Purchaser and each Senior
Subordinated Notes Exchanging Dealer, and to any other Holder who so
requests, without charge, at least one conformed copy of the Senior
Subordinated Notes Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules and, if any Initial Purchaser or Senior Subordinated Notes
Exchanging Dealer or any such Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).
(g) The Company will, during the Senior Subordinated Notes Exchange
Offer Registration Period or the Shelf Registration Period, as applicable,
promptly deliver to each Initial Purchaser, each Senior Subordinated Notes
Exchanging Dealer and such other persons that are required to deliver a
prospectus following the Senior Subordinated Notes Registered Exchange
Offer, without charge, as many copies of the final prospectus included in
the Senior Subordinated Notes Exchange Offer Registration Statement or the
Senior Subordinated Notes Shelf Registration Statement and any amendment
or supplement thereto as such Initial Purchaser, Senior Subordinated Notes
Exchanging Dealer or other persons may reasonably request; and the Company
and Holdings consent to the use of such prospectus or any amendment or
supplement thereto by any such Initial Purchaser, Senior Subordinated
Notes Exchanging Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Senior Subordinated Notes
Registration Statement, the Company and Holdings will use their reasonable
best efforts to register or qualify, or cooperate with the Holders of
Senior Subordinated Notes, Senior Subordinated Exchange Notes or Private
Senior Subordinated Exchange Notes included therein and their respective
counsel in connection with the registration or qualification of, such
Senior Subordinated Notes, Senior Subordinated Exchange Notes or Private
Senior Subordinated Exchange Notes for offer and sale under the securities
or blue sky laws of such jurisdictions as any such Holder reasonably
requests in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the Senior
Subordinated Notes, Senior Subordinated Exchange Notes or Private Senior
Subordinated Exchange Notes covered by such Senior Subordinated Notes
Registration Statement; provided that the Company and Holdings will not be
required to qualify generally to do business in any jurisdiction where
they are not then so qualified or to take any action which would subject
them to general service of process or to taxation in any such jurisdiction
where they are not then so subject.
(i) The Company and Holdings will cooperate with the Holders of
Senior Subordinated Notes, Senior Subordinated Exchange Notes or Private
Senior Subordinated Exchange Notes to facilitate the timely preparation
and delivery of certificates representing Senior Subordinated Notes,
Senior Subordinated Exchange Notes or Private Senior Subordinated Exchange
Notes to be sold pursuant to any Senior Subordinated Notes Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders thereof may request in writing
prior to sales of Senior Subordinated Notes, Senior Subordinated Exchange
Notes or Private Senior
9
Subordinated Exchange Notes pursuant to such Senior Subordinated Notes
Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company and Holdings are required to
maintain an effective Senior Subordinated Notes Registration Statement,
the Company and Holdings will promptly prepare and file with the
Commission a post-effective amendment to the Senior Subordinated Notes
Registration Statement or a supplement to the related prospectus or file
any other required document so that, as thereafter delivered to purchasers
of the Senior Subordinated Notes, Senior Subordinated Exchange Notes or
Private Senior Subordinated Exchange Notes from a Holder, the prospectus
will not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(k) Not later than the effective date of the applicable Senior
Subordinated Notes Registration Statement, the Company will provide a
CUSIP number for the Senior Subordinated Notes, the Senior Subordinated
Exchange Notes and the Private Senior Subordinated Exchange Notes, as the
case may be, and provide the applicable trustee with printed certificates
for the Senior Subordinated Notes, the Senior Subordinated Exchange Notes
or the Private Senior Subordinated Exchange Notes, as the case may be, in
a form eligible for deposit with The Depository Trust Company.
(l) The Company and Holdings will comply with all applicable rules
and regulations of the Commission and the Company will make generally
available to its security holders as soon as practicable after the
effective date of the applicable Senior Subordinated Notes Registration
Statement an earning statement covering at least 12 months satisfying the
provisions of Section 11(a) of the Securities Act.
(m) The Company and Holdings will cause the Senior Subordinated
Notes Indenture or the Senior Subordinated Exchange Notes Indenture, as
the case may be, to be qualified under the Trust Indenture Act as required
by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Senior Subordinated Notes
Shelf Registration Statement to furnish to the Company such information
concerning the Holder and the distribution of such Transfer Restricted
Securities as the Company may from time to time reasonably require for
inclusion in such Senior Subordinated Notes Shelf Registration Statement,
and the Company may exclude from such registration the Transfer Restricted
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
(o) In the case of a Senior Subordinated Notes Shelf Registration
Statement, each Holder of Transfer Restricted Securities to be registered
pursuant thereto agrees by acquisition of such Transfer Restricted
Securities that, upon receipt of any notice from the Company pursuant to
Section 4(b)(ii) through (v), such Holder will discontinue disposition of
such Transfer Restricted Securities until such Holder's receipt of copies
of the supplemental or amended prospectus contemplated by Section 4(j) or
until advised in writing (the "Advice") by the Company that the use of the
applicable prospectus may be resumed. If the Company shall give any notice
under Section 4(b)(ii) through (v) during the period that the Company is
required to maintain an effective Senior Subordinated Notes Registration
Statement (the "Effectiveness Period"), such Effectiveness Period shall be
extended by the number of days during such period from and including the
date of the giving of such notice to and including the date when each
seller of Transfer Restricted Securities covered by such Senior
Subordinated Notes Registration Statement shall have received (x) the
copies of the supplemental or amended prospectus contemplated by
10
Section 4(j) (if an amended or supplemental prospectus is required) or (y)
the Advice (if no amended or supplemental prospectus is required).
(p) In the case of a Senior Subordinated Notes Shelf Registration
Statement, the Company and Holdings shall enter into such customary
agreements (including, if requested, an underwriting agreement in
customary form) and take all such other action, if any, as Holders of a
majority in aggregate principal amount of the Senior Subordinated Notes,
Senior Subordinated Exchange Notes and Private Senior Subordinated
Exchange Notes being sold or the managing underwriters (if any) shall
reasonably request in order to facilitate any disposition of Senior
Subordinated Notes, Senior Subordinated Exchange Notes or Private Senior
Subordinated Exchange Notes pursuant to such Senior Subordinated Notes
Shelf Registration Statement.
(q) In the case of a Senior Subordinated Notes Shelf Registration
Statement, the Company shall (i) make reasonably available for inspection
by a representative of, and Special Counsel (as defined below) acting for,
Holders of a majority in aggregate principal amount of the Senior
Subordinated Notes, Senior Subordinated Exchange Notes and Private Senior
Subordinated Exchange Notes being sold and any underwriter participating
in any disposition of Senior Subordinated Notes, Senior Subordinated
Exchange Notes or Private Senior Subordinated Exchange Notes pursuant to
such Senior Subordinated Notes Shelf Registration Statement, all relevant
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries and (ii) use its reasonable best
efforts to have its officers, directors, employees, accountants and
counsel supply all relevant information reasonably requested by such
representative, Special Counsel or any such underwriter (an "Inspector")
in connection with such Senior Subordinated Notes Shelf Registration
Statement.
(r) In the case of a Senior Subordinated Notes Shelf Registration
Statement, the Company shall, if requested by Holders of a majority in
aggregate principal amount of the Senior Subordinated Notes, Senior
Subordinated Exchange Notes and Private Senior Subordinated Exchange Notes
being sold, their Special Counsel or the managing underwriters (if any) in
connection with such Senior Subordinated Notes Shelf Registration
Statement, use its reasonable best efforts to cause (i) its counsel to
deliver an opinion relating to the Senior Subordinated Notes Shelf
Registration Statement and the Senior Subordinated Notes, Senior
Subordinated Exchange Notes or Private Senior Subordinated Exchange Notes,
as applicable, in customary form, (ii) its officers to execute and deliver
all customary documents and certificates requested by Holders of a
majority in aggregate principal amount of the Senior Subordinated Notes,
Senior Subordinated Exchange Notes and Private Senior Subordinated
Exchange Notes being sold, their Special Counsel or the managing
underwriters (if any) and (iii) its independent public accountants to
provide a comfort letter or letters in customary form, subject to receipt
of appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.
5. Registration Expenses. The Company and Holdings will jointly and
severally bear all expenses incurred in connection with the performance of its
obligations under Sections 1, 2, 3 and 4 and, other than in connection with the
Senior Subordinated Notes Exchange Offer Registration Statement, the Company
will reimburse the Initial Purchasers and the Holders for the reasonable fees
and disbursements of one firm of attorneys chosen by the Holders of a majority
in aggregate principal amount of the Senior Subordinated Notes, the Senior
Subordinated Exchange Notes and the Private Senior Subordinated Exchange Notes
to be sold pursuant to each Senior Subordinated Notes Registration Statement
(the "Special Counsel") acting for the Initial Purchasers or Holders in
connection therewith.
6. Indemnification. (a) In the event of a Senior Subordinated Notes
Shelf Registration Statement or in connection with any prospectus delivery
pursuant to an Senior Subordinated Notes Exchange Offer Registration Statement
by an Initial Purchaser or Senior
11
Subordinated Notes Exchanging Dealer, as applicable, the Company and Holdings
shall jointly and severally indemnify and hold harmless each Holder (including,
without limitation, any such Initial Purchaser or Senior Subordinated Notes
Exchanging Dealer), its affiliates, their respective officers, directors,
employees, representatives and agents, and each person, if any, who controls
such Holder within the meaning of the Securities Act or the Exchange Act
(collectively referred to for purposes of this Section 6 and Section 7 as a
Holder) from and against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, without limitation, any loss,
claim, damage, liability or action relating to purchases and sales of Senior
Subordinated Notes, Senior Subordinated Exchange Notes or Private Senior
Subordinated Exchange Notes), to which that Holder may become subject, whether
commenced or threatened, under the Securities Act, the Exchange Act, any other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in any such Senior Subordinated Notes Registration Statement or
any prospectus forming part thereof or in any amendment or supplement thereto or
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
shall reimburse each Holder promptly upon demand for any legal or other expenses
reasonably incurred by that Holder in connection with investigating or defending
or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company and Holdings shall
not be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Holders' Information; and
provided, further, that with respect to any such untrue statement in or omission
from any related preliminary prospectus, the indemnity agreement contained in
this Section 6(a) shall not inure to the benefit of any Holder from whom the
person asserting any such loss, claim, damage, liability or action received
Senior Subordinated Notes, Senior Subordinated Exchange Notes or Private Senior
Subordinated Exchange Notes to the extent that such loss, claim, damage,
liability or action of or with respect to such Holder results from the fact that
both (A) a copy of the final prospectus was not sent or given to such person at
or prior to the written confirmation of the sale of such Senior Subordinated
Notes, Senior Subordinated Exchange Notes or Private Senior Subordinated
Exchange Notes to such person and (B) the untrue statement in or omission from
the related preliminary prospectus was corrected in the final prospectus unless,
in either case, such failure to deliver the final prospectus was a result of
non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Senior Subordinated Notes Shelf Registration
Statement, each Holder shall indemnify and hold harmless the Company, its
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6(b) and Section 7 as the Company), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company may become subject, whether commenced or threatened, under
the Securities Act, the Exchange Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Senior
Subordinated Notes Registration Statement or any prospectus forming part thereof
or in any amendment or supplement thereto or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with any
Holders' Information furnished to the Company by such Holder, and shall
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending or preparing to defend
against or appearing as a third party witness in connection with any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that no such Holder shall be liable for
12
any indemnity claims hereunder in excess of the amount of net proceeds received
by such Holder from the sale of Senior Subordinated Notes, Senior Subordinated
Exchange Notes or Private Senior Subordinated Exchange Notes pursuant to such
Senior Subordinated Notes Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
13
benefits received by the Company from the offering and sale of the Senior
Subordinated Notes, on the one hand, and a Holder with respect to the sale by
such Holder of Senior Subordinated Notes, Senior Subordinated Exchange Notes or
Private Senior Subordinated Exchange Notes, on the other, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
Holdings, on the one hand, and such Holder, on the other, with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company and Holdings, on
the one hand, and a Holder, on the other, with respect to such offering and such
sale shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Senior Subordinated Notes (before deducting expenses)
received by or on behalf of the Company as set forth in the table on the cover
of the Offering Memorandum, on the one hand, bear to the total proceeds received
by such Holder with respect to its sale of Senior Subordinated Notes, Senior
Subordinated Exchange Notes or Private Senior Subordinated Exchange Notes, on
the other. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to the Company and
Holdings or information supplied by the Company and Holdings, on the one hand,
or to any Holders' Information supplied by such Holder, on the other, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this Section 7 were to be determined by pro rata allocation or by any other
method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 7 shall be deemed to include, for
purposes of this Section 7, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending or
preparing to defend any such action or claim. Notwithstanding the provisions of
this Section 7, an indemnifying party that is a Holder of Senior Subordinated
Notes, Senior Subordinated Exchange Notes or Private Senior Subordinated
Exchange Notes shall not be required to contribute any amount in excess of the
amount by which the total price at which the Senior Subordinated Notes, Senior
Subordinated Exchange Notes or Private Senior Subordinated Exchange Notes sold
by such indemnifying party to any purchaser exceeds the amount of any damages
which such indemnifying party has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
8. Rules 144 and 144A. The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the written request of any Holder
of Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of such Holder's securities pursuant to Rules
144 and 144A. The Company and Holdings covenant that they will take such further
action as any Holder of Transfer Restricted Securities may reasonably request,
all to the extent required from time to time to enable such Holder to sell
Transfer Restricted Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rules 144 and 144A
(including, without limitation, the requirements of Rule 144A(d)(4)). Upon the
written request of any Holder of Transfer Restricted Securities, the Company and
Holdings shall deliver to such Holder a written statement as to whether they
have complied with such requirements. Notwithstanding the foregoing, nothing in
this Section 8 shall be deemed to require the Company to register any of its
securities pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Senior Subordinated Notes Shelf Registration Statement
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will administer the offering will be
selected by the Holders of a majority in aggregate principal
14
amount of such Transfer Restricted Securities included in such offering, subject
to the consent of the Company (which shall not be unreasonably withheld or
delayed), and such Holders shall be responsible for all underwriting commissions
and discounts in connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Senior Subordinated Notes, the Senior Subordinated
Exchange Notes and the Private Senior Subordinated Exchange Notes, taken as a
single class. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose Senior Subordinated Notes, Senior Subordinated Exchange
Notes or Private Senior Subordinated Exchange Notes are being sold pursuant to a
Senior Subordinated Notes Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of a
majority in aggregate principal amount of the Senior Subordinated Notes, the
Senior Subordinated Exchange Notes and the Private Senior Subordinated Exchange
Notes being sold by such Holders pursuant to such Senior Subordinated Notes
Registration Statement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Senior Subordinated
Notes Indenture, with a copy in like manner to Chase Securities Inc. and
Lehman Brothers Inc.;
(2) if to an Initial Purchaser, initially at its address set forth
in the Purchase Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except
15
where otherwise expressly provided, the term "affiliate" has the meaning set
forth in Rule 405 under the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) Remedies. In the event of a breach by the Company, Holdings or
by any Holder of any of their obligations under this Agreement, each Holder, the
Company or Holdings, as the case may be, in addition to being entitled to
exercise all rights granted by law, including recovery of damages (other than
the recovery of damages for a breach by the Company or Holdings of its
obligations under Sections 1 or 2 hereof for which liquidated damages have been
paid pursuant to Section 3 hereof), will be entitled to specific performance of
its rights under this Agreement. The Company, Holdings and each Holder agree
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by each such person of any of the provisions of this
Agreement and hereby further agree that, in the event of any action for specific
performance in respect of such breach, each such person shall waive the defense
that a remedy at law would be adequate.
(i) No Inconsistent Agreements. Each of the Company and Holdings
represents, warrants and agrees that (i) it has not entered into, shall not, on
or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof, (ii) it has not previously
entered into any agreement which remains in effect granting any registration
rights with respect to any of its debt securities to any person and (iii) (with
respect to the Company) without limiting the generality of the foregoing,
without the written consent of the Holders of a majority in aggregate principal
amount of the then outstanding Transfer Restricted Securities, it shall not
grant to any person the right to request the Company to register any debt
securities of the Company under the Securities Act unless the rights so granted
are not in conflict or inconsistent with the provisions of this Agreement.
(j) No Piggyback on Registrations. Neither the Company nor any of
its security holders (other than the Holders of Transfer Restricted Securities
in such capacity) shall have the right to include any securities of the Company
in any Shelf Registration or Senior Subordinated Notes Registered Exchange Offer
other than Transfer Restricted Securities.
(k) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
16
Please confirm that the foregoing correctly sets forth the agreement
among the Company, Holdings and the Initial Purchasers.
Very truly yours,
WESCO DISTRIBUTION, INC.
by
--------------------------------
Name:
Title:
WESCO INTERNATIONAL, INC.
by
--------------------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
by
--------------------------------
Authorized Signatory
LEHMAN BROTHERS INC.
by
--------------------------------
Authorized Signatory
ANNEX A
Each broker-dealer that receives Senior Subordinated Exchange Notes
for its own account pursuant to the Senior Subordinated Notes Registered
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such Senior Subordinated Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Senior Subordinated Exchange Notes received in exchange for
Senior Subordinated Notes where such Senior Subordinated Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution".
ANNEX B
Each broker-dealer that receives Senior Subordinated Exchange Notes
for its own account in exchange for Senior Subordinated Notes, where such Senior
Subordinated Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Senior
Subordinated Exchange Notes. See "Plan of Distribution".
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Senior Subordinated Exchange Notes
for its own account pursuant to the Senior Subordinated Notes Registered
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such Senior Subordinated Exchange Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Senior Subordinated Exchange Notes
received in exchange for Senior Subordinated Notes where such Senior
Subordinated Notes were acquired as a result of market-making activities or
other trading activities. The Company has agreed that, for a period of 180 days
after the Expiration Date, it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until [ ] 199[ ], all dealers effecting
transactions in the Senior Subordinated Exchange Notes may be required to
deliver a prospectus.
The Company will not receive any proceeds from any sale of Senior
Subordinated Exchange Notes by broker-dealers. Senior Subordinated Exchange
Notes received by broker-dealers for their own account pursuant to the Senior
Subordinated Notes Registered Exchange Offer may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Senior Subordinated Exchange
Notes or a combination of such methods of resale, at market prices prevailing at
the time of resale, at prices related to such prevailing market prices or at
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the purchasers of any
such Senior Subordinated Exchange Notes. Any broker-dealer that resells Senior
Subordinated Exchange Notes that were received by it for its own account
pursuant to the Senior Subordinated Notes Registered Exchange Offer and any
broker or dealer that participates in a distribution of such Senior Subordinated
Exchange Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Senior Subordinated Exchange
Notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Senior Subordinated Notes Registered Exchange Offer (including
the expenses of one counsel for the Holders of the Senior Subordinated Notes)
other than commissions or concessions of any broker-dealers and will indemnify
the Holders of the Senior Subordinated Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Senior
Subordinated Exchange Notes. If the undersigned is a broker-dealer that will
receive Senior Subordinated Exchange Notes for its own account in exchange for
Senior Subordinated Notes that were acquired as a result of market-making
activities or other trading activities, it acknowledges that it will deliver a
prospectus in connection with any resale of such Senior Subordinated Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
EXHIBIT 4.5
================================================================================
WESCO INTERNATIONAL, INC.
11 1/8% Senior Discount Notes due 2008
----------
INDENTURE
Dated as of June 5, 1998
----------
BANK ONE, N.A.,
Senior Discount Notes Trustee
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions....................................................1
SECTION 1.02. Other Definitions.............................................21
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.............21
SECTION 1.04. Rules of Construction.........................................22
ARTICLE 2
The Senior Discount Notes
SECTION 2.01. Form and Dating...............................................22
SECTION 2.02. Execution and Authentication..................................23
SECTION 2.03. Registrar and Paying Agent....................................23
SECTION 2.04. Paying Agent To Hold Money in Trust...........................24
SECTION 2.05. Senior Discount Noteholder Lists..............................24
SECTION 2.06. Transfer and Exchange.........................................24
SECTION 2.07. Replacement Senior Discount Notes.............................25
SECTION 2.08. Outstanding Senior Discount Notes.............................26
SECTION 2.09. Temporary Senior Discount Notes...............................26
SECTION 2.10. Cancelation...................................................26
SECTION 2.11. Defaulted Interest............................................27
SECTION 2.12. CUSIP Numbers.................................................27
ARTICLE 3
Redemption
SECTION 3.01. Notices to Senior Discount Notes Trustee......................27
SECTION 3.02. Selection of Senior Discount Notes To Be Redeemed.............27
SECTION 3.03. Notice of Redemption..........................................28
SECTION 3.04. Effect of Notice of Redemption................................29
SECTION 3.05. Deposit of Redemption Price...................................29
SECTION 3.06. Senior Discount Notes Redeemed in Part........................29
ARTICLE 4
Covenants
SECTION 4.01. Payment of Senior Discount Notes..............................29
SECTION 4.02. SEC Reports...................................................30
SECTION 4.03. Limitation on Indebtedness....................................30
SECTION 4.04. Limitation on Restricted Payments.............................32
SECTION 4.05. Limitation on Restrictions on Distributions from Restricted
Subsidiaries................................................35
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock............36
SECTION 4.07. Limitation on Transactions with Affiliates....................39
SECTION 4.08. Change of Control.............................................40
SECTION 4.09. Compliance Certificate........................................42
SECTION 4.10. Further Instruments and Acts..................................42
SECTION 4.11. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries.....................................42
SECTION 4.12. Limitation on Liens...........................................42
ARTICLE 5
Successor Company
SECTION 5.01. When Holdings May Merge or Transfer Assets....................43
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default.............................................44
SECTION 6.02. Acceleration..................................................46
SECTION 6.03. Other Remedies................................................46
SECTION 6.04. Waiver of Past Defaults.......................................46
SECTION 6.05. Control by Majority...........................................46
SECTION 6.06. Limitation on Suits...........................................47
SECTION 6.07. Rights of Senior Discount Noteholders to
Receive Payment.............................................47
SECTION 6.08. Collection Suit by Senior Discount Notes Trustee..............47
SECTION 6.09. Senior Discount Notes Trustee May File Proofs of Claim........48
SECTION 6.10. Priorities....................................................48
SECTION 6.11. Undertaking for Costs.........................................48
SECTION 6.12. Waiver of Stay or Extension Laws..............................49
ARTICLE 7
Senior Discount Notes Trustee
SECTION 7.01. Duties of Senior Discount Notes Trustee.......................49
SECTION 7.02. Rights of Senior Discount Notes Trustee.......................50
SECTION 7.03. Individual Rights of Senior Discount Notes Trustee............51
SECTION 7.04. Senior Discount Notes Trustee's Disclaimer....................51
SECTION 7.05. Notice of Defaults............................................51
SECTION 7.06. Reports by Senior Discount Notes Trustee to Senior
Discount Noteholders........................................51
SECTION 7.07. Compensation and Indemnity....................................52
SECTION 7.08. Replacement of Senior Discount Notes Trustee..................52
SECTION 7.09. Successor Senior Discount Notes Trustee by Merger.............53
SECTION 7.10. Eligibility; Disqualification.................................54
SECTION 7.11. Preferential Collection of Claims Against Holdings............54
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Senior Discount Notes;
Defeasance..................................................54
SECTION 8.02. Conditions to Defeasance......................................55
SECTION 8.03. Application of Trust Money....................................56
SECTION 8.04. Repayment to Holdings.........................................56
SECTION 8.05. Indemnity for Government Obligations..........................56
SECTION 8.06. Reinstatement.................................................57
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Senior Discount Noteholders................57
SECTION 9.02. With Consent of Senior Discount Noteholders...................58
SECTION 9.03. Compliance with Trust Indenture Act...........................58
SECTION 9.04. Revocation and Effect of Consents and Waivers.................59
SECTION 9.05. Notation on or Exchange of Senior Discount Notes..............59
SECTION 9.06. Senior Discount Notes Trustee To Sign Amendments..............60
ARTICLE 10
Miscellaneous
SECTION 10.01. Trust Indenture Act Controls.................................60
SECTION 10.02. Notices......................................................60
SECTION 10.03. Communication by Senior Discount Noteholders with
Other Senior Discount Noteholders...........................60
SECTION 10.04. Certificate and Opinion as to Conditions Precedent...........61
SECTION 10.05. Statements Required in Certificate or Opinion................61
SECTION 10.06. When Senior Discount Notes Disregarded.......................61
SECTION 10.07. Rules by Senior Discount Notes Trustee, Paying Agent
and Registrar...............................................61
SECTION 10.08. Legal Holidays...............................................62
SECTION 10.09. GOVERNING LAW................................................62
SECTION 10.10. No Recourse Against Others...................................62
SECTION 10.11. Successors...................................................62
SECTION 10.12. Multiple Originals...........................................62
SECTION 10.13. Table of Contents; Headings..................................62
Appendix A - Provisions Relating to Initial Senior Discount Notes, Private
Senior Discount Exchange Notes and Senior Discount Exchange
Notes
Exhibit A - Form of Initial Senior Discount Note
Exhibit B - Form of Face of Senior Discount Exchange Note
Exhibit C - Form of Transferee Letter of Representation
INDENTURE dated as of June 5, 1998, among WESCO
INTERNATIONAL, INC., a Delaware corporation ("Holdings") and
BANK ONE, N.A., a national banking association, as trustee
(the "Senior Discount Notes Trustee").
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of (i) Holdings' 11 1/8%
Senior Discount Notes due 2008 issued on the date hereof (the "Initial Senior
Discount Notes"), (ii) if and when issued as provided in the Senior Discount
Notes Registration Agreement (as defined in Appendix A hereto (the "Appendix")),
Holdings' 11 1/8% Senior Discount Notes due 2008 issued in the Senior Discount
Notes Registered Exchange Offer (as defined in the Appendix) in exchange for any
Initial Senior Discount Notes (the "Senior Discount Exchange Notes") and (iii)
if and when issued as provided in the Senior Discount Notes Registration
Agreement, the Private Senior Discount Exchange Notes (as defined in the
Appendix) issued in the Senior Discount Notes Private Exchange (as defined in
the Appendix, and together with the Initial Senior Discount Notes and any Senior
Discount Exchange Notes issued hereunder, the "Senior Discount Notes"). Except
as otherwise provided herein, the Senior Discount Notes will be limited to $87
million in aggregate principal amount at maturity outstanding.
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Accreted Value" as of any date (the "Specified Date") means, with
respect to each $1,000 principal amount at maturity of Senior Discount Notes:
(i) if the Specified Date is one of the following dates (each a
"Semi-Annual Accretion Date"), the amount set forth opposite such date below:
Semi-Annual Accretion Date Accreted Value
- - - - -------------------------- --------------
Issue Date..................................................... $ 580.21
December 1, 1998............................................... $ 611.89
June 1, 1999................................................... $ 646.07
December 1, 1999............................................... $ 682.17
June 1, 2000................................................... $ 720.29
December 1, 2000............................................... $ 760.54
June 1, 2001................................................... $ 803.03
December 1, 2001............................................... $ 847.90
June 1, 2002................................................... $ 895.28
December 1, 2002............................................... $ 945.30
June 1, 2003................................................... $ 998.12
(ii) if the Specified Date occurs between two Semi-Annual Accretion Dates,
the sum of (a) the Accreted Value for the Semi-Annual Accretion Date immediately
preceding the Specified Date and (b) an amount equal to the product of (x) the
Accreted Value for the immediately following Semi-Annual Accretion Date less the
Accreted Value for the immediately preceding Semi-Annual Accretion Date and (y)
a fraction, the numerator of which is the number of days actually elapsed from
the immediately
2
preceding Semi-Annual Accretion Date to the Specified Date and the denominator
of which is 180, and
(iii) if the Specified Date is after June 1, 2003, $998.12.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by Holdings or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by Holdings or another Restricted Subsidiary; or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a Restricted
Subsidiary; provided, however, that any such Restricted Subsidiary described in
clause (ii) or (iii) above is primarily engaged in a Related Business.
"Additional Senior Subordinated Notes" means up to $200 million
aggregate principal amount of Senior Subordinated Notes which may be issued
subsequent to the Closing Date.
"Adjusted Consolidated Assets" means at any time the total amount of
assets of Holdings and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), after deducting
therefrom all current liabilities of Holdings and its Restricted Subsidiaries
(excluding intercompany items), all as set forth on the Consolidated balance
sheet of Holdings and its Restricted Subsidiaries as of the end of the most
recent fiscal quarter for which financial statements are available prior to the
date of determination.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Premium" means, with respect to a Senior Discount Note
at any redemption date, the greater of (i) 1.0% of the Accreted Value of such
Senior Discount Note and (ii) the excess of (A) the present value at such time
of the redemption price of such Senior Discount Note at June 1, 2003 (such
redemption price being set forth in the table in paragraph 5 of the Senior
Discount Notes) computed using a discount rate equal to the Treasury Rate plus
50 basis points, over (B) the Accreted Value of such Senior Discount Note.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
Holdings or any Restricted Subsidiary, including any disposition by means of a
merger, consolidation, or similar transaction (each referred to for the purposes
of this definition as a "disposition"), of (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than Holdings or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of Holdings or any Restricted Subsidiary or (iii) any other
assets of Holdings or any Restricted Subsidiary outside the ordinary course of
business of Holdings or such
3
Restricted Subsidiary (other than, in the case of (i), (ii) and (iii) above, (A)
a disposition by a Restricted Subsidiary to Holdings or by Holdings or a
Restricted Subsidiary to a Wholly Owned Subsidiary, (B) for purposes of the
provisions described in Section 4.06 only, a disposition subject to Section
4.04, (C) a disposition of assets with a fair market value of less than
$1,000,000, (D) a sale of accounts receivable and related assets of the type
specified in the definition of "Qualified Receivables Transaction" to a
Receivables Entity in a Qualified Receivables Transaction, (E) a transfer of
accounts receivables and related assets of the type specified in the definition
of "Qualified Receivables Transaction" (or a fractional undivided interest
therein) by a Receivables Entity in a Qualified Receivables Transaction, (F) the
disposition of all or substantially all of the assets of Holdings in a manner
permitted pursuant to the provisions of Section 5.01 or any disposition that
constitutes a Change of Control, (G) any exchange of like property pursuant to
Section 1031 of the Code for use in a Related Business, and (H) any sale of
Capital Stock in, or Indebtedness or other securities of, an Unrestricted
Subsidiary).
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Senior Discount Notes after June 1, 2003, compounded
annually) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction
(including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Credit Agreement and any Refinancing Indebtedness with respect
thereto, as amended from time to time, including principal, premium (if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to Holdings whether or not a claim for
post-filing interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations, guarantees, indemnities and all other amounts payable
thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of Holdings or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP;
4
and the Stated Maturity thereof shall be the date of the last payment of rent or
any other amount due under such lease prior to the first date upon which such
lease may be prepaid by the lessee without payment of a penalty.
"Change of Control" means the occurrence of any of the following
events:
(i) prior to the first public offering of common stock of Holdings,
the Permitted Holders cease to be the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of
a majority in the aggregate of the total voting power of the Voting Stock
of Holdings, whether as a result of issuance of securities of Holdings,
any merger, consolidation, liquidation or dissolution of Holdings, any
direct or indirect transfer of securities by any Permitted Holder or
otherwise (for purposes of this clause (i) and clause (ii) below, the
Permitted Holders shall be deemed to beneficially own any Voting Stock of
an entity (the "specified entity") held by any other entity (the "parent
entity") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, in the aggregate a majority of the
voting power of the Voting Stock of the parent entity);
(ii) on or after any such public offering referred to in clause (i),
(A) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (i) above, except that for purposes
of this clause (ii) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the total voting power
of the Voting Stock of Holdings and (B) the Permitted Holders
"beneficially own" (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Voting Stock of Holdings than such other person and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of Holdings
(for the purposes of this clause (ii), such other person shall be deemed
to beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person is the beneficial owner (as
defined in this clause (ii)), directly or indirectly, of more than 35% of
the voting power of the Voting Stock of such parent corporation and the
Permitted Holders "beneficially own" (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
corporation);
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of
Holdings (together with any new directors whose election by the Board of
Directors of Holdings or whose nomination for election by the shareholders
of Holdings was approved by a vote of 66 2/3% of the directors of Holdings
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Holdings then in office; or
5
(iv) the merger or consolidation of Holdings with or into another
Person or the merger of another Person with or into Holdings, or the sale
of all or substantially all the assets of Holdings to another Person
(other than a Person that is controlled by the Permitted Holders), and, in
the case of any such merger or consolidation, the securities of Holdings
that are outstanding immediately prior to such transaction and which
represent 100% of the aggregate voting power of the Voting Stock of
Holdings are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving Person that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of the
surviving Person; provided, however, that any sale of accounts receivable
in connection with a Qualified Receivables Transaction shall not
constitute a Change of Control.
"Closing Date" means the date of this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means WESCO Distribution, Inc., a Delaware corporation and
Wholly Owned Subsidiary of Holdings.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for which internal financial statements
are available prior to the date of such determination to (ii) Consolidated
Interest Expense for such four fiscal quarters; provided, however, that (A) if
Holdings or any Restricted Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding on such date of determination
or if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period (except that, in making such computation, the amount of Indebtedness
under any revolving credit facility outstanding on the date of such calculation
shall be computed based on (1) the average daily balance of such Indebtedness
(and any Indebtedness under a revolving credit facility replaced by such
Indebtedness) during such four fiscal quarters or such shorter period when such
facility and any replaced facility was outstanding or (2) if such facility was
created after the end of such four fiscal quarters, the average daily balance of
such Indebtedness (and any Indebtedness under a revolving credit facility
replaced by such Indebtedness) during the period from the date of creation of
such facility to the date of the calculation), (B) if Holdings or any Restricted
Subsidiary has repaid, repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of such period or if any Indebtedness is to be
repaid, repurchased, defeased or otherwise discharged (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced) on the date
of the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall
be calculated on a pro forma basis as if such discharge had occurred on the
first day of such period and as if Holdings or such Restricted Subsidiary has
not earned the interest income actually earned during such
6
period in respect of cash or Temporary Cash Investments used to repay,
repurchase, defease or otherwise discharge such Indebtedness, (C) if since the
beginning of such period Holdings or any Restricted Subsidiary shall have made
any Asset Disposition, the EBITDA for such period shall be reduced by an amount
equal to the EBITDA (if positive) directly attributable to the assets that are
the subject of such Asset Disposition for such period or increased by an amount
equal to the EBITDA (if negative) directly attributable thereto for such period
and Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of Holdings or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to Holdings and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent Holdings and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (D) if since the beginning of such period Holdings or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
and (E) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into Holdings or any
Restricted Subsidiary since the beginning of such period) shall have made any
Asset Disposition or any Investment or acquisition of assets that would have
required an adjustment pursuant to clause (C) or (D) above if made by Holdings
or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or acquisition of assets
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of Holdings, and such pro forma calculations
shall include (A)(x) the savings in cost of goods sold that would have resulted
from using Holdings' actual costs for comparable goods and services during the
comparable period and (y) other savings in cost of goods sold or eliminations of
selling, general and administrative expenses as determined by a responsible
financial or accounting Officer of Holdings in good faith in connection with
Holdings' consideration of such acquisition and consistent with Holdings'
experience in acquisitions of similar assets, less (B) the incremental expenses
that would be included in cost of goods sold and selling, general and
administrative expenses that would have been incurred by Holdings in the
operation of such acquired assets during such period. If any Indebtedness bears
a floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term as at the date of determination in
excess of 12 months).
7
"Consolidated Interest Expense" means, for any period, the total
interest expense (net of interest income) of Holdings and its Consolidated
Restricted Subsidiaries, plus, to the extent Incurred by Holdings and its
Restricted Subsidiaries in such period but not included in such interest
expense, (i) interest expense attributable to Capitalized Lease Obligations and
the interest expense attributable to leases constituting part of a
Sale/Leaseback Transaction, (ii) amortization of debt discount, (iii)
capitalized interest, (iv) non-cash interest expense, (v) commissions, discounts
and other fees and charges attributable to letters of credit and bankers'
acceptance financing, (vi) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by Holdings or any
Restricted Subsidiary, (vii) net costs associated with Hedging Obligations
(including amortization of fees), (viii) dividends in respect of all Preferred
Stock of Holdings and any of the Restricted Subsidiaries of Holdings (other than
pay in kind dividends and accretions to liquidation value) to the extent held by
Persons other than Holdings or a Wholly Owned Subsidiary, (ix) interest Incurred
in connection with investments in discontinued operations and (x) the cash
contributions to any employee stock ownership plan or similar trust to the
extent such contributions are used by such plan or trust to pay interest or fees
to any Person (other than Holdings) in connection with Indebtedness Incurred by
such plan or trust, less, to the extent included in such total interest expense,
the amortization during such period of capitalized financing costs.
Notwithstanding anything to the contrary contained herein, interest expense,
commissions, discounts, yield and other fees and charges Incurred in connection
with any Qualified Receivables Transaction pursuant to which Holdings or any
Subsidiary may sell, convey or otherwise transfer or grant a security interest
in any accounts receivable or related assets of the type specified in the
definition of "Qualified Receivables Transaction" shall not be included in
Consolidated Interest Expense; provided that any interest expense, commissions,
discounts, yield and other fees and charges Incurred in connection with any
receivables financing or securitization that does not constitute a Qualified
Receivables Transaction shall be included in Consolidated Interest Expense.
"Consolidated Net Income" means, for any period, the net income of
Holdings and its Consolidated Subsidiaries for such period; provided, however,
that there shall not be included in such Consolidated Net Income:
(i) any net income of any Person (other than Holdings) if such
Person is not a Restricted Subsidiary, except that (A) subject to the
limitations contained in clause (iv) below, Holdings' equity in the net
income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to Holdings or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution made to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) Holdings' equity in a
net loss of any such Person for such period shall be included in
determining such Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by Holdings or
a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income (or loss) of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such
Restricted
8
Subsidiary, directly or indirectly, to Holdings (other than, in the case
of the Company (but not its Subsidiaries), restrictions permitted by
Section 4.05), except that (A) subject to the limitations contained in
clause (iv) below, Holdings' equity in the net income of any such
Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash which could
have been distributed by such Restricted Subsidiary during such period to
Holdings or another Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution
made to another Restricted Subsidiary, to the limitation contained in this
clause) and (B) Holdings' equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
(iv) any gain (or loss) realized upon the sale or other disposition
of any asset of Holdings or its Consolidated Subsidiaries (including
pursuant to any Sale/Leaseback Transaction) that is not sold or otherwise
disposed of in the ordinary course of business and any gain (or loss)
realized upon the sale or other disposition of any Capital Stock of any
Person;
(v) any extraordinary gain or loss;
(vi) the cumulative effect of a change in accounting principles; and
(vii) any expenses or charges paid to third parties related to any
Equity Offering, Permitted Investment, acquisition, recapitalization or
Indebtedness permitted to be Incurred by this Indenture (whether or not
successful) (including such fees, expenses, or charges related to the
Recapitalization).
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries to
Holdings or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
Section pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of Holdings and its Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of Holdings
for which internal financial statements are available, as (i) the par or stated
value of all outstanding Capital Stock of Holdings plus (ii) paid-in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Consolidation" means the consolidation of the amounts of each of
the Restricted Subsidiaries with those of Holdings in accordance with GAAP
consistently applied; provided, however, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of Holdings or any Restricted Subsidiary in an Unrestricted Subsidiary shall be
accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Credit Agreement" means the credit agreement to be dated as of the
Closing Date, as amended, waived or otherwise modified from time to time, among
Holdings, WESCO Distribution -- Canada, Inc., certain financial institutions to
be party
9
thereto, The Chase Manhattan Bank, as U.S. administrative agent, syndication
agent and U.S. collateral agent, The Chase Manhattan Bank of Canada, as Canadian
administrative agent and Canadian collateral agent, and Lehman Commercial Paper
Inc., as documentation agent.
"Credit Facilities" means, with respect to Holdings or the Company,
one or more debt facilities, or commercial paper facilities with banks or other
institutional lenders or indentures providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against receivables), letters of credit or other long-term Indebtedness, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Currency Agreement" means with respect to any Person any foreign
exchange contract, currency swap agreement or other similar agreement or
arrangement to which such Person is a party or of which it is a beneficiary.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Designated Noncash Consideration" means the fair market value of
noncash consideration received by Holdings or any of its Restricted Subsidiaries
in connection with an Asset Disposition that is so designated as Designated
Noncash Consideration pursuant to an Officers' Certificate, setting forth the
basis of such valuation, less the amount of cash or cash equivalents received in
connection with a subsequent sale of such Designated Noncash Consideration.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (i) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the
holder thereof, in whole or in part, in each case on or prior to the 91st day
following the Stated Maturity of the Senior Discount Notes; provided, however,
that any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the first anniversary of the Stated
Maturity of the Securities shall not constitute Disqualified Stock if the "asset
sale" or "change of control" provisions applicable to such Capital Stock are not
more favorable to the holders of such Capital Stock than the provisions of
Sections 4.06 and 4.08.
"EBITDA" for any period means the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense of Holdings and its Consolidated
Restricted Subsidiaries, (ii) Consolidated Interest Expense, (iii) depreciation
expense of Holdings and its Consolidated Restricted Subsidiaries, (iv)
amortization expense of Holdings and its Consolidated Restricted Subsidiaries
(excluding amortization expense attributable to a prepaid cash item that was
paid in a prior period), (v) all other non-cash charges of Holdings and its
Consolidated Restricted Subsidiaries (excluding any such non-cash charge to the
extent it represents an accrual of or reserve for cash expenditures in any
10
future period) in each case for such period and (vi) income attributable to
discontinued operations. Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation and amortization and
non-cash charges of, a Restricted Subsidiary of Holdings shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding amount would be
permitted at the date of determination to be dividended to Holdings by such
Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Equity Offering" means a private sale or public offering of Capital
Stock (other than Disqualified Stock) of Holdings.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Contribution" means the Net Cash Proceeds received by
Holdings from (a) contributions to its common equity capital and (b) the sale
(other than to a Subsidiary or to any Holdings or Subsidiary management equity
plan or stock option plan or any other management or employee benefit plan or
agreement) of Capital Stock (other than Disqualified Stock) of Holdings, in each
case designated as Excluded Contributions pursuant to an Officers' Certificate
executed by the principal executive officer and the principal financial officer
of Holdings on the date such capital contributions are made or the date such
Capital Stock is sold.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Closing Date, including those set forth
in (i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC. All ratios and
computations based on GAAP contained in this Indenture shall be computed in
conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a
11
verb has a corresponding meaning. The term "Guarantor" shall mean any Person
Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holdings" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Person at the time it becomes a Subsidiary. The term "Incurrence" when used as a
noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication),
(i) the principal of and premium (if any) in respect of indebtedness
of such Person for borrowed money;
(ii) the principal of and premium (if any) in respect of obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments;
(iii) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with
respect thereto) (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (i),
(ii), (iv) and (v) hereof) to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the 30th day following payment on the letter of credit so
long as such letter of credit is entered into in the ordinary course of
business);
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion
of such services;
(v) all Capitalized Lease Obligations and all Attributable Debt of
such Person;
(vi) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock
or, with respect to any Subsidiary of such Person, any Preferred Stock
(but excluding, in each case, any accrued dividends);
12
(vii) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, however, that the amount of Indebtedness of such Person
shall be the lesser of (A) the fair market value of such asset at such
date of determination and (B) the amount of such Indebtedness of such
other Persons;
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person; and
(ix) all obligations of the type referred to in clauses (i) through
(viii) of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable, directly
or indirectly, as obligor, guarantor or otherwise, including by means of
any Guarantee.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; provided, however, that
the amount outstanding at any time of any Indebtedness Incurred with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP. Any "Qualified Receivables
Transaction", whether or not such transfer constitutes a sale for the purposes
of GAAP, shall not constitute Indebtedness hereunder; provided that any
receivables financing or securitization that does not constitute a Qualified
Receivables Transaction and does not qualify as a sale under GAAP shall
constitute Indebtedness hereunder.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Independent Financial Advisor" means an accounting, appraisal,
investment banking firm or consultant of nationally recognized standing that is,
in the good faith determination of Holdings, qualified to perform the task for
which it has been engaged.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall include the
portion (proportionate to Holdings' equity interest in such Subsidiary) of the
fair market value of the net assets of any Subsidiary of Holdings at the time
that such Subsidiary is designated an Unrestricted Subsidiary; provided,
however, that upon a
13
redesignation of such Subsidiary as a Restricted Subsidiary, Holdings shall be
deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) Holdings' "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to Holdings' equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments
received (including (a) any cash payments received upon the sale or other
disposition of any Designated Noncash Consideration received in any Asset
Disposition, (b) any cash proceeds received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and (c) any
cash proceeds from the sale or other disposition of any securities received as
consideration, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of
Indebtedness or other obligations relating to the properties or assets that are
the subject of such Asset Disposition or received in any other non-cash form)
therefrom, in each case net of (i) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred (including, without limitation,
all broker's and finder's fees and expenses, all investment banking fees and
expenses, employee severance and termination costs, and trade payable and
similar liabilities solely related to the assets sold or otherwise disposed of
and required to be paid by the seller as a result thereof), and all Federal,
state, provincial, foreign and local taxes required to be paid or accrued as a
liability under GAAP, as a consequence of such Asset Disposition, (ii) all
relocation expenses incurred as a result thereof, (iii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon or other security agreement of any
kind with respect to such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable law be
repaid out of the proceeds from such Asset Disposition, (iv) all distributions
and other payments required to be made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Disposition and (v)
appropriate amounts to be provided by the seller as a reserve, in accordance
with GAAP, against any liabilities associated with the property or other assets
disposed of in such Asset Disposition and retained by Holdings or any Restricted
Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
Holdings.
14
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Senior Discount Notes Trustee. The counsel may be an
employee of or counsel to Holdings or the Senior Discount Notes Trustee.
"Permitted Holders" means (i) The Cypress Group L.L.C., Cypress
Merchant Banking Partners L.P., Cypress Offshore Partners L.P., Chase Equity
Associates, L.P., Co-Investment Partners, L.P. and any Person who on the Senior
Discount Notes Issue Date is an Affiliate of any of the foregoing; (ii) any
Person who is a member of the senior management of Holdings and a stockholder of
Holdings on the Senior Discount Notes Issue Date; and (iii) any Person acting in
the capacity of an underwriter in connection with a public or private offering
of Holdings' Capital Stock.
"Permitted Investment" means an Investment by Holdings or any
Restricted Subsidiary in (i) Holdings, a Restricted Subsidiary or a Person that
will, upon the making of such Investment, become a Restricted Subsidiary; (ii)
another Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, Holdings or a Restricted Subsidiary; (iii) Temporary Cash
Investments; (iv) receivables owing to Holdings or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as Holdings or any
such Restricted Subsidiary deems reasonable under the circumstances; (v)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business consistent with
past practices of Holdings or such Restricted Subsidiary and not exceeding $5.0
million in the aggregate outstanding at any one time; (vii) stock, obligations
or securities received in settlement of debts created in the ordinary course of
business and owing to Holdings or any Restricted Subsidiary or in satisfaction
of judgments; (viii) any Person to the extent such Investment represents the
non-cash portion of the consideration received for an Asset Disposition that was
made pursuant to and in compliance with Section 4.06; (ix) Investments made in
connection with any Asset Disposition or other sale, lease, transfer or other
disposition permitted under this Indenture; (x) a Receivables Entity or any
Investment by a Receivables Entity in any other Person in connection with a
Qualified Receivables Transaction, including Investments of funds held in
accounts permitted or required by the arrangements governing such Qualified
Receivables Transaction or any related Indebtedness; provided that any
Investment in a Receivables Entity is in the form of a Purchase Money Note,
contribution of additional receivables or an equity interest; (xi) Investments
in a Related Business having an aggregate fair market value, taken together with
all other Investments made pursuant to this clause (xi) that are at that time
outstanding (and not including any Investments outstanding on the Closing Date),
not to exceed 5% of Adjusted Consolidated Assets at the time of such Investments
(with the fair market value of each Investment being measured at the time made
and without giving effect to subsequent changes in value); and (xii) additional
Investments in an aggregate amount which, together with all other Investments
made pursuant to this clause that are then outstanding, does not exceed $10.0
million.
15
"Permitted Liens" means (a) Liens of Holdings securing Indebtedness
of Holdings or any of its Restricted Subsidiaries Incurred under the Credit
Agreement or other Credit Facilities to the extent permitted to be Incurred
under Section 4.03(b)(i) and (xiii); (b) Liens in favor of Wholly Owned
Subsidiaries; (c) Liens of Holdings securing Indebtedness of Holdings Incurred
under Section 4.03(b)(v); (d) Liens of Holdings securing Indebtedness of
Holdings (including under a Sale/Leaseback Transaction) permitted to be Incurred
under Section 4.03(b)(vi), (vii) and (viii) so long as the Capital Stock,
property (real or personal) or equipment to which such Lien attaches solely
consists of the Capital Stock, property or equipment which is the subject of
such acquisition, purchase, lease, improvement, Sale/Leaseback Transaction and
additions and improvements thereto (and the proceeds therefrom); (e) Liens on
property existing at the time of acquisition thereof by Holdings; provided that
such Liens were not Incurred in connection with, or in contemplation of, such
acquisition and such Liens do not extend to or cover any property other than
such property, additions and improvements thereon and any proceeds therefrom;
(f) Liens Incurred or deposits made to secure the performance of tenders, bids,
leases, statutory obligations, surety or appeal bonds, government contracts,
performance and return of money bonds or other obligations of a like nature
Incurred in the ordinary course of business; (g) Liens existing on the Senior
Discount Notes Issue Date and any additional Liens created under the terms of
the agreements relating to such Liens existing on the Senior Discount Notes
Issue Date; (h) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings; provided that any reserve or other appropriate
provision as shall be required in conformity with GAAP shall have been made
therefor; (i) Liens Incurred in the ordinary course of business of Holdings with
respect to obligations that do not exceed $20.0 million in the aggregate at any
one time outstanding and that (1) are not Incurred in connection with or in
contemplation of the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (2) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of the business by Holdings; (j)
statutory Liens of landlords and warehousemen's, carrier's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens (including
contractual landlords' liens) arising in the ordinary course of business of
Holdings; (k) Liens Incurred or deposits made in the ordinary course of business
of Holdings in connection with workers' compensation, unemployment insurance and
other types of social security; (l) easements, rights of way, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the business of
Holdings; (m) Liens securing reimbursement obligations with respect to letters
of credit permitted under Section 4.03 which encumber only cash and marketable
securities and documents and other property relating to such letters of credit
and the products and proceeds thereof; (n) judgment and attachment Liens not
giving rise to an Event of Default; (o) any interest or title of a lessor in the
property subject to any Capitalized Lease Obligation permitted under Section
4.03; (p) Liens on accounts receivable and related assets of the type specified
in the definition of "Qualified Receivables Transaction" Incurred in connection
with a Qualified Receivables Transaction; (q) Liens securing Refinancing
Indebtedness to the extent such Liens do not extend to or cover any property of
Holdings not previously subjected to Liens relating to the Indebtedness being
refinanced; or (r) Liens on pledges of the capital stock of any Unrestricted
Subsidiary securing any Indebtedness of such Unrestricted Subsidiary.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated
16
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
"principal" of a Senior Discount Note means the principal of the
Senior Discount Note plus the premium, if any, payable on the Senior Discount
Note that is due or overdue or is to become due at the relevant time.
"Purchase Money Note" means a promissory note of a Receivables
Entity evidencing a line of credit, which may be irrevocable, from Holdings or
any Subsidiary of Holdings in connection with a Qualified Receivables
Transaction to a Receivables Entity, which note (a) shall be repaid from cash
available to the Receivables Entity, other than (i) amounts required to be
established as reserves pursuant to agreements, (ii) amounts paid to investors
in respect of interest, (iii) principal and other amounts owing to such
investors and amounts owing to such investors, (iv) amounts required to pay
expenses in connection with such Qualified Receivables Transaction and (v)
amounts paid in connection with the purchase of newly generated receivables and
(b) may be subordinated to the payments described in (a).
"Qualified Receivables Transaction" means any financing by Holdings
or any of its Subsidiaries of accounts receivable in any transaction or series
of transactions that may be entered into by Holdings or any of its Subsidiaries
pursuant to which (a) Holdings or any of its Subsidiaries sells, conveys or
otherwise transfers to a Receivables Entity and (b) a Receivables Entity sells,
conveys or otherwise transfers to any other Person or grants a security interest
to any Person in, any accounts receivable (whether now existing or arising in
the future) of Holdings or any of its Subsidiaries, and any assets related
thereto including, without limitation, all collateral securing such accounts
receivable, all contracts and all Guarantees or other obligations in respect of
such accounts receivable, proceeds of such accounts receivable and other assets
which are customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable; provided that (i) the Board of Directors shall
have determined in good faith that such Qualified Receivables Transaction is
economically fair and reasonable to Holdings and the Receivables Entity and (ii)
all sales of accounts receivable and related assets to the Receivables Entity
are made at fair market value (as determined in good faith by Holdings). The
grant of a security interest in any accounts receivable of Holdings or any of
its Restricted Subsidiaries to secure Bank Indebtedness shall not be deemed a
Qualified Receivables Transaction.
"Receivables Entity" means any Wholly Owned Subsidiary of Holdings
(or another Person in which Holdings or any Subsidiary of Holdings makes an
Investment and to which Holdings or any Subsidiary of Holdings transfers
accounts receivable and related assets) (i) which engages in no activities other
than in connection with the financing of accounts receivable, all proceeds
thereof and all rights (contractual or other), collateral and other assets
relating thereto, and any business or activities incidental or related to such
business, (ii) which is designated by the Board of Directors
17
(as provided below) as a Receivables Entity and (iii) no portion of the
Indebtedness or any other obligations (contingent or otherwise) of which (A) is
Guaranteed by Holdings or any other Subsidiary of Holdings (excluding Guarantees
of obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings), (B) is recourse to or
obligates Holdings or any other Subsidiary of Holdings in any way other than
pursuant to Standard Securitization Undertakings or (C) subjects any property or
asset of Holdings or any other Subsidiary of Holdings, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than pursuant to
Standard Securitization Undertakings. Any such designation by the Board of
Directors shall be evidenced to the Senior Discount Notes Trustee by filing with
the Senior Discount Notes Trustee a certified copy of the resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) any Indebtedness of Holdings or any
Restricted Subsidiary existing on the date of this Indenture or Incurred in
compliance with this Indenture (including Indebtedness of Holdings that
Refinances Refinancing Indebtedness); provided, however, that (i) the
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) the Refinancing Indebtedness
has an Average Life at the time such Refinancing Indebtedness is Incurred that
is equal to or greater than the Average Life of the Indebtedness being
refinanced and (iii) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal amount (or if
issued with original issue discount, the aggregate accreted value) then
outstanding of the Indebtedness being Refinanced (plus any accrued interest and
premium thereon and reasonable expenses Incurred in connection therewith);
provided further, however, that Refinancing Indebtedness shall not include (x)
Indebtedness of a Restricted Subsidiary that Refinances Indebtedness of Holdings
or (y) Indebtedness of Holdings or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any businesses of Holdings and the
Restricted Subsidiaries on the Closing Date and any business related, ancillary
or complementary thereto.
"Restricted Subsidiary" means any Subsidiary of Holdings other than
an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by Holdings or a Restricted Subsidiary
whereby Holdings or a Restricted Subsidiary transfers such property to a Person
and Holdings or such Restricted Subsidiary leases it from such Person, other
than leases between Holdings and a Wholly Owned Subsidiary or between Wholly
Owned Subsidiaries.
18
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of Holdings secured by
a Lien.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Discount Noteholder" or "Holder" means the Person in whose
name a Senior Discount Note is registered on the Registrar's books.
"Senior Discount Notes" means the Senior Discount Notes issued under
this Indenture.
"Senior Discount Notes Issue Date" means the date on which the
Initial Senior Discount Notes are originally issued.
"Senior Discount Notes Trustee" means the party named as such in
this Indenture until a successor replaces it and, thereafter, means the
successor.
"Senior Indebtedness" of Holdings means the principal of, premium
(if any) and accrued and unpaid interest on (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization of
Holdings, regardless of whether or not a claim for post-filing interest is
allowed in such proceedings), and fees and all other amounts owing in respect
of, the Senior Discount Notes and all other Indebtedness of Holdings, whether
outstanding on the Closing Date or thereafter Incurred, unless in the instrument
creating or evidencing the same or pursuant to which the same is outstanding it
is provided that such obligations are subordinated in right of payment to the
Senior Discount Notes; provided, however, that Senior Indebtedness shall not
include (i) any obligation of Holdings to any Subsidiary, (ii) any liability for
Federal, state, local or other taxes owed or owing by Holdings, (iii) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including Guarantees thereof or instruments evidencing such
liabilities), (iv) any Indebtedness or obligation of Holdings (and any accrued
and unpaid interest in respect thereof) that by its terms is subordinate or
junior in any respect to any other Indebtedness or obligation of Holdings,
including any Subordinated Obligations, (v) any payment obligations with respect
to any Capital Stock or (vi) any Indebtedness Incurred in violation of this
Indenture.
"Senior Subordinated Notes" means $300 million aggregate principal
amount of the 9 1/8% senior subordinated notes due 2008 issued by the Company on
the Closing Date under the indenture dated as of the Closing Date among the
Company, Holdings and Bank One, N.A., as trustee.
"Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of Holdings within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC, but shall in no event include a
Receivables Entity.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by Holdings or any Subsidiary
of Holdings which Holdings has determined in good faith to be customary in an
accounts receivable
19
transaction including, without limitation, those relating to the servicing of
the assets of a Receivables Entity.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).
"Subordinated Obligation" means any Indebtedness of Holdings
(whether outstanding on the Closing Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Senior Discount Notes pursuant
to a written agreement.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in 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, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within one year of the date of acquisition
thereof issued by a bank or trust company that is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States of America having capital, surplus and undivided
profits aggregating in excess of $100,000,000 (or the foreign currency
equivalent thereof) and whose long-term debt is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money market fund sponsored by a registered broker-dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a financial institution meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing not more than one
year after the date of acquisition, issued by a corporation (other than an
Affiliate of Holdings) organized and in existence under the laws of the United
States of America or any foreign country recognized by the United States of
America with a rating at the time as of which any investment therein is made of
"P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Service, a division of The
McGraw-Hill Companies, Inc. ("S&P"), and (v) investments in securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-
77bbbb), as amended, as in effect on the date of this Indenture.
20
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled by, and published in, the most recent Federal Reserve Statistical
Release H.15 (519) which has become publicly available at least two Business
Days prior to the date fixed for redemption of the Senior Discount Notes
following a Change of Control (or, if such Statistical Release is no longer
published, any publicly available source of similar market data)) most nearly
equal to the period from the redemption date to June 1, 2003; provided, however,
that if the period from the redemption date to June 1, 2003 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the redemption date to June 1, 2003 is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trust Officer" means the Chairman of the Board, the President or
any other officer or assistant officer of the Senior Discount Notes Trustee
assigned by the Senior Discount Notes Trustee to administer its corporate trust
matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of Holdings that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of Holdings (including any newly acquired or newly formed Subsidiary of
Holdings) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, Holdings or any other Subsidiary of Holdings that is
not a Subsidiary of the Subsidiary to be so designated; provided, however, that
either (A) the Subsidiary to be so designated has total Consolidated assets of
$1,000 or less or (B) if such Subsidiary has Consolidated assets greater than
$1,000, then such designation would be permitted under Section 4.04. The Board
of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) Holdings could Incur $1.00 of additional Indebtedness under
Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any
such designation of a Subsidiary as a Restricted Subsidiary or Unrestricted
Subsidiary by the Board of Directors shall be evidenced to the Senior Discount
Notes Trustee by promptly filing with the Senior Discount Notes Trustee a copy
of the resolution of the Board of Directors giving effect to such designation
and an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith
21
and credit of the United States of America is pledged and which are not callable
or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of Holdings
all the Capital Stock of which (other than directors' qualifying shares) is
owned by Holdings or another Wholly Owned Subsidiary.
SECTION 1.02. Other Definitions.
Defined in
Term Section
- - - - ---- ----------
"Affiliate Transaction"............................................ 4.07
"Bankruptcy Law"................................................... 6.01
"covenant defeasance option"....................................... 8.01(b)
"Change of Control Offer".......................................... 4.08(b)
"Custodian"........................................................ 6.01
"Event of Default"................................................. 6.01
"legal defeasance option".......................................... 8.01(b)
"Legal Holiday".................................................... 10.08
"Offer"............................................................ 4.06(b)
"Offer Amount"..................................................... 4.06(c)(2)
"Offer Period"..................................................... 4.06(c)(2)
"Paying Agent"..................................................... 2.03
"protected purchaser".............................................. 2.07
"Purchase Date".................................................... 4.06(c)(1)
"Registrar"........................................................ 2.03
"Restricted Payment"............................................... 4.04(a)
"Successor Company"................................................ 5.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Senior Discount Notes.
"indenture security holder" means a Senior Discount Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Senior
Discount Notes Trustee.
22
"obligor" on the indenture securities means Holdings and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared
in accordance with GAAP; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2
The Senior Discount Notes
SECTION 2.01. Form and Dating. Provisions relating to the Initial
Senior Discount Notes, the Private Senior Discount Exchange Notes and the Senior
Discount Exchange Notes are set forth in the Appendix, which is hereby
incorporated in and expressly made a part of this Indenture. The (i) Initial
Senior Discount Notes and the Senior Discount Notes Trustee's certificate of
authentication and (ii) Private Senior Discount Exchange Notes and the Senior
Discount Notes Trustee's certificate of authentication shall each be
substantially in the form of Exhibit A hereto, which is hereby incorporated in
and expressly made a part of this Indenture. The Senior Discount Exchange Notes
and the Senior Discount Notes Trustee's certificate of authentication shall be
substantially in the form of Exhibit B hereto, which is hereby incorporated in
23
and expressly made a part of this Indenture. The Senior Discount Notes may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which Holdings is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to Holdings). Each
Senior Discount Note shall be dated the date of its authentication. The Senior
Discount Notes shall be issued only in registered form without coupons and only
in denominations of $1,000 (in principal amount at maturity) and integral
multiples thereof.
SECTION 2.02. Execution and Authentication. One or more Officers
shall sign the Senior Discount Notes for Holdings by manual or facsimile
signature.
If an Officer whose signature is on a Senior Discount Note no longer
holds that office at the time the Senior Discount Notes Trustee authenticates
the Senior Discount Note, the Senior Discount Note shall be valid nevertheless.
A Senior Discount Note shall not be valid until an authorized
signatory of the Senior Discount Notes Trustee manually signs the certificate of
authentication on the Senior Discount Note. The signature shall be conclusive
evidence that the Senior Discount Note has been authenticated under this
Indenture.
The Senior Discount Notes Trustee shall authenticate and make
available for delivery Senior Discount Notes as set forth in the Appendix.
The Senior Discount Notes Trustee may appoint an authenticating
agent reasonably acceptable to Holdings to authenticate the Senior Discount
Notes. Any such appointment shall be evidenced by an instrument signed by a
Trust Officer, a copy of which shall be furnished to Holdings. Unless limited by
the terms of such appointment, an authenticating agent may authenticate Senior
Discount Notes whenever the Senior Discount Notes Trustee may do so. Each
reference in this Indenture to authentication by the Senior Discount Notes
Trustee includes authentication by such agent. An authenticating agent has the
same rights as any Registrar, Paying Agent or agent for service of notices and
demands.
SECTION 2.03. Registrar and Paying Agent. Holdings shall maintain an
office or agency where Senior Discount Notes may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Senior Discount Notes may be presented for payment (the "Paying Agent"). The
Registrar shall keep a register of the Senior Discount Notes and of their
transfer and exchange. Holdings may have one or more co-registrars and one or
more additional paying agents. The term "Paying Agent" includes any additional
paying agent, and the term "Registrar" includes any co-registrars. Holdings
initially appoints the Senior Discount Notes Trustee as (i) Registrar and Paying
Agent in connection with the Senior Discount Notes and (ii) the Senior Discount
Notes Custodian (as defined in the Appendix) with respect to the Global Senior
Discount Notes (as defined in the Appendix).
Holdings shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the terms of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such agent. Holdings shall notify the Senior Discount
Notes Trustee of the name and address of any such agent. If Holdings fails to
maintain a Registrar or Paying Agent, the Senior Discount Notes Trustee shall
act as such and shall be entitled to appropriate
24
compensation therefor pursuant to Section 7.07. Holdings or any of its
domestically organized Wholly Owned Subsidiaries may act as Paying Agent or
Registrar.
Holdings may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Senior Discount Notes
Trustee; provided, however, that no such removal shall become effective until
(1) acceptance of an appointment by a successor as evidenced by an appropriate
agreement entered into by Holdings and such successor Registrar or Paying Agent,
as the case may be, and delivered to the Senior Discount Notes Trustee or (2)
notification to the Senior Discount Notes Trustee that the Senior Discount Notes
Trustee shall serve as Registrar or Paying Agent until the appointment of a
successor in accordance with clause (1) above. The Registrar or Paying Agent may
resign at any time upon written notice; provided, however, that the Senior
Discount Notes Trustee may resign as Paying Agent or Registrar only if the
Senior Discount Notes Trustee also resigns as Senior Discount Notes Trustee in
accordance with Section 7.08.
SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due
date of the principal and interest on any Senior Discount Note, Holdings shall
deposit with the Paying Agent (or if Holdings or a Subsidiary is acting as
Paying Agent, segregate and hold in trust for the benefit of the Persons
entitled thereto) a sum sufficient to pay such principal and interest when so
becoming due. Holdings shall require each Paying Agent (other than the Senior
Discount Notes Trustee) to agree in writing that the Paying Agent shall hold in
trust for the benefit of Senior Discount Noteholders or the Senior Discount
Notes Trustee all money held by the Paying Agent for the payment of principal of
or interest on the Senior Discount Notes and shall notify the Senior Discount
Notes Trustee of any default by Holdings in making any such payment. If Holdings
or a Subsidiary of Holdings acts as Paying Agent, it shall segregate the money
held by it as Paying Agent and hold it as a separate trust fund. Holdings at any
time may require a Paying Agent to pay all money held by it to the Senior
Discount Notes Trustee and to account for any funds disbursed by the Paying
Agent. Upon complying with this Section, the Paying Agent shall have no further
liability for the money delivered to the Senior Discount Notes Trustee.
SECTION 2.05. Senior Discount Noteholder Lists. The Senior Discount
Notes Trustee shall preserve in as current a form as is reasonably practicable
the most recent list available to it of the names and addresses of Senior
Discount Noteholders. If the Senior Discount Notes Trustee is not the Registrar,
Holdings shall furnish, or cause the Registrar to furnish, to the Senior
Discount Notes Trustee, in writing at least five Business Days before each
interest payment date and at such other times as the Senior Discount Notes
Trustee may request in writing, a list in such form and as of such date as the
Senior Discount Notes Trustee may reasonably require of the names and addresses
of Senior Discount Noteholders.
SECTION 2.06. Transfer and Exchange. The Senior Discount Notes shall
be issued in registered form and shall be transferable only upon the surrender
of a Senior Discount Note for registration of transfer and in compliance with
the Appendix. When a Senior Discount Note is presented to the Registrar with a
request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of Section 8-401(a)(l) of the Uniform Commercial
Code are met. When Senior Discount Notes are presented to the Registrar with a
request to exchange them for an equal principal amount at maturity of Senior
Discount Notes of other denominations, the
25
Registrar shall make the exchange as requested if the same requirements are met.
To permit registration of transfers and exchanges, Holdings shall execute and
the Senior Discount Notes Trustee shall authenticate Senior Discount Notes at
the Registrar's request. Holdings may require payment of a sum sufficient to pay
all taxes, assessments or other governmental charges in connection with any
transfer or exchange pursuant to this Section. Holdings shall not be required to
make and the Registrar need not register transfers or exchanges of Senior
Discount Notes selected for redemption (except, in the case of Senior Discount
Notes to be redeemed in part, the portion thereof not to be redeemed) or any
Senior Discount Notes for a period of 15 days before a selection of Senior
Discount Notes to be redeemed.
Prior to the due presentation for registration of transfer of any
Senior Discount Note, Holdings, the Senior Discount Notes Trustee, the Paying
Agent, and the Registrar may deem and treat the Person in whose name a Senior
Discount Note is registered as the absolute owner of such Senior Discount Note
for the purpose of receiving payment of principal of and interest, if any, on
such Senior Discount Note and for all other purposes whatsoever, whether or not
such Senior Discount Note is overdue, and none of Holdings, the Senior Discount
Notes Trustee, the Paying Agent, or the Registrar shall be affected by notice to
the contrary.
Any Holder of a Global Senior Discount Note shall, by acceptance of
such Global Senior Discount Note, agree that transfers of beneficial interest in
such Global Senior Discount Note may be effected only through a book-entry
system maintained by (i) the Senior Discount Noteholder of such Global Senior
Discount Note (or its agent) or (ii) any Senior Discount Noteholder of a
beneficial interest in such Global Senior Discount Note, and that ownership of a
beneficial interest in such Global Senior Discount Note shall be required to be
reflected in a book entry.
All Senior Discount Notes issued upon any transfer or exchange
pursuant to the terms of this Indenture will evidence the same debt and will be
entitled to the same benefits under this Indenture as the Senior Discount Notes
surrendered upon such transfer or exchange.
SECTION 2.07. Replacement Senior Discount Notes. If a mutilated
Senior Discount Note is surrendered to the Registrar or if the Senior Discount
Noteholder of a Senior Discount Note claims that the Senior Discount Note has
been lost, destroyed or wrongfully taken, Holdings shall issue and the Senior
Discount Notes Trustee shall authenticate a replacement Senior Discount Note if
the requirements of Section 8-405 of the Uniform Commercial Code are met, such
that the Senior Discount Noteholder (i) satisfies Holdings or the Senior
Discount Notes Trustee within a reasonable time after he has notice of such
loss, destruction or wrongful taking and the Registrar does not register a
transfer prior to receiving such notification, (ii) makes such request to
Holdings or the Senior Discount Notes Trustee prior to the Senior Discount Note
being acquired by a protected purchaser as defined in Section 8-303 of the
Uniform Commercial Code (a "protected purchaser") and (iii) satisfies any other
reasonable requirements of the Senior Discount Notes Trustee. If required by the
Senior Discount Notes Trustee or Holdings, such Senior Discount Noteholder shall
furnish an indemnity bond sufficient in the judgment of the Senior Discount
Notes Trustee to protect Holdings, the Senior Discount Notes Trustee, the Paying
Agent and the Registrar from any loss that any of them may suffer if a Senior
Discount Note is replaced. Holdings and the Senior Discount Notes Trustee may
charge the Senior Discount Noteholder for their expenses in replacing a
26
Senior Discount Note. In the event any such mutilated, lost, destroyed or
wrongfully taken Senior Discount Note has become or is about to become due and
payable, Holdings in its discretion may pay such Senior Discount Note instead of
issuing a new Senior Discount Note in replacement thereof.
Every replacement Senior Discount Note is an additional obligation
of Holdings.
The provisions of this Section 2.07 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken Senior
Discount Notes.
SECTION 2.08. Outstanding Senior Discount Notes. Senior Discount
Notes outstanding at any time are all Senior Discount Notes authenticated by the
Senior Discount Notes Trustee except for those canceled by it, those delivered
to it for cancelation and those described in this Section as not outstanding. A
Senior Discount Note does not cease to be outstanding because Holdings or an
Affiliate of Holdings holds the Senior Discount Note.
If a Senior Discount Note is replaced pursuant to Section 2.07, it
ceases to be outstanding unless the Senior Discount Notes Trustee and Holdings
receive proof satisfactory to them that the replaced Senior Discount Note is
held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest payable on that date with respect to the Senior
Discount Notes (or portions thereof) to be redeemed or maturing, as the case may
be, then on and after that date such Senior Discount Notes (or portions thereof)
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Temporary Senior Discount Notes. In the event that
Definitive Senior Discount Notes (as defined in the Appendix) are to be issued
under the terms of this Indenture, until such Definitive Senior Discount Notes
are ready for delivery, Holdings may prepare and the Senior Discount Notes
Trustee shall authenticate temporary Senior Discount Notes. Temporary Senior
Discount Notes shall be substan tially in the form of Definitive Senior Discount
Notes but may have variations that Holdings considers appropriate for temporary
Senior Discount Notes. Without unreasonable delay, Holdings shall prepare and
the Senior Discount Notes Trustee shall authenticate Definitive Senior Discount
Notes and deliver them in exchange for temporary Senior Discount Notes upon
surrender of such temporary Senior Discount Notes at the office or agency of
Holdings, without charge to the Senior Discount Noteholder.
SECTION 2.10. Cancelation. Holdings at any time may deliver Senior
Discount Notes to the Senior Discount Notes Trustee for cancelation. The
Registrar and the Paying Agent shall forward to the Senior Discount Notes
Trustee any Senior Discount Notes surrendered to them for registration of
transfer, exchange or payment. The Senior Discount Notes Trustee and no one else
shall cancel all Senior Discount Notes surrendered for registration of transfer,
exchange, payment or cancelation and deliver canceled Senior Discount Notes to
Holdings pursuant to written direction by an
27
Officer. Holdings may not issue new Senior Discount Notes to replace Senior
Discount Notes it has redeemed, paid or delivered to the Senior Discount Notes
Trustee for cancelation. The Senior Discount Notes Trustee shall not
authenticate Senior Discount Notes in place of canceled Senior Discount Notes
other than pursuant to the terms of this Indenture.
SECTION 2.11. Defaulted Interest. If Holdings defaults in a payment
of interest on the Senior Discount Notes, Holdings shall pay the defaulted
interest (plus interest on such defaulted interest at the rate of 111/8% per
annum to the extent lawful) in any lawful manner. Holdings may pay the defaulted
interest to the Persons who are Senior Discount Noteholders on a subsequent
special record date. Holdings shall fix or cause to be fixed any such special
record date and payment date to the reasonable satisfaction of the Senior
Discount Notes Trustee and shall promptly mail or cause to be mailed to each
Senior Discount Noteholder a notice that states the special record date, the
payment date and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP Numbers. Holdings in issuing the Senior Discount
Notes may use "CUSIP" numbers (if then generally in use) and, if so, the Senior
Discount Notes Trustee shall use "CUSIP" numbers in notices of redemption as a
convenience to Senior Discount Noteholders; provided, however, that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Senior Discount Notes or as contained in any
notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Senior Discount Notes, and any such
redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Senior Discount Notes Trustee. If Holdings
elects to redeem Senior Discount Notes pursuant to paragraph 5 of the Senior
Discount Notes, it shall notify the Senior Discount Notes Trustee in writing of
the redemption date and the principal amount at maturity of Senior Discount
Notes to be redeemed.
Holdings shall give each notice to the Senior Discount Notes Trustee
provided for in this Section at least 60 days before the redemption date unless
the Senior Discount Notes Trustee consents to a shorter period. Such notice
shall be accompanied by an Officers' Certificate and an Opinion of Counsel from
Holdings to the effect that such redemption will comply with the conditions
herein. If fewer than all the Senior Discount Notes are to be redeemed, the
record date relating to such redemption shall be selected by Holdings and given
to the Senior Discount Notes Trustee, which record date shall be not fewer than
15 days after the date of notice to the Senior Discount Notes Trustee. Any such
notice may be canceled at any time prior to notice of such redemption being
mailed to any Senior Discount Noteholder and shall thereby be void and of no
effect.
SECTION 3.02. Selection of Senior Discount Notes To Be Redeemed. (a)
If the mandatory redemption of Senior Discount Notes pursuant to paragraph 9 of
the Senior Discount Notes would result in an outstanding Senior Discount Note in
a
28
denomination (i) of less than $1,000 principal amount at maturity or (ii) other
than an integral multiple of $1,000 principal amount at maturity, such Senior
Discount Note will be redeemed (A) in whole, in the case of clause (i), or (B)
by an additional amount so that such Senior Discount Note will be in a
denomination of an integral multiple of $1,000 principal amount at maturity, in
the case of clause (ii).
(b) If fewer than all the Senior Discount Notes are to be redeemed
pursuant to paragraph 5 of the Senior Discount Notes, the Senior Discount Notes
Trustee shall select the Senior Discount Notes to be redeemed pro rata or by
lot. The Senior Discount Notes Trustee shall make the selection from outstanding
Senior Discount Notes not previously called for redemption. The Senior Discount
Notes Trustee may select for redemption pursuant to paragraph 5 of the Senior
Discount Notes portions of the principal of Senior Discount Notes that have
denominations larger than $1,000 (at maturity) Senior Discount Notes and
portions of them the Senior Discount Notes Trustee selects shall be in amounts
of $1,000 (in principal amount at maturity) or a whole multiple of $1,000.
Provisions of this Indenture that apply to Senior Discount Notes called for
redemption also apply to portions of Senior Discount Notes called for
redemption. The Senior Discount Notes Trustee shall notify Holdings promptly of
the Senior Discount Notes or portions of Senior Discount Notes to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days but not more
than 60 days before a date for redemption of Senior Discount Notes, Holdings
shall mail a notice of redemption by first-class mail to each Senior Discount
Noteholder of Senior Discount Notes to be redeemed at such Senior Discount
Noteholder's registered address.
The notice shall identify the Senior Discount Notes to be redeemed
and shall state:
(1) the redemption date;
(2) the redemption price and the amount of accrued interest to the
redemption date;
(3) the name and address of the Paying Agent;
(4) that Senior Discount Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Senior Discount Notes are to
be redeemed, the certificate numbers and principal amounts at maturity of
the particular Senior Discount Notes to be redeemed;
(6) that, unless Holdings defaults in making such redemption payment
or the Paying Agent is prohibited from making such payment pursuant to the
terms of this Indenture, Accreted Value and interest on Senior Discount
Notes (or portion thereof) called for redemption ceases to accrete or
accrue on and after the redemption date;
(7) the paragraph of the Senior Discount Notes pursuant to which the
Senior Discount Notes called for redemption are being redeemed;
29
(8) the CUSIP number, if any, printed on the Senior Discount Notes
being redeemed;
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Senior Discount Notes; and
(10) if applicable, that a Change of Control has occurred and the
circumstances and relevant facts regarding such Change of Control.
At Holdings' request, the Senior Discount Notes Trustee shall give
the notice of redemption in Holdings' name and at Holdings' expense. In such
event, Holdings shall provide the Senior Discount Notes Trustee with the
information required by this Section.
SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Senior Discount Notes called for redemption become due and
payable on the redemption date and at the redemption price stated in the notice.
Upon surrender to the Paying Agent, such Senior Discount Notes shall be paid at
the redemption price stated in the notice, plus accrued interest, if any, to the
redemption date; provided, however, that if the redemption date is after a
regular record date and on or prior to the interest payment date, the accrued
interest shall be payable to the Senior Discount Noteholder of the redeemed
Senior Discount Notes registered on the relevant record date. Failure to give
notice or any defect in the notice to any Senior Discount Noteholder shall not
affect the validity of the notice to any other Senior Discount Noteholder.
SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. on
the redemption date, Holdings shall deposit with the Paying Agent (or, if
Holdings or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Senior Discount Notes to be redeemed on that date other than Senior Discount
Notes or portions of Senior Discount Notes called for redemption that have been
delivered by Holdings to the Senior Discount Notes Trustee for cancelation.
SECTION 3.06. Senior Discount Notes Redeemed in Part. Upon surrender
of a Senior Discount Note that is redeemed in part, Holdings shall execute and
the Senior Discount Notes Trustee shall authenticate for the Senior Discount
Noteholder (at Holdings' expense) a new Senior Discount Note equal in principal
amount at maturity to the unredeemed portion of the Senior Discount Note
surrendered.
ARTICLE 4
Covenants
SECTION 4.01. Payment of Senior Discount Notes. Holdings shall
promptly pay the principal of and interest (and Accreted Value, if applicable)
on the Senior Discount Notes on the dates and in the manner provided in the
Senior Discount Notes and in this Indenture. Principal and interest (and
Accreted Value, if applicable) shall be considered paid on the date due if on
such date the Senior Discount Notes
30
Trustee or the Paying Agent holds in accordance with this Indenture money
sufficient to pay all principal and interest (and Accreted Value, if applicable)
then due and the Senior Discount Notes Trustee or the Paying Agent, as the case
may be, is not prohibited from paying such money to the Senior Discount
Noteholders on that date pursuant to the terms of this Indenture.
Holdings shall pay interest on overdue principal at the rate
specified therefor in the Senior Discount Notes, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC Reports. Notwithstanding that Holdings may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, Holdings shall file with the SEC and provide the Senior Discount Notes
Trustee and any Senior Discount Noteholder or prospective Senior Discount
Noteholder (upon the request of such Senior Discount Noteholder or prospective
Senior Discount Noteholder) with such annual reports and such information,
documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed and provided at the
times specified for the filing of such information, documents and reports under
such Sections.
SECTION 4.03. Limitation on Indebtedness. (a) Holdings shall not,
and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness; provided, however, that Holdings and the Company
may Incur Indebtedness if on the date of such Incurrence and after giving effect
thereto the Consolidated Coverage Ratio would be greater than 2.00:1.00.
(b) Notwithstanding Section 4.03(a), Holdings and its Restricted
Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness Incurred pursuant to the Credit Agreement or any
other Credit Facility in an aggregate principal amount at any time
outstanding not to exceed $400 million;
(ii) Indebtedness of Holdings owed to and held by any Wholly Owned
Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by
Holdings or any Wholly Owned Subsidiary; provided, however, that (A) any
subsequent issuance or transfer of any Capital Stock or any other event
that results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to Holdings or a Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the issuer
thereof and (B) if Holdings is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in
cash of all obligations with respect to the Senior Discount Notes;
(iii) Indebtedness (A) represented by the Senior Discount Notes and
the Senior Subordinated Notes (not including any Additional Senior
Subordinated Notes), (B) outstanding on the Closing Date (other than the
Indebtedness described in clauses (i) and (ii) above), (C) consisting of
Refinancing Indebtedness Incurred in respect of any Indebtedness described
in this
31
clause (iii) (including Indebtedness Refinancing Refinancing Indebtedness)
or Section 4.03(a) and (D) consisting of Guarantees of (x) any
Indebtedness permitted under clauses (i) and (ii) of this paragraph (b)
and (y) the Senior Subordinated Notes;
(iv) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted Subsidiary
was acquired by Holdings (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Subsidiary of or was otherwise acquired by Holdings); provided, however,
if the aggregate amount of all such Indebtedness of all such Restricted
Subsidiaries would exceed $20 million, that on the date that such
Restricted Subsidiary is acquired by Holdings, Holdings would have been
able to Incur $1.00 of additional Indebtedness pursuant to Section 4.03(a)
after giving effect to the Incurrence of such Indebtedness pursuant to
this clause (iv) and (B) Refinancing Indebtedness Incurred by a Restricted
Subsidiary in respect of Indebtedness Incurred by such Restricted
Subsidiary pursuant to this clause (iv);
(v) Indebtedness (A) in respect of performance bonds, bankers'
acceptances, letters of credit and surety or appeal bonds provided by
Holdings and the Restricted Subsidiaries in the ordinary course of their
business, and (B) under Hedging Obligations consisting of Interest Rate
Agreements directly related (as determined in good faith by Holdings) to
Indebtedness permitted to be Incurred by Holdings and its Restricted
Subsidiaries pursuant to this Indenture and Currency Agreements Incurred
in the ordinary course of business;
(vi) Indebtedness Incurred by Holdings or any Restricted Subsidiary
(including Capitalized Lease Obligations) financing the purchase, lease or
improvement of property (real or personal) or equipment (whether through
the direct purchase of assets or the Capital Stock of the Person owning
such assets), in each case Incurred no more than 180 days after such
purchase, lease or improvement of such property and any Refinancing
Indebtedness in respect of such Indebtedness; provided, however, that at
the time of the Incurrence of such Indebtedness and after giving effect
thereto, the aggregate principal amount of all Indebtedness incurred
pursuant to this clause (vi) and then outstanding shall not exceed the
greater of $25.0 million and 5% of Adjusted Consolidated Assets;
(vii) Indebtedness Incurred by Holdings or the Company in connection
with the acquisition of a Related Business and any Refinancing
Indebtedness in respect of such Indebtedness; provided, however, that the
aggregate amount of Indebtedness Incurred and outstanding pursuant to this
clause (vii) shall not exceed $50.0 million at any one time;
(viii) Attributable Debt Incurred by Holdings or the Company in
respect of Sale/Leaseback Transactions; provided, however, that the
aggregate amount of Attributable Debt Incurred and outstanding pursuant to
this clause (viii) shall not exceed $75.0 million at any one time;
(ix) Indebtedness arising from agreements of Holdings or a
Restricted Subsidiary providing for indemnification, purchase price
adjustment or similar
32
obligations, in each case, Incurred or assumed in connection with the
disposition of any business, assets or a Subsidiary, other than Guarantees
of Indebtedness Incurred by any Person acquiring all or any portion of
such business, assets or a Subsidiary for the purpose of financing such
acquisition; provided, however, that the maximum assumable liability in
respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by Holdings and its Restricted Subsidiaries in
connection with such disposition;
(x) any Guarantee by Holdings of Indebtedness or other obligations
of any of its Restricted Subsidiaries so long as the Incurrence of such
Indebtedness Incurred by such Restricted Subsidiary is permitted under the
terms of this Indenture;
(xi) Indebtedness arising from Guarantees to suppliers, lessors,
licensees, contractors, franchisees or customers Incurred in the ordinary
course of business;
(xii) Indebtedness Incurred by a Receivables Entity in a Qualified
Receivables Transaction that is not recourse to Holdings or any other
Restricted Subsidiary of Holdings (except for Standard Securitization
Undertakings); and
(xiii) Indebtedness (other than Indebtedness permitted to be
Incurred pursuant to Section 4.03(a) or any other clause of this Section
4.03(b)) in an aggregate principal amount on the date of Incurrence that,
when added to all other Indebtedness Incurred pursuant to this clause
(xiii) and then outstanding, shall not exceed $50.0 million.
(c) Notwithstanding any other provision of this Section 4.03, the
maximum amount of Indebtedness that Holdings or any Restricted Subsidiary may
Incur pursuant to this Section shall not be deemed to be exceeded solely as a
result of fluctuations in the exchange rates of currencies. For purposes of
determining the outstanding principal amount of any particular Indebtedness
Incurred pursuant to this Section 4.03, (i) Indebtedness permitted by this
Section 4.03 need not be permitted solely by reference to one provision
permitting such Indebtedness but may be permitted in part by one such provision
and in part by one or more other provisions of this Section permitting such
Indebtedness and (ii) in the event that Indebtedness meets the criteria of more
than one of the types of Indebtedness described in this Section, Holdings, in
its sole discretion, shall classify or reclassify such Indebtedness and only be
required to include the amount of such Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments. (a) Holdings shall
not, and shall not permit any Restricted Subsidiary, directly or indirectly, to
(i) declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving Holdings) or similar payment to the direct or indirect
holders of its Capital Stock except dividends or distributions payable solely in
its Capital Stock (other than Disqualified Stock) and except dividends or
distributions payable to Holdings or another Restricted Subsidiary (and, if such
Restricted Subsidiary has equity holders other than Holdings or other Restricted
Subsidiaries, to its other equity holders on a pro rata basis), (ii) purchase,
redeem, retire or otherwise acquire for value any Capital Stock of Holdings or
any Restricted Subsidiary held by Persons other than Holdings or another
Restricted Subsidiary, (iii) purchase, repurchase, redeem, defease or otherwise
acquire or retire for
33
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment any Subordinated Obligations of Holdings (other than the purchase,
repurchase or other acquisition of Subordinated Obligations of Holdings
purchased in anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition) or (iv) make any Investment (other than a Permitted Investment) in
any Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment being herein referred to
as a "Restricted Payment") if at the time Holdings or such Restricted Subsidiary
makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) Holdings could not Incur at least $1.00 of additional
Indebtedness under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a resolution of the Board of
Directors) declared or made subsequent to the Closing Date would exceed
the sum of:
(A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the beginning of the
fiscal quarter immediately following the fiscal quarter during which
the Closing Date occurs to the end of the most recent fiscal quarter
for which internal financial statements are available prior to the
date of such Restricted Payment (or, in case such Consolidated Net
Income will be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds or fair market value of
assets or property received by Holdings as a contribution to its
equity capital or from the issue or sale of its Capital Stock (in
each case other than Disqualified Stock and Excluded Contributions)
subsequent to the Closing Date (other than an issuance or sale to
(x) a Subsidiary of Holdings or (y) an employee stock ownership plan
or other trust established by Holdings or any of its Subsidiaries);
(C) the amount by which Indebtedness or Disqualified Stock of
Holdings or its Restricted Subsidiaries is reduced on Holdings'
balance sheet upon the conversion or exchange (other than by a
Subsidiary of Holdings) subsequent to the Closing Date of any
Indebtedness or Disqualified Stock of Holdings or its Restricted
Subsidiaries issued after the Closing Date for Capital Stock (other
than Disqualified Stock) of Holdings (less the amount of any cash or
the fair market value of other property distributed by Holdings or
any Restricted Subsidiary upon such conversion or exchange); and
(D) the amount equal to the net reduction in Investments in
any Person (other than a Restricted Subsidiary) resulting from (i)
payments of dividends, repayments of the principal of loans or
advances or other
34
transfers of assets to Holdings or any Restricted Subsidiary from
such Person, (ii) the sale or liquidation for cash of such
Investment or (iii) the redesignation of Unrestricted Subsidiaries
as Restricted Subsidiaries (valued in each case as provided in the
definition of "Investment") not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made
by Holdings or any Restricted Subsidiary in such Unrestricted
Subsidiary, which amount was included in the calculation of the
amount of Restricted Payments.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any Restricted Payment made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of
Holdings (other than Disqualified Stock and other than Capital Stock
issued or sold to a Subsidiary of Holdings or an employee stock ownership
plan or other trust established by Holdings or any of its Subsidiaries);
provided, however, that (A) such Restricted Payment shall be excluded in
the calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale applied in the manner set forth in this clause (i)
shall be excluded from the calculation of amounts under Section
4.04(a)(3)(B);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations of
Holdings made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of Holdings that is permitted to be
Incurred pursuant to Section 4.03(b); provided, however, that such
purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount of
Restricted Payments;
(iii) any purchase or redemption of Subordinated Obligations of
Holdings from Net Available Cash to the extent permitted by Section 4.06;
provided, however, that such purchase or redemption shall be excluded in
the calculation of the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.04(a); provided, however, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
(v) any Restricted Payment made for the repurchase, redemption or
other acquisition or retirement for value of any Capital Stock of Holdings
or any Restricted Subsidiaries held by any employee, former employee,
director or former director of Holdings or any of its Subsidiaries (and
any permitted transferees thereof) pursuant to any equity subscription
agreement, stock option agreement or plan or other similar agreement;
provided, however, that the aggregate amount of such Restricted Payments
shall not exceed $5.0 million in any calendar year and $20.0 million in
the aggregate; provided further, however, that such Restricted Payments
shall be included in the calculation of the amount of Restricted Payments;
35
(vi) following the initial Equity Offering by Holdings, any payment
of dividends or common stock buybacks by Holdings in an aggregate amount
in any year not to exceed 6% of the aggregate Net Cash Proceeds actually
received by Holdings in connection with such initial Equity Offering and
any subsequent Equity Offering by Holdings; provided, however, that no
Default or Event of Default shall have occurred and be continuing
immediately before or after any such payment; provided further, however,
that such dividends or common stock buybacks shall be included in the
calculation of the amount of Restricted Payments;
(vii) any repurchase of Capital Stock deemed to occur upon exercise
of stock options if such Capital Stock represents a portion of the
exercise price of such option; provided, however, that such repurchase
shall be included in the calculation of the amount of Restricted Payments;
(viii) the declaration and payment of dividends to holders of any
class or series of Disqualified Stock of Holdings issued in accordance
with Section 4.03(b) to the extent such dividends are included in the
definition of Consolidated Interest Expense; provided, however, that such
dividends shall be included in the calculation of the amount of Restricted
Payments;
(ix) Investments made with Excluded Contributions; provided,
however, that such Investments shall be excluded in the calculation of the
amount of Restricted Payments;
(x) any Restricted Payment made to fund the Recapitalization
(including fees and expenses); provided, however, that such Restricted
Payment shall be excluded in the calculation of the amount of Restricted
Payments; or
(xi) other Restricted Payments in an aggregate amount not to exceed
$10.0 million; provided, however, that such payments shall be included in
the calculation of the amount of Restricted Payments.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. Holdings shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to Holdings, (ii) make
any loans or advances to Holdings or (iii) transfer any of its property or
assets to Holdings, except:
(1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Closing Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by Holdings (other than Indebtedness
Incurred as consideration in, in contemplation of, or to provide all or
any portion of the funds or credit support utilized to consummate the
transaction or series of related transactions pursuant to
36
which such Restricted Subsidiary became a Restricted Subsidiary or was
otherwise acquired by Holdings) and outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (1) or (2) of this Section 4.05 or this clause (3)
or contained in any amendment to an agreement referred to in clause (1) or
(2) of this Section 4.05 or this clause (3); provided, however, that the
encumbrances and restrictions contained in any such Refinancing agreement
or amendment are no less favorable to the Senior Discount Noteholders than
the encumbrances and restrictions contained in such predecessor
agreements;
(4) in the case of clause (iii), any encumbrance or restriction (A)
that restricts in a customary manner the subletting, assignment or
transfer of any property or asset that is subject to a lease, license or
similar contract, (B) contained in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent such
encumbrance or restriction restricts the transfer of the property subject
to such security agreements or mortgages or (C) in connection with
purchase money obligations for property acquired in the ordinary course of
business;
(5) with respect to a Restricted Subsidiary, any restriction imposed
pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition;
(6) any encumbrance or restriction of a Receivables Entity effected
in connection with a Qualified Receivables Transaction; provided, however,
that such restrictions apply only to such Receivables Entity; and
(7) any encumbrance or restriction existing pursuant to other
Indebtedness permitted to be Incurred subsequent to the Senior Discount
Notes Issue Date pursuant to Section 4.03; provided, however, that any
such encumbrance or restrictions are ordinary and customary with respect
to the type of Indebtedness being Incurred (under the relevant
circumstances).
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) Holdings shall not, and shall not permit any Restricted Subsidiary to, make
any Asset Disposition unless (i) Holdings or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
sole responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value (as determined
in good faith by Holdings) of the shares and assets subject to such Asset
Disposition, (ii) at least 75% of the consideration thereof received by Holdings
or such Restricted Subsidiary is in the form of cash or cash equivalents
(provided that the amount of (w) any liabilities (as shown on Holdings' or such
Restricted Subsidiary's most recent balance sheet or in the notes thereto) of
Holdings or any Restricted Subsidiary (other than liabilities that are by their
terms subordinated to the Senior Discount Notes) that are assumed by the
transferee of any such assets without recourse to Holdings or any of the
Restricted Subsidiaries, (x) any notes or other obligations received by Holdings
or such Restricted Subsidiary from such transferee that are converted by
Holdings or such Restricted Subsidiary into cash (to the
37
extent of the cash received) within 180 days following the closing of such Asset
Disposition, (y) any Designated Noncash Consideration received by Holdings or
any of its Restricted Subsidiaries in such Asset Disposition having an aggregate
fair market value, taken together with all other Designated Noncash
Consideration received pursuant to this clause (y) that is at that time
outstanding, not to exceed 5% of Adjusted Consolidated Assets at the time of the
receipt of such Designated Noncash Consideration (with the fair market value of
each item of Designated Noncash Consideration being measured at the time
received and without giving effect to subsequent changes in value) and (z) any
assets received in exchange for assets related to a Related Business of
comparable market value in the good faith determination of the Board of
Directors shall be deemed to be cash for purposes of this provision) and (iii)
an amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by Holdings (or such Restricted Subsidiary, as the case may be) (A)
first, to the extent Holdings elects (or is required by the terms of any
Indebtedness), to prepay, repay, redeem or purchase Indebtedness (other than any
Disqualified Stock and other than any Preferred Stock) of a Wholly Owned
Subsidiary (in each case other than Indebtedness owed to Holdings or an
Affiliate of Holdings) within 365 days after the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; (B) second, to the extent
of the balance of Net Available Cash after application in accordance with clause
(A), to the extent Holdings or such Restricted Subsidiary elects, to reinvest in
Additional Assets (including by means of an Investment in Additional Assets by a
Restricted Subsidiary with Net Available Cash received by Holdings or another
Restricted Subsidiary) within 365 days from the later of such Asset Disposition
or the receipt of such Net Available Cash; and (C) third, to the extent of the
balance of such Net Available Cash after application in accordance with clauses
(A) and (B), to make an Offer (as defined below) to purchase Senior Discount
Notes pursuant to and subject to the conditions of Section 4.06(b); provided,
however, that if Holdings elects (or is required by the terms of any other
Senior Indebtedness of Holdings), such Offer may be made ratably to purchase the
Senior Discount Notes and other Senior Indebtedness of Holdings; provided,
however, that in connection with any prepayment, repayment or purchase of
Indebtedness pursuant to clause (A) or (C) above, Holdings or such Restricted
Subsidiary shall retire such Indebtedness and shall cause the related loan
commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing
provisions of this Section 4.06, Holdings and the Restricted Subsidiaries shall
not be required to apply any Net Available Cash in accordance with this Section
4.06(a) except to the extent that the aggregate Net Available Cash from all
Asset Dispositions that is not applied in accordance with this Section 4.06(a)
exceeds $20.0 million.
(b) In the event of an Asset Disposition that requires the purchase
of Senior Discount Notes (and other Senior Indebtedness of Holdings) pursuant to
Section 4.06(a)(iii)(C), Holdings shall be required to purchase Senior Discount
Notes (and other Senior Indebtedness of Holdings) tendered pursuant to an offer
by Holdings for the Senior Discount Notes (and other Senior Indebtedness of
Holdings) (the "Offer") at a purchase price of (a) 100% of the Accreted Value
thereof at the date of purchase plus liquidated damages thereon, if any, to the
date of purchased, if purchased on or prior to June 1, 2003, and (b) 100% of the
principal amount thereof plus accrued and unpaid interest and liquidated
damages, if any, to the date of purchase, if purchased after June 1, 2003, in
each case in accordance with the procedures (including prorating in the event of
oversubscription), set forth in Section 4.06(c). If the aggregate purchase price
of Senior Discount Notes (and other Senior Indebtedness of Holdings) tendered
pursuant to the
38
Offer is less than the Net Available Cash allotted to the purchase of the Senior
Discount Notes (and other Senior Indebtedness of Holdings), Holdings may apply
the remaining Net Available Cash for any purpose permitted by the terms of this
Indenture. Holdings shall not be required to make an Offer for Senior Discount
Notes (and other Senior Indebtedness of Holdings) pursuant to this Section 4.06
if the Net Available Cash available therefor (after application of the proceeds
as provided in clauses (A) and (B) of Section 4.06(a)(iii)) is less than $10.0
million for any particular Asset Disposition (which lesser amount shall be
carried forward for purposes of determining whether an Offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 30 days after Holdings
becomes obligated to make an Offer, Holdings shall be obligated to deliver to
the Senior Discount Notes Trustee and send, by first-class mail to each Senior
Discount Noteholder, a written notice stating that the Senior Discount
Noteholder may elect to have his Senior Discount Notes purchased by Holdings
either in whole or in part (subject to prorating as hereinafter described in the
event the Offer is oversubscribed) in integral multiples of $1,000 of principal
amount at maturity, at the applicable purchase price. The notice shall specify a
purchase date not less than 30 days nor more than 60 days after the date of such
notice (the "Purchase Date") and shall contain or incorporate by reference such
information concerning the business of Holdings which Holdings in good faith
believes will enable such Senior Discount Noteholders to make an informed
decision and all instructions and materials necessary to tender Senior Discount
Notes pursuant to the Offer, together with the address referred to in clause
(3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Senior Discount Notes Trustee as provided above, Holdings shall
deliver to the Senior Discount Notes Trustee an Officers' Certificate as to (i)
the amount of the Offer (the "Offer Amount"), (ii) the allocation of the Net
Available Cash from the Asset Dispositions pursuant to which such Offer is being
made and (iii) the compliance of such allocation with the provisions of Section
4.06(a). On such date, Holdings shall also irrevocably deposit with the Senior
Discount Notes Trustee or with a paying agent (or, if Holdings is acting as its
own paying agent, segregate and hold in trust) an amount equal to the Offer
Amount to be invested in Temporary Cash Investments and to be held for payment
in accordance with the provisions of this Section. Upon the expiration of the
period for which the Offer remains open (the "Offer Period"), Holdings shall
deliver to the Senior Discount Notes Trustee for cancelation the Senior Discount
Notes or portions thereof that have been properly tendered to and are to be
accepted by Holdings. The Senior Discount Notes Trustee (or the Paying Agent, if
not the Senior Discount Notes Trustee) shall, on the date of purchase, mail or
deliver payment to each tendering Senior Discount Noteholder in the amount of
the purchase price. In the event that the aggregate purchase price of the Senior
Discount Notes (and other Senior Indebtedness of Holdings) delivered by Holdings
to the Senior Discount Notes Trustee is less than the Offer Amount applicable to
the Senior Discount Notes (and other Senior Indebtedness of Holdings), the
Senior Discount Notes Trustee shall deliver the excess to Holdings immediately
after the expiration of the Offer Period for application in accordance with this
Section 4.06.
(3) Senior Discount Noteholders electing to have a Senior Discount
Note purchased shall be required to surrender the Senior Discount Note, with an
appropriate form duly completed, to Holdings at the address specified in the
notice at least three Business Days prior to the Purchase Date. Senior Discount
Noteholders shall be entitled
39
to withdraw their election if the Senior Discount Notes Trustee or Holdings
receives not later than one Business Day prior to the Purchase Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the Senior
Discount Noteholder, the principal amount at maturity of the Senior Discount
Note which was delivered by the Senior Discount Noteholder for purchase and a
statement that such Senior Discount Noteholder is withdrawing his election to
have such Senior Discount Note purchased. If at the expiration of the Offer
Period the aggregate principal amount (or Accreted Value, if applicable) of
Senior Discount Notes and any other Senior Indebtedness of Holdings included in
the Offer surrendered by holders thereof exceeds the Offer Amount, Holdings
shall select the Senior Discount Notes and other Senior Indebtedness of Holdings
to be purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by Holdings so that only Senior Discount Notes and other Senior
Indebtedness of Holdings in denominations of $1,000 (principal amount at
maturity), or integral multiples thereof, shall be purchased). Senior Discount
Noteholders whose Senior Discount Notes are purchased only in part will be
issued new Senior Discount Notes equal in principal amount at maturity to the
unpurchased portion of the Senior Discount Notes surrendered.
(4) At the time Holdings delivers Senior Discount Notes to the
Senior Discount Notes Trustee which are to be accepted for purchase, Holdings
shall also deliver an Officers' Certificate stating that such Senior Discount
Notes are to be accepted by Holdings pursuant to and in accordance with the
terms of this Section. A Senior Discount Note shall be deemed to have been
accepted for purchase at the time the Senior Discount Notes Trustee, directly or
through an agent, mails or delivers payment therefor to the surrendering Senior
Discount Noteholder.
(d) Holdings shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Senior Discount Notes
pursuant to this Section. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section, Holdings shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue thereof.
SECTION 4.07. Limitation on Transactions with Affiliates.
(a) Holdings shall not, and shall not cause or permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or Guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction") involving
aggregate consideration in excess of $5.0 million, unless (i) such Affiliate
Transaction is on terms that are not materially less favorable to Holdings or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by Holdings or such Restricted Subsidiary with an
unrelated Person and (ii) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, Holdings delivers to the Senior Discount Notes Trustee a
resolution adopted by the majority of the Board of Directors, approving such
Affiliate Transaction and set forth in an Officers' Certificate certifying that
such Affiliate Transaction complies with clause (i) above.
(b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or
40
other payments, Guarantees, awards or grants in cash, securities or otherwise
pursuant to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors, (iii) the grant of stock
options or similar rights to employees and directors of Holdings pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees in
the ordinary course of business in accordance with past practices of Holdings,
but in any event not to exceed $5.0 million in the aggregate outstanding at any
one time, (v) the payment of reasonable fees to directors of Holdings and its
Restricted Subsidiaries who are not employees of Holdings or its Subsidiaries,
(vi) any transaction between Holdings and a Restricted Subsidiary or between
Restricted Subsidiaries, (vii) any transaction effected as part of a Qualified
Receivables Transaction, (viii) indemnification agreements with, and the payment
of fees and indemnities to, directors, officers and employees of Holdings and
its Restricted Subsidiaries, in each case, in the ordinary course of business,
(ix) any employment, compensation, noncompetition or confidentiality agreement
entered into by Holdings and its Restricted Subsidiaries with its employees in
the ordinary course of business, (x) the payment by Holdings of fees, expenses
and other amounts to Cypress and its Affiliates in connection with the
Recapitalization, (xi) payments by Holdings or any of its Restricted
Subsidiaries to Cypress and its Affiliates made pursuant to any financial
advisory, financing, underwriting or placement agreement, or in respect of other
investment banking activities, in each case, as determined by the Board of
Directors in good faith, (xii) any issuance of Capital Stock of Holdings (other
than Disqualified Stock), (xiii) any agreement as in effect as of the date of
this Indenture or any amendment or replacement hereto so long as any such
amendment or replacement agreement is not more disadvantageous to the Senior
Discount Noteholders of the Senior Discount Notes in any material respect than
the original agreement as in effect on the Closing Date and (xiv) transactions
in which Holdings or any of its Restricted Subsidiaries, as the case may be,
delivers to the Senior Discount Notes Trustee a letter from an Independent
Financial Advisor stating that such transaction is fair to Holdings or such
Restricted Subsidiary from a financial point of view or meets the requirements
of Section 4.07(a).
SECTION 4.08. Change of Control. (a) Upon the occurrence of a Change
of Control, unless all Senior Discount Notes have been called for redemption
pursuant to paragraph 5 of the Senior Discount Notes, each Senior Discount
Noteholder shall have the right to require Holdings to repurchase all or any
part of such Senior Discount Noteholder's Senior Discount Notes at a purchase
price in cash equal to (a) 101% of the Accreted Value thereof at the date of
repurchase plus liquidated damages thereon, if any, to the date of repurchase,
if repurchased on or prior to June 1, 2003, and (b) 101% of the principal amount
thereof plus accrued and unpaid interest and liquidated damages, if any, to the
date of repurchase (subject to the right of Senior Discount Noteholders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if repurchased after June 1, 2003, in each case in
accordance with Section 4.08(b). Prior to the mailing of the notice referred to
below, but in any event within 30 days following the date on which Holdings
becomes aware that a Change of Control has occurred, if the purchase of the
Senior Discount Notes would violate or constitute a default under any other
Indebtedness of Holdings or its Subsidiaries, or not be permitted by (including
because Subsidiaries of Holdings could not provide adequate funds therefor),
then Holdings shall and shall cause its Subsidiaries, to the extent needed to
permit such purchase of Senior Discount Notes, either (i) to repay all such
Indebtedness and terminate all commitments outstanding thereunder or (ii)
request the holders of such Indebtedness to give the requisite consents to
permit the purchase of the Senior Discount Notes as provided below. Until such
time as Holdings is able to repay
41
all such Indebtedness and terminate all commitments outstanding thereunder or
such time as such requisite consents are obtained, Holdings shall not be
required to make the Change of Control Offer or purchase the Senior Discount
Notes pursuant to the provisions described below.
(b) Within 30 days following any Change of Control, unless all
Senior Discount Notes have been called for redemption pursuant to paragraph 5 of
the Senior Discount Notes, Holdings shall mail a notice to each Senior Discount
Noteholder with a copy to the Senior Discount Notes Trustee (the "Change of
Control Offer") stating:
(1) that a Change of Control has occurred and that such Senior
Discount Noteholder has the right to require Holdings to purchase such
Senior Discount Noteholder's Senior Discount Notes at a purchase price in
cash equal to (a) 101% of the Accreted Value thereof at the date of
repurchase plus liquidated damages thereon if any, to the date of
repurchase, if repurchased on or prior to June 1, 2003, and (b) 101% of
the principal amount thereof, plus accrued and unpaid interest and
liquidated damages, if any, to the date of repurchase (subject to the
right of Senior Discount Noteholders of record on the relevant record date
to receive interest on the relevant interest payment date), if repurchased
after June 1, 2003;
(2) the circumstances and relevant facts regarding such Change of
Control;
(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed); and
(4) the instructions determined by Holdings, consistent with this
Section, that a Senior Discount Noteholder must follow in order to have
its Senior Discount Notes repurchased.
(c) Senior Discount Noteholders electing to have a Senior Discount
Note repurchased shall be required to surrender the Senior Discount Note, with
an appropriate form duly completed, to Holdings at the address specified in the
notice at least three Business Days prior to the repurchase date. Senior
Discount Noteholders shall be entitled to withdraw their election if the Senior
Discount Notes Trustee or Holdings receives not later than one Business Day
prior to the repurchase date a telegram, telex, facsimile transmission or letter
setting forth the name of the Senior Discount Noteholder, the principal amount
at maturity of the Senior Discount Note which was delivered for repurchase by
the Senior Discount Noteholder and a statement that such Senior Discount
Noteholder is withdrawing his election to have such Senior Discount Note
repurchased.
(d) On the repurchase date, all Senior Discount Notes repurchased by
Holdings under this Section shall be delivered to the Senior Discount Notes
Trustee for cancelation, and Holdings shall pay the purchase price plus accrued
and unpaid interest and liquidated damages, if any, to the Senior Discount
Noteholders entitled thereto.
(e) Notwithstanding the foregoing provisions of this Section,
Holdings will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in Section
4.08(b) applicable to a Change
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of Control Offer made by Holdings and purchases all Senior Discount Notes
validly tendered and not withdrawn under such Change of Control Offer.
(f) Holdings shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Senior Discount Notes
pursuant to this Section. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Section, Holdings shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section by virtue thereof.
SECTION 4.09. Compliance Certificate. Holdings shall deliver to the
Senior Discount Notes Trustee within 120 days after the end of each fiscal year
of Holdings an Officers' Certificate stating that a review of Holdings'
activities during the preceding fiscal year has been made under the supervision
of the signing Officers with a view to determining whether Holdings has kept,
observed, performed and fulfilled its obligations under this Indenture and
further stating, as to each such Officer signing such certificate, whether to
the best of such Officer's knowledge Holdings during such preceding fiscal year
has kept, observed, performed and fulfilled each and every such covenant
contained in this Indenture and that in the course of the performance by the
signers of their duties as Officers of Holdings they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do know of any Default, the certificate
shall describe the Default, its status and what action Holdings is taking or
proposes to take with respect thereto. Holdings also shall comply with Section
314(a)(4) of the TIA.
SECTION 4.10. Further Instruments and Acts. Upon request of the
Senior Discount Notes Trustee, Holdings shall execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Indenture.
SECTION 4.11. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. Holdings shall not sell or otherwise dispose of any
shares of Capital Stock of a Restricted Subsidiary, and shall not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any shares of its Capital Stock except: (i) to Holdings or a Wholly
Owned Subsidiary or to any director of a Restricted Subsidiary to the extent
required as director's qualifying shares; (ii) if, immediately after giving
effect to such issuance, sale or other disposition, neither Holdings nor any of
its Subsidiaries own any Capital Stock of such Restricted Subsidiary or (iii)
if, immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect thereto would have been permitted
to be made under Section 4.04 if made on the date of such issuance, sale or
other disposition. The provisions of this Section 4.11 shall not prohibit any
transaction effected as part of a Qualified Receivables Transaction. The
proceeds of any sale of such Capital Stock permitted hereby shall be treated as
Net Available Cash from an Asset Disposition and shall be applied in accordance
with Section 4.06.
SECTION 4.12. Limitation on Liens. Holdings shall not directly or
indirectly Incur or permit to exist any Lien that secures Indebtedness of
Holdings of any
43
nature whatsoever on any of its property or assets (including Capital Stock of a
Restricted Subsidiary), whether owned at the Closing Date or thereafter
acquired, other than Permitted Liens, without effectively providing that the
Senior Discount Notes shall be secured equally and ratably with (or on a senior
basis to in the case of Subordinated Obligations of Holdings) the obligations so
secured for so long as such obligations are so secured.
ARTICLE 5
Successor Company
SECTION 5.01. When Holdings May Merge or Transfer Assets.
Holdings shall not consolidate with or merge with or into, or convey, transfer
or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not Holdings) shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Senior Discount Notes Trustee, in form satisfactory to the Senior Discount
Notes Trustee, all the obliga tions of Holdings under the Senior Discount
Notes and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transac tion), no Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, (A) the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a) or (B) the Consolidated Coverage
Ratio for the Successor Company and its Restricted Subsidiaries would be
greater than such ratio for Holdings and its Restricted Subsidiaries
immediately prior to such transaction;
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of Holdings immediately prior to
such transaction; and
(v) Holdings shall have delivered to the Senior Discount Notes
Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with this Indenture.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, Holdings under this Indenture, but the
predecessor Holdings in the case of a conveyance, transfer or lease of all or
substantially all its assets shall not be released from the obligation to pay
the principal of and interest on the Senior Discount Notes.
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Notwithstanding clause (iii) above, a Wholly Owned Subsidiary may be
consolidated with or merged into Holdings and Holdings may consolidate with or
merge with or into another Person, if such Person is a single purpose
corporation that has not conducted any business or Incurred any Indebtedness or
other liabilities and such transaction is being consummated solely to change the
state of incorporation of Holdings.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of Default" occurs if:
(1) Holdings defaults in any payment of interest on any Senior
Discount Note when the same becomes due and payable, and such default
continues for a period of 30 days;
(2) Holdings (i) defaults in the payment of Accreted Value or the
principal of any Senior Discount Note when the same becomes due and
payable at its Stated Maturity, upon redemption, upon declaration or
otherwise, or (ii) fails to redeem or purchase Senior Discount Notes when
required pursuant to this Indenture or the Senior Discount Notes;
(3) Holdings fails to comply with Section 5.01;
(4) Holdings fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08, 4.11 or 4.12 (other than a failure to purchase Senior
Discount Notes when required under Section 4.06 or 4.08) and such failure
continues for 30 days after the notice specified below;
(5) Holdings fails to comply with any of its agreements in the
Senior Discount Notes or this Indenture (other than those referred to in
(1), (2), (3) or (4) above) and such failure continues for 60 days after
the notice specified below;
(6) Indebtedness of Holdings or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or the
acceleration of any such Indebtedness by the holders thereof because of a
default and the total amount of such Indebtedness unpaid or accelerated
exceeds $25 million or its foreign currency equivalent at the time and
such failure continues for 10 days after the notice specified below;
(7) Holdings or any Significant Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in
an involuntary case;
(C) consents to the appointment of a Custodian of it or for
any substantial part of its property; or
45
(D) makes a general assignment for the benefit of its
creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against Holdings or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of Holdings or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of Holdings or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
(9) any judgment or decree for the payment of money in excess of $25
million or its foreign currency equivalent at the time is entered against
Holdings or any Significant Subsidiary and is not discharged, waived or
stayed and either (A) an enforcement proceeding has been commenced by any
creditor upon such judgment or decree or (B) there is a period of 60 days
following the entry of such judgment or decree during which such judgment
or decree is not discharged, waived or the execution thereof stayed and
such judgment or decree is not discharged, waived or the execution thereof
stayed within 10 days after the notice specified below.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (4), (5), (6) or (9) above is not an Event of
Default until the Senior Discount Notes Trustee or the Senior Discount
Noteholders of at least 25% in principal amount at maturity of the outstanding
Senior Discount Notes notify Holdings of the Default and Holdings does not cure
such Default within the time specified after receipt of such notice. Such notice
must specify the Default, demand that it be remedied and state that such notice
is a "Notice of Default".
Holdings shall deliver to the Senior Discount Notes Trustee, within
30 days after the occurrence thereof, written notice in the form of an Officers'
Certificate of any event which with the giving of notice or the lapse of time
would become an Event of Default under clause (4), (5) or (9), its status and
what action Holdings is taking or proposes to take with respect thereto.
46
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to Holdings)
occurs and is continuing, the Senior Discount Notes Trustee by notice to
Holdings, or the Senior Discount Noteholders of at least 25% in principal amount
at maturity of the outstanding Senior Discount Notes by notice to Holdings, may
declare (a) the Accreted Value of all the Senior Discount Notes, if on or prior
to June 1, 2003, or (b) the principal of and accrued but unpaid interest on all
the Senior Discount Notes, if after June 1, 2003, to be due and payable. Upon
such a declaration, such Accreted Value or principal and interest shall be due
and payable immediately. If an Event of Default specified in Section 6.01(7) or
(8) with respect to Holdings occurs, (a) the Accreted Value of all the Senior
Discount Notes, if on or prior to June 1, 2003, or (b) the principal of and
interest on all the Senior Discount Notes, if after June 1, 2003, shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Senior Discount Notes Trustee or any Senior Discount
Noteholders. The Senior Discount Noteholders of a majority in principal amount
at maturity of the Senior Discount Notes by notice to the Senior Discount Notes
Trustee may rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except nonpay ment of Accreted Value or principal or
interest that has become due solely because of acceleration. No such rescission
shall affect any subsequent Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Senior Discount Notes Trustee may pursue any available remedy to
collect the payment of Accreted Value or principal of or interest on the Senior
Discount Notes or to enforce the performance of any provision of the Senior
Discount Notes or this Indenture.
The Senior Discount Notes Trustee may maintain a proceeding even if
it does not possess any of the Senior Discount Notes or does not produce any of
them in the proceeding. A delay or omission by the Senior Discount Notes Trustee
or any Senior Discount Noteholder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
principal amount at maturity of the Senior Discount Notes by notice to the
Senior Discount Notes Trustee may waive an existing Default and its consequences
except (i) a Default in the payment of Accreted Value or the principal of or
interest on a Senior Discount Note, (ii) a Default arising from the failure to
redeem or purchase any Senior Discount Note when required pursuant to the terms
of this Indenture or (iii) a Default in respect of a provision that under
Section 9.02 cannot be amended without the consent of each Senior Discount
Noteholder affected. When a Default is waived, it is deemed cured, but no such
waiver shall extend to any subsequent or other Default or impair any consequent
right.
SECTION 6.05. Control by Majority. The Senior Discount Noteholders
of a majority in principal amount at maturity of the Senior Discount Notes may
direct the time, method and place of conducting any proceeding for any remedy
available to the Senior Discount Notes Trustee or of exercising any trust or
power conferred on the
47
Senior Discount Notes Trustee. However, the Senior Discount Notes Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Senior Discount Notes Trustee determines is
unduly prejudicial to the rights of other Senior Discount Noteholders or would
involve the Senior Discount Notes Trustee in personal liability; provided,
however, that the Senior Discount Notes Trustee may take any other action deemed
proper by the Senior Discount Notes Trustee that is not inconsistent with such
direction. Prior to taking any action hereunder, the Senior Discount Notes
Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to
receive payment of Accreted Value, principal, premium (if any) or interest when
due, no Senior Discount Noteholder may pursue any remedy with respect to this
Indenture or the Senior Discount Notes unless:
(1) the Senior Discount Noteholder gives to the Senior Discount
Notes Trustee written notice stating that an Event of Default is
continuing;
(2) the Senior Discount Noteholders of at least 25% in principal
amount at maturity of the Senior Discount Notes make a written request to
the Senior Discount Notes Trustee to pursue the remedy;
(3) such Senior Discount Noteholder or Senior Discount Noteholders
offer to the Senior Discount Notes Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Senior Discount Notes Trustee does not comply with the
request within 60 days after receipt of the request and the offer of
security or indemnity; and
(5) the Senior Discount Noteholders of a majority in principal
amount at maturity of the Senior Discount Notes do not give the Senior
Discount Notes Trustee a direction inconsistent with the request during
such 60-day period.
A Senior Discount Noteholder may not use this Indenture to prejudice
the rights of another Senior Discount Noteholder or to obtain a preference or
priority over another Senior Discount Noteholder.
SECTION 6.07. Rights of Senior Discount Noteholders to Receive
Payment. Notwithstanding any other provision of this Indenture, the right of any
Senior Discount Noteholder to receive payment of Accreted Value, principal of
and liquidated damages and interest on the Senior Discount Notes held by such
Senior Discount Noteholder, on or after the respective due dates expressed in
the Senior Discount Notes, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Senior Discount Noteholder.
SECTION 6.08. Collection Suit by Senior Discount Notes Trustee. If
an Event of Default specified in Section 6.01(1) or (2) occurs and is
continuing, the Senior Discount Notes Trustee may recover judgment in its own
name and as trustee of an express trust against Holdings for the whole amount
then due and owing (together with
48
interest on any unpaid interest to the extent lawful) and the amounts provided
for in Section 7.07.
SECTION 6.09. Senior Discount Notes Trustee May File Proofs of
Claim. The Senior Discount Notes Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Senior Discount Notes Trustee and the Senior Discount Noteholders allowed
in any judicial proceedings relative to Holdings, its creditors or its property
and, unless prohibited by law or applicable regulations, may vote on behalf of
the Senior Discount Noteholders in any election of a trustee in bankruptcy or
other Person performing similar functions, and any Custodian in any such
judicial proceeding is hereby authorized by each Senior Discount Noteholder to
make payments to the Senior Discount Notes Trustee and, in the event that the
Senior Discount Notes Trustee shall consent to the making of such payments
directly to the Senior Discount Noteholders, to pay to the Senior Discount Notes
Trustee any amount due it for the reasonable compensation, expenses, disburse
ments and advances of the Senior Discount Notes Trustee, its agents and its
counsel, and any other amounts due the Senior Discount Notes Trustee under
Section 7.07.
SECTION 6.10. Priorities. If the Senior Discount Notes Trustee
collects any money or property pursuant to this Article 6, it shall pay out the
money or property in the following order:
FIRST: to the Senior Discount Notes Trustee for amounts due under
Section 7.07;
SECOND: to Senior Discount Noteholders for amounts due and unpaid on
the Senior Discount Notes for Accreted Value, principal and interest,
ratably, and any liquidated damages without preference or priority of any
kind, according to the amounts due and payable on the Senior Discount
Notes for Accreted Value, principal, any liquidated damages and interest,
respectively; and
THIRD: to Holdings.
The Senior Discount Notes Trustee may fix a record date and payment
date for any payment to Senior Discount Noteholders pursuant to this Section. At
least 15 days before such record date, the Senior Discount Notes Trustee shall
mail to each Senior Discount Noteholder and Holdings a notice that states the
record date, the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Senior
Discount Notes Trustee for any action taken or omitted by it as Senior Discount
Notes Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Senior Discount Notes Trustee, a
suit by a Senior Discount Noteholder pursuant to Section 6.07 or a suit by
Senior Discount Noteholders of more than 10% in principal amount at maturity of
the Senior Discount Notes.
49
SECTION 6.12. Waiver of Stay or Extension Laws. Holdings (to the
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and Holdings (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Senior Discount Notes Trustee, but shall
suffer and permit the execution of every such power as though no such law had
been enacted.
ARTICLE 7
Senior Discount Notes Trustee
SECTION 7.01. Duties of Senior Discount Notes Trustee. (a) If an
Event of Default has occurred and is continuing, the Senior Discount Notes
Trustee shall exercise the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent Person
would exercise or use under the circumstances in the conduct of such Person's
own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Senior Discount Notes Trustee need only perform such duties
as are specifically set forth in this Indenture and no implied covenants
or obligations shall be read into this Indenture against the Senior
Discount Notes Trustee; and
(2) in the absence of bad faith on its part, the Senior Discount
Notes Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Senior Discount Notes Trustee and conforming to
the require ments of this Indenture. However, the Senior Discount Notes
Trustee shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) The Senior Discount Notes Trustee may not be relieved from
liability for its own negligent action, its own negligent failure to act or its
own wilful misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Senior Discount Notes Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer unless it is
proved that the Senior Discount Notes Trustee was negligent in
ascertaining the pertinent facts; and
(3) the Senior Discount Notes Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 6.05.
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(d) Every provision of this Indenture that in any way relates to the
Senior Discount Notes Trustee is subject to paragraphs (a), (b) and (c) of this
Section.
(e) The Senior Discount Notes Trustee shall not be liable for
interest on any money received by it except as the Senior Discount Notes Trustee
may agree in writing with Holdings.
(f) Money held in trust by the Senior Discount Notes Trustee need
not be segregated from other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Senior Discount
Notes Trustee to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers, if it shall have reasonable grounds to believe
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Senior Discount Notes
Trustee shall be subject to the provisions of this Section and to the provisions
of the TIA.
SECTION 7.02. Rights of Senior Discount Notes Trustee. (a) The
Senior Discount Notes Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Senior
Discount Notes Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Senior Discount Notes Trustee acts or refrains from
acting, it may require an Officers' Certificate or an Opinion of Counsel. The
Senior Discount Notes Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on the Officers' Certificate or Opinion
of Counsel.
(c) The Senior Discount Notes Trustee may act through agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Senior Discount Notes Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers.
(e) The Senior Discount Notes Trustee may consult with counsel, and
the advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Senior Discount Notes shall be full and complete authorization
and protection from liability in respect to any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(f) The Senior Discount Notes Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other paper or document, but the Senior
Discount Notes Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
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(g) The Senior Discount Notes Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Indenture at the
request, order or direction of any of the Senior Discount Noteholders pursuant
to the provisions of this Indenture, unless such Senior Discount Noteholders
shall have offered to the Senior Discount Notes Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
SECTION 7.03. Individual Rights of Senior Discount Notes Trustee.
The Senior Discount Notes Trustee in its individual or any other capacity may
become the owner or pledgee of Senior Discount Notes and may otherwise deal with
Holdings or its Affiliates with the same rights it would have if it were not
Senior Discount Notes Trustee. Any Paying Agent, Registrar or co-paying agent
may do the same with like rights. However, the Senior Discount Notes Trustee
must comply with Sections 7.10 and 7.11.
SECTION 7.04. Senior Discount Notes Trustee's Disclaimer. The Senior
Discount Notes Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Senior Discount Notes,
it shall not be accountable for Holdings' use of the proceeds from the Senior
Discount Notes, and it shall not be responsible for any statement of Holdings in
this Indenture or in any document issued in connection with the sale of the
Senior Discount Notes or in the Senior Discount Notes other than the Senior
Discount Notes Trustee's certificate of authentication.
SECTION 7.05. Notice of Defaults. (a) The Senior Discount Notes
Trustee shall not be deemed to have notice of any Default, other than a payment
default, unless a Trust Officer shall have been advised in writing that a
Default has occurred. No duty imposed upon the Senior Discount Notes Trustee in
this Indenture shall be applicable with respect to any Default of which the
Senior Discount Trustee is not deemed to have notice.
(b) If a Default occurs and is continuing and if it is known to the
Senior Discount Notes Trustee, the Senior Discount Notes Trustee shall mail to
each Senior Discount Noteholder notice of the Default within the earlier of 90
days after it occurs or 30 days after it is known to a Trust Officer or written
notice of it is received by the Senior Discount Notes Trustee. Except in the
case of a Default in payment of Accreted Value, principal, premium (if any) or
interest on any Senior Discount Note (including payments pursuant to the
redemption provisions of such Senior Discount Note), the Senior Discount Notes
Trustee may withhold notice if and so long as a committee of its Trust Officers
in good faith determines that withholding notice is in the interests of the
Senior Discount Noteholders.
SECTION 7.06. Reports by Senior Discount Notes Trustee to Senior
Discount Noteholders. As promptly as practicable after each June 30 beginning
with the June 30 following the first anniversary of the date of this Indenture,
and in any event prior to August 31 in each subsequent year, the Senior Discount
Notes Trustee shall, to the extent that any of the events described in TIA ss.
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Senior Discount Noteholder a brief report dated as of June 30 that complies
with Section 313(a) of the TIA. The Senior Discount Notes Trustee shall also
comply with Section 313(b) of the TIA.
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A copy of each report at the time of its mailing to Senior Discount
Noteholders shall be filed with the SEC and each stock exchange (if any) on
which the Senior Discount Notes are listed. Holdings agrees to notify promptly
the Senior Discount Notes Trustee whenever the Senior Discount Notes become
listed on any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. Holdings shall pay to the
Senior Discount Notes Trustee from time to time such compensation as Holdings
and the Senior Discount Notes Trustee shall from time to time agree in writing.
The Senior Discount Notes Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. Holdings shall reimburse the
Senior Discount Notes Trustee upon request for all reasonable out-of-pocket
expenses incurred or made by it, including costs of collection, in addition to
the compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Senior Discount
Notes Trustee's agents, counsel, accountants and experts. Holdings shall
indemnify the Senior Discount Notes Trustee, and hold it harmless, against any
and all loss, liability or expense (including reasonable attorneys' fees)
incurred by or in connection with the offer and sale of the Senior Discount
Notes or the administration of this trust and the performance of its duties
hereunder. The Senior Discount Notes Trustee shall notify Holdings of any claim
for which it may seek indemnity promptly upon obtaining actual knowledge
thereof; provided, however, that any failure so to notify Holdings shall not
relieve Holdings of its indemnity obligations hereunder. Holdings shall defend
the claim and the indemnified party shall provide reasonable cooperation at
Holdings' expense in the defense. Such indemnified parties may have separate
counsel and Holdings shall pay the fees and expenses of such counsel; provided,
however, that Holdings shall not be required to pay such fees and expenses if it
assumes such indemnified parties' defense and, in such indemnified parties'
reasonable judgment, there is no conflict of interest between Holdings and such
parties in connection with such defense. Holdings need not reimburse any expense
or indemnify against any loss, liability or expense incurred by an indemnified
party through such party's own wilful misconduct and negligence.
To secure Holdings' payment obligations in this Section, the Senior
Discount Notes Trustee shall have a lien prior to the Senior Discount Notes on
all money or property held or collected by the Senior Discount Notes Trustee
other than money or property held in trust to pay Accreted Value, principal of
and interest and any liquidated damages on particular Senior Discount Notes.
Holdings' payment obligations pursuant to this Section shall survive
the satisfaction or discharge of this Indenture, any rejection or termination of
this Indenture under any bankruptcy law or the resignation or removal of the
Senior Discount Notes Trustee. When the Senior Discount Notes Trustee incurs
expenses after the occurrence of a Default specified in Section 6.01(7) or (8)
with respect to Holdings, the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Senior Discount Notes Trustee. The
Senior Discount Notes Trustee may resign at any time by so notifying Holdings.
The Holders of a majority in principal amount at maturity of the Senior Discount
Notes may
53
remove the Senior Discount Notes Trustee by so notifying the Senior Discount
Notes Trustee and may appoint a successor Senior Discount Notes Trustee.
Holdings shall remove the Senior Discount Notes Trustee if:
(1) the Senior Discount Notes Trustee fails to comply with Section
7.10;
(2) the Senior Discount Notes Trustee is adjudged bankrupt or
insolvent;
(3) a receiver or other public officer takes charge of the Senior
Discount Notes Trustee or its property; or
(4) the Senior Discount Notes Trustee otherwise becomes incapable of
acting.
If the Senior Discount Notes Trustee resigns, is removed by Holdings
or by the Holders of a majority in principal amount at maturity of the Senior
Discount Notes and such Senior Discount Noteholders do not reasonably promptly
appoint a successor Senior Discount Notes Trustee, or if a vacancy exists in the
office of Senior Discount Notes Trustee for any reason (the Senior Discount
Notes Trustee in such event being referred to herein as the retiring Senior
Discount Notes Trustee), Holdings shall promptly appoint a successor Senior
Discount Notes Trustee.
A successor Senior Discount Notes Trustee shall deliver a written
acceptance of its appointment to the retiring Senior Discount Notes Trustee and
to Holdings. Thereupon the resignation or removal of the retiring Senior
Discount Notes Trustee shall become effective, and the successor Senior Discount
Notes Trustee shall have all the rights, powers and duties of the Senior
Discount Notes Trustee under this Indenture. The successor Senior Discount Notes
Trustee shall mail a notice of its succession to Senior Discount Noteholders.
The retiring Senior Discount Notes Trustee shall promptly transfer all property
held by it as Senior Discount Notes Trustee to the successor Senior Discount
Notes Trustee, subject to the lien provided for in Section 7.07.
If a successor Senior Discount Notes Trustee does not take office
within 60 days after the retiring Senior Discount Notes Trustee resigns or is
removed, the retiring Senior Discount Notes Trustee or the Holders of 10% in
principal amount at maturity of the Senior Discount Notes may petition any court
of competent jurisdiction for the appointment of a successor Senior Discount
Notes Trustee.
If the Senior Discount Notes Trustee fails to comply with Section
7.10, any Senior Discount Noteholder may petition any court of competent
jurisdiction for the removal of the Senior Discount Notes Trustee and the
appointment of a successor Senior Discount Notes Trustee.
Notwithstanding the replacement of the Senior Discount Notes Trustee
pursuant to this Section, Holdings' obligations under Section 7.07 shall
continue for the benefit of the retiring Senior Discount Notes Trustee.
SECTION 7.09. Successor Senior Discount Notes Trustee by Merger. If
the Senior Discount Notes Trustee consolidates with, merges or converts into, or
transfers all or substantially all its corporate trust business or assets to,
another
54
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Senior Discount Notes
Trustee.
In case at the time such successor or successors by merger,
conversion or consolidation to the Senior Discount Notes Trustee shall succeed
to the trusts created by this Indenture any of the Senior Discount Notes shall
have been authenticated but not delivered, any such successor to the Senior
Discount Notes Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Senior Discount Notes so authenticated;
and in case at that time any of the Senior Discount Notes shall not have been
authenticated, any successor to the Senior Discount Notes Trustee may
authenticate such Senior Discount Notes either in the name of any predecessor
hereunder or in the name of the successor to the Senior Discount Notes Trustee;
and in all such cases such certificates shall have the full force which it is
anywhere in the Senior Discount Notes or in this Indenture provided that the
certificate of the Senior Discount Notes Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The Senior Discount
Notes Trustee shall at all times satisfy the requirements of TIA ss. 310(a). The
Senior Discount Notes Trustee shall have a combined capital and surplus of at
least $100,000,000 as set forth in its most recent published annual report of
condition. The Senior Discount Notes Trustee shall comply with TIA ss. 310(b);
provided, however, that there shall be excluded from the operation of TIA ss.
310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of Holdings are
out standing if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Holdings.
The Senior Discount Notes Trustee shall comply with TIA ss. 311(a), excluding
any creditor relationship listed in TIA ss. 311(b). A Senior Discount Notes
Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to
the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Senior Discount Notes;
Defeasance. (a) When (i) Holdings delivers to the Senior Discount Notes Trustee
all outstanding Senior Discount Notes (other than Senior Discount Notes replaced
pursuant to Section 2.07) for cancelation or (ii) all outstanding Senior
Discount Notes have become due and payable, whether at maturity or as a result
of the mailing of a notice of redemption pursuant to Article 3 hereof, and
Holdings irrevocably deposits with the Senior Discount Notes Trustee funds or
U.S. Government Obligations on which payment of principal and interest when due
will be sufficient to pay at maturity or upon redemption all outstanding Senior
Discount Notes, including interest thereon to maturity or such redemption date
(other than Senior Discount Notes replaced pursuant to Section 2.07), and if in
either case Holdings pays all other sums payable hereunder by Holdings, then
this Indenture shall, subject to Section 8.01(c), cease to be of further effect.
The Senior Discount Notes Trustee shall acknowledge satisfaction and discharge
of this Indenture on demand of Holdings accompanied by an Officers' Certificate
and an Opinion of Counsel and at the cost and expense of Holdings.
55
(b) Subject to Sections 8.01(c) and 8.02, Holdings at any time may
terminate (i) all of its obligations under the Senior Discount Notes and this
Indenture ("legal defeasance option") or (ii) its obligations under Sections
4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 and 4.12 and the
operation of Section 5.01(iii), 5.01(iv), 6.01(4), 6.01(6), 6.01(7) (with
respect to Significant Subsidiaries of Holdings only), 6.01(8) (with respect to
Significant Subsidiaries of Holdings only) and 6.01(9) ("covenant defeasance
option"). Holdings may exercise its legal defeasance option not withstanding its
prior exercise of its covenant defeasance option.
If Holdings exercises its legal defeasance option, payment of the
Senior Discount Notes may not be accelerated because of an Event of Default. If
Holdings exer cises its covenant defeasance option, payment of the Senior
Discount Notes may not be accelerated because of an Event of Default specified
in Section 6.01(4), 6.01(6), 6.01(7) (with respect to Significant Subsidiaries
of Holdings only) or 6.01(8) (with respect to Significant Subsidiaries of
Holdings only) or because of the failure of Holdings to comply with clauses
(iii) and (iv) of Section 5.01.
Upon satisfaction of the conditions set forth herein and upon
request of Holdings, the Senior Discount Notes Trustee shall acknowledge in
writing the discharge of those obligations that Holdings terminates.
(c) Notwithstanding clauses (a) and (b) above, Holdings' obligations
in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08 and in this Article 8
shall survive until the Senior Discount Notes have been paid in full.
Thereafter, Holdings' obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. Holdings may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) Holdings irrevocably deposits in trust with the Senior Discount
Notes Trustee money or U.S. Government Obligations for the payment of
principal, premium (if any) and interest on the Senior Discount Notes to
maturity or redemption, as the case may be;
(2) Holdings delivers to the Senior Discount Notes Trustee a
certificate from a nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and interest when
due and without reinvestment on the deposited U.S. Government Obligations
plus any deposited money without investment will provide cash at such
times and in such amounts as will be sufficient to pay principal and
interest when due on all the Senior Discount Notes to maturity or
redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(7) or (8) with respect to
Holdings occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on Holdings;
(5) Holdings delivers to the Senior Discount Notes Trustee an
Opinion of Counsel to the effect that the trust resulting from the deposit
does not constitute,
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or is qualified as, a regulated investment company under the Investment
Company Act of 1940;
(6) in the case of the legal defeasance option, Holdings shall have
delivered to the Senior Discount Notes Trustee an Opinion of Counsel
stating that (i) Holdings has received from, or there has been published
by, the Internal Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Senior Discount Noteholders will not
recognize income, gain or loss for Federal income tax purposes as a result
of such deposit and defeasance and will be subject to Federal income tax
on the same amounts, in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred;
(7) in the case of the covenant defeasance option, Holdings shall
have delivered to the Senior Discount Notes Trustee an Opinion of Counsel
to the effect that the Senior Discount Noteholders will not recognize
income, gain or loss for Federal income tax purposes as a result of such
deposit and defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred; and
(8) Holdings delivers to the Senior Discount Notes Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the Senior
Discount Notes as contemplated by this Article 8 have been complied with.
Before or after a deposit, Holdings may make arrangements
satisfactory to the Senior Discount Notes Trustee for the redemption of Senior
Discount Notes at a future date in accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Senior Discount Notes
Trustee shall hold in trust money or U.S. Government Obligations deposited with
it pursuant to this Article 8. It shall apply the deposited money and the money
from U.S. Government Obligations through the Paying Agent and in accordance with
this Indenture to the payment of principal of and interest on the Senior
Discount Notes.
SECTION 8.04. Repayment to Holdings. The Senior Discount Notes
Trustee and the Paying Agent shall promptly turn over to Holdings upon request
any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Senior
Discount Notes Trustee and the Paying Agent shall pay to Holdings upon written
request any money held by them for the payment of principal or interest that
remains unclaimed for two years, and, thereafter, Senior Discount Noteholders
entitled to the money must look to Holdings for payment as general creditors.
SECTION 8.05. Indemnity for Government Obligations. Holdings shall
pay and shall indemnify the Senior Discount Notes Trustee against any tax, fee
or other
57
charge imposed on or assessed against deposited U.S. Government Obligations or
the principal and interest received on such U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Senior Discount Notes Trustee or
Paying Agent is unable to apply any money or U.S. Government Obligations in
accordance with this Article 8 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, Holdings' obligations
under this Indenture and the Senior Discount Notes shall be revived and
reinstated as though no deposit had occurred pursuant to this Article 8 until
such time as the Senior Discount Notes Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with this
Article 8; provided, however, that, if Holdings has made any payment of interest
on or principal of any Senior Discount Notes because of the reinstatement of its
obligations, Holdings shall be subrogated to the rights of the Senior Discount
Noteholders of such Senior Discount Notes to receive such payment from the money
or U.S. Government Obligations held by the Senior Discount Notes Trustee or
Paying Agent.
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Senior Discount Noteholders.
Holdings and the Senior Discount Notes Trustee may amend this Indenture or the
Senior Discount Notes without notice to or consent of any Senior Discount
Noteholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Senior Discount Notes in addition
to or in place of certificated Senior Discount Notes; provided, however,
that the uncertificated Senior Discount Notes are issued in registered
form for purposes of Section 163(f) of the Code or in a manner such that
the uncertificated Senior Discount Notes are described in Section
163(f)(2)(B) of the Code;
(4) to add Guarantees with respect to the Senior Discount Notes or
to secure the Senior Discount Notes;
(5) to add to the covenants of Holdings for the benefit of the
Senior Discount Noteholders or to surrender any right or power herein
conferred upon Holdings;
(6) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA;
(7) to make any change that does not adversely affect the rights of
any Senior Discount Noteholder; or
58
(8) to provide for the issuance of the Senior Discount Exchange
Notes or Private Senior Discount Exchange Notes, which shall have terms
substantially identical in all material respects to the Initial Senior
Discount Notes (except that the transfer restrictions contained in the
Initial Senior Discount Notes shall be modified or eliminated, as
appropriate), and which shall be treated, together with any outstanding
Initial Senior Discount Notes, as a single issue of securities.
After an amendment under this Section becomes effective, Holdings
shall mail to Senior Discount Noteholders a notice briefly describing such
amendment. The failure to give such notice to all Senior Discount Noteholders,
or any defect therein, shall not impair or affect the validity of an amendment
under this Section.
SECTION 9.02. With Consent of Senior Discount Noteholders. Holdings
and the Senior Discount Notes Trustee may amend this Indenture or the Senior
Discount Notes with the written consent of the Holders of at least a majority in
principal amount at maturity of the Senior Discount Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Senior Discount Notes), without notice to any other Senior Discount
Noteholder. However, without the consent of each Holder of an outstanding Senior
Discount Note affected, an amendment may not:
(1) reduce the principal amount of Senior Discount Notes whose
Senior Discount Noteholders must consent to an amendment;
(2) reduce the rate of or extend the time for payment of interest or
any liquidated damages on any Senior Discount Note;
(3) reduce the Accreted Value or principal of or extend the Stated
Maturity of any Senior Discount Note;
(4) reduce the premium payable upon the redemption of any Senior
Discount Note or change the time at which any Senior Discount Note may be
redeemed in accordance with Article 3;
(5) make any Senior Discount Note payable in money other than that
stated in the Senior Discount Note; or
(6) make any change in Section 6.04 or 6.07 or the second sentence
of this Section 9.02.
It shall not be necessary for the consent of the Senior Discount
Noteholders under this Section to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment under this Section becomes effective, Holdings
shall mail to Senior Discount Noteholders a notice briefly describing such
amendment. The failure to give such notice to all Senior Discount Noteholders,
or any defect therein, shall not impair or affect the validity of an amendment
under this Section.
SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Senior Discount Notes shall comply with the TIA as then
in effect.
59
SECTION 9.04. Revocation and Effect of Consents and Waivers. A
consent to an amendment or a waiver by a Senior Discount Noteholder of a Senior
Discount Note shall bind the Senior Discount Noteholder and every subsequent
Senior Discount Noteholder of that Senior Discount Note or portion of the Senior
Discount Note that evidences the same debt as the consenting Senior Discount
Noteholder's Senior Discount Note, even if notation of the consent or waiver is
not made on the Senior Discount Note. However, any such Senior Discount
Noteholder or subsequent Senior Discount Noteholder may revoke the consent or
waiver as to such Senior Discount Noteholder's Senior Discount Note or portion
of the Senior Discount Note if the Senior Discount Notes Trustee receives the
notice of revocation before the date the amendment or waiver becomes effective.
After an amendment or waiver becomes effective, it shall bind every Senior
Discount Noteholder. An amendment or waiver becomes effective once both (i) the
requisite number of consents have been received by Holdings or the Senior
Discount Notes Trustee and (ii) such amendment or waiver has been executed by
Holdings and the Senior Discount Notes Trustee.
Holdings may, but shall not be obligated to, fix a record date for
the purpose of determining the Senior Discount Noteholders entitled to give
their consent or take any other action described above or required or permitted
to be taken pursuant to this Indenture. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those Persons who were
Senior Discount Noteholders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to give such consent or to
revoke any consent previously given or to take any such action, whether or not
such Persons continue to be Senior Discount Noteholders after such record date.
No such consent shall be valid or effective for more than 120 days after such
record date.
SECTION 9.05. Notation on or Exchange of Senior Discount Notes. If
an amendment changes the terms of a Senior Discount Note, the Senior Discount
Notes Trustee may require the Senior Discount Noteholder of the Senior Discount
Note to deliver it to the Senior Discount Notes Trustee. The Senior Discount
Notes Trustee may place an appropriate notation on the Senior Discount Note
regarding the changed terms and return it to the Senior Discount Noteholder.
Alternatively, if Holdings or the Senior Discount Notes Trustee so determines,
Holdings in exchange for the Senior Discount Note shall issue and the Senior
Discount Notes Trustee shall authenticate a new Senior Discount Note that
reflects the changed terms. Failure to make the appropriate notation or to issue
a new Senior Discount Note shall not affect the validity of such amendment.
SECTION 9.06. Senior Discount Notes Trustee To Sign Amendments. The
Senior Discount Notes Trustee shall sign any amendment authorized pursuant to
this Article 9 if the amendment does not adversely affect the rights, duties,
liabilities or immunities of the Senior Discount Notes Trustee. If it does, the
Senior Discount Notes Trustee may but need not sign it. In signing such
amendment the Senior Discount Notes Trustee shall be entitled to receive
indemnity reasonably satisfactory to it and to receive, and (subject to Section
7.01) shall be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel stating that such amendment is authorized or permitted by
this Indenture and that such amendment is the legal, valid and binding
obligation of Holdings enforceable against it in accordance with its terms,
subject to customary exceptions, and complies with the provisions hereof
(including Section 9.03).
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ARTICLE 10
Miscellaneous
SECTION 10.01. Trust Indenture Act Controls. If any provision of
this Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 10.02. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to Holdings:
WESCO International, Inc.
Commerce Court, Suite 700
Four Station Square
Pittsburgh, PA 15219
Attention: General Counsel
if to the Senior Discount Notes Trustee:
Bank One, N.A.
100 East Broad Street, 8th Floor
Columbus, OH 43215
Attention: Corporate Trust Department
Holdings or the Senior Discount Notes Trustee by notice to the other
may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Senior Discount Noteholder
shall be mailed to the Senior Discount Noteholder at the Senior Discount
Noteholder's address as it appears on the registration books of the Registrar
and shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Senior Discount
Noteholder or any defect in it shall not affect its sufficiency with respect to
other Senior Discount Noteholders. If a notice or communication is mailed in the
manner provided above, it is duly given, whether or not the addressee receives
it.
SECTION 10.03. Communication by Senior Discount Noteholders with
Other Senior Discount Noteholders. Senior Discount Noteholders may communicate
pursuant to TIA ss. 312(b) with other Senior Discount Noteholders with respect
to their rights under this Indenture or the Senior Discount Notes. Holdings, the
Senior Discount Notes Trustee, the Registrar and anyone else shall have the
protection of TIA ss. 312(c).
61
SECTION 10.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by Holdings to the Senior Discount Notes Trustee
to take or refrain from taking any action under this Indenture, Holdings shall
furnish to the Senior Discount Notes Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Senior Discount Notes Trustee stating that, in the
opinion of the signers, all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied with;
and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Senior Discount Notes Trustee stating that, in the
opinion of such counsel, all such conditions precedent have been complied
with.
SECTION 10.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 10.06. When Senior Discount Notes Disregarded. In
determining whether the Senior Discount Noteholders of the required principal
amount at maturity of Senior Discount Notes have concurred in any direction,
waiver or consent, Senior Discount Notes owned by Holdings or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with Holdings shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the Senior
Discount Notes Trustee shall be protected in relying on any such direction,
waiver or consent, only Senior Discount Notes which the Senior Discount Notes
Trustee knows are so owned shall be so disregarded. Subject to the fore going,
only Senior Discount Notes outstanding at the time shall be considered in any
such determination.
SECTION 10.07. Rules by Senior Discount Notes Trustee, Paying Agent
and Registrar. The Senior Discount Notes Trustee may make reasonable rules for
action by or a meeting of Senior Discount Noteholders. The Registrar and the
Paying Agent may make reasonable rules for their functions.
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SECTION 10.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York or the State of Ohio. If a payment date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period. If a regular record
date is a Legal Holiday, the record date shall not be affected.
SECTION 10.09. GOVERNING LAW. THIS INDENTURE AND THE SENIOR DISCOUNT
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 10.10. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of Holdings shall not have any liability for
any obligations of Holdings under the Senior Discount Notes or this Indenture or
for any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Senior Discount Note, each Senior Discount Noteholder
shall waive and release all such liability. The waiver and release shall be part
of the consideration for the issue of the Senior Discount Notes.
SECTION 10.11. Successors. All agreements of Holdings in this
Indenture and the Senior Discount Notes shall bind its successors. All
agreements of the Senior Discount Notes Trustee in this Indenture shall bind its
successors.
SECTION 10.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 10.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
63
IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.
WESCO INTERNATIONAL, INC.,
by /s/ [Illegible]
--------------------------------
Name:
Title:
BANK ONE, N.A., as Senior Discount
Notes Trustee,
by /s/ Ruth H. Fussell
--------------------------------
Name: RUTH H. FUSSELL
Title: VICE PRESIDENT
CORPORATE TRUST DEPT.
APPENDIX A
PROVISIONS RELATING TO INITIAL SENIOR DISCOUNT NOTES,
PRIVATE SENIOR DISCOUNT EXCHANGE
NOTES AND SENIOR DISCOUNT EXCHANGE NOTES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Regulation S Global Senior Discount Note or beneficial
interest therein, the rules and procedures of the Depositary for such Global
Senior Discount Note, Euroclear and Cedel, in each case to the extent applicable
to such transaction and as in effect from time to time.
"Cedel" means Cedel Bank, S.A., or any successor securities clearing
agency.
"Definitive Senior Discount Note" means a certificated Initial
Senior Discount Note or Senior Discount Exchange Note (bearing the Restricted
Senior Discount Notes Legend if the transfer of such Senior Discount Note is
restricted by applicable law) that does not include the Global Senior Discount
Notes Legend.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Euroclear" means the Euroclear Clearance System or any successor
securities clearing agency.
"Global Senior Discount Notes Legend" means the legend set forth
under that caption in Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Chase Securities Inc. and Lehman Brothers
Inc.
"Private Senior Discount Exchange Notes" means the Senior Discount
Notes of Holdings issued in exchange for Initial Senior Discount Notes pursuant
to this Indenture in connection with the Senior Discount Notes Private Exchange
pursuant to the Senior Discount Notes Registration Agreement.
"Purchase Agreement" means the Purchase Agreement dated May 29,
1998, among the Company, Holdings and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Regulation S" means Regulation S under the Securities Act.
2
"Regulation S Senior Discount Notes" means all Initial Senior
Discount Notes offered and sold outside the United States in reliance on
Regulation S.
"Restricted Period", with respect to any Senior Discount Notes,
means the period of 40 consecutive days beginning on and including the later of
(i) the day on which such Senior Discount Notes are first offered to persons
other than distributors (as defined in Regulation S under the Securities Act) in
reliance on Regulation S and (ii) the Senior Discount Notes Issue Date with
respect to such Senior Discount Notes.
"Restricted Senior Discount Notes Legend" means the legend set forth
in Section 2.3(e)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Senior Discount Notes" means all Initial Senior Discount
Notes offered and sold to QIBs in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Discount Notes Custodian" means the custodian with respect
to a Global Senior Discount Note (as appointed by the Depositary) or any
successor person thereto, who shall initially be the Senior Discount Notes
Trustee.
"Senior Discount Notes Private Exchange" means an offer by Holdings,
pursuant to the Senior Discount Notes Registration Agreement, to issue and
deliver to certain purchasers, in exchange for the Initial Senior Discount Notes
held by such purchasers as part of their initial distribution, a like aggregate
principal amount at maturity of Private Senior Discount Exchange Notes.
"Senior Discount Notes Registered Exchange Offer" means the offer by
Holdings, pursuant to the Senior Discount Notes Registration Agreement, to
certain Holders of Initial Senior Discount Notes, to issue and deliver to such
Holders, in exchange for their Initial Senior Discount Notes, a like aggregate
principal amount at maturity of Senior Discount Exchange Notes registered under
the Securities Act.
"Senior Discount Notes Registration Agreement" means the Exchange
and Registration Rights Agreement dated June 5, 1998, among Holdings and the
Initial Purchasers.
"Senior Discount Notes Shelf Registration Statement" means a
registration statement filed by Holdings in connection with the offer and sale
of Initial Senior Discount Notes pursuant to the Senior Discount Notes
Registration Agreement.
"Transfer Restricted Senior Discount Notes" means Definitive Senior
Discount Notes and any other Senior Discount Notes that bear or are required to
bear the Restricted Senior Discount Notes Legend.
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1.2 Other Definitions
Term: Defined in Section:
----- ------------------
"Agent Members"..........................................................2.1(b)
"IAI Global Senior Discount Note.........................................2.1(a)
"Global Senior Discount Note"............................................2.1(a)
"Regulation S Global Senior Discount Note"...............................2.1(a)
"Rule 144A Global Senior Discount Note"..................................2.1(a)
2. The Senior Discount Notes
2.1 Form and Dating
The Initial Senior Discount Notes issued on the date hereof will be
(i) offered and sold by Holdings pursuant to the Purchase Agreement and (ii)
resold, initially only to (A) QIBs in reliance on Rule 144A and (B) Persons
other than U.S. Persons (as defined in Regulation S) in reliance on Regulation
S. Such Initial Senior Discount Notes may thereafter be transferred to, among
others, QIBs, purchasers in reliance on Regulation S and, except as set forth
below, IAIs in accordance with Rule 501.
(a) Global Senior Discount Notes. Rule 144A Senior Discount Notes
shall be issued initially in the form of one or more permanent global Senior
Discount Notes in definitive, fully registered form (collectively, the "Rule
144A Global Senior Discount Note") and Regulation S Senior Discount Notes shall
be issued initially in the form of one or more global Senior Discount Notes
(collectively, the "Regulation S Global Senior Discount Note"), in each case
without interest coupons and bearing the Global Senior Discount Notes Legend and
Restricted Senior Discount Notes Legend, which shall be deposited on behalf of
the purchasers of the Senior Discount Notes represented thereby with the Senior
Discount Notes Custodian, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by Holdings and authenticated by the
Senior Discount Notes Trustee as provided in this Indenture. One or more global
securities in definitive, fully registered form without interest coupons and
bearing the Global Senior Discount Notes Legend and the Restricted Senior
Discount Notes Legend (collectively, the "IAI Global Senior Discount Note")
shall also be issued on the Closing Date, deposited with the Senior Discount
Notes Custodian, and registered in the name of the Depositary or a nominee of
the Depositary, duly executed by Holdings and authenticated by the Senior
Discount Notes Trustee as provided in this Indenture to accommodate transfers of
beneficial interests in the Senior Discount Notes to IAIs subsequent to the
initial distribution. Beneficial ownership interests in the Regulation S Global
Senior Discount Note will not be exchangeable for interests in the Rule 144A
Global Senior Discount Note, the IAI Global Senior Discount Note or any other
Senior Discount Note without a Restricted Senior Discount Notes Legend until the
expiration of the Restricted Period. The Rule 144A Global Senior Discount Note,
the IAI Global Senior Discount Note and the Regulation S Global Senior Discount
Note are each referred to herein as a "Global Senior Discount Note" and are
collectively referred to herein as "Global Senior Discount Notes." The aggregate
principal amount at maturity of the Global Senior Discount Notes may from time
to time be increased or decreased by adjustments made on the records of the
Senior Discount Notes Trustee and the Depositary or its nominee as hereinafter
provided.
4
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a
Global Senior Discount Note deposited with or on behalf of the Depositary.
Holdings shall execute and the Senior Discount Notes Trustee shall,
in accordance with this Section 2.1(b) and pursuant to an order of Holdings,
authenticate and deliver initially one or more Global Senior Discount Notes that
(a) shall be registered in the name of the Depositary for such Global Senior
Discount Note or Global Senior Discount Notes or the nominee of such Depositary
and (b) shall be delivered by the Senior Discount Notes Trustee to such
Depositary or pursuant to such Depositary's instructions or held by the Senior
Discount Notes Trustee as Senior Discount Notes Custodian.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Senior
Discount Note held on their behalf by the Depositary or by the Senior Discount
Notes Trustee as Senior Discount Notes Custodian or under such Global Senior
Discount Note, and the Depositary may be treated by Holdings, the Senior
Discount Notes Trustee and any agent of Holdings or the Senior Discount Notes
Trustee as the absolute owner of such Global Senior Discount Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
Holdings, the Senior Discount Notes Trustee or any agent of Holdings or the
Senior Discount Notes Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or impair, as between
the Depositary and its Agent Members, the operation of customary practices of
such Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global Senior Discount Note.
(c) Definitive Senior Discount Notes. Except as provided in Section
2.3 or 2.4, owners of beneficial interests in Global Senior Discount Notes will
not be entitled to receive physical delivery of certificated Senior Discount
Notes.
2.2 Authentication. The Senior Discount Notes Trustee shall
authenticate and make available for delivery upon a written order of Holdings
signed by two Officers (1) Initial Senior Discount Notes for original issue on
the date hereof in an aggregate principal amount at maturity of $87 million and
(2) the (A) Senior Discount Exchange Notes for issue only in a Senior Discount
Notes Registered Exchange Offer and (B) Private Senior Discount Exchange Notes
for issue only in the Senior Discount Notes Private Exchange, in the case of
each of (A) and (B) pursuant to the Senior Discount Notes Registration Agreement
and for a like principal amount at maturity of Initial Senior Discount Notes
exchanged pursuant thereto. Such order shall specify the amount of the Senior
Discount Notes to be authenticated, the date on which the original issue of
Senior Discount Notes is to be authenticated and whether the Senior Discount
Notes are to be Initial Senior Discount Notes, Senior Discount Exchange Notes or
Private Senior Discount Exchange Notes. The aggregate principal amount at
maturity of Senior Discount Notes outstanding at any time may not exceed $87
million, except as provided in Section 2.07 of this Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Senior Discount Notes. When Definitive Senior Discount Notes are presented to
the Registrar with a request:
(x) to register the transfer of such Definitive Senior Discount
Notes; or
5
(y) to exchange such Definitive Senior Discount Notes for an equal
principal amount at maturity of Definitive Senior Discount Notes of other
authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Definitive Senior Discount Notes surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to Holdings and the Registrar,
duly executed by the Senior Discount Noteholder thereof or his attorney
duly authorized in writing; and
(ii) are accompanied by the following additional information and
documents, as applicable:
(A) if such Definitive Senior Discount Notes are being
delivered to the Registrar by a Senior Discount Noteholder for
registration in the name of such Senior Discount Noteholder, without
transfer, a certification from such Senior Discount Noteholder to
that effect (in the form set forth on the reverse side of the
Initial Senior Discount Note); or
(B) if such Definitive Senior Discount Notes are being
transferred to Holdings, a certification to that effect (in the form
set forth on the reverse side of the Initial Senior Discount Note);
or
(C) if such Definitive Senior Discount Notes are being
transferred pursuant to an exemption from registration in accordance
with Rule 144 under the Securities Act or in reliance upon another
exemption from the registration requirements of the Securities Act,
(i) a certification to that effect (in the form set forth on the
reverse side of the Initial Senior Discount Note) and (ii) if
Holdings so requests, an opinion of counsel or other evidence
reasonably satisfactory to it as to the compliance with the
restrictions set forth in the legend set forth in Section 2.3(e)(i).
(b) Restrictions on Transfer of a Definitive Senior Discount Note
for a Beneficial Interest in a Global Senior Discount Note. A Definitive Senior
Discount Note may not be exchanged for a beneficial interest in a Global Senior
Discount Note except upon satisfaction of the requirements set forth below. Upon
receipt by the Senior Discount Notes Trustee of a Definitive Senior Discount
Note, duly endorsed or accompanied by a written instrument of transfer in form
reasonably satisfactory to Holdings and the Registrar, together with:
(i) certification (in the form set forth on the reverse side of the
Initial Senior Discount Note) that such Definitive Senior Discount Note is
being transferred (A) to a QIB in accordance with Rule 144A, (B) to an IAI
that has furnished to the Senior Discount Notes Trustee a signed letter
substantially in the form of Exhibit D or (C) outside the United States in
an offshore transaction within the meaning of Regulation S and in
compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Senior Discount Notes
Trustee to make, or to direct the Senior Discount Notes Custodian to make,
an adjustment on its books
6
and records with respect to such Global Senior Discount Note to reflect an
increase in the aggregate principal amount at maturity of the Senior
Discount Notes represented by the Global Senior Discount Note, such
instructions to contain information regarding the Depositary account to be
credited with such increase,
then the Senior Discount Notes Trustee shall cancel such Definitive Senior
Discount Note and cause, or direct the Senior Discount Notes Custodian to cause,
in accordance with the standing instructions and procedures existing between the
Depositary and the Senior Discount Notes Custodian, the aggregate principal
amount at maturity of Senior Discount Notes represented by the Global Senior
Discount Note to be increased by the aggregate principal amount at maturity of
the Definitive Senior Discount Note to be exchanged and shall credit or cause to
be credited to the account of the Person specified in such instructions a
beneficial interest in the Global Senior Discount Note equal to the principal
amount at maturity of the Definitive Senior Discount Note so canceled. If no
Global Senior Discount Notes are then outstanding and the Global Senior Discount
Note has not been previously exchanged for certificated securities pursuant to
Section 2.4, Holdings shall issue and the Senior Discount Notes Trustee shall
authenticate, upon written order of Holdings in the form of an Officers'
Certificate, a new Global Senior Discount Note in the appropriate principal
amount at maturity.
(c) Transfer and Exchange of Global Senior Discount Notes. (i) The
transfer and exchange of Global Senior Discount Notes or beneficial interests
therein shall be effected through the Depositary, in accordance with this
Indenture (including applicable restrictions on transfer set forth herein, if
any) and the procedures of the Depositary therefor. A transferor of a beneficial
interest in a Global Senior Discount Note shall deliver a written order given in
accordance with the Depositary's procedures containing information regarding the
participant account of the Depositary to be credited with a beneficial interest
in such Global Senior Discount Note or another Global Senior Discount Note and
such account shall be credited in accordance with such order with a beneficial
interest in the applicable Global Senior Discount Note and the account of the
Person making the transfer shall be debited by an amount equal to the beneficial
interest in the Global Senior Discount Note being transferred. Transfers by an
owner of a beneficial interest in the Rule 144A Global Senior Discount Note or
the IAI Global Senior Discount Note to a transferee who takes delivery of such
interest through the Regulation S Global Senior Discount Note, whether before or
after the expiration of the Restricted Period, will be made only upon receipt by
the Senior Discount Notes Trustee of a certification from the transferor to the
effect that such transfer is being made in accordance with Regulation S or (if
available) Rule 144 under the Securities Act and that, if such transfer is being
made prior to the expiration of the Restricted Period, the interest transferred
will be held immediately thereafter through Euroclear or Cedel. In the case of a
transfer of a beneficial interest in either the Regulation S Global Senior
Discount Note or the Rule 144A Global Senior Discount Note for an interest in
the IAI Global Senior Discount Note, the transferee must furnish a signed letter
substantially in the form of Exhibit D to the Senior Discount Notes Trustee.
(ii) If the proposed transfer is a transfer of a beneficial interest
in one Global Senior Discount Note to a beneficial interest in another
Global Senior Discount Note, the Registrar shall reflect on its books and
records the date and an increase in the principal amount at maturity of
the Global Senior Discount Note to which such interest is being
transferred in an amount equal to the principal amount at maturity of the
interest to be so transferred, and the Registrar shall reflect on its
books and
7
records the date and a corresponding decrease in the principal amount at
maturity of Global Senior Discount Note from which such interest is being
transferred.
(iii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4), a Global Senior Discount
Note may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary.
(iv) In the event that a Global Senior Discount Note is exchanged
for Definitive Senior Discount Notes pursuant to Section 2.4 prior to the
consummation of the Senior Discount Notes Registered Exchange Offer or the
effectiveness of the Senior Discount Notes Shelf Registration Statement
with respect to such Senior Discount Notes, such Senior Discount Notes may
be exchanged only in accordance with such procedures as are substantially
consistent with the provisions of this Section 2.3 (including the
certification requirements set forth on the reverse of the Initial Senior
Discount Notes intended to ensure that such transfers comply with Rule
144A, Regulation S or such other applicable exemption from registration
under the Securities Act, as the case may be) and such other procedures as
may from time to time be adopted by Holdings.
(d) Restrictions on Transfer of Regulation S Global Senior Discount
Note. (i) Prior to the expiration of the Restricted Period, interests in the
Regulation S Global Senior Discount Note may only be held through Euroclear or
Cedel. During the Restricted Period, beneficial ownership interests in the
Regulation S Global Senior Discount Note may only be sold, pledged or
transferred through Euroclear or Cedel in accordance with the Applicable
Procedures and only (A) to Holdings, (B) so long as such security is eligible
for resale pursuant to Rule 144A, to a person whom the selling holder reasonably
believes is a QIB that purchases for its own account or for the account of a QIB
to whom notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A, (C) in an offshore transaction in accordance with
Regulation S, (D) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 (if applicable) under the Securities Act,
(E) to an IAI purchasing for its own account, or for the account of such an IAI,
in a minimum principal amount at maturity of Senior Discount Notes of $250,000
or (F) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States. Prior to the expiration of the Restricted Period, transfers
by an owner of a beneficial interest in the Regulation S Global Senior Discount
Note to a transferee who takes delivery of such interest through the Rule 144A
Global Senior Discount Note or the IAI Global Senior Discount Note will be made
only in accordance with Applicable Procedures and upon receipt by the Senior
Discount Notes Trustee of a written certification from the transferor of the
beneficial interest in the form provided on the reverse of the Initial Senior
Discount Note to the effect that such transfer is being made to (i) a person
whom the transferor reasonably believes is a QIB within the meaning of Rule 144A
in a transaction meeting the requirements of Rule 144A or (ii) an IAI purchasing
for its own account, or for the account of such an IAI, in a minimum principal
amount at maturity of the Senior Discount Notes of $250,000. Such written
certification will no longer be required after the expiration of the Restricted
Period. In the case of a transfer of a beneficial interest in the Regulation S
Global Senior Discount Note for an interest in the IAI Global Senior Discount
Note, the transferee must furnish a signed letter substantially in the form of
Exhibit D to the Senior Discount Notes Trustee.
8
(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Regulation S Global Senior Discount Note will
be transferable in accordance with applicable law and the other terms of
this Indenture.
(e) Legend.
(i) Except as permitted by the following paragraphs (ii), (iii) or
(iv), each Senior Discount Note certificate evidencing the Global Senior
Discount Notes and the Definitive Senior Discount Notes (and all Senior
Discount Notes issued in exchange therefor or in substitution thereof)
shall bear a legend in substantially the following form (each defined term
in the legend being defined as such for purposes of the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH HOLDINGS OR
ANY AFFILIATE OF HOLDINGS WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (A) TO HOLDINGS, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF
RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR,
IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT AT MATURITY OF THE SECURITIES
OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER
OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
9
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO HOLDINGS' AND
THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
Each Definitive Senior Discount Note will also bear the following additional
legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION
AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted Senior
Discount Note that is a Definitive Senior Discount Note, the Registrar
shall permit the Senior Discount Noteholder thereof to exchange such
Transfer Restricted Senior Discount Note for a Definitive Senior Discount
Note that does not bear the legends set forth above and rescind any
restriction on the transfer of such Transfer Restricted Senior Discount
Note if the Senior Discount Noteholder certifies in writing to the
Registrar that its request for such exchange was made in reliance on Rule
144 (such certification to be in the form set forth on the reverse of the
Initial Senior Discount Note).
(iii) After a transfer of any Initial Senior Discount Notes or
Private Exchange Senior Discount Notes during the period of the
effectiveness of a Senior Discount Notes Shelf Registration Statement with
respect to such Initial Senior Discount Notes or Private Senior Discount
Exchange Notes, as the case may be, all requirements pertaining to the
Restricted Senior Discount Notes Legend on such Initial Senior Discount
Notes or such Private Senior Discount Exchange Notes will cease to apply
and the requirements that any such Initial Senior Discount Notes or such
Private Senior Discount Exchange Notes be issued in global form will
continue to apply.
(iv) Upon the consummation of a Senior Discount Notes Registered
Exchange Offer with respect to the Initial Senior Discount Notes pursuant
to which Senior Discount Noteholders of such Initial Senior Discount Notes
are offered Senior Discount Exchange Notes in exchange for their Initial
Senior Discount Notes, all requirements pertaining to Initial Senior
Discount Notes that Initial Senior Discount Notes be issued in global form
will continue to apply, and Senior Discount Exchange Notes in global form
without the Restricted Senior Discount Notes Legend will be available to
Senior Discount Noteholders that exchange such Initial Senior Discount
Notes in such Senior Discount Notes Registered Exchange Offer.
(v) Upon the consummation of a Senior Discount Notes Private
Exchange with respect to the Initial Senior Discount Notes pursuant to
which Holders of such Initial Senior Discount Notes are offered Private
Senior Discount Exchange Notes in exchange for their Initial Senior
Discount Notes, all requirements pertaining to such Initial Senior
Discount Notes that Initial Senior Discount Notes be issued in global
10
form will continue to apply, and Private Senior Discount Exchange Notes in
global form with the Restricted Senior Discount Notes Legend will be
available to Senior Discount Noteholders that exchange such Initial Senior
Discount Notes in such Senior Discount Notes Private Exchange.
(vi) Upon a sale or transfer after the expiration of the Restricted
Period of any Initial Senior Discount Note acquired pursuant to Regulation
S, all requirements that such Initial Senior Discount Note bear the
Restricted Senior Discount Notes Legend will cease to apply and the
requirements requiring any such Initial Senior Discount Note be issued in
global form will continue to apply.
(f) Cancelation or Adjustment of Global Senior Discount Note. At
such time as all beneficial interests in a Global Senior Discount Note have
either been exchanged for Definitive Senior Discount Notes, transferred,
redeemed, repurchased or canceled, such Global Senior Discount Note shall be
returned by the Depositary to the Senior Discount Notes Trustee for cancelation
or retained and canceled by the Senior Discount Notes Trustee. At any time prior
to such cancelation, if any beneficial interest in a Global Senior Discount Note
is exchanged for Definitive Senior Discount Notes, transferred in exchange for
an interest in another Global Senior Discount Note, redeemed, repurchased or
canceled, the principal amount at maturity of Senior Discount Notes represented
by such Global Senior Discount Note shall be reduced and an adjustment shall be
made on the books and records of the Senior Discount Notes Trustee (if it is
then the Senior Discount Notes Custodian for such Global Senior Discount Note)
with respect to such Global Senior Discount Note, by the Senior Discount Notes
Trustee or the Senior Discount Notes Custodian, to reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of Senior
Discount Notes.
(i) To permit registrations of transfers and exchanges, Holdings
shall execute and the Senior Discount Notes Trustee shall authenticate,
Definitive Senior Discount Notes and Global Senior Discount Notes at the
Registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but Holdings may require payment of a sum sufficient
to cover any transfer tax, assessments, or similar governmental charge
payable in connection therewith (other than any such transfer taxes,
assessments or similar governmental charge payable upon exchange or
transfer pursuant to Section 3.06, 4.06, 4.08 and 9.05).
(iii) Prior to the due presentation for registration of transfer of
any Senior Discount Note, Holdings, the Senior Discount Notes Trustee, the
Paying Agent or the Registrar may deem and treat the person in whose name
a Senior Discount Note is registered as the absolute owner of such Senior
Discount Note for the purpose of receiving payment of principal of and
interest on such Senior Discount Note and for all other purposes
whatsoever, whether or not such Senior Discount Note is overdue, and none
of Holdings, the Senior Discount Notes Trustee, the Paying Agent or the
Registrar shall be affected by notice to the contrary.
(iv) All Senior Discount Notes issued upon any transfer or exchange
pursuant to the terms of this Indenture shall evidence the same debt and
shall be entitled to the
11
same benefits under this Indenture as the Senior Discount Notes
surrendered upon such transfer or exchange.
(h) No Obligation of the Senior Discount Notes Trustee.
(i) The Senior Discount Notes Trustee shall have no responsibility
or obligation to any beneficial owner of a Global Senior Discount Note, a
member of, or a participant in the Depositary or any other Person with
respect to the accuracy of the records of the Depositary or its nominee or
of any participant or member thereof, with respect to any ownership
interest in the Senior Discount Notes or with respect to the delivery to
any participant, member, beneficial owner or other Person (other than the
Depositary) of any notice (including any notice of redemption or
repurchase) or the payment of any amount, under or with respect to such
Senior Discount Notes. All notices and communications to be given to the
Senior Discount Noteholders and all payments to be made to Senior Discount
Noteholders under the Senior Discount Notes shall be given or made only to
the registered Senior Discount Noteholders (which shall be the Depositary
or its nominee in the case of a Global Senior Discount Note). The rights
of beneficial owners in any Global Senior Discount Note shall be exercised
only through the Depositary subject to the applicable rules and procedures
of the Depositary. The Senior Discount Notes Trustee may rely and shall be
fully protected in relying upon information furnished by the Depositary
with respect to its members, participants and any beneficial owners.
(ii) The Senior Discount Notes Trustee shall have no obligation or
duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under applicable
law with respect to any transfer of any interest in any Senior Discount
Note (including any transfers between or among Depositary participants,
members or beneficial owners in any Global Senior Discount Note) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by, the terms of this Indenture, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
2.4 Definitive Senior Discount Notes
(a) A Global Senior Discount Note deposited with the Depositary or
with the Senior Discount Notes Trustee as Senior Discount Notes Custodian
pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in
the form of Definitive Senior Discount Notes in an aggregate principal amount at
maturity equal to the principal amount at maturity of such Global Senior
Discount Note, in exchange for such Global Senior Discount Note, only if such
transfer complies with Section 2.3 and (i) the Depositary notifies Holdings that
it is unwilling or unable to continue as a Depositary for such Global Senior
Discount Note or if at any time the Depositary ceases to be a "clearing agency"
registered under the Exchange Act, and a successor depositary is not appointed
by Holdings within 90 days of such notice, or (ii) an Event of Default has
occurred and is continuing or (iii) Holdings, in its sole discretion, notifies
the Senior Discount Notes Trustee in writing that it elects to cause the
issuance of certificated Senior Discount Notes under this Indenture.
(b) Any Global Senior Discount Note that is transferable to the
beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by
the Depositary to the Senior Discount Notes Trustee, to be so transferred, in
whole or from time to time in part,
12
without charge, and the Senior Discount Notes Trustee shall authenticate and
deliver, upon such transfer of each portion of such Global Senior Discount Note,
an equal aggregate principal amount at maturity of Definitive Senior Discount
Notes of authorized denominations. Any portion of a Global Senior Discount Note
transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 (in principal amount at maturity) and
any integral multiple thereof and registered in such names as the Depositary
shall direct. Any certificated Initial Senior Discount Note in the form of a
Definitive Senior Discount Note delivered in exchange for an interest in the
Global Senior Discount Note shall, except as otherwise provided by Section
2.3(e), bear the Restricted Senior Discount Notes Legend.
(c) Subject to the provisions of Section 2.4(b), the registered
Senior Discount Noteholder of a Global Senior Discount Note may grant proxies
and otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Senior Discount
Noteholder is entitled to take under this Indenture or the Senior Discount
Notes.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii) or (iii), Holdings will promptly make available to the
Senior Discount Notes Trustee a reasonable supply of Definitive Senior Discount
Notes in fully registered form without interest coupons.
EXHIBIT A
[FORM OF FACE OF INITIAL SENIOR DISCOUNT NOTE]
[Global Senior Discount Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO HOLDINGS OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Senior Discount Notes Legend]
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH HOLDINGS OR
ANY AFFILIATE OF HOLDINGS WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (A) TO HOLDINGS, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL
2
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE
ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM
PRINCIPAL AMOUNT AT MATURITY OF THE SECURITIES OF $250,000, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO HOLDINGS' AND THE TRUSTEE'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Definitive Senior Discount Note will also bear the following additional
legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT
MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.
No. $__________
11 1/8% Senior Discount Note due 2008
CUSIP No. ______
WESCO International, Inc., a Delaware corporation, promises to pay
to Cede & Co., or registered assigns, the principal sum [of Dollars]
[listed on the Schedule of Increases or Decreases in Global Senior Discount Note
attached hereto](1) on June 1, 2008.
Interest Payment Dates: June 1 and December 1, commencing on June 1,
2003.
Record Dates: May 15 and November 15.
- - - - ----------
(1) Use the Schedule of Increases and Decreases language if Note is in Global
Form.
2
Additional provisions of this Senior Discount Note are set forth on
the other side of this Senior Discount Note.
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed.
WESCO INTERNATIONAL, INC.,
by
---------------------------------------
Name:
Title:
by
---------------------------------------
Name:
Title:
Dated:
SENIOR DISCOUNT NOTES TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
BANK ONE, N.A.,
as Senior Discount Notes Trustee, certifies
that this is one of
the Senior Discount Notes referred
to in the Indenture.
By:
----------------------------------
Authorized Signatory
[FORM OF REVERSE SIDE OF SENIOR DISCOUNT NOTE]
11 1/8% Senior Discount Note due 2008
1. Interest
(a) WESCO INTERNATIONAL, INC., a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called "Holdings"), promises to pay interest on the
principal amount at maturity of this Senior Discount Note at the rate per annum
shown above. Cash interest will not accrue or be payable on this Senior Discount
Note prior to June 1, 2003. From June 1, 2003, Holdings will pay interest
semiannually on June 1 and December 1 of each year. Interest on the Senior
Discount Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from June 1, 2003. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
(b) Liquidated Damages. The holder of this Senior Discount Note is
entitled to the benefits of an Exchange and Registration Rights Agreement, dated
as of June 5, 1998, among Holdings and the Initial Purchasers named therein (the
"Senior Discount Notes Registration Agreement"). Capitalized terms used in this
paragraph (b) but not defined herein have the meanings assigned to them in the
Senior Discount Notes Registration Agreement. If (i) the Senior Discount Notes
Shelf Registration Statement or Senior Discount Notes Exchange Offer
Registration Statement, as applicable under the Senior Discount Notes
Registration Agreement, is not filed with the Commission on or prior to 90 days
after the Senior Discount Notes Issue Date (or, in the case of a Senior Discount
Notes Shelf Registration Statement required to be filed in response to a change
in law or applicable interpretations of the Commission's staff, if later, within
45 days after publication of the change in law or interpretations, but in no
event before 90 days after the Senior Discount Notes Issue Date), (ii) the
Senior Discount Notes Exchange Offer Registration Statement or the Senior
Discount Notes Shelf Registration Statement, as the case may be, is not declared
effective within 200 days after the Senior Discount Notes Issue Date (or in the
case of a Senior Discount Notes Shelf Registration Statement required to be
filed in response to a change in law or the applicable interpretations of
Commission's staff, if later, within 90 days after publication of the change in
law or interpretation, but in no event before 200 days after the Senior Discount
Notes Issue Date), (iii) the Senior Discount Notes Registered Exchange Offer is
not consummated on or prior to 230 days after the Senior Discount Notes Issue
Date (other than in the event Holdings files a Senior Discount Notes Shelf
Registration Statement), or (iv) the Senior Discount Notes Shelf Registration
Statement is filed and declared effective within 200 days after the Senior
Discount Notes Issue Date but shall thereafter cease to be effective (at any
time that Holdings is obligated to maintain the effectiveness thereof) without
being succeeded within 90 days by an additional Senior Discount Notes
Registration Statement filed and declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), Holdings shall pay
liquidated damages to each holder of Transfer Restricted Senior Discount Notes,
during the period of such Registration Default, in an amount equal to $0.192 per
week per $1,000 Accreted Value of the Senior Discount Notes constituting
Transfer Restricted Senior Discount Notes held by such holder until (i) the
applicable Senior Discount Notes Registration Statement is filed, (ii) the
Senior Discount Notes Exchange Offer Registration Statement is declared
effective and the Senior Discount Notes Registered Exchange Offer is
consummated, (iii) the Senior Discount Notes Shelf Registration Statement is
declared effective or (iv) the Senior Discount
2
Notes Shelf Registration Statement again becomes effective, as the case may be.
All accrued liquidated damages shall be paid to holders on the next semi-annual
accretion date (if on or prior to June 1, 2003) or in the same manner as
interest payments on the Senior Discount Notes on semi-annual payment dates
which correspond to interest payment dates for the Senior Discount Notes (if
after June 1, 2003). Following the cure of all Registration Defaults, the
accrual of liquidated damages will cease. The Senior Discount Notes Trustee
shall have no responsibility with respect to the determination of the amount of
any such liquidated damages. For purposes of the foregoing, "Transfer Restricted
Senior Discount Notes" means (i) each Initial Senior Discount Note until the
date on which such Initial Senior Discount Note has been exchanged for a freely
transferable Senior Discount Exchange Note in the Senior Discount Notes
Registered Exchange Offer, (ii) each Initial Senior Discount Note or Private
Senior Discount Exchange Note until the date on which such Initial Senior
Discount Note or Private Senior Discount Exchange Note has been effectively
registered under the Securities Act and disposed of in accordance with a Senior
Discount Notes Shelf Registration Statement or (iii) each Initial Senior
Discount Note or Private Senior Discount Exchange Note until the date on which
such Initial Senior Discount Note or Private Senior Discount Exchange Note is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act.
2. Method of Payment
Holdings will pay interest on the Senior Discount Notes (except
defaulted interest) to the Persons who are registered holders of Senior Discount
Notes at the close of business on the May 15 or November 15 next preceding the
interest payment date even if Senior Discount Notes are canceled after the
record date and on or before the interest payment date. Holders must surrender
Senior Discount Notes to a Paying Agent to collect principal payments. Holdings
will pay principal and interest in money of the United States of America that at
the time of payment is legal tender for payment of public and private debts.
Payments in respect of the Senior Discount Notes represented by a Global Senior
Discount Note (including principal, premium and interest) will be made by wire
transfer of immediately available funds to the accounts specified by The
Depository Trust Company. Holdings will make all payments in respect of a
certificated Senior Discount Note (including principal, premium and interest),
by mailing a check to the registered address of each Senior Discount Noteholder
thereof; provided, however, that payments on the Senior Discount Notes may also
be made, in the case of a Senior Discount Noteholder of at least $1,000,000
aggregate principal amount at maturity of Senior Discount Notes, by wire
transfer to a U.S. dollar account maintained by the payee with a bank in the
United States if such Senior Discount Noteholder elects payment by wire transfer
by giving written notice to the Senior Discount Notes Trustee or the Paying
Agent to such effect designating such account no later than 30 days immediately
preceding the relevant due date for payment (or such other date as the Senior
Discount Notes Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, Bank One, N.A., a national banking association (the
"Senior Discount Notes Trustee"), will act as Paying Agent and Registrar.
Holdings may appoint and change any Paying Agent, Registrar or co-registrar
without notice. Holdings or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
3
4. Indenture
Holdings issued the Senior Discount Notes under an Indenture dated
as of June 5, 1998 (the "Indenture"), among Holdings and the Senior Discount
Notes Trustee. The terms of the Senior Discount Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date
of the Indenture (the "TIA"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Senior Discount
Notes are subject to all such terms, and Senior Discount Noteholders are
referred to the Indenture and the TIA for a statement of those terms.
The Senior Discount Notes are senior unsecured obligations of
Holdings limited to $87 million aggregate principal amount at maturity at any
one time outstanding (subject to Section 2.07 of the Indenture). This Senior
Discount Note is one of the Initial Senior Discount Notes referred to in the
Indenture issued in an aggregate principal amount at maturity of $87 million.
The Senior Discount Notes include the Initial Senior Discount Notes and any
Senior Discount Exchange Notes issued in exchange for Initial Senior Discount
Notes. The Initial Senior Discount Notes and the Senior Discount Exchange Notes
are treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the ability of Holdings and its Restricted
Subsidiaries to, among other things, make certain Investments and other
Restricted Payments, pay dividends and other distributions, incur Indebtedness,
enter into consensual restrictions upon the payment of certain dividends and
distributions by such Restricted Subsidiaries, issue or sell shares of capital
stock of such Restricted Subsidiaries, enter into or permit certain transactions
with Affiliates, create or incur Liens and make asset sales. The Indenture also
imposes limitations on the ability of Holdings to consolidate or merge with or
into any other Person or convey, transfer or lease all or substantially all of
the property of Holdings.
5. Optional Redemption
Except as set forth in the following two paragraphs, the Senior
Discount Notes will not be redeemable at the option of Holdings prior to June 1,
2003. Thereafter, the Senior Discount Notes will be redeemable at the option of
Holdings, in whole or in part, on not less than 30 nor more than 60 days' prior
notice, at the following redemption prices (expressed as percentages of
principal amount at maturity), plus accrued and unpaid interest and liquidated
damages (if any) to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
June 1, of the years set forth below:
Redemption
Year Price
---- ------------
2003..................................................... 105.563%
2004..................................................... 103.708%
2005..................................................... 101.854%
2006 and thereafter...................................... 100.000%
In addition, at any time prior to June 1, 2001, Holdings may redeem,
in whole but not in part, the Senior Discount Notes with the Net Cash Proceeds
of one or more Equity Offerings by Holdings, at a redemption price equal to
111.125% of the Accreted Value at the
4
date of redemption plus liquidated damages, if any, thereon to the date of
redemption. Any such redemption shall be made within 120 days of such Equity
Offering upon not less than 30 nor more than 60 days' notice mailed to each
holder of Senior Discount Notes being redeemed and otherwise in accordance with
the procedures set forth in the Indenture.
At any time prior to June 1, 2003, the Senior Discount Notes may be
redeemed, in whole but not in part, at the option of Holdings at any time within
180 days after a Change of Control, at a redemption price equal to the sum of
(i) 100% of the Accreted Value thereof together with liquidated damages, if any,
to the redemption date plus (ii) the Applicable Premium.
6. Sinking Fund
The Senior Discount Notes are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Senior
Discount Noteholder of Senior Discount Notes to be redeemed at his or her
registered address. Senior Discount Notes in denominations larger than $1,000
(in principal amount at maturity) may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Senior Discount Notes (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Senior Discount Notes (or such
portions thereof) called for redemption.
8. Repurchase of Senior Discount Notes at the Option of Senior Discount
Noteholders upon Change of Control
Upon a Change of Control, any Senior Discount Noteholder of Senior
Discount Notes will have the right, subject to certain conditions specified in
the Indenture, to cause Holdings to repurchase all or any part of the Senior
Discount Notes of such Senior Discount Noteholder at a purchase price equal to
(a) 101% of the Accreted Value thereof at the date of repurchase plus liquidated
damages thereon, if any, to the date of repurchase, if repurchased on or prior
to June 1, 2003, and (b) 101% of the principal amount of the Senior Discount
Notes to be repurchased plus accrued and unpaid interest and liquidated damages,
if any, to the date of repurchase (subject to the right of Senior Discount
Noteholders of record on the relevant record date to receive interest due on the
relevant interest payment date), if repurchased after June 1, 2003, as provided
in, and subject to the terms of, the Indenture.
9. Mandatory Principal Redemption
On June 1, 2003, Holdings will be required to redeem an amount equal
to $354.96 per $1,000 principal amount at maturity of each Senior Discount Note
then outstanding ($30,881,520 in aggregate principal amount at maturity of the
Senior Discount Notes, assuming all of the Senior Discount Notes remain
outstanding on such date (the "Mandatory Principal Redemption Amount")) on a pro
rata basis at a redemption price of 100% of the principal amount at maturity of
the Senior Discount Notes so redeemed. If the redemption of a Senior Discount
Note pursuant to this paragraph 9 would result in an outstanding Senior Discount
Note in a denomination (i) of less than $1,000 principal amount
5
at maturity or (ii) other than an integral multiple of $1,000 principal amount
at maturity, such Senior Discount Note will be redeemed (A) in whole, in the
case of clause (i), or (B) by an additional amount so that such Senior Discount
Note will be in a denomination of an integral multiple of $1,000 principal
amount at maturity, in the case of clause (ii).
10. Denominations; Transfer; Exchange
The Senior Discount Notes are in registered form without coupons in
denominations of $1,000 (in principal amount at maturity) and whole multiples of
$1,000. A Senior Discount Noteholder may transfer or exchange Senior Discount
Notes in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Senior Discount Notes Trustee may require a Senior Discount
Noteholder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes required by law or permitted by the Indenture.
The Registrar need not register the transfer of or exchange any Senior Discount
Notes selected for redemption (except, in the case of a Senior Discount Note to
be redeemed in part, the portion of the Senior Discount Note not to be redeemed)
or to transfer or exchange any Senior Discount Notes for a period of 15 days
prior to a selection of Senior Discount Notes to be redeemed.
11. Persons Deemed Owners
The registered Senior Discount Noteholder of this Senior Discount
Note may be treated as the owner of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Senior Discount Notes Trustee or Paying Agent shall pay the
money back to Holdings at its written request unless an abandoned property law
designates another Person. After any such payment, Senior Discount Noteholders
entitled to the money must look only to Holdings and not to the Senior Discount
Notes Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, Holdings at any time may terminate
some of or all its obligations under the Senior Discount Notes and the Indenture
if Holdings deposits with the Senior Discount Notes Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Senior
Discount Notes to redemption or maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Senior Discount Notes may be amended without prior notice to
any Senior Discount Noteholder but with the written consent of the Senior
Discount Noteholders of at least a majority in aggregate principal amount at
maturity of the outstanding Senior Discount Notes and (ii) any default or
noncompliance with any provision may be waived with the written consent of the
Senior Discount Noteholders of at least a majority in principal amount at
maturity of the outstanding Senior Discount Notes. Subject to certain exceptions
set forth in the Indenture, without the consent of any Senior Discount
Noteholder of Senior Discount Notes, Holdings and the Senior Discount Notes
Trustee may amend the Indenture or the
6
Senior Discount Notes (i) to cure any ambiguity, omission, defect or
inconsistency; (ii) to comply with Article 5 of the Indenture; (iii) to provide
for uncertificated Senior Discount Notes in addition to or in place of
certificated Senior Discount Notes; (iv) to add Guarantees with respect to the
Senior Discount Notes; (v) to secure the Senior Discount Notes; (vi) to add
additional covenants of Holdings for the benefit of the Senior Discount
Noteholders or to surrender rights and powers conferred on Holdings; (vii) to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA; (viii) to make any change that
does not adversely affect the rights of any Senior Discount Noteholder; or (ix)
to provide for the issuance of the Senior Discount Exchange Notes or Private
Senior Discount Exchange Notes.
15. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of
Holdings) and is continuing, the Senior Discount Notes Trustee or the Senior
Discount Noteholders of at least 25% in principal amount at maturity of the
outstanding Senior Discount Notes may declare (a) the Accreted Value of all the
Senior Discount Notes, if on or prior to June 1, 2003, or (b) the principal of
and accrued but unpaid interest on all the Senior Discount Notes, if after June
1, 2003, to be due and payable. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of Holdings occurs, (a) the
Accreted Value of all the Senior Discount Notes, if on or prior to June 1, 2003,
or (b) the principal of and interest on all the Senior Discount Notes, if after
June 1, 2003, will become immediately due and payable without any declaration or
other act on the part of the Senior Discount Notes Trustee or any Senior
Discount Noteholders. Under certain circumstances, the Senior Discount
Noteholders of a majority in principal amount at maturity of the outstanding
Senior Discount Notes may rescind any such acceleration with respect to the
Senior Discount Notes and its consequences.
If an Event of Default occurs and is continuing, the Senior Discount
Notes Trustee will be under no obligation to exercise any of the rights or
powers under the Indenture at the request or direction of any of the Senior
Discount Noteholders unless such Senior Discount Noteholders have offered to the
Senior Discount Notes Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of Accreted
Value, principal, premium (if any) or interest when due, no Senior Discount
Noteholder may pursue any remedy with respect to the Indenture or the Senior
Discount Notes unless (i) such Senior Discount Noteholder has previously given
the Senior Discount Notes Trustee notice that an Event of Default is continuing,
(ii) Senior Discount Noteholders of at least 25% in principal amount at maturity
of the outstanding Senior Discount Notes have requested the Senior Discount
Notes Trustee in writing to pursue the remedy, (iii) such Senior Discount
Noteholders have offered the Senior Discount Notes Trustee reasonable security
or indemnity against any loss, liability or expense, (iv) the Senior Discount
Notes Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the Senior
Discount Noteholders of a majority in principal amount at maturity of the
outstanding Senior Discount Notes have not given the Senior Discount Notes
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Senior Discount Noteholders of a majority
in principal amount at maturity of the outstanding Senior Discount Notes are
given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Senior Discount Notes Trustee or of
exercising any trust or power conferred on the Senior Discount Notes Trustee.
The Senior Discount Notes Trustee, however, may
7
refuse to follow any direction that conflicts with law or the Indenture or that
the Senior Discount Notes Trustee determines is unduly prejudicial to the rights
of any other Senior Discount Noteholder or that would involve the Senior
Discount Notes Trustee in personal liability. Prior to taking any action under
the Indenture, the Senior Discount Notes Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
16. Senior Discount Notes Trustee Dealings with Holdings
Subject to certain limitations imposed by the TIA, the Senior
Discount Notes Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Senior Discount Notes and may
otherwise deal with and collect obligations owed to it by Holdings or its
Affiliates and may otherwise deal with Holdings or its Affiliates with the same
rights it would have if it were not Senior Discount Notes Trustee.
17. No Recourse Against Others
A director, officer, employee or stockholder, as such, of Holdings
shall not have any liability for any obligations of Holdings under the Senior
Discount Notes or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Senior Discount
Note, each Senior Discount Noteholder waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the Senior
Discount Notes.
18. Authentication
This Senior Discount Note shall not be valid until an authorized
signatory of the Senior Discount Notes Trustee (or an authenticating agent)
manually signs the certificate of authentication on the other side of this
Senior Discount Note.
19. Abbreviations
Customary abbreviations may be used in the name of a Senior Discount
Noteholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
20. GOVERNING LAW
THIS SENIOR DISCOUNT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Holdings has caused CUSIP numbers to be
printed on the Senior Discount Notes and has directed the Senior Discount Notes
Trustee to use CUSIP numbers in notices of redemption as a convenience to Senior
Discount Noteholders. No
8
representation is made as to the accuracy of such numbers either as printed on
the Senior Discount Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
Holdings will furnish to any Senior Discount Noteholder of Senior
Discount Notes upon written request and without charge to the Senior Discount
Noteholder a copy of the Indenture which has in it the text of this Senior
Discount Note.
ASSIGNMENT FORM
To assign this Senior Discount Note, fill in the form below:
I or we assign and transfer this Senior Discount Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Senior Discount Note
on the books of Holdings. The agent may substitute another to act for him.
- - - - --------------------------------------------------------------------------------
Date: Your Signature:
----------------------------- -----------------------------
- - - - --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Senior Discount
Note.
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED SENIOR DISCOUNT NOTES
This certificate relates to $_________ principal amount at maturity of Senior
Discount Notes held in (check applicable space) ____ book-entry or _____
definitive form by the undersigned.
The undersigned (check one box below):
|_| has requested the Senior Discount Notes Trustee by written order to
deliver in exchange for its beneficial interest in the Global Senior
Discount Note held by the Depositary a Senior Discount Note or Senior
Discount Notes in definitive, registered form of authorized denominations
and an aggregate principal amount at maturity equal to its beneficial
interest in such Global Senior Discount Note (or the portion thereof
indicated above);
|_| has requested the Senior Discount Notes Trustee by written order to
exchange or register the transfer of a Senior Discount Note or Senior
Discount Notes.
In connection with any transfer of any of the Senior Discount Notes evidenced by
this certificate occurring prior to the expiration of the period referred to in
Rule 144(k) under the Securities Act, the undersigned confirms that such Senior
Discount Notes are being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) |_| to Holdings; or
(2) |_| pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) |_| inside the United States to a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act of 1933) that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that such transfer is
being made in reliance on Rule 144A, in each case pursuant to and
in compliance with Rule 144A under the Securities Act of 1933; or
(4) |_| outside the United States in an offshore transaction within the
meaning of Regulation S under the Securities Act in compliance
with Rule 904 under the Securities Act of 1933; or
(5) |_| to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that
has furnished to the Senior Discount Notes Trustee a signed letter
containing certain representations and agreements; or
(6) |_| pursuant to another available exemption from registration provided
by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Senior Discount Notes Trustee will
refuse to register any of the Senior Discount Notes evidenced by this
certificate in the name of any Person other than the registered holder thereof;
provided, however, that if box (4), (5) or (6) is checked, the Senior Discount
Notes Trustee may require, prior to registering any such transfer of the Senior
Discount Notes, such legal opinions, certifications and other information as
Holdings has reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act of 1933.
---------------------------
Your Signature
Signature Guarantee:
Date:
--------------------------- -------------------------------
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Senior Discount Notes Trustee
- - - - ------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Senior Discount Note for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding Holdings as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
--------------------- ------------------------------
NOTICE: To be executed by
an executive officer
[TO BE ATTACHED TO GLOBAL SENIOR DISCOUNT NOTES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SENIOR
DISCOUNT NOTE
The initial principal amount at maturity of this Global Senior
Discount Note is $[ ]. The following increases or decreases in this Global
Senior Discount Note have been made:
Date of Amount of decrease in Amount of increase in Principal Amount at Signature of authorized
Exchange Principal Amount at Principal Amount at Maturity of this Global signatory of Senior
Maturity of this Global Maturity of this Global Senior Discount Note Discount Notes Trustee or
Senior Discount Note Senior Discount Note following such decrease or Senior Discount Notes
increase Custodian
OPTION OF SENIOR DISCOUNT NOTEHOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Discount Note purchased by
Holdings pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of
the Indenture, check the box:
Asset Sale |_| Change of Control |_|
If you want to elect to have only part of this Senior Discount Note
purchased by Holdings pursuant to Section 4.06 or 4.08 of the Indenture, state
the amount:
$
Date:_________________ Your Signature:_________________________________________
(Sign exactly as your name appears on the
other side of the Senior Discount Note)
Signature Guarantee: ___________________________________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Senior Discount
Notes Trustee
EXHIBIT B
[FORM OF FACE OF SENIOR DISCOUNT EXCHANGE NOTE]
No. $__________
11 1/8% Senior Discount Note due 2008
CUSIP No. ______
WESCO International, Inc., a Delaware corporation, promises to pay
to Cede & Co., or registered assigns, the principal sum [of Dollars]
[listed on the Schedule of Increases or Decreases in Global Senior Discount Note
attached hereto(2) on June 1, 2008.
Interest Payment Dates: June 1 and December 1, commencing on June 1,
2003.
Record Dates: May 15 and November 15.
- - - - ----------
(2) Use the Schedule of Increases and Decreases language if Note is in Global
Form.
2
Additional provisions of this Senior Discount Note are set forth on
the other side of this Senior Discount Note.
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed.
WESCO INTERNATIONAL, INC.,
by
---------------------------------------
Name:
Title:
by
---------------------------------------
Name:
Title:
Dated:
SENIOR DISCOUNT NOTES TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
BANK ONE, N.A.,
as Senior Discount Notes Trustee, certifies
that this is one of
the Senior Discount Notes referred
to in the Indenture.
By:
----------------------------------
Authorized Signatory
- - - - ----------
(*) If the Senior Discount Note is to be issued in global form, add the Global
Senior Discount Notes Legend and the attachment from Exhibit A captioned "TO BE
ATTACHED TO GLOBAL SENIOR DISCOUNT NOTES - SCHEDULE OF INCREASES OR DECREASES IN
GLOBAL SENIOR DISCOUNT NOTE".
[FORM OF REVERSE SIDE OF SENIOR DISCOUNT EXCHANGE NOTE]
11 1/8% Senior Discount Note due 2008
1. Interest.
WESCO INTERNATIONAL, INC., a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called "Holdings"), promises to pay interest on the principal
amount at maturity of this Senior Discount Note at the rate per annum shown
above. Cash interest will not accrue or be payable on this Senior Discount Note
prior to June 1, 2003. From June 1, 2003, Holdings will pay interest
semiannually on June 1 and December 1 of each year. Interest on the Senior
Discount Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from June 1, 2003. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment
Holdings will pay interest on the Senior Discount Notes (except
defaulted interest) to the Persons who are registered holders of Senior Discount
Notes at the close of business on the May 15 or November 15 next preceding the
interest payment date even if Senior Discount Notes are canceled after the
record date and on or before the interest payment date. Senior Discount
Noteholders must surrender Senior Discount Notes to a Paying Agent to collect
principal payments. Holdings will pay principal and interest in money of the
United States of America that at the time of payment is legal tender for payment
of public and private debts. Payments in respect of the Senior Discount Notes
represented by a Global Senior Discount Note (including principal, premium and
interest) will be made by wire transfer of immediately available funds to the
accounts specified by The Depository Trust Company. Holdings will make all
payments in respect of a certificated Senior Discount Note (including principal,
premium and interest), by mailing a check to the registered address of each
Senior Discount Noteholder thereof; provided, however, that payments on the
Senior Discount Notes may also be made, in the case of a Senior Discount
Noteholder of at least $1,000,000 aggregate principal amount at maturity of
Senior Discount Notes, by wire transfer to a U.S. dollar account maintained by
the payee with a bank in the United States if such Senior Discount Noteholder
elects payment by wire transfer by giving written notice to the Senior Discount
Notes Trustee or the Paying Agent to such effect designating such account no
later than 30 days immediately preceding the relevant due date for payment (or
such other date as the Senior Discount Notes Trustee may accept in its
discretion).
3. Paying Agent and Registrar
Initially, Bank One, N.A., a national banking association (the
"Senior Discount Notes Trustee"), will act as Paying Agent and Registrar.
Holdings may appoint and change any Paying Agent, Registrar or co-registrar
without notice. Holdings or any of its domestically incorporated Wholly Owned
Subsidiaries may act as Paying Agent, Registrar or co-registrar.
2
4. Indenture
Holdings issued the Senior Discount Notes under an Indenture dated
as of June 5, 1998 (the "Indenture"), among Holdings and the Senior Discount
Notes Trustee. The terms of the Senior Discount Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa- 77bbbb) as in effect on the date
of the Indenture (the "TIA"). Terms defined in the Indenture and not defined
herein have the meanings ascribed thereto in the Indenture. The Senior Discount
Notes are subject to all such terms, and Senior Discount Noteholders are
referred to the Indenture and the TIA for a statement of those terms.
The Senior Discount Notes are senior unsecured obligations of
Holdings limited to $87 million aggregate principal amount at maturity at any
one time outstanding. This Senior Discount Note is one of the Initial Senior
Discount Notes referred to in the Indenture. The Senior Discount Notes include
the Initial Senior Discount Notes and any Senior Discount Exchange Notes and
Private Senior Discount Exchange Notes issued in exchange for the Initial Senior
Discount Notes pursuant to the Indenture. The Initial Senior Discount Notes, the
Senior Discount Exchange Notes and the Private Senior Discount Exchange Notes
are treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the ability of Holdings and its Restricted
Subsidiaries to, among other things, make certain Investments and other
Restricted Payments, pay dividends and other distributions, incur Indebtedness,
enter into consensual restrictions upon the payment of certain dividends and
distributions by such Restricted Subsidiaries, issue or sell shares of capital
stock of such Restricted Subsidiaries, enter into or permit certain transactions
with Affiliates, create or incur Liens and make Asset Sales. The Indenture also
imposes limitations on the ability of Holdings to consolidate or merge with or
into any other Person or convey, transfer or lease all or substantially all of
the property of Holdings.
5. Optional Redemption
Except as set forth in the following two paragraphs, the Senior
Discount Notes will not be redeemable at the option of Holdings prior to June 1,
2003. Thereafter, the Senior Discount Notes will be redeemable at the option of
Holdings, in whole or in part, on not less than 30 nor more than 60 days' prior
notice, at the following redemption prices (expressed as percentages of
principal amount at maturity), plus accrued and unpaid interest and liquidated
damages (if any) to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
June 1 of the years set forth below:
Redemption
Year Price
---- ------------
2003...................................................... 105.563%
2004...................................................... 103.708%
2005...................................................... 101.854%
2006 and thereafter....................................... 100.000%
In addition, at any time prior to June 1, 2001, Holdings may redeem,
in whole but not in part, the Senior Discount Notes with the Net Cash Proceeds
of one or more Equity Offerings by Holdings, at a redemption price equal to
111.125% of the Accreted Value at the
3
date of redemption plus liquidated damages, if any, thereon to the date of
redemption. Any such redemption shall be made within 120 days of such Equity
Offering upon not less than 30 nor more than 60 days' notice mailed to each
holder of Senior Discount Notes being redeemed and otherwise in accordance with
the procedures set forth in the Indenture.
At any time prior to June 1, 2003, the Senior Discount Notes may be
redeemed, in whole but not in part, at the option of Holdings at any time within
180 days after a Change of Control, at a redemption price equal to the sum of
(i) 100% of the Accreted Value thereof together with liquidated damages, if any,
to the redemption date plus (ii) the Applicable Premium.
6. Sinking Fund
The Senior Discount Notes are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Senior
Discount Noteholder of Senior Discount Notes to be redeemed at his or her
registered address. Senior Discount Notes in denominations larger than $1,000
(in principal amount at maturity) may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of and
accrued interest on all Senior Discount Notes (or portions thereof) to be
redeemed on the redemption date is deposited with the Paying Agent on or before
the redemption date and certain other conditions are satisfied, on and after
such date interest ceases to accrue on such Senior Discount Notes (or such
portions thereof) called for redemption.
8. Repurchase of Senior Discount Notes at the Option of Senior Discount
Noteholders upon Change of Control
Upon a Change of Control, any Senior Discount Noteholder of Senior
Discount Notes will have the right, subject to certain conditions specified in
the Indenture, to cause Holdings to repurchase all or any part of the Senior
Discount Notes of such Senior Discount Noteholder at a purchase price equal to
(a) 101% of the Accreted Value thereof at the date of repurchase plus liquidated
damages thereon, if any, to the date of repurchase, if repurchased on or prior
to June 1, 2003, and (b) 101% of the principal amount of the Senior Discount
Notes to be repurchased plus accrued and unpaid interest and liquidated damages,
if any, to the date of repurchase (subject to the right of Senior Discount
Noteholders of record on the relevant record date to receive interest due on the
relevant interest payment date), if repurchased after June 1, 2003, as provided
in, and subject to the terms of, the Indenture.
9. Mandatory Principal Redemption
On June 1 , 2003, Holdings will be required to redeem an amount
equal to $354.96 per $1,000 principal amount at maturity of each Senior Discount
Note then outstanding ($30,881,520 in aggregate principal amount at maturity of
the Senior Discount Notes, assuming all of the Senior Discount Notes remain
outstanding on such date (the "Mandatory Principal Redemption Amount")) on a pro
rata basis at a redemption price of 100% of the principal amount at maturity of
the Senior Discount Notes so redeemed. If the redemption of a Senior Discount
Note pursuant to this paragraph 9 would result in an outstanding Senior Discount
Note in a denomination (i) of less than $1,000 principal amount
4
at maturity or (ii) other than an integral multiple of $1,000 principal amount
at maturity, such Senior Discount Note will be redeemed (A) in whole, in the
case of clause (i), or (B) by an additional amount so that such Senior Discount
Note will be in a denomination of an integral multiple of $1,000 principal
amount at maturity, in the case of clause (ii).
10. Denominations; Transfer; Exchange
The Senior Discount Notes are in registered form without coupons in
denominations of $1,000 (in principal amount and maturity) and whole multiples
of $1,000. A Senior Discount Noteholder may transfer or exchange Senior Discount
Notes in accordance with the Indenture. Upon any transfer or exchange, the
Registrar and the Senior Discount Notes Trustee may require a Senior Discount
Noteholder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes required by law or permitted by the Indenture.
The Registrar need not register the transfer of or exchange any Senior Discount
Notes selected for redemption (except, in the case of a Senior Discount Note to
be redeemed in part, the portion of the Senior Discount Note not to be redeemed)
or to transfer or exchange any Senior Discount Notes for a period of 15 days
prior to a selection of Senior Discount Notes to be redeemed or 15 days before
an interest payment date.
11. Persons Deemed Owners
The registered Senior Discount Noteholder of this Senior Discount
Note may be treated as the owner of it for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Senior Discount Notes Trustee or Paying Agent shall pay the
money back to Holdings at its written request unless an abandoned property law
designates another Person. After any such payment, Senior Discount Noteholders
entitled to the money must look only to Holdings and not to the Senior Discount
Notes Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, Holdings at any time may terminate
some of or all its obligations under the Senior Discount Notes and the Indenture
if Holdings deposits with the Senior Discount Notes Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Senior
Discount Notes to redemption or maturity, as the case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Senior Discount Notes may be amended without prior notice to
any Senior Discount Noteholder but with the written consent of the Senior
Discount Noteholders of at least a majority in aggregate principal amount at
maturity of the outstanding Senior Discount Notes and (ii) any default or
noncompliance with any provision may be waived with the written consent of the
Senior Discount Noteholders of at least a majority in principal amount at
maturity of the outstanding Senior Discount Notes. Subject to certain exceptions
set forth in the Indenture, without the consent of any Senior Discount
Noteholder of Senior Discount Notes, Holdings and the Senior Discount Notes
Trustee may amend the Indenture or the
5
Senior Discount Notes (i) to cure any ambiguity, omission, defect or
inconsistency; (ii) to comply with Article 5 of the Indenture; (iii) to provide
for uncertificated Senior Discount Notes in addition to or in place of
certificated Senior Discount Notes; (iv) to add Guarantees with respect to the
Senior Discount Notes; (v) to secure the Senior Discount Notes; (vi) to add
additional covenants of Holdings for the benefit of the Senior Discount
Noteholders or to surrender rights and powers conferred on Holdings; (vii) to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA; (viii) to make any change that
does not adversely affect the rights of any Senior Discount Noteholder; or (ix)
to provide for the issuance of the Senior Discount Exchange Notes or Private
Senior Discount Exchange Notes.
15. Defaults and Remedies
If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of
Holdings) and is continuing, the Senior Discount Notes Trustee or the Senior
Discount Noteholders of at least 25% in principal amount at maturity of the
outstanding Senior Discount Notes may declare (a) the Accreted Value of all the
Senior Discount Notes, if on or prior to June 1, 2003, or (b) the principal of
and accrued but unpaid interest on all the Senior Discount Notes, if after June
1, 2003, to be due and payable. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of Holdings occurs, (a) the
Accreted Value of all the Senior Discount Notes, if on or prior to June 1, 2003,
or (b) the principal of and interest on all the Senior Discount Notes, if after
June 1, 2003, will become immediately due and payable without any declaration or
other act on the part of the Senior Discount Notes Trustee or any Senior
Discount Noteholders. Under certain circumstances, the Senior Discount
Noteholders of a majority in principal amount at maturity of the outstanding
Senior Discount Notes may rescind any such acceleration with respect to the
Senior Discount Notes and its consequences.
If an Event of Default occurs and is continuing, the Senior Discount
Notes Trustee will be under no obligation to exercise any of the rights or
powers under the Indenture at the request or direction of any of the Senior
Discount Noteholders unless such Senior Discount Noteholders have offered to the
Senior Discount Notes Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of Accreted
Value, principal, premium (if any) or interest when due, no Senior Discount
Noteholder may pursue any remedy with respect to the Indenture or the Senior
Discount Notes unless (i) such Senior Discount Noteholder has previously given
the Senior Discount Notes Trustee notice that an Event of Default is continuing,
(ii) Senior Discount Noteholders of at least 25% in principal amount at maturity
of the outstanding Senior Discount Notes have requested the Senior Discount
Notes Trustee in writing to pursue the remedy, (iii) such Senior Discount
Noteholders have offered the Senior Discount Notes Trustee reasonable security
or indemnity against any loss, liability or expense, (iv) the Senior Discount
Notes Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the Senior
Discount Noteholders of a majority in principal amount at maturity of the
outstanding Senior Discount Notes have not given the Senior Discount Notes
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Senior Discount Noteholders of a majority
in principal amount at maturity of the outstanding Senior Discount Notes are
given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Senior Discount Notes Trustee or of
exercising any trust or power conferred on the Senior Discount Notes Trustee.
The Senior Discount Notes Trustee, however, may
6
refuse to follow any direction that conflicts with law or the Indenture or that
the Senior Discount Notes Trustee determines is unduly prejudicial to the rights
of any other Senior Discount Noteholder or that would involve the Senior
Discount Notes Trustee in personal liability. Prior to taking any action under
the Indenture, the Senior Discount Notes Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
16. Senior Discount Notes Trustee Dealings with Holdings
Subject to certain limitations imposed by the TIA, the Senior
Discount Notes Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Senior Discount Notes and may
otherwise deal with and collect obligations owed to it by Holdings or its
Affiliates and may otherwise deal with Holdings or its Affiliates with the same
rights it would have if it were not Senior Discount Notes Trustee.
17. No Recourse Against Others
A director, officer, employee or stockholder, as such, of Holdings
shall not have any liability for any obligations of Holdings under the Senior
Discount Notes or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. By accepting a Senior Discount
Note, each Senior Discount Noteholder waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the Senior
Discount Notes.
18. Authentication
This Senior Discount Note shall not be valid until an authorized
signatory of the Senior Discount Notes Trustee (or an authenticating agent)
manually signs the certificate of authentication on the other side of this
Senior Discount Note.
19. Abbreviations
Customary abbreviations may be used in the name of a Senior Discount
Noteholder or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship
and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to
Minors Act).
20. GOVERNING LAW
THIS SENIOR DISCOUNT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
21. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, Holdings has caused CUSIP numbers to be
printed on the Senior Discount Notes and has directed the Senior Discount Notes
Trustee to use CUSIP numbers in notices of redemption as a convenience to Senior
Discount Noteholders. No
7
representation is made as to the accuracy of such numbers either as printed on
the Senior Discount Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
Holdings will furnish to any Senior Discount Noteholder of Senior
Discount Notes upon written request and without charge to the Senior Discount
Noteholder a copy of the Indenture which has in it the text of this Senior
Discount Note.
ASSIGNMENT FORM
To assign this Senior Discount Note, fill in the form below:
I or we assign and transfer this Senior Discount Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Senior Discount
Note on the books of Holdings. The agent may substitute another to act for him.
- - - - --------------------------------------------------------------------------------
Date: Your Signature:
----------------------------- -----------------------------
- - - - --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Senior Discount
Note. Signature must be guaranteed by a participant in a recognized signature
guaranty medallion program or other signature guarantor acceptable to the Senior
Discount Notes Trustee.
OPTION OF SENIOR DISCOUNT NOTEHOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Discount Note purchased by
Holdings pursuant to Section 4.06 (Asset Sale) or 4.08 (Change of Control) of
the Indenture, check the box:
Asset Sale |_| Change of Control |_|
If you want to elect to have only part of this Senior Discount Note
purchased by Holdings pursuant to Section 4.06 or 4.08 of the Indenture, state
the amount:
$
Date:_________________ Your Signature:_________________________________________
(Sign exactly as your name appears on the
other side of the Senior Discount Note)
Signature Guarantee: ___________________________________________________________
Signature must be guaranteed by a participant in a
recognized signature guaranty medallion program or other
signature guarantor acceptable to the Senior Discount
Notes Trustee.
EXHIBIT C
Form of
Transferee Letter of Representation
WESCO International, Inc.
In care of Bank One, N.A.
Bank One Trust Company, N.A.
c/o First Chicago Trust Company
14 Wall Street
8th Floor, Suite 4607
New York, NY 10002
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $
principal amount at maturity of the 11 1/8% Senior Discount Notes due 2008 (the
"Senior Discount Notes") of WESCO International, Inc. ("Holdings").
Upon transfer, the Senior Discount Notes would be registered in the
name of the new beneficial owner as follows:
Name:
-------------------------------
Address:
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Taxpayer ID Number:
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The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount at
maturity of the Senior Discount Notes, and we are acquiring the Senior Discount
Notes not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act. We have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Senior Discount Notes, and we invest
in or purchase Senior Discount Notes similar to the Senior Discount Notes in the
normal course of our business. We, and any accounts for which we are acting, are
each able to bear the economic risk of our or its investment.
2. We understand that the Senior Discount Notes have not been
registered under the Securities Act and, unless so registered, may not be sold
except as permitted in the following sentence. We agree on our own behalf and on
behalf of any investor account for which we are purchasing Senior Discount Notes
to offer, sell or otherwise transfer such Senior Discount Notes prior to the
date that is two years after the later of the date of original issue and the
last date on which Holdings or any affiliate of Holdings was the owner of such
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Senior Discount Notes (or any predecessor thereto) (the "Resale Restriction
Termination Date") only (a) to Holdings, (b) pursuant to a registration
statement that has been declared effective under the Securities Act, (c) in a
transaction complying with the requirements of Rule 144A under the Securities
Act ("Rule 144A"), to a person we reasonably believe is a qualified
institutional investor under Rule 144A (a "QIB") that purchases for its own
account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional
"accredited investor," in each case in a minimum principal amount at maturity of
Notes of $250,000, or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of law that the disposition of our property
or the property of such investor account or accounts be at all times within our
or their control and in compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the Resale
Restriction Termination Date. If any resale or other transfer of the Notes is
proposed to be made pursuant to clause (e) above prior to the Resale Restriction
Termination Date, the transferor shall deliver a letter from the transferee
substantially in the form of this letter to Holdings and the Senior Discount
Notes Trustee, which shall provide, among other things, that the transferee is
an institutional "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act and that it is acquiring such Senior
Discount Notes for investment purposes and not for distribution in violation of
the Securities Act. Each purchaser acknowledges that Holdings and the Senior
Discount Notes Trustee reserve the right prior to the offer, sale or other
transfer prior to the Resale Termination Date of the Senior Discount Notes
pursuant to clause (d), (e) or (f) above to require the delivery of an opinion
of counsel, certifications or other information satisfactory to Holdings and the
Senior Discount Notes Trustee.
TRANSFEREE:___________________,
by:___________________________
EXHIBIT 4.8
WESCO INTERNATIONAL, INC.
$87,000,000
11-1/8% Senior Discount Notes due 2008
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
June 5, 1998
CHASE SECURITIES INC.
LEHMAN BROTHERS INC.
c/o Chase Securities Inc.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
WESCO International, Inc., a Delaware corporation ("Holdings"),
proposes to issue and sell to Chase Securities Inc. ("CSI") and Lehman Brothers
Inc. (together with CSI, the "Initial Purchasers"), upon the terms and subject
to the conditions set forth in a purchase agreement dated May 29, 1998 (the
"Purchase Agreement"), $87,000,000 aggregate principal amount at maturity of its
11-1/8% Senior Discount Notes due 2008 (the "Senior Discount Notes").
Capitalized terms used but not defined herein shall have the meanings given to
such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Initial Purchasers thereunder, Holdings agrees with the Initial Purchasers, for
the benefit of the holders (including the Initial Purchasers) of the Senior
Discount Notes, the Senior Discount Exchange Notes (as defined herein) and the
Private Senior Discount Exchange Notes (as defined herein) (collectively, the
"Holders"), as follows:
1. Senior Discount Notes Registered Exchange Offer. Holdings shall
(i) prepare and, not later than 90 days following the date of original issuance
of the Senior Discount Notes (the "Senior Discount Notes Issue Date"), file with
the Commission a registration statement (the "Senior Discount Notes Exchange
Offer Registration Statement") on an appropriate form under the Securities Act
with respect to a proposed offer to the Holders of the Senior Discount Notes
(the "Senior Discount Notes Registered Exchange Offer") to issue and deliver to
such Holders, in exchange for the Senior Discount Notes, a like aggregate
principal amount at maturity of debt securities of Holdings (the "Senior
Discount Exchange Notes") that are identical in all material respects to the
Senior Discount Notes, except for the transfer restrictions relating to the
Senior Discount Notes, (ii) use its reasonable best efforts to cause the Senior
Discount Notes Exchange Offer Registration Statement to become effective under
the Securities Act no later than 200 days after the Senior Discount Notes Issue
Date and the Senior Discount Notes Registered Exchange Offer to be consummated
no later than 230 days after the Senior Discount Notes Issue Date and (iii) keep
the Senior Discount Notes Exchange Offer Registration Statement effective for
not less than 20 business days (or longer, if required by applicable law) after
the date on which notice of the Senior Discount Notes Registered Exchange Offer
is mailed to the Holders (such period being called the "Senior Discount Notes
Exchange Offer Registration Period"). The Senior Discount Exchange Notes will be
issued under the Senior Discount Notes Indenture or an indenture (the "Senior
Discount Exchange Notes Indenture") between Holdings and the Senior Discount
Notes Trustee or such other bank or trust company that is reasonably
satisfactory to the Initial Purchasers, as trustee (the "Senior Discount
Exchange Notes Trustee"), such indenture to be identical in all material
respects to the Senior Discount Notes Indenture, except for the transfer
restrictions relating to the Senior Discount Notes (as described above).
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Upon the effectiveness of the Senior Discount Notes Exchange Offer
Registration Statement, Holdings shall promptly commence the Senior Discount
Notes Registered Exchange Offer, it being the objective of such Senior Discount
Notes Registered Exchange Offer to enable each Holder electing to exchange
Senior Discount Notes for Senior Discount Exchange Notes (assuming that such
Holder (a) is not an affiliate of Holdings or a Senior Discount Notes Exchanging
Dealer (as defined herein) not complying with the requirements of the next
sentence, (b) is not an Initial Purchaser holding Senior Discount Notes that
have, or that are reasonably likely to have, the status of an unsold allotment
in an initial distribution, (c) acquires the Senior Discount Exchange Notes in
the ordinary course of such Holder's business and (d) has no arrangements or
understandings with any person to participate in the distribution of the Senior
Discount Exchange Notes) and to trade such Senior Discount Exchange Notes from
and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. Holdings, the Initial Purchasers and
each Senior Discount Notes Exchanging Dealer acknowledge that, pursuant to
current interpretations by the Commission's staff of Section 5 of the Securities
Act, each Holder that is a broker-dealer electing to exchange Senior Discount
Notes, acquired for its own account as a result of market-making activities or
other trading activities, for Senior Discount Exchange Notes (a "Senior Discount
Notes Exchanging Dealer"), is required to deliver a prospectus containing
substantially the information set forth in Annex A hereto on the cover, in Annex
B hereto in the "Exchange Offer Procedures" section and the "Purpose of the
Exchange Offer" section and in Annex C hereto in the "Plan of Distribution"
section of such prospectus in connection with a sale of any such Senior Discount
Exchange Notes received by such Senior Discount Notes Exchanging Dealer pursuant
to the Senior Discount Notes Registered Exchange Offer.
If, prior to the consummation of the Senior Discount Notes
Registered Exchange Offer, any Holder holds any Senior Discount Notes acquired
by it that have, or that are reasonably likely to be determined to have, the
status of an unsold allotment in an initial distribution, or any Holder is not
entitled to participate in the Senior Discount Notes Registered Exchange Offer,
Holdings shall, upon the request of any such Holder, simultaneously with the
delivery of the Senior Discount Exchange Notes in the Senior Discount Notes
Registered Exchange Offer, issue and deliver to any such Holder, in exchange for
the Senior Discount Notes held by such Holder (the "Senior Discount Notes
Private Exchange"), a like aggregate principal amount at maturity of debt
securities of Holdings (the "Private Senior Discount Exchange Notes") that are
identical in all material respects to the Senior Discount Exchange Notes, except
for the transfer restrictions relating to such Private Senior Discount Exchange
Notes. The Private Senior Discount Exchange Notes will be issued under the same
indenture as the Senior Discount Exchange Notes, and Holdings shall use its
reasonable best efforts to cause the Private Senior Discount Exchange Notes to
bear the same CUSIP number as the Senior Discount Exchange Notes.
In connection with the Senior Discount Notes Registered Exchange
Offer, Holdings shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Senior Discount Notes Exchange Offer Registration Statement, together with
an appropriate letter of transmittal and related documents;
(b) keep the Senior Discount Notes Registered Exchange Offer open
for not less than 20 business days (or longer, if required by applicable
law) after the date on which notice of the Senior Discount Notes
Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Senior Discount
Notes Registered Exchange Offer with an address in the Borough of
Manhattan, The City of New York;
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(d) permit Holders to withdraw tendered Senior Discount Notes at any
time prior to the close of business, New York City time, on the last
business day on which the Senior Discount Notes Registered Exchange Offer
shall remain open; and
(e) otherwise comply in all respects with all laws that are
applicable to the Senior Discount Notes Registered Exchange Offer.
As soon as practicable after the close of the Senior Discount Notes
Registered Exchange Offer and any Senior Discount Notes Private Exchange, as the
case may be, Holdings shall:
(a) accept for exchange all Senior Discount Notes tendered and not
validly withdrawn pursuant to the Senior Discount Notes Registered
Exchange Offer and the Senior Discount Notes Private Exchange;
(b) deliver to the Senior Discount Notes Trustee for cancelation all
Senior Discount Notes so accepted for exchange; and
(c) cause the Senior Discount Notes Trustee or the Senior Discount
Exchange Notes Trustee, as the case may be, promptly to authenticate and
deliver to each Holder, Senior Discount Exchange Notes or Private Senior
Discount Exchange Notes, as the case may be, equal in principal amount at
maturity to the Senior Discount Notes of such Holder so accepted for
exchange.
Holdings shall use its reasonable best efforts to keep the Senior
Discount Notes Exchange Offer Registration Statement effective and to amend and
supplement the prospectus contained therein in order to permit such prospectus
to be used by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Senior Discount Exchange Notes; provided
that (i) in the case where such prospectus and any amendment or supplement
thereto must be delivered by a Senior Discount Notes Exchanging Dealer, such
period shall be the lesser of 180 days and the date on which all Senior Discount
Notes Exchanging Dealers have sold all Senior Discount Exchange Notes held by
them and (ii) Holdings shall make such prospectus and any amendment or
supplement thereto available to any broker-dealer for use in connection with any
resale of any Senior Discount Exchange Notes for a period of not less than 180
after the consummation of the Senior Discount Notes Registered Exchange Offer.
The Senior Discount Notes Indenture or the Senior Discount Exchange
Notes Indenture, as the case may be, shall provide that the Senior Discount
Notes, the Senior Discount Exchange Notes and the Private Senior Discount
Exchange Notes shall vote and consent together on all matters as one class and
that none of the Senior Discount Notes, the Senior Discount Exchange Notes or
the Private Senior Discount Exchange Notes will have the right to vote or
consent as a separate class on any matter.
Principal or interest on each Senior Discount Exchange Note and
Private Senior Discount Exchange Note issued pursuant to the Senior Discount
Notes Registered Exchange Offer and in the Senior Discount Notes Private
Exchange will accrete or accrue, as applicable, from the last semi-annual
accretion date or interest payment date on which principal accreted or interest
was paid, as applicable, on the Senior Discount Notes surrendered in exchange
therefor or, if no principal has accreted or no interest has been paid, as
applicable, on the Senior Discount Notes, from the Senior Discount Notes Issue
Date.
Each Holder participating in the Senior Discount Notes Registered
Exchange Offer shall be required to represent to Holdings that at the time of
the consummation of the Senior Discount Notes Registered Exchange Offer (i) any
Senior Discount Exchange Notes received by such Holder will be acquired in the
ordinary course of business, (ii) such Holder will have no arrangements or
understandings with any person to participate in the distribution of the Senior
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Discount Notes or the Senior Discount Exchange Notes within the meaning of the
Securities Act and (iii) such Holder is not an affiliate of Holdings or, if it
is such an affiliate, such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, Holdings will ensure
that (i) any Senior Discount Notes Exchange Offer Registration Statement and any
amendment thereto and any prospectus forming part thereof and any supplement
thereto complies in all material respects with the Securities Act and the rules
and regulations of the Commission thereunder, (ii) any Senior Discount Notes
Exchange Offer Registration Statement and any amendment thereto does not, when
it becomes effective, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) any prospectus forming part of any
Senior Discount Notes Exchange Offer Registration Statement, and any supplement
to such prospectus, does not, as of the consummation of the Senior Discount
Notes Registered Exchange Offer, include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
2. Shelf Registration. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff Holdings is not
permitted to effect the Senior Discount Notes Registered Exchange Offer as
contemplated by Section 1 hereof, or (ii) any Senior Discount Notes validly
tendered pursuant to the Senior Discount Notes Registered Exchange Offer are not
exchanged for Senior Discount Exchange Notes within 230 days after the Senior
Discount Notes Issue Date, or (iii) any Initial Purchaser so requests with
respect to Senior Discount Notes or Private Senior Discount Exchange Notes not
eligible to be exchanged for Senior Discount Exchange Notes in the Senior
Discount Notes Registered Exchange Offer and held by it following the
consummation of the Senior Discount Notes Registered Exchange Offer, or (iv) any
applicable law or interpretations do not permit any Holder to participate in the
Senior Discount Notes Registered Exchange Offer, or (v) any Holder that
participates in the Senior Discount Notes Registered Exchange Offer does not
receive freely transferable Senior Discount Exchange Notes in exchange for
tendered Senior Discount Notes, or (vi) Holdings so elects, then the following
provisions shall apply:
(a) Holdings shall use its reasonable best efforts to file as
promptly as practicable with the Commission, and thereafter shall use its
reasonable best efforts to cause to be declared effective, a shelf
registration statement on an appropriate form under the Securities Act
relating to the offer and sale of the Transfer Restricted Securities (as
defined below) by the Holders thereof from time to time in accordance with
the methods of distribution set forth in such registration statement
(hereafter, a "Senior Discount Notes Shelf Registration Statement" and,
together with any Senior Discount Notes Exchange Offer Registration
Statement, a "Senior Discount Notes Registration Statement").
(b) Holdings shall use its reasonable best efforts to keep the
Senior Discount Notes Shelf Registration Statement continuously effective
in order to permit the prospectus forming part thereof to be used by
Holders of Transfer Restricted Securities for a period ending on the
earlier of (i) two years from the Senior Discount Notes Issue Date or such
shorter period that will terminate when all the Transfer Restricted
Securities covered by the Senior Discount Notes Shelf Registration
Statement have been sold pursuant thereto and (ii) the date on which the
Senior Discount Notes become eligible for resale without volume
restrictions pursuant to Rule 144 under the Securities Act (in any such
case, such period being called the "Shelf Registration Period"). Holdings
shall be deemed not to have used its reasonable best efforts to keep the
Senior Discount Notes Shelf Registration Statement effective during the
requisite period if it voluntarily takes any action that would result in
Holders of Transfer Restricted Securities covered thereby not being able
to offer and sell such Transfer Restricted Securities during that period,
unless (A) such action is required by applicable law or (B) such action
was permitted by Section 3(b).
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(c) Notwithstanding any other provisions hereof, Holdings will
ensure that (i) any Senior Discount Notes Shelf Registration Statement and
any amendment thereto and any prospectus forming part thereof and any
supplement thereto complies in all material respects with the Securities
Act and the rules and regulations of the Commission thereunder, (ii) any
Senior Discount Notes Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information included
therein in reliance upon or in conformity with written information
furnished to Holdings by or on behalf of any Holder specifically for use
therein (the "Holders' Information")) does not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Senior Discount Notes Shelf
Registration Statement, and any supplement to such prospectus (in either
case, other than with respect to Holders' Information), does not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3. Liquidated Damages. (a) The parties hereto agree that the Holders
of Transfer Restricted Securities will suffer damages if Holdings fails to
fulfill its obligations under Section 1 or Section 2, as applicable, and that it
would not be feasible to ascertain the extent of such damages. Accordingly, if
(i) the applicable Senior Discount Notes Registration Statement is not filed
with the Commission on or prior to 90 days after the Senior Discount Notes Issue
Date (or, in the case of a Senior Discount Notes Shelf Registration Statement
required to be filed in response to a change in law or applicable
interpretations of the Commission's staff, if later, within 45 days after
publication of the change in law or interpretations, but in no event before 90
days after the Senior Discount Notes Issue Date), (ii) the Senior Discount Notes
Exchange Offer Registration Statement or the Senior Discount Notes Shelf
Registration Statement, as the case may be, is not declared effective within 200
days after the Senior Discount Notes Issue Date (or in the case of a Senior
Discount Notes Shelf Registration Statement required to be filed in response to
a change in law or the applicable interpretations of Commission's staff, if
later, within 90 days after publication of the change in law or interpretation,
but in no event before 200 days after the Senior Discount Notes Issue Date),
(iii) the Senior Discount Notes Registered Exchange Offer is not consummated on
or prior to 230 days after the Senior Discount Notes Issue Date (other than in
the event Holdings files a Senior Discount Notes Shelf Registration Statement),
or (iv) the Senior Discount Notes Shelf Registration Statement is filed and
declared effective within 200 days after the Senior Discount Notes Issue Date
(or in the case of a Senior Discount Notes Shelf Registration Statement required
to be filed in response to a change in law or the applicable interpretations of
Commission's staff, if later, within 90 days after publication of the change in
law or interpretation, but in no event before 200 days after the Senior Discount
Notes Issue Date) but shall thereafter cease to be effective (at any time that
Holdings is obligated to maintain the effectiveness thereof) without being
succeeded within 90 days by an additional Senior Discount Notes Registration
Statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default"), Holdings will be obligated to pay
liquidated damages to each Holder of Transfer Restricted Securities, during the
period of one or more such Registration Defaults, in an amount equal to $ 0.192
per week per $1,000 Accreted Value (as defined in the Senior Discount Notes
Indenture) of Transfer Restricted Securities held by such Holder until (i) the
applicable Senior Discount Notes Registration Statement is filed, (ii) the
Senior Discount Notes Exchange Offer Registration Statement is declared
effective and the Senior Discount Notes Registered Exchange Offer is
consummated, (iii) the Senior Discount Notes Shelf Registration Statement is
declared effective or (iv) the Senior Discount Notes Shelf Registration
Statement again becomes effective, as the case may be. Following the cure of all
Registration Defaults, the accrual of liquidated damages will cease. As used
herein, the term "Transfer Restricted Securities" means (i) each Senior Discount
Note until the date on which such Senior Discount Note has been exchanged for a
freely transferable Senior Discount Exchange Note in the Senior Discount Notes
Registered Exchange Offer, (ii) each Senior Discount Note or Private Senior
Discount Exchange Note until the date on which it has been effectively
registered under the Securities Act and disposed of in accordance with the
Senior Discount Notes Shelf Registration Statement or (iii) each Senior Discount
Note or Private Senior Discount Exchange Note until the date on which it is
distributed to
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the public pursuant to Rule 144 under the Securities Act or is saleable pursuant
to Rule 144(k) under the Securities Act. Notwithstanding anything to the
contrary in this Section 3(a), Holdings shall not be required to pay liquidated
damages to a Holder of Transfer Restricted Securities if such Holder failed to
comply with its obligations to make the representations set forth in the second
to last paragraph of Section 1 or failed to provide the information required to
be provided by it, if any, pursuant to Section 4(n).
(b) Notwithstanding the foregoing provisions of Section 3(a),
Holdings may issue a notice that the Senior Discount Notes Shelf Registration
Statement is unusable pending the announcement of a material development or
event and may issue any notice suspending use of the Senior Discount Notes Shelf
Registration Statement required under applicable securities laws to be issued
and, in the event that the aggregate number of days in any consecutive
twelve-month period for which all such notices are issued and effective exceeds
45 days in the aggregate, then Holdings will be obligated to pay liquidated
damages to each Holder of Transfer Restricted Securities in an amount equal to
$0.192 per week per $1,000 Accreted Value of Transfer Restricted Securities held
by such Holder. Upon Holdings declaring that the Senior Discount Notes Shelf
Registration Statement is usable after the period of time described in the
preceding sentence the accrual of liquidated damages shall cease; provided,
however, that if after any such cessation of the accrual of liquidated damages
the Senior Discount Notes Shelf Registration Statement again ceases to be usable
beyond the period permitted above, liquidated damages will again accrue pursuant
to the foregoing provisions.
(c) Holdings shall notify the Senior Discount Notes Trustee and the
Paying Agent under the Senior Discount Notes Indenture immediately upon the
happening of each and every Registration Default. Holdings shall pay the
liquidated damages due on the Transfer Restricted Securities by depositing with
the Paying Agent (which may not be Holdings for these purposes), in trust, for
the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on
the next semi-annual accretion date (if on or prior to June 1, 2003) or interest
payment date (if after June 1, 2003) specified by the Senior Discount Notes
Indenture and the Senior Discount Notes, sums sufficient to pay the liquidated
damages then due. The liquidated damages due shall be payable on each
semi-annual accretion date (if on or prior to June 1, 2003) or interest payment
date (if after June 1, 2003) specified by the Senior Discount Notes Indenture
and the Senior Discount Notes to the record holder on such date (if on or prior
to June 1, 2003) or the record holder entitled to receive the interest payment
to be made on such date (if after June 1, 2003). Each obligation to pay
liquidated damages shall be deemed to accrue from and including the date of the
applicable Registration Default.
(d) The parties hereto agree that the liquidated damages provided
for in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Senior Discount Notes
Shelf Registration Statement or the Senior Discount Notes Exchange Offer
Registration Statement to be filed, (ii) the Senior Discount Notes Shelf
Registration Statement to remain effective or (iii) the Senior Discount Notes
Exchange Offer Registration Statement to be declared effective and the Senior
Discount Notes Registered Exchange Offer to be consummated, in each case to the
extent required by this Agreement.
4. Registration Procedures. In connection with any Senior Discount
Notes Registration Statement, the following provisions shall apply:
(a) Holdings shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Senior Discount
Notes Registration Statement and each amendment thereof and each
supplement, if any, to the prospectus included therein; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution" section
of the prospectus forming a part of the Senior Discount Notes Exchange
Offer Registration Statement, and include the information set forth in
Annex D hereto in the Letter of Transmittal delivered
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pursuant to the Senior Discount Notes Registered Exchange Offer; and (iii)
if requested by any Initial Purchaser, include the information required by
Items 507 or 508 of Regulation S-K, as applicable, in the prospectus
forming a part of the Senior Discount Notes Exchange Offer Registration
Statement.
(b) Holdings shall advise each Initial Purchaser, each Senior
Discount Notes Exchanging Dealer and the Holders (if applicable) and, if
requested by any such person, confirm such advice in writing (which advice
pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction
to suspend the use of the prospectus until the requisite changes have been
made):
(i) when any Senior Discount Notes Registration Statement and
any amendment thereto has been filed with the Commission and when
such Senior Discount Notes Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Senior Discount Notes Registration Statement or
the prospectus included therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Senior Discount Notes
Registration Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by Holdings of any notification with
respect to the suspension of the qualification of the Senior
Discount Notes, the Senior Discount Exchange Notes or the Private
Senior Discount Exchange Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of
any changes in any Senior Discount Notes Registration Statement or
the prospectus included therein in order that the statements therein
are not misleading and do not omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
(c) Holdings will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Senior Discount Notes Registration Statement.
(d) Holdings will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Senior Discount Notes Shelf
Registration Statement, without charge, at least one conformed copy of
such Senior Discount Notes Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules and, if any such Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).
(e) Holdings will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within
the coverage of any Senior Discount Notes Shelf Registration Statement,
without charge, as many copies of the prospectus (including each
preliminary prospectus) included in such Senior Discount Notes Shelf
Registration Statement and any amendment or supplement thereto as such
Holder may reasonably request; and Holdings consents to the use of such
prospectus or any amendment or supplement thereto by each of the selling
Holders of Transfer Restricted Securities in connection with the offer and
sale of the Transfer Restricted Securities covered by such prospectus or
any amendment or supplement thereto.
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(f) Holdings will, during the period not exceeding 180 days
following the expiration of the Senior Discount Notes Registered Exchange
Offer, furnish to each Initial Purchaser and each Senior Discount Notes
Exchanging Dealer, and to any other Holder who so requests, without
charge, at least one conformed copy of the Senior Discount Notes Exchange
Offer Registration Statement and any post-effective amendment thereto,
including financial statements and schedules and, if any Initial Purchaser
or Senior Discount Notes Exchanging Dealer or any such Holder so requests
in writing, all exhibits thereto (including those, if any, incorporated by
reference).
(g) Holdings will, during the Senior Discount Notes Exchange Offer
Registration Period or the Shelf Registration Period, as applicable,
promptly deliver to each Initial Purchaser, each Senior Discount Notes
Exchanging Dealer and such other persons that are required to deliver a
prospectus following the Senior Discount Notes Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Senior Discount Notes Exchange Offer Registration Statement or the Senior
Discount Notes Shelf Registration Statement and any amendment or
supplement thereto as such Initial Purchaser, Senior Discount Notes
Exchanging Dealer or other persons may reasonably request; and Holdings
consents to the use of such prospectus or any amendment or supplement
thereto by any such Initial Purchaser, Senior Discount Notes Exchanging
Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Senior Discount Notes
Registration Statement, Holdings will use its reasonable best efforts to
register or qualify, or cooperate with the Holders of Senior Discount
Notes, Senior Discount Exchange Notes or Private Senior Discount Exchange
Notes included therein and their respective counsel in connection with the
registration or qualification of, such Senior Discount Notes, Senior
Discount Exchange Notes or Private Senior Discount Exchange Notes for
offer and sale under the securities or blue sky laws of such jurisdictions
as any such Holder reasonably requests in writing and do any and all other
acts or things necessary or advisable to enable the offer and sale in such
jurisdictions of the Senior Discount Notes, Senior Discount Exchange Notes
or Private Senior Discount Exchange Notes covered by such Senior Discount
Notes Registration Statement; provided that Holdings will not be required
to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to general
service of process or to taxation in any such jurisdiction where it is not
then so subject.
(i) Holdings will cooperate with the Holders of Senior Discount
Notes, Senior Discount Exchange Notes or Private Senior Discount Exchange
Notes to facilitate the timely preparation and delivery of certificates
representing Senior Discount Notes, Senior Discount Exchange Notes or
Private Senior Discount Exchange Notes to be sold pursuant to any Senior
Discount Notes Registration Statement free of any restrictive legends and
in such denominations and registered in such names as the Holders thereof
may request in writing prior to sales of Senior Discount Notes, Senior
Discount Exchange Notes or Private Senior Discount Exchange Notes pursuant
to such Senior Discount Notes Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which Holdings is required to maintain an effective
Senior Discount Notes Registration Statement, Holdings will promptly
prepare and file with the Commission a post-effective amendment to the
Senior Discount Notes Registration Statement or a supplement to the
related prospectus or file any other required document so that, as
thereafter delivered to purchasers of the Senior Discount Notes, Senior
Discount Exchange Notes or Private Senior Discount Exchange Notes from a
Holder, the prospectus will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
9
(k) Not later than the effective date of the applicable Senior
Discount Notes Registration Statement, Holdings will provide a CUSIP
number for the Senior Discount Notes, the Senior Discount Exchange Notes
and the Private Senior Discount Exchange Notes, as the case may be, and
provide the applicable trustee with printed certificates for the Senior
Discount Notes, the Senior Discount Exchange Notes or the Private Senior
Discount Exchange Notes, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) Holdings will comply with all applicable rules and regulations
of the Commission and Holdings will make generally available to its
security holders as soon as practicable after the effective date of the
applicable Senior Discount Notes Registration Statement an earning
statement covering at least 12 months satisfying the provisions of Section
11(a) of the Securities Act.
(m) Holdings will cause the Senior Discount Notes Indenture or the
Senior Discount Exchange Notes Indenture, as the case may be, to be
qualified under the Trust Indenture Act as required by applicable law in a
timely manner.
(n) Holdings may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Senior Discount Notes Shelf
Registration Statement to furnish to Holdings such information concerning
the Holder and the distribution of such Transfer Restricted Securities as
Holdings may from time to time reasonably require for inclusion in such
Senior Discount Notes Shelf Registration Statement, and Holdings may
exclude from such registration the Transfer Restricted Securities of any
Holder that fails to furnish such information within a reasonable time
after receiving such request.
(o) In the case of a Senior Discount Notes Shelf Registration
Statement, each Holder of Transfer Restricted Securities to be registered
pursuant thereto agrees by acquisition of such Transfer Restricted
Securities that, upon receipt of any notice from Holdings pursuant to
Section 4(b)(ii) through (v), such Holder will discontinue disposition of
such Transfer Restricted Securities until such Holder's receipt of copies
of the supplemental or amended prospectus contemplated by Section 4(j) or
until advised in writing (the "Advice") by Holdings that the use of the
applicable prospectus may be resumed. If Holdings shall give any notice
under Section 4(b)(ii) through (v) during the period that Holdings is
required to maintain an effective Senior Discount Notes Registration
Statement (the "Effectiveness Period"), such Effectiveness Period shall be
extended by the number of days during such period from and including the
date of the giving of such notice to and including the date when each
seller of Transfer Restricted Securities covered by such Senior Discount
Notes Registration Statement shall have received (x) the copies of the
supplemental or amended prospectus contemplated by Section 4(j) (if an
amended or supplemental prospectus is required) or (y) the Advice (if no
amended or supplemental prospectus is required).
(p) In the case of a Senior Discount Notes Shelf Registration
Statement, Holdings shall enter into such customary agreements (including,
if requested, an underwriting agreement in customary form) and take all
such other action, if any, as Holders of a majority in aggregate principal
amount at maturity of the Senior Discount Notes, Senior Discount Exchange
Notes and Private Senior Discount Exchange Notes being sold or the
managing underwriters (if any) shall reasonably request in order to
facilitate any disposition of Senior Discount Notes, Senior Discount
Exchange Notes or Private Senior Discount Exchange Notes pursuant to such
Senior Discount Notes Shelf Registration Statement.
(q) In the case of a Senior Discount Notes Shelf Registration
Statement, Holdings shall (i) make reasonably available for inspection by
a representative of, and Special Counsel (as defined below) acting for,
Holders of a majority in aggregate principal amount at maturity of the
Senior Discount Notes, Senior Discount Exchange Notes and
10
Private Senior Discount Exchange Notes being sold and any underwriter
participating in any disposition of Senior Discount Notes, Senior Discount
Exchange Notes or Private Senior Discount Exchange Notes pursuant to such
Senior Discount Notes Shelf Registration Statement, all relevant financial
and other records, pertinent corporate documents and properties of
Holdings and its subsidiaries and (ii) use its reasonable best efforts to
have its officers, directors, employees, accountants and counsel supply
all relevant information reasonably requested by such representative,
Special Counsel or any such underwriter (an "Inspector") in connection
with such Senior Discount Notes Shelf Registration Statement.
(r) In the case of a Senior Discount Notes Shelf Registration
Statement, Holdings shall, if requested by Holders of a majority in
aggregate principal amount at maturity of the Senior Discount Notes,
Senior Discount Exchange Notes and Private Senior Discount Exchange Notes
being sold, their Special Counsel or the managing underwriters (if any) in
connection with such Senior Discount Notes Shelf Registration Statement,
use its reasonable best efforts to cause (i) its counsel to deliver an
opinion relating to the Senior Discount Notes Shelf Registration Statement
and the Senior Discount Notes, Senior Discount Exchange Notes or Private
Senior Discount Exchange Notes, as applicable, in customary form, (ii) its
officers to execute and deliver all customary documents and certificates
requested by Holders of a majority in aggregate principal amount at
maturity of the Senior Discount Notes, Senior Discount Exchange Notes and
Private Senior Discount Exchange Notes being sold, their Special Counsel
or the managing underwriters (if any) and (iii) its independent public
accountants to provide a comfort letter or letters in customary form,
subject to receipt of appropriate documentation as contemplated, and only
if permitted, by Statement of Auditing Standards No. 72.
5. Registration Expenses. Holdings will bear all expenses incurred
in connection with the performance of its obligations under Sections 1, 2,
3 and 4 and, other than in connection with the Senior Discount Notes
Exchange Offer Registration Statement, Holdings will reimburse the Initial
Purchasers and the Holders for the reasonable fees and disbursements of
one firm of attorneys chosen by the Holders of a majority in aggregate
principal amount at maturity of the Senior Discount Notes, the Senior
Discount Exchange Notes and the Private Senior Discount Exchange Notes to
be sold pursuant to each Senior Discount Notes Registration Statement (the
"Special Counsel") acting for the Initial Purchasers or Holders in
connection therewith.
6. Indemnification. (a) In the event of a Senior Discount Notes
Shelf Registration Statement or in connection with any prospectus delivery
pursuant to an Senior Discount Notes Exchange Offer Registration Statement by an
Initial Purchaser or Senior Discount Notes Exchanging Dealer, as applicable,
Holdings shall indemnify and hold harmless each Holder (including, without
limitation, any such Initial Purchaser or Senior Discount Notes Exchanging
Dealer), its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6 and Section 7 as a Holder) from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of Senior Discount Notes,
Senior Discount Exchange Notes or Private Senior Discount Exchange Notes), to
which that Holder may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Senior
Discount Notes Registration Statement or any prospectus forming part thereof or
in any amendment or supplement thereto or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and shall reimburse each Holder promptly
upon demand for any legal or other expenses reasonably incurred by that Holder
in connection with investigating or defending or preparing to defend against or
appearing as a third party witness in connection with any such loss,
11
claim, damage, liability or action as such expenses are incurred; provided,
however, that Holdings shall not be liable in any such case to the extent that
any such loss, claim, damage, liability or action arises out of, or is based
upon, an untrue statement or alleged untrue statement in or omission or alleged
omission from any of such documents in reliance upon and in conformity with any
Holders' Information; and provided, further, that with respect to any such
untrue statement in or omission from any related preliminary prospectus, the
indemnity agreement contained in this Section 6(a) shall not inure to the
benefit of any Holder from whom the person asserting any such loss, claim,
damage, liability or action received Senior Discount Notes, Senior Discount
Exchange Notes or Private Senior Discount Exchange Notes to the extent that such
loss, claim, damage, liability or action of or with respect to such Holder
results from the fact that both (A) a copy of the final prospectus was not sent
or given to such person at or prior to the written confirmation of the sale of
such Senior Discount Notes, Senior Discount Exchange Notes or Private Senior
Discount Exchange Notes to such person and (B) the untrue statement in or
omission from the related preliminary prospectus was corrected in the final
prospectus unless, in either case, such failure to deliver the final prospectus
was a result of non-compliance by Holdings with Section 4(d), 4(e), 4(f) or
4(g).
(b) In the event of a Senior Discount Notes Shelf Registration
Statement, each Holder shall indemnify and hold harmless Holdings, its
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls Holdings within the meaning of the
Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6(b) and Section 7 as Holdings), from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof, to
which Holdings may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Senior
Discount Notes Registration Statement or any prospectus forming part thereof or
in any amendment or supplement thereto or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, but in each case only to the extent that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with any Holders' Information
furnished to Holdings by such Holder, and shall reimburse Holdings for any legal
or other expenses reasonably incurred by Holdings in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Senior Discount Notes,
Senior Discount Exchange Notes or Private Senior Discount Exchange Notes
pursuant to such Senior Discount Notes Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
however, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof
12
other than the reasonable costs of investigation; provided, however, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by Holdings from the offering and sale of the Senior Discount
Notes, on the one hand, and a Holder with respect to the sale by such Holder of
Senior Discount Notes, Senior Discount Exchange Notes or Private Senior Discount
Exchange Notes, on the other, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of Holdings, on the one hand, and such Holder, on the
other, with respect to the statements or omissions that resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by Holdings,
on the one hand, and a Holder, on the other, with respect to such offering and
such sale shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Senior Discount Notes (before deducting expenses)
received by or on behalf of Holdings as set forth in the table on the cover of
the Offering Memorandum, on the one hand, bear to the total proceeds received by
such Holder with respect to its sale of Senior Discount Notes, Senior Discount
Exchange Notes or Private Senior Discount Exchange Notes, on the other. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to Holdings or information
supplied by Holdings, on the one hand, or to any Holders' Information supplied
by such Holder, on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 7 were to be determined
by pro rata allocation or by any other method of allocation that
13
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
damage or liability, or action in respect thereof, referred to above in this
Section 7 shall be deemed to include, for purposes of this Section 7, any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending or preparing to defend any such action or claim.
Notwithstanding the provisions of this Section 7, an indemnifying party that is
a Holder of Senior Discount Notes, Senior Discount Exchange Notes or Private
Senior Discount Exchange Notes shall not be required to contribute any amount in
excess of the amount by which the total price at which the Senior Discount
Notes, Senior Discount Exchange Notes or Private Senior Discount Exchange Notes
sold by such indemnifying party to any purchaser exceeds the amount of any
damages which such indemnifying party has otherwise paid or become liable to pay
by reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
8. Rules 144 and 144A. Holdings shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time Holdings is not
required to file such reports, it will, upon the written request of any Holder
of Transfer Restricted Securities, make publicly available other information so
long as necessary to permit sales of such Holder's securities pursuant to Rules
144 and 144A. Holdings covenants that it will take such further action as any
Holder of Transfer Restricted Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Transfer
Restricted Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). Upon the written request of
any Holder of Transfer Restricted Securities, Holdings shall deliver to such
Holder a written statement as to whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require Holdings to register any of its securities pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Senior Discount Notes Shelf Registration Statement are
to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will administer the offering will be
selected by the Holders of a majority in aggregate principal amount at maturity
of such Transfer Restricted Securities included in such offering, subject to the
consent of Holdings (which shall not be unreasonably withheld or delayed), and
such Holders shall be responsible for all underwriting commissions and discounts
in connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous. (a) Amendments and Waivers. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless
Holdings has obtained the written consent of Holders of a majority in aggregate
principal amount at maturity of the Senior Discount Notes, the Senior Discount
Exchange Notes and the Private Senior Discount Exchange Notes, taken as a single
class. Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders whose Senior Discount Notes, Senior Discount Exchange Notes or
Private Senior Discount Exchange Notes are being sold pursuant to a Senior
Discount Notes Registration Statement and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of a majority in
aggregate principal amount at maturity of the Senior Discount Notes, the Senior
Discount Exchange Notes and the Private Senior Discount Exchange Notes being
sold by such Holders pursuant to such Senior Discount Notes Registration
Statement.
14
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder
to Holdings in accordance with the provisions of this Section 10(b), which
address initially is, with respect to each Holder, the address of such
Holder maintained by the Registrar under the Senior Discount Notes
Indenture, with a copy in like manner to Chase Securities Inc. and Lehman
Brothers Inc.;
(2) if to an Initial Purchaser, initially at its address set forth
in the Purchase Agreement; and
(3) if to Holdings, initially at the address of Holdings set forth
in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; one business day
after being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors And Assigns. This Agreement shall be binding upon
Holdings and its successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) Remedies. In the event of a breach by Holdings or by any Holder
of any of their obligations under this Agreement, each Holder or Holdings, as
the case may be, in addition to being entitled to exercise all rights granted by
law, including recovery of damages (other than the recovery of damages for a
breach by Holdings of its obligations under Sections 1 or 2 hereof for which
liquidated damages have been paid pursuant to Section 3 hereof), will be
entitled to specific performance of its rights under this Agreement. Holdings
and each Holder agree that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agree that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(i) No Inconsistent Agreements. Holdings represents, warrants and
agrees that (i) it has not entered into, shall not, on or after the date of this
Agreement, enter into any agreement that is inconsistent with the rights granted
to the Holders in this Agreement or otherwise conflicts with the provisions
hereof, (ii) it has not previously entered into any agreement which remains in
15
effect granting any registration rights with respect to any of its debt
securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in aggregate
principal amount at maturity of the then outstanding Transfer Restricted
Securities, it shall not grant to any person the right to request Holdings to
register any debt securities of Holdings under the Securities Act unless the
rights so granted are not in conflict or inconsistent with the provisions of
this Agreement.
(j) No Piggyback on Registrations. Neither Holdings nor any of its
security holders (other than the Holders of Transfer Restricted Securities in
such capacity) shall have the right to include any securities of Holdings in any
Shelf Registration or Senior Discount Notes Registered Exchange Offer other than
Transfer Restricted Securities.
(k) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
Please confirm that the foregoing correctly sets forth the agreement
among Holdings and the Initial Purchasers.
Very truly yours,
WESCO INTERNATIONAL, INC.
by
-----------------------
Name:
Title:
Accepted:
CHASE SECURITIES INC.
by
-------------------------
Authorized Signatory
LEHMAN BROTHERS INC.
by
-------------------------
Authorized Signatory
ANNEX A
Each broker-dealer that receives Senior Discount Exchange Notes for
its own account pursuant to the Senior Discount Notes Registered Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any resale
of such Senior Discount Exchange Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Senior Discount
Exchange Notes received in exchange for Senior Discount Notes where such Senior
Discount Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. Holdings has agreed that, for a period
of 180 days after the Expiration Date (as defined herein), it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution"
.
ANNEX B
Each broker-dealer that receives Senior Discount Exchange Notes for
its own account in exchange for Senior Discount Notes, where such Senior
Discount Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Senior Discount Exchange Notes.
See "Plan of Distribution".
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Senior Discount Exchange Notes for its own
account pursuant to the Senior Discount Notes Registered Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Senior Discount Exchange Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Senior Discount Exchange Notes received in exchange for Senior
Discount Notes where such Senior Discount Notes were acquired as a result of
market-making activities or other trading activities. Holdings has agreed that,
for a period of 180 days after the Expiration Date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until [ ] 199[ ], all
dealers effecting transactions in the Senior Discount Exchange Notes may be
required to deliver a prospectus.
Holdings will not receive any proceeds from any sale of Senior
Discount Exchange Notes by broker-dealers. Senior Discount Exchange Notes
received by broker-dealers for their own account pursuant to the Senior Discount
Notes Registered Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Senior Discount Exchange Notes or a combination of
such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer or the purchasers of any such Senior Discount
Exchange Notes. Any broker-dealer that resells Senior Discount Exchange Notes
that were received by it for its own account pursuant to the Senior Discount
Notes Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Senior Discount Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Senior Discount Exchange Notes and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an Aunderwriter@ within the meaning of the Securities
Act.
For a period of 180 days after the Expiration Date Holdings will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. Holdings has agreed to pay all expenses incident
to the Senior Discount Notes Registered Exchange Offer (including the expenses
of one counsel for the Holders of the Senior Discount Notes) other than
commissions or concessions of any broker-dealers and will indemnify the Holders
of the Senior Discount Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10
COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Senior
Discount Exchange Notes. If the undersigned is a broker-dealer that will receive
Senior Discount Exchange Notes for its own account in exchange for Senior
Discount Notes that were acquired as a result of market-making activities or
other trading activities, it acknowledges that it will deliver a prospectus in
connection with any resale of such Senior Discount Exchange Notes; however, by
so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
Exhibit 10.14
================================================================================
CREDIT AGREEMENT
dated as of
June 5, 1998
among
WESCO INTERNATIONAL, INC.,
WESCO DISTRIBUTION, INC.,
as U.S. Borrower,
WESCO DISTRIBUTION - CANADA, INC.,
as Canadian Borrower,
The Lenders Party Hereto,
THE CHASE MANHATTAN BANK,
as U.S. Administrative Agent,
Syndication Agent, U.S. Collateral Agent
and U.S. Swingline Lender,
THE CHASE MANHATTAN BANK OF CANADA, as Canadian
Administrative Agent, Canadian Collateral Agent
and Canadian Swingline Lender,
and
LEHMAN COMMERCIAL PAPER INC.,
as Documentation Agent
---------------------------
CHASE SECURITIES INC.,
as Arranger
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Defined Terms...................................................2
SECTION 1.02. Classification of Loans and Borrowings.........................31
SECTION 1.03. Terms Generally................................................31
SECTION 1.04. Accounting Terms; GAAP.........................................31
ARTICLE II
The Credits
SECTION 2.01. Commitments....................................................32
SECTION 2.02. Loans and Borrowings...........................................32
SECTION 2.03. Requests for Borrowings........................................33
SECTION 2.04. U.S. $ Swingline Loans.........................................34
SECTION 2.04A. C $ Swingline Loans...........................................34
SECTION 2.05. U.S. $ Letters of Credit.......................................35
SECTION 2.05A. C $ Letters of Credit.........................................38
SECTION 2.06. Funding of Borrowings..........................................42
SECTION 2.07. Interest Elections.............................................42
SECTION 2.08. Termination and Reduction of Commitments.......................44
SECTION 2.09. Repayment of Loans; Evidence of Debt...........................44
SECTION 2.10. Amortization of Term Loans.....................................45
SECTION 2.11. Prepayment of Loans............................................47
SECTION 2.12. Fees...........................................................49
SECTION 2.13. Interest.......................................................50
SECTION 2.14. Alternate Rate of Interest.....................................51
SECTION 2.15. Increased Costs................................................51
SECTION 2.16. Break Funding Payments.........................................52
SECTION 2.17. Taxes..........................................................53
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs.......................................................54
SECTION 2.19. Mitigation Obligations; Replacement of Lenders.................55
SECTION 2.20. Bankers' Acceptances...........................................56
SECTION 2.21. Spot Exchange Rate Calculations................................58
SECTION 2.22. Reallocation...................................................58
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers...........................................59
SECTION 3.02. Authorization; Enforceability..................................59
SECTION 3.03. Governmental Approvals; No Conflicts...........................59
SECTION 3.04. Financial Condition; No Material Adverse Change................60
SECTION 3.05. Properties.....................................................60
SECTION 3.06. Litigation and Environmental Matters...........................60
SECTION 3.07. Compliance with Laws and Agreements............................61
SECTION 3.08. Investment and Holding Company Status..........................61
SECTION 3.09. Taxes..........................................................61
SECTION 3.10. ERISA..........................................................61
SECTION 3.11. Disclosure.....................................................61
SECTION 3.12. Subsidiaries...................................................62
SECTION 3.13. Insurance......................................................62
SECTION 3.14. Labor Matters..................................................62
2
Page
SECTION 3.15. Solvency.......................................................62
SECTION 3.16. Security Documents.............................................62
SECTION 3.17. Federal Reserve Regulations....................................63
SECTION 3.18. Recapitalization...............................................63
SECTION 3.19. Capitalization of Parent.......................................63
SECTION 3.20. Year 2000 Compliance...........................................63
ARTICLE IV
Conditions
SECTION 4.01. Closing Date...................................................64
SECTION 4.02. Each Credit Event..............................................67
ARTICLE V
Affirmative Covenants
SECTION 5.01. Financial Statements and Other Information.....................68
SECTION 5.02. Notices of Material Events.....................................69
SECTION 5.03. Information Regarding Collateral...............................69
SECTION 5.04. Existence; Conduct of Business.................................69
SECTION 5.05. Payment of Obligations.........................................69
SECTION 5.06. Maintenance of Properties......................................69
SECTION 5.07. Insurance......................................................69
SECTION 5.08. Casualty and Condemnation......................................70
SECTION 5.09. Books and Records; Inspection and Audit Rights.................70
SECTION 5.10. Compliance with Laws...........................................70
SECTION 5.11. Use of Proceeds and Letters of Credit..........................70
SECTION 5.12. Additional Subsidiaries........................................71
SECTION 5.13. Further Assurances.............................................71
SECTION 5.14. Landlord Consents..............................................71
SECTION 5.15. Surveys........................................................72
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness; Certain Equity Securities........................72
SECTION 6.02. Liens..........................................................74
SECTION 6.03. Fundamental Changes............................................75
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions......75
SECTION 6.05. Asset Sales....................................................77
SECTION 6.06. Sale and Lease-Back Transactions...............................78
SECTION 6.07. Hedging Agreements.............................................78
SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness..........78
SECTION 6.09. Transactions with Affiliates...................................79
SECTION 6.10. Other Indebtedness.............................................79
SECTION 6.11. Restrictive Agreements.........................................79
SECTION 6.12. Amendment of Material Documents................................80
SECTION 6.13. Capital Expenditures...........................................80
SECTION 6.14. Leverage Ratio.................................................81
SECTION 6.15. Consolidated Net Cash Interest Expense Coverage Ratio..........81
SECTION 6.16. Working Capital Covenant.......................................81
SECTION 6.17. Additional Subsidiaries........................................81
SECTION 6.18. Fiscal Year....................................................81
3
Page
ARTICLE VII
Events of Default
ARTICLE VIII
The Administrative Agents and the Collateral Agents
ARTICLE IX
Collection Allocation Mechanism
SECTION 9.01. Implementation of CAM..........................................85
SECTION 9.02. Letters of Credit..............................................86
SECTION 9.03. Conversion.....................................................87
ARTICLE X
Miscellaneous
SECTION 10.01. Notices.......................................................87
SECTION 10.02. Waivers; Amendments...........................................88
SECTION 10.03. Expenses; Indemnity; Damage Waiver............................89
SECTION 10.04. Successors and Assigns........................................90
SECTION 10.05. Survival......................................................92
SECTION 10.06. Counterparts; Integration; Effectiveness......................92
SECTION 10.07. Severability..................................................93
SECTION 10.08. Right of Setoff...............................................93
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process....93
SECTION 10.10. WAIVER OF JURY TRIAL..........................................93
SECTION 10.11. Headings......................................................94
SECTION 10.12. Confidentiality...............................................94
SECTION 10.13. Interest Rate Limitation......................................94
SECTION 10.14. Judgment Currency.............................................94
SECTION 10.15. Limitation on Liability.......................................95
SCHEDULES:
Schedule 1.01(a) --Mortgaged Properties
Schedule 1.01(b) --Capital Leases
Schedule 2.01 --Commitments
Schedule 3.05 --Real Property
Schedule 3.06 --Disclosed Matters
Schedule 3.12 --Subsidiaries
Schedule 3.13 --Insurance
Schedule 3.16(d) --Mortgage Filing Offices
Schedule 6.01 --Existing Indebtedness
Schedule 6.02 --Existing Liens
Schedule 6.04 --Investments
Schedule 6.11 --Existing Restrictions
4
EXHIBITS:
- - - - ---------
Exhibit A -- Form of Assignment and Acceptance
Exhibit B-1 -- Form of Opinion of Debevoise & Plimpton
Exhibit B-2 -- Form of Opinion of Simpson Thacher & Bartlett
Exhibit B-3 -- Form of Opinion of Jeffrey B. Kramp, Esq.
Exhibit B-4 -- Form of Opinion of Amster, Rothstein & Ebenstein
Exhibit C-1 -- Form of Opinion of U.S. Local Counsel
Exhibit C-2 -- Form of Opinion of Canadian Local Counsel
Exhibit D -- Form of Parent Guarantee Agreement
Exhibit E -- Form of U.S. Subsidiary Guarantee Agreement
Exhibit E-1 -- Form of Canadian Subsidiary Guarantee Agreement
Exhibit F -- Form of Indemnity, Subrogation and Contribution Agreement
Exhibit G -- Form of U.S. Pledge Agreement
Exhibit H -- Form of U.S. Security Agreement
Exhibit H-1 -- Form of Canadian Security Agreement
Exhibit I -- Form of Mortgage
Exhibit J -- Form of B/A Equivalent Note
Exhibit K -- Form of Landlord Waiver
Exhibit L -- Form of Canadian Affiliate Guarantee Agreement
Exhibit M -- Form of U.S. Borrower Guarantee Agreement
CREDIT AGREEMENT, dated as of June 5, 1998, among WESCO
INTERNATIONAL, INC., a Delaware corporation ("Parent"), WESCO
DISTRIBUTION, INC., a Delaware corporation (the "U.S.
Borrower"), WESCO DISTRIBUTION - CANADA, INC., a corporation
organized and existing under the laws of the Province of
Ontario (the "Canadian Borrower"), the LENDERS party hereto,
THE CHASE MANHATTAN BANK, a New York banking corporation, as
U.S. Administrative Agent, Syndication Agent, U.S. Collateral
Agent and U.S. Swingline Lender, THE CHASE MANHATTAN BANK OF
CANADA, a Canadian chartered bank, as Canadian Administrative
Agent, Canadian Collateral Agent and Canadian Swingline
Lender, and LEHMAN COMMERCIAL PAPER INC., as Documentation
Agent.
Pursuant to the terms of the Recapitalization Agreement (such term
and each other capitalized term used but not defined in this introductory
statement having the meanings assigned to such terms in Article I), Investor
intends to purchase not less than approximately 80% of the outstanding shares of
Class A Common Stock. In connection therewith, (a) Cypress and certain of its
Affiliates will contribute an aggregate amount of not less than $400,000,000
(less the amount of the Roll-Over Equity) (the "Contributed Amount") in cash to
Investor, (b) Investor will purchase newly issued shares of Class A Common Stock
for an amount in cash equal to the Contributed Amount (the "New Stock
Purchase"), (c) Investor will purchase from certain Existing Stockholders a
portion of their shares of Class A Common Stock (the "Existing Stock Purchase"
and, together with the New Stock Purchase, the "Stock Purchase"), (d) Parent
will consummate the Redemption, (e) each of the options to purchase Class A
Common Stock that are outstanding immediately prior to the Redemption (other
than certain options held by the Remaining Stockholders as part of the Roll-Over
Equity) will be canceled and the holder thereof will be entitled to receive an
amount in cash equal to the difference between the Per-Share Purchase Price and
the exercise price of such option and (f) the Remaining Stockholders will
continue to hold Class A Common Stock and options to purchase Class A Common
Stock (the "Roll-Over Equity") having a value, based on the Per-Share Purchase
Price, of not less than $95,000,000. In addition, in connection with the
Recapitalization, (a) the U.S. Borrower will issue $300,000,000 in aggregate
principal amount of its Senior Subordinated Notes in a public offering or in a
Rule 144A or other private placement, (b) Parent will receive not less than
$50,000,000 in gross cash proceeds from the issuance of its Senior Discount
Notes in a public offering or in a Rule 144A or other private placement, (c)
Parent will repay or will cause to be repaid all outstanding indebtedness in
connection with (i) the Existing Credit Agreements and (ii) the Existing Notes
and (d) the Receivables Subsidiary will consummate the Permitted Receivables
Financing and pursuant thereto will receive an aggregate amount of up to
$250,000,000 on the Closing Date.
The Borrowers have requested (a) the U.S. $ Revolving Lenders to
extend credit to the U.S. Borrower in the form of U.S. $ Revolving Loans during
the U.S. $ Revolving Availability Period in an aggregate principal amount at any
time outstanding not in excess of $59,245,282.98 minus the sum of the U.S. $ LC
Exposure and the U.S. $ Swingline Exposure at such time, (b) the C $ Revolving
Lenders to extend credit to the Canadian Borrower in the form of C $ Revolving
Loans during the C $ Revolving Availability Period in an aggregate principal
amount at any time outstanding not in excess of $40,754,717.02 minus the sum of
the C $ LC Exposure and the C $ Swingline Exposure at such time, (c) the Tranche
A Lenders to extend credit in the form of Tranche A Term Loans on the Closing
Date in an aggregate principal amount not in excess of $80,000,000, (d) the
Tranche B Lenders to extend credit in the form of Tranche B Term Loans on the
Closing Date in an aggregate principal amount not in excess of $90,000,000, (e)
the Delayed Draw Lenders to extend credit in the form of Delayed Draw Term Loans
during the Delayed Draw Availability Period in an aggregate principal amount not
in excess of $100,000,000, (f) the U.S. Issuing Bank to issue U.S. $ Letters of
Credit during the U.S. $ LC Availability Period in an aggregate face amount at
any time outstanding not in excess of $25,000,000, (g) the U.S. Swingline Lender
to extend credit in the form of U.S. $ Swingline Loans during the U.S. $
Revolving Availability Period in an aggregate principal amount at any time
outstanding not in excess of $20,000,000, (h) the Canadian Issuing Bank to issue
C $ Letters of Credit during the C $ LC Availability Period in an aggregate face
amount at any time outstanding not in excess of $5,000,000, and (i) the Canadian
Swingline Lender to extend credit in the form of C $ Swingline Loans during the
C $ Revolving Availability Period in an aggregate amount at any time outstanding
not in excess of $5,000,000.
The proceeds of the Term Loans, the Revolving Loans, the Additional
Revolving Loans, any Letters of Credit and any Swingline Loans from and after
the Closing Date will be used by the Borrowers as provided in Section 5.11.
2
The Lenders and the Swingline Lenders are willing to extend such
credit to the Borrowers and the Issuing Banks are willing to issue Letters of
Credit for the account of the Borrowers on the terms and subject to the
conditions set forth herein. Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Acceptance Fee" means a fee payable in Canadian Dollars by the
Canadian Borrower to a C $ Revolving Lender with respect to the acceptance of a
B/A or the purchase of a B/A Equivalent Note, calculated on the face amount of
the B/A or the B/A Equivalent Note at the rate per annum equal to the B/A Spread
on the basis of the number of days in the applicable Contract Period and a year
of 365 days (it being agreed that the B/A Spread in respect of a B/A Equivalent
Note is equivalent to the B/A Spread otherwise applicable to the B/A Borrowing
which has been replaced by the purchase of such B/A Equivalent Note pursuant to
Section 2.20(g)).
"Additional Revolving Availability Period" means the period from and
including July 1, 1998, to but excluding the earlier of (a) the Revolving
Maturity Date and (b) the date of termination of the Additional Revolving
Commitments and the Canadian Revolving Commitments.
"Additional Revolving Commitment" means, with respect to any Lender,
the commitment, if any, of such Lender to make Additional Revolving Loans during
the Additional Revolving Availability Period, expressed as an amount
representing the maximum aggregate principal amount of such Lender's Additional
Revolving Loans hereunder, as such commitment may be (a) temporarily or
permanently reduced from time to time pursuant to Sections 2.08 and 2.22 and (b)
reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 2.19 or 10.04. The initial aggregate amount of the
Additional Revolving Lenders' Additional Revolving Commitments is $0.
"Additional Revolving Lender" means each C $ Revolving Lender,
lending through a U.S. Office (or, if any C $ Revolving Lender is not a Canadian
Schedule I chartered bank, the Affiliate designated by such C $ Revolving Lender
that is a U.S. chartered bank or other financial institution (each, a
"Designated U.S. Affiliate")) with an Additional Revolving Commitment or, if the
Additional Revolving Commitment shall equal zero, a Lender (individually or
together with its Designated U.S. Affiliate) that may be required, pursuant to
Section 2.22, to make Additional Revolving Loans.
"Additional Revolving Loan" means any loan made by an Additional
Revolving Lender pursuant to its Additional Revolving Commitment.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agents" means the U.S. Administrative Agent and the
Canadian Administrative Agent.
"Administrative Questionnaire" means an Administrative Questionnaire
in a form supplied by the U.S. Administrative Agent or Canadian Administrative
Agent, as applicable.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Agents" means the U.S. Administrative Agent, the Canadian
Administrative Agent, the Syndication Agent, the U.S. Collateral Agent, the
Canadian Collateral Agent and the Documentation Agent.
3
"Aggregate Redemption Price" means the aggregate purchase price of
the Repurchased Shares which, pursuant to the Recapitalization Agreement, is
equal to the product of (a) the Per-Share Purchase Price and (b) the number of
such Repurchased Shares.
"Alternate Base Rate" means, for any day, a rate per annum equal to
the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect
on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" means, with respect to any (a) U.S. $
Revolving Lender, the percentage of the Total U.S. $ Revolving Commitment
represented by such Lender's U.S. $ Revolving Commitment, (b) C $ Revolving
Lender, the percentage of the Total C $ Revolving Commitment represented by such
Lender's C $ Revolving Commitment and (c) Additional Revolving Lender, the
percentage of the Total Additional Revolving Commitment represented by such
Lender's Additional Revolving Commitment. In the event any Revolving Commitments
or Additional Revolving Commitments shall have expired or been terminated, the
Applicable Percentages shall be determined on the basis of the relevant
Revolving Commitments or Additional Revolving Commitments most recently in
effect, but giving effect to any assignments pursuant to Section 10.04.
"Applicable Rate" means, (a) for any day with respect to any ABR
Loan (excluding Swingline Loans) or Eurodollar Loan or with respect to the
Commitment Fees payable hereunder in respect of the U.S. $ Revolving Commitments
and the Additional Revolving Commitments, as the case may be, the applicable
rate per annum set forth below under the caption "ABR Spread", "Eurodollar
Spread" or "Commitment Fee Rate", as the case may be, based upon the Leverage
Ratio as of the most recent determination date, provided that until the date of
delivery to the U.S. Administrative Agent, pursuant to Section 5.01(b), of
Parent's and the U.S. Borrower's consolidated financial statements for Parent's
and the U.S. Borrower's first four full fiscal quarters commencing after the
Closing Date, the "Applicable Rate" with respect to any ABR Loan or Eurodollar
Loan that is a U.S. $ Revolving Loan or Additional Revolving Loan and the
Commitment Fee Rate shall be the applicable rate per annum set forth below in
Category 1:
===============================================================================================================
Leverage Ratio: ABR Eurodollar Commitment Fee
- - - - -------------- Spread Spread Rate
------ ------ ----
- - - - ---------------------------------------------------------------------------------------------------------------
Category 1
Equal to or greater than 3.25 to 1.00 1.25% 2.25% 0.500%
- - - - ---------------------------------------------------------------------------------------------------------------
Category 2
Less than 3.25 to 1.00 but equal to or greater 1.00% 2.00% 0.500%
than 2.50 to 1.00
- - - - ---------------------------------------------------------------------------------------------------------------
Category 3
Less than 2.50 to 1.00 but equal to or greater 0.75% 1.75% 0.500%
than 2.00 to 1.00
- - - - ---------------------------------------------------------------------------------------------------------------
Category 4
Less than 2.00 to 1.00 0.50% 1.50% 0.400%
===============================================================================================================
(b) for any day with respect to any ABR Loan or Eurodollar Loan that is a
Tranche A Term Loan, as the case may be, the applicable rate per annum set forth
below under the caption "ABR Spread--Term Loan A" or "Eurodollar Spread--Term
Loan A", as the case may be, based upon the Leverage Ratio as of the most recent
determination date, provided that until the date of delivery to the U.S.
Administrative Agent, pursuant to Section 5.01(b), of Parent's and the U.S.
Borrower's consolidated financial statements for Parent's and the U.S.
4
Borrower's first four full fiscal quarters commencing after the Closing Date,
the "Applicable Rate" with respect to any ABR Loan or Eurodollar Loan that is a
Tranche A Term Loan shall be the applicable rate per annum set forth below in
Category 1:
================================================================================
ABR Eurodollar
Leverage Ratio: Spread-- Spread--Term
- - - - -------------- Term Loan A Loan A
----------- ------
- - - - --------------------------------------------------------------------------------
Category 1
Equal to or greater than 3.25 to 1.00 1.25% 2.25%
- - - - --------------------------------------------------------------------------------
Category 2
Less than 3.25 to 1.00 but equal to or greater 1.00% 2.00%
than 2.50 to 1.00
- - - - --------------------------------------------------------------------------------
Category 3
Less than 2.50 to 1.00 but equal to or greater 0.75% 1.75%
than 2.00 to 1.00
- - - - --------------------------------------------------------------------------------
Category 4
Less than 2.00 to 1.00 0.50% 1.50%
================================================================================
(c) for any day with respect to any ABR Loan or Eurodollar Loan that is a
Tranche B Term Loan, as the case may be, the applicable rate per annum set forth
below under the caption "ABR Spread--Term Loan B" or "Eurodollar Spread--Term
Loan B" as the case may be, based upon the Leverage Ratio as of the most recent
determination date, provided that until the date of delivery to the U.S.
Administrative Agent, pursuant to Section 5.01(b), of Parent's and the U.S.
Borrower's consolidated financial statements for Parent's and the U.S.
Borrower's first four full fiscal quarters commencing after the Closing Date,
the "Applicable Rate" with respect to any ABR Loan or Eurodollar that is a
Tranche B Term Loan shall be the applicable rate per annum set forth below in
Category 1:
================================================================================
ABR Eurodollar
Leverage Ratio: Spread--Term Loan B Spread--Term Loan B
- - - - --------------- ------------------- -------------------
- - - - --------------------------------------------------------------------------------
Category 1
Equal to or greater than 2.50 to 1.00 1.50% 2.50%
- - - - --------------------------------------------------------------------------------
Category 2
Less than 2.50 to 1.00 1.25% 2.25%
================================================================================
(d) for any day with respect to any ABR Loan or Eurodollar Loan that is a
Delayed Draw Term Loan, or with respect to the Commitment Fees payable hereunder
in respect of the Delayed Draw Term Loans, the applicable rate per annum set
forth below under the caption "ABR Spread -- Delayed Draw Term Loan",
"Eurodollar Spread -- Delayed Draw Term Loan" or "Commitment Fee Rate", as the
case may be, based upon the Leverage Ratio as of the most recent determination
date, provided that until the date of delivery to the U.S. Administrative Agent,
pursuant to Section 5.01(b), of Parent's and the U.S. Borrower's consolidated
financial statements for Parent's and the U.S. Borrower's first four full fiscal
quarters commencing after the Closing Date, the "Applicable Rate" with respect
to any ABR Loan or Eurodollar Loan that is a Delayed Draw Term Loan shall be the
applicable rate per annum set forth below in Category 1:
============================================================================================
ABR Eurodollar
Leverage Ratio: Spread--Delayed Spread--Delayed Commitment Fee
-------------- Draw Term Loan Draw Term Loan Rate
-------------- -------------- ----
- - - - --------------------------------------------------------------------------------------------
Category 1
Equal to or greater than 2.50 to 1.00 1.50% 2.50% 0.500%
- - - - --------------------------------------------------------------------------------------------
Category 2
Less than 2.50 to 1.00 1.25% 2.25% 0.500%
============================================================================================
and (e) for any day with respect to any Canadian Prime Rate Loan, B/A Borrowing
or with respect to the Canadian Commitment Fees in respect of the C $ Revolving
Commitments payable hereunder, as the case may be, the applicable rate per annum
set forth below under the caption "Canadian Prime Rate--C $ Revolving Loan",
"B/A Spread-C $ Revolving Loan" or "Canadian Commitment Fee Rate", as the case
may be, based upon the Leverage Ratio as of the most recent determination date,
provided that until the date of delivery to the Canadian Administrative Agent,
pursuant to Section 5.01(b), of Parent's and the U.S. Borrower's consolidated
financial statements for Parent's and the U.S. Borrower's first four full fiscal
quarters commencing after the
5
Closing Date, the "Applicable Rate" with respect to any Canadian Prime Rate Loan
shall be the applicable rate per annum set forth below in Category 1:
==============================================================================================================
Leverage Ratio: Canadian Canadian
-------------- Prime Rate--C $ B/A Spread--C $ Commitment
Revolving Loan Revolving Loan Fee Rate
-------------- -------------- --------
Category 1
Equal to or greater than 3.25 to 1.00 1.25% 2.25% 0.500%
- - - - --------------------------------------------------------------------------------------------------------------
Category 2
Less than 3.25 to 1.00 but equal to or greater than 1.00% 2.00% 0.500%
2.50 to 1.00
- - - - --------------------------------------------------------------------------------------------------------------
Category 3
Less than 2.50 to 1.00 but equal to or greater than 0.75% 1.75% 0.500%
2.00 to 1.00
- - - - --------------------------------------------------------------------------------------------------------------
Category 4
Less than 2.00 to 1.00 0.50% 1.50% 0.400%
==============================================================================================================
For purposes of the foregoing, (a) the Leverage Ratio shall be
determined as of the end of each fiscal quarter of Parent's fiscal year based
upon Parent's consolidated financial statements delivered pursuant to Section
5.01(a) or (b), and (b) each change in the Applicable Rate resulting from a
change in the Leverage Ratio shall be effective during the period commencing on
and including the date of (such day, the "Applicable Rate Determination Date")
delivery to the U.S. Administrative Agent of such consolidated financial
statements indicating such change and ending on the date immediately preceding
the effective date of the next such change, provided that the Leverage Ratio
shall be deemed to be in Category 1 if the U.S. Borrower fails to deliver the
consolidated financial statements required to be delivered by it pursuant to
Section 5.01(a) or (b), during the period from the expiration of the time for
delivery thereof until such consolidated financial statements are delivered.
"Approved Fund" means with respect to any Lender that is a fund that
invests in bank loans, any other fund that invests in bank loans and is advised
or managed by the same investment advisor as such Lender or by an Affiliate of
such investment advisor.
"Assessment Rate" means, for any day, the annual assessment rate in
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in Dollars at the
offices of such member in the United States, provided that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the U.S. Administrative Agent in its reasonable
judgment to be representative of the cost of such insurance to the Lenders.
"Assigned Dollar Value" means in respect of any C $ Revolving
Borrowing, the Dollar Equivalent of the amount set forth in the initial
Borrowing Request with respect thereto or, in the case of a B/A Borrowing, the
Dollar Equivalent of the face amount of the Bankers' Acceptances or B/A
Equivalent Notes relating thereto. Thereafter, Assigned Dollar Value shall mean,
(a) in respect of any C $ Revolving Borrowing, the Dollar Equivalent of the
principal amount of the Loans relating to such Borrowing (or the face amounts of
the Bankers' Acceptances or B/A Equivalent Notes relating thereto) as determined
on the most recent Reset Date based on the Spot Exchange Rate, (b) in respect of
the undrawn amount of any C $ Letter of Credit, the Dollar Equivalent thereof
determined based upon the Spot Exchange Rate as of (i) the date that is three
Business Days prior to the date of issuance of such C $ Letter of Credit, until
the first day after such date of issuance which is the last day of March, June,
September or December and (ii) thereafter, the most recent date that is the last
day of March, June, September or December, (c) in respect of a C $ LC
Disbursement, the Dollar Equivalent thereof determined based upon the Spot
Exchange Rate as of the date such C $ LC Disbursement was made and (d) in
respect of a C $ Swingline Loan, the Dollar Equivalent thereof based upon the
applicable Spot Exchange Rate as of the date that the C $ Swingline Loan was
made. The Assigned Dollar Value of a Loan included in any Borrowing shall equal
the portion of the Assigned Dollar Value of such Borrowing represented by such
Loan.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 10.04), and accepted by the U.S. Administrative
Agent, (and, in the case of an assignment of C $ Revolving Commitments, C
6
$ Revolving Loans, Additional Revolving Commitments or Additional Revolving
Loans, accepted by the Canadian Administrative Agent), in the form of Exhibit A
or any other form approved by the applicable Administrative Agent.
"Assumed Debt" means the existing debt of the U.S. Borrower in an
aggregate principal amount of up to $23,200,000, incurred in connection with
certain acquisitions by the U.S. Borrower.
"B/A Borrowing" means a Borrowing comprised of a Bankers' Acceptance
or, as applicable, a B/A Equivalent Note.
"B/A Equivalent Note" has the meaning set forth in Section 2.20(g).
"B/A Spread" means, for any day, with respect to any B/A Borrowing,
the Applicable Rate that would apply to such Borrowing on such day.
"Bankers' Acceptance" and "B/A" mean a bill of exchange denominated
in Canadian Dollars, drawn by the Canadian Borrower and accepted by a C $
Revolving Lender in accordance with this Agreement, provided that with respect
to a C $ Revolving Lender that is not a chartered bank under the Bank Act
(Canada) or that has notified the Canadian Administrative Agent that it is
otherwise unable to accept such bills of exchange, it shall mean a B/A
Equivalent Note.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD
Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Barclays" means Barclays Bank Plc, a banking corporation organized
under the laws of the United Kingdom.
"Board" means the Board of Governors of the Federal Reserve System
of the United States of America.
"Borrowers" means the U.S. Borrower and the Canadian Borrower.
"Borrowing" means (a) Loans of the same Class and Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect, (b) a U.S. $ Swingline Loan or
(c) a C $ Swingline Loan.
"Borrowing Request" means a request by either of the Borrowers for a
Borrowing or Borrowings in accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed, provided that, (a) when used in connection with a Eurodollar
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market and (b) when
used in connection with a C $ Revolving Loan, the term "Business Day" shall also
exclude any day on which banks are required or permitted to be closed in the
city of Toronto.
"C $ LC Availability Period" means the period from and including the
Closing Date to but excluding the earlier of (a) the date that is five Business
Days prior to the Revolving Maturity Date and (b) the date of termination of the
C $ Revolving Commitments.
"C $ LC Disbursement" means a payment or disbursement made by the
applicable Canadian Issuing Bank pursuant to a C $ Letter of Credit.
"C $ LC Exposure" means at any time, the sum of (a) the Assigned
Dollar Value at such time of the aggregate undrawn amount of all outstanding C $
Letters of Credit at such time, plus (b) the Assigned Dollar Value at such time
of the aggregate principal amount of all C $ LC Disbursements that have not yet
been reimbursed at such time. The C $ LC Exposure of any C $ Revolving Lender at
any time shall mean its Applicable Percentage of the aggregate C $ LC Exposure
at such time.
"C $ LC Participation Fee" has the meaning set forth in Section
2.12(c).
"C $ Letter of Credit" means any letter of credit issued by the
Canadian Issuing Bank pursuant to Section 2.05A.
7
"C $ Revolving Availability Period" means the period from and
including the Closing Date to but excluding the earlier of (a) the Revolving
Maturity Date and (b) the date of termination of the C $ Revolving Commitments.
"C $ Revolving Borrowing" means a Borrowing comprised of C $
Revolving Loans.
"C $ Revolving Commitment" means, with respect to any C $ Revolving
Lender at any time, the commitment, if any, of such Lender to make C $ Revolving
Loans and accept Bankers' Acceptances during the C $ Revolving Availability
Period and to acquire participations in C $ Letters of Credit and C $ Swingline
Loans hereunder, expressed as an amount representing the maximum aggregate
amount of such Lender's C $ Revolving Exposure hereunder, as such commitment may
be (a) temporarily or permanently reduced or increased from time to time
pursuant to Sections 2.08 and 2.22 and (b) reduced or increased from time to
time pursuant to assignments by or to such Lender pursuant to Section 2.19 or
10.04. The initial amount of each C $ Revolving Lender's C $ Revolving
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its C $ Revolving Commitment,
as applicable. The initial aggregate amount of the C $ Revolving Lenders' C $
Revolving Commitments is $40,754,717.02.
"C $ Revolving Exposure" means, with respect to any Lender at any
time, the sum of (a) the Assigned Dollar Value at such time of all outstanding C
$ Revolving Loans of such Lender, plus (b) the aggregate amount at such time of
such Lender's C $ Swingline Exposure, plus (c) the aggregate amount at such time
of such Lender's C $ LC Exposure.
"C $ Revolving Lender" means a Lender, which on the date such Person
becomes a Lender shall be a Canadian chartered bank or other Canadian financial
institution, with a C $ Revolving Commitment or, if the C $ Revolving Commitment
shall equal zero, a Lender that may be required, pursuant to Section 2.22, to
make C $ Revolving Loans.
"C $ Revolving Loan" means any loan made by a Lender, and any
Bankers' Acceptance accepted by a Lender, pursuant to its C $ Revolving
Commitment.
"C $ Swingline Exposure" means at any time the Assigned Dollar Value
of the aggregate principal amount at such time of all outstanding C $ Swingline
Loans. The C $ Swingline Exposure of any C $ Revolving Lender at any time shall
mean its Applicable Percentage of the aggregate C $ Swingline Exposure at such
time.
"C $ Swingline Loan" means a Loan made pursuant to Section 2.04A.
"Calculation Date" means (a) the last Business Days' of each March,
June, September and December and (b) in respect of C $ Revolving Loans at any
time when (i) the aggregate C $ Revolving Exposure exceeds 85% of the Total C $
Revolving Commitments and (ii) there has been a material change in the Spot
Exchange Rate since the immediately preceding Calculation Date, any other date
the Canadian Administrative Agent may determine (upon at least three Business
Days' prior notice to the U.S. Borrower) in its discretion to be a Calculation
Date (but not more than one date during any calendar week).
"CAM" means the mechanism for the allocation and exchange of
interests in the Credit Facilities and collections thereunder established under
Article IX.
"CAM Exchange" means the exchange of the Lenders' interests provided
for in Section 9.01.
"CAM Exchange Date" means the first date after the Closing Date on
which there shall occur (a) any event described in paragraph (h) or (i) of
Article VII with respect to Parent or either of the Borrowers or (b) an
acceleration of the maturity of Loans pursuant to Article VII.
"CAM Percentage" means, as to each Lender, a fraction, expressed as
a decimal, of which (a) the numerator shall be the sum of (i) the aggregate
Designated Obligations owed to such Lender and (ii) the U.S. $ LC Exposure and
the C $ LC Exposure of such Lender, in each case immediately prior to the CAM
Exchange Date, and (b) the denominator shall be the sum of (i) the aggregate
Designated Obligations owed to all the Lenders and (ii) the aggregate LC
Exposure of all the Lenders, in each case immediately prior to such CAM Exchange
Date. For purposes of computing each Lender's CAM Percentage, all Designated
Obligations that are denominated in Canadian Dollars and C $ LC Exposures shall
be translated into Dollars at the Spot Exchange Rate in effect on the CAM
Exchange Date.
8
"Canadian" means, with respect to any Subsidiary, that such
Subsidiary is organized under the laws of Canada or a province thereof.
"Canadian Administrative Agent" means The Chase Manhattan Bank of
Canada, in its capacity as administrative agent for the C $ Revolving Lenders
hereunder.
"Canadian Affiliate Guarantee Agreement" means the Affiliate
Guarantee Agreement, substantially in the form of Exhibit L, among the Foreign
Subsidiaries and the Canadian Collateral Agent for the benefit of the Canadian
Secured Parties.
"Canadian Borrower" means WESCO Distribution - Canada, Inc., a
corporation organized and existing under the laws of the Province of Ontario.
The Canadian Borrower is a wholly owned subsidiary of the U.S. Borrower.
"Canadian Borrower Subsidiaries" means any subsidiary of the
Canadian Borrower.
"Canadian Collateral Agent" means the "Canadian Collateral Agent",
as defined in the Canadian Security Agreement.
"Canadian Commitment Fee" has the meaning given such term in Section
2.12(a).
"Canadian Dollars" or "C$" means lawful money of Canada.
"Canadian Fronting Fee" has the meaning set forth in Section
2.12(c).
"Canadian Issuing Bank" means (a) the Primary Canadian Issuing Bank
and (b) each other Lender designated by the Canadian Borrower from time to time,
with the consent of the Canadian Administrative Agent (not to be unreasonably
withheld) and such C $ Revolving Lender, to act as issuer of C $ Letters of
Credit hereunder. Each Canadian Issuing Bank may, in its discretion, arrange for
one or more C $ Letters of Credit to be issued by Affiliates of such Canadian
Issuing Bank, in which case the term "Canadian Issuing Bank" shall include any
such Affiliate with respect to C $ Letters of Credit issued by such Affiliate.
"Canadian Prime Rate Borrowing" means a Borrowing comprised of
Canadian Prime Rate Loans.
"Canadian Prime Rate Loan" means a Loan denominated in Canadian
Dollars that bears interest at a rate based upon the Canadian Prime Rate.
"Canadian Prime Rate" means, on any day, the annual rate of interest
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to the greater
of:
(a) the annual rate of interest determined by the Canadian
Administrative Agent as the annual rate of interest announced
from time to time by the Canadian Administrative Agent as its
prime rate in effect at its principal office in Toronto on
such day for determining interest rates on Canadian Dollar
denominated commercial loans in Canada; and
(b) the annual rate of interest equal to the sum of (i) the CDOR
Rate in effect on such day and (ii) 1%.
"Canadian Receivables Sale Agreement" means the Canadian Receivables
Sale Agreement dated as of June 5, 1998, among the Receivables Subsidiary, the
Canadian Borrower and the U.S. Borrower, as the same may be amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof
(including to add additional parties), and any successor or replacement
receivables sale agreement entered into in connection with a new Permitted
Receivables Financing to replace the Permitted Receivables Financing
contemplated at the Closing Date.
"Canadian Secured Parties" has the meaning assigned to such term in
the Canadian Security Agreement.
9
"Canadian Security Agreement" means the Security Agreement,
substantially in the Form of Exhibit H-1, among the Canadian Borrower, the
Canadian Borrower Subsidiaries, the Foreign Subsidiaries and the Canadian
Collateral Agent for the benefit of the Canadian Secured Parties.
"Canadian Security Documents" means the Parent Guarantee Agreement,
the Canadian Subsidiary Guarantee Agreement, the Canadian Security Agreement,
the Canadian Affiliate Guarantee Agreement, the Mortgages and such other
agreements as may from time to time be executed pursuant to Sections 5.12 and
5.13.
"Canadian Subsidiary Guarantee Agreement" means the Subsidiary
Guarantee Agreement, substantially in the form of Exhibit E-1, made by the
Canadian Borrower Subsidiaries in favor of the Canadian Collateral Agent for the
benefit of the Canadian Secured Parties.
"Canadian Swingline Lender" means The Chase Manhattan Bank of
Canada, in its capacity as the lender of C $ Swingline Loans.
"Capital Expenditures" means, for any period, the additions to
property, plant and equipment and other capital expenditures of Parent and its
consolidated subsidiaries that are or would be required to be set forth in a
consolidated statement of cash flows of Parent for such period prepared in
accordance with GAAP, including the cost of assets acquired pursuant to capital
leases incurred by Parent and its consolidated subsidiaries during such period,
provided that Capital Expenditures shall exclude (a) amounts paid for
Reinvestment Assets and (b) any amount representing capitalized interest on
capital leases.
"Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Capital Leases" means the capital leases of Parent, the Borrowers
and the Subsidiaries that are in effect immediately prior to the Closing Date
and listed on Schedule 1.01(b).
"CDOR Rate" means, on any date, the annual rate of interest that is
the rate based on an average rate applicable to C $ bankers' acceptances for a
term of 30 days appearing on the "Reuters Screen CDOR Page" (as defined in the
International Swaps and Derivatives Association, Inc. definitions, as modified
and amended from time to time) at approximately 10:00 a.m. (Toronto time), on
such date, or if such date is not a Business Day, then on the immediately
preceding Business Day, provided that if such rate does not appear on the
Reuters Screen CDOR Page as contemplated, then the CDOR Rate on any date shall
be calculated as the rate for the term referred to above applicable to C $
bankers' acceptances quoted by the Canadian Administrative Agent as of 10:00
a.m. (Toronto time) on such date or, if such date is not a Business Day, then on
the immediately preceding Business Day.
"CDW Realco" means CDW Realco, Inc., a Delaware corporation.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq.
"Change in Control" means (a) the failure by the Investor Group to
own, directly or indirectly, beneficially and of record (and possess the right
to vote), shares representing 100% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of Investor; (b) at any
time after the consummation of the Recapitalization, (i) the failure by Cypress
and its Affiliates to own, directly or indirectly, beneficially and of record
(and possess the right to vote), Class A Common Stock representing more than 50%
of the aggregate ordinary voting power represented by the issued and outstanding
capital stock of Parent, (ii) the acquisition of ownership, directly or
indirectly, beneficially or of record (or the possession of the right to vote),
by any Person or group (within the meaning of the Securities Exchange Act of
1934 and the rules of the Securities and Exchange Commission thereunder as in
effect on the date hereof) other than Cypress and its Affiliates, of Class A
Common Stock representing more than 35% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of Parent or (iii)
occupation of a majority of the seats (other than vacant seats) on the board of
directors of Parent by Persons who were neither (A) nominated by the board of
directors of Parent nor (B) appointed by directors so nominated; and (c) at any
time, (i) the failure by Parent to own, directly, beneficially and of record
(and possess the right to vote), shares representing 100% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock of
the U.S. Borrower or (ii) the occurrence of any change in control (or similar
event, howsoever denominated) with
10
respect to Parent or either of the Borrowers under and as defined in any
indenture or agreement in respect of any Material Indebtedness to which Parent,
either of the Borrowers or any of the Subsidiaries is a party, to the extent
that such change in control (or similar event) (A) gives rise to any right on
the part of the holder of such Material Indebtedness to accelerate the maturity
of such Material Indebtedness or require the repayment thereof and (B) such
right has not been waived.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender or
any of the Issuing Banks (or, for purposes of Section 2.15(b), by any lending
office of such Lender or by such Lender's or such Issuing Bank's holding
company, if any) with any request, guideline or directive (whether or not having
the force of law) of any Governmental Authority made or issued after the date of
this Agreement.
"Chase Equity" means Chase Equity Associates L.P.
"Class", when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, are U.S. $ Revolving
Loans, C $ Revolving Loans, Additional Revolving Loans, Tranche A Term Loans,
Tranche B Term Loans, Delayed Draw Term Loans, U.S. $ Swingline Loans or C $
Swingline Loans and, when used in reference to any Commitment, refers to whether
such Commitment is a Delayed Draw Commitment, U.S. $ Revolving Commitment, C $
Revolving Commitment or Additional Revolving Commitment.
"Class A Common Stock" means the Class A Common Stock, par value
$0.1 per share, of Parent.
"Class B Common Stock" means the Class B Common Stock, par value
$0.1 per share, of Parent.
"Closing Date" means June 5, 1998.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" means any and all "Collateral", as defined in any
applicable Security Document.
"Collateral Agents" means the U.S. Collateral Agent and the Canadian
Collateral Agent.
"Commitment" means with respect to any Lender, such Lender's Delayed
Draw Commitment, U.S. $ Revolving Commitment, C $ Revolving Commitment or
Additional Revolving Commitment and, in the case of the U.S. Swingline Lender,
the U.S. $ Swingline Commitment and, in the case of the Canadian Swingline
Lender, the C $ Swingline Commitment, or any combination thereof (as the context
requires).
"Commitment Fees" has the meaning set forth in Section 2.12.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period, plus, without duplication and to the extent deducted from
revenues in determining Consolidated Net Income, the sum of (a) the aggregate
amount of Consolidated Net Cash Interest Expense for such period, (b) the
aggregate amount of letter of credit fees and other charges, fees and charges
under bankers' acceptance financings and net cash costs under Hedging Agreements
expensed during such period, (c) the aggregate amount of income tax expense for
such period, (d) all amounts attributable to depreciation, amortization and
other similar noncash charges for such period, including the amortization of
debt discounts and deferred financing charges, (e) Transaction Costs, (f) all
extraordinary, non-recurring or unusual charges during such period, (g) fees and
expenses in connection with any financing, refinancing and Permitted Acquisition
(whether or not consummated), (h) compensation expense resulting from the
issuance of capital stock, stock options or stock appreciation rights issued to
employees, including officers, of Investor, Parent, either of the Borrowers or
any Subsidiary, or the exercise of such options or rights, in each case to the
extent the obligation (if any) associated therewith is not expected to be
settled by the payment of cash by Parent or any Affiliate of Parent, and
compensation expense resulting from the repurchase of any such capital stock,
options and rights, (i) any one-time expenses incurred or payments made in
connection with the Transactions in an amount not to exceed $12,000,000 and (j)
one-time non-cash charges relating to reserve adjustments for worker's
compensation, and other balance sheet adjustments and write-offs in connection
with or resulting from the Transactions, and minus, without duplication and to
the extent added to revenues in determining Consolidated Net Income for such
period, all extraordinary, non-recurring or unusual gains during such period,
all as determined on a
11
consolidated basis with respect to Parent and its consolidated subsidiaries in
accordance with GAAP, provided that in the event that Parent, either of the
Borrowers or any Subsidiary makes a Permitted Acquisition or investment
permitted under Section 6.04(p) or (s) on any date during such period, the
Consolidated EBITDA for such period shall be computed on the assumption that
such Permitted Acquisition or such investment and any related financing thereof
was completed on the first day of such period.
"Consolidated Net Cash Interest Expense" means, for any period,
interest expense (including the interest component in respect of Capital Lease
Obligations and excluding the amortization of debt discounts, deferred financing
charges and other non-cash interest expenses) of Parent, the Borrowers and the
Subsidiaries during such period, and interest-equivalent costs associated with
any Permitted Receivables Financing, whether accounted for as interest expense
or loss on the sale of Receivables, net of any cash interest income recorded
during such period (including any interest-equivalent income associated with any
Permitted Receivables Financing), determined on a consolidated basis in
accordance with GAAP (except for interest-equivalent costs associated with any
Permitted Receivables Financing, whether accounted for as interest expense or
loss on the sale of Receivables), provided that in the event that Parent, either
of the Borrowers or any Subsidiary makes a Permitted Acquisition or investment
permitted under Section 6.04(p) or (s) on any date during such period, the
Consolidated Net Cash Interest Expense for such period shall be computed on the
assumption that any Indebtedness incurred or repaid in connection with such
Permitted Acquisition or such investment was incurred or repaid on the first day
of such period.
"Consolidated Net Income" means, for any period, net income or loss
of Parent, the Borrowers and the Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP, provided that there shall be
excluded (a) the income of any Person in which any other Person (other than
Parent, the Borrowers or any of the Subsidiaries or any director holding
qualifying shares in compliance with applicable law) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid to Parent, the Borrowers or any of the Subsidiaries by such Person during
such period, and (b) the income (or loss) of any Person accrued prior to the
date it becomes a Subsidiary or is merged into or consolidated with Parent,
either of the Borrowers or any of the Subsidiaries or the date that Person's
assets are acquired by Parent, either of the Borrowers or any of the
Subsidiaries.
"Contract Period" means the term of a B/A or B/A Equivalent Note
selected by the Canadian Borrower in accordance with Section 2.20 commencing on
the date of such Borrowing or any rollover date, as applicable, of such B/A or
B/A Equivalent Note (which shall be a Business Day) and expiring on a Business
Day that shall be either 30 days, 60 days, 90 days or (subject to availability
from all the C $ Revolving Lenders) 180 days thereafter, provided that no
Contract Period shall extend beyond the Revolving Maturity Date. Notwithstanding
the foregoing, whenever the last day of any Contract Period would otherwise
occur on a day that is not a Business Day, the last day of such Contract Period
shall occur on the next succeeding Business Day and such extension of time shall
in such case be included in computing the Acceptance Fee in respect of the
relevant B/A unless such next succeeding Business Day would fall in the next
calendar month, in which case such Contract Period shall end on the next
preceding Business Day.
"Contributed Amount" has the meaning set forth in the introductory
statement of this Agreement.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power or by contract. The terms
"Controlling" and "Controlled" have meanings correlative thereto.
"Credit Facility" means a category of Commitments and extensions of
credit thereunder. For purposes hereof, each of the following comprises a
separate Credit Facility: (a) the U.S. $ Revolving Commitments, the U.S. $
Revolving Loans, the U.S. $ Swingline Exposure and the U.S. $ LC Exposure; (b)
the C $ Revolving Commitments, the C $ Revolving Loans, the C $ Swingline
Exposure and the C $ LC Exposure; (c) the Additional Revolving Commitments and
the Additional Revolving Loans; (d) the Tranche A Term Loans; (e) the Tranche B
Term Loans; and (f) the Delayed Draw Commitments and the Delayed Draw Term
Loans.
"Cypress" means The Cypress Group L.L.C., a Delaware limited
liability company.
"Default" means any event or condition that constitutes an Event of
Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default pursuant to Article VII.
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"Delayed Draw Availability Period" means the period from and
including the Closing Date to but excluding the Delayed Draw Commitment
Termination Date.
"Delayed Draw Commitment" means, with respect to any Lender, the
commitment, if any, of such Lender to make Delayed Draw Term Loans hereunder
during the Delayed Draw Availability Period, expressed as an amount representing
the maximum aggregate principal amount of the Delayed Draw Term Loans to be made
by such Lender hereunder. The initial amount of each Delayed Draw Lender's
Delayed Draw Commitment is set forth on Schedule 2.01, or in the Assignment and
Acceptance pursuant to which such Lender shall have assumed its Delayed Draw
Commitment, as applicable. The initial aggregate amount of the Delayed Draw
Lenders' Delayed Draw Commitments is $100,000,000.
"Delayed Draw Commitment Termination Date" means June 5, 2000.
"Delayed Draw Lender" means a Lender with a Delayed Draw Commitment
or an outstanding Delayed Draw Term Loan.
"Delayed Draw Maturity Date" means June 5, 2005.
"Delayed Draw Term Loan" means a Loan made pursuant to clause (c) of
Section 2.01.
"Delayed Draw Term Loan Closing Date" means each date, which shall
be a Business Day on or before the Delayed Draw Commitment Termination Date, on
which a Delayed Draw Term Loan is made.
"Denomination Date" means, in relation to any Canadian Dollar
Borrowing, the date that is three Business Days before the date such Borrowing
is made.
"Designated Obligations" means all Obligations of the Loan Parties
in respect of (a) principal of and interest on the Loans (including B/As, B/A
Equivalent Notes and Acceptance Fees with respect thereto) and (b) Fees, whether
or not the same shall at the time of any determination be due and payable under
the terms of the Loan Documents.
"Designated U.S. Affiliate" has the meaning set forth in the
definition of the term "Additional Revolving Lender".
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.
"Discount Proceeds" means, for any B/A (or, as applicable, any B/A
Equivalent Note), an amount (rounded to the nearest whole cent, and with
one-half of one cent being rounded upwards) calculated on the applicable date of
the Borrowing of which such B/A or B/A Equivalent Note is a part or any rollover
date for such Borrowing by multiplying:
(a) the face amount of the B/A (or, as applicable, the B/A
Equivalent Note); by
(b) the quotient of one divided by the sum of one plus the product
of:
(i) the Discount Rate (expressed as a decimal) applicable to
such B/A (or as applicable, such B/A Equivalent Note),
and
(ii) a fraction, the numerator of which is the Contract
Period of the B/A (or, as applicable, the B/A Equivalent
Note) and the denominator of which is the number of days
in the applicable calendar year,
with such quotient being rounded up or down to the fifth decimal
place, and .000005 being rounded up.
"Discount Rate" means:
(a) with respect to any C $ Revolving Lender that is a Schedule I
chartered bank under the Bank Act (Canada), as applicable to a B/A (or, as
applicable, a B/A Equivalent Note) being purchased by such Lender on any
day, the average (as determined by the Canadian Administrative Agent) of
the respective percentage discount rates (expressed to two decimal places
and rounded upward, if necessary, to the nearest 0.01%) quoted by the
Schedule I Reference Banks as the
13
percentage discount rate at which the Schedule I Reference Banks would, in
accordance with their normal practices, at or about 10:00 a.m., Toronto
time, on such date, be prepared to purchase bankers' acceptances accepted
by the Schedule I Reference Banks having a face amount and term comparable
to the face amount and term of such B/A or B/A Equivalent Note; and
(b) with respect to any C $ Revolving Lender that is not a Schedule
I chartered bank under the Bank Act (Canada), as applicable to a B/A (or,
as applicable, a B/A Equivalent Note) being purchased by such Lender on
any day, the average (as determined by the Canadian Administrative Agent)
of the respective percentage discount rates (expressed to two decimal
places and rounded upward, if necessary, to the nearest 0.01%) quoted by
the Schedule II Reference Banks as the percentage discount rates at which
the Schedule II Reference Banks would, in accordance with their normal
practices, at or about 10:00 a.m., Toronto time, on such date, be prepared
to purchase bankers' acceptances accepted by the Schedule II Reference
Banks having a face amount and term comparable to the face amount and term
of such B/A; provided, however, that no Discount Rate calculated pursuant
to this clause (b) shall exceed the Discount Rate calculated pursuant to
clause (a) above in respect of the same issue of Bankers' Acceptances plus
7 basis points (0.07%) per annum.
"Documentation Agent" means Lehman Commercial Paper Inc., in its
capacity as documentation agent for the Lenders hereunder.
"Dollars" or "$" refers to lawful money of the United States of
America.
"Dollar Equivalent" means, with respect to any amount of Canadian
Dollars on any date, the amount of Dollars that may be purchased with such
amount of Canadian Dollars at the Spot Exchange Rate on such date.
"Domestic" means, with respect to any Subsidiary, that such
Subsidiary is organized in the United States.
"Environmental Laws" means all applicable laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, handling, treatment, storage, disposal, Release or
threatened Release of any Hazardous Material or, to the extent relating to the
environment, to health and safety matters.
"Environmental Liability" means any liability (including any
liability for damages, natural resource damage, costs of environmental
investigation, monitoring or remediation, administrative oversight costs, fines,
penalties or indemnities) of Parent, either of the Borrowers or any of the
Subsidiaries resulting from or based upon (a) actual or alleged violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of, or the actual or alleged exposure to, any Hazardous
Materials, (c) the Release or threatened Release of any Hazardous Materials into
the environment or (d) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"Equity Partners" means Co-Investment Partners, L.P., a Delaware
limited partnership.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" means Parent and each subsidiary of Parent.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043(c) of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the U.S. Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan under Section 4041(c) or 4042 of ERISA; (e) the receipt
by the U.S. Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
U.S. Borrower or any of its ERISA Affiliates of any liability with respect to
the withdrawal or partial withdrawal from any Multiemployer Plan; or (g) the
receipt by the U.S. Borrower or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from the U.S. Borrower or any ERISA
14
Affiliate of any notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article
VII.
"Excess Cash Flow" means, for any period, the sum (without
duplication) of:
(a) the Consolidated Net Income for such period, adjusted to exclude
any gains or losses (in each case net of Taxes applicable with respect to
such gains or losses during such period) attributable to Prepayment
Events; plus
(b) depreciation, amortization and other noncash charges or losses
(in each case net of Taxes applicable with respect to such charges or
losses during such period) deducted in determining such Consolidated Net
Income for such period; plus
(c) the sum of (i) the amount, if any, by which Net Working Capital
decreased during such period plus (ii) the amount, if any, by which the
consolidated deferred revenues of the U.S. Borrower and its consolidated
subsidiaries increased during such period plus (iii) the aggregate
principal amount of Capital Lease Obligations and other Indebtedness (A)
incurred during such period to finance Capital Expenditures (including
Capital Expenditures that are committed by the Borrowers to be made and
are actually made within 90 days after the end of such period pursuant to
a purchase order or other written agreement entered into during such
period (such Capital Expenditures being referred to as "Committed Capital
Expenditures")), Permitted Acquisitions or other investments permitted
under Section 6.04 or (B) incurred within 90 days after the end of such
period to finance Committed Capital Expenditures committed to during such
period, in each case to the extent that mandatory principal payments in
respect of such Indebtedness would not be excluded from clause (f) below
when made; minus
(d) the sum of (i) any noncash gains (in each case net of Taxes
applicable with respect to such gains during such period) included in
determining Consolidated Net Income for such period plus (ii) the amount,
if any, by which Net Working Capital increased during such period plus
(iii) the amount, if any, by which the consolidated deferred revenues of
the U.S. Borrower and its consolidated subsidiaries decreased during such
period; minus
(e) Capital Expenditures (including Committed Capital Expenditures
that are committed to during such period), Permitted Acquisitions and
other investments permitted under Section 6.04 for such period, except to
the extent such Capital Expenditures are financed with the proceeds of
asset dispositions (including casualty and condemnation events and
including, in the case of Committed Capital Expenditures, asset
dispositions effected within 90 days after the end of such period); minus
(f) the aggregate principal amount of Indebtedness repaid or prepaid
by Parent and its consolidated subsidiaries during such period as
permitted by this Agreement, excluding (i) Indebtedness in respect of
Revolving Loans, Swingline Loans and Letters of Credit (other than to the
extent that the Revolving Commitments are permanently reduced by such
repayments or prepayments), (ii) Term Loans prepaid pursuant to Section
2.11(b), (c) or (d), (iii) repayments or prepayments of Indebtedness
financed by incurring other Indebtedness, to the extent that mandatory
principal payments in respect of such other Indebtedness would, pursuant
to this clause (f), be deducted in determining Excess Cash Flow when made
and (iv) Indebtedness referred to in clauses (iii), (iv) and (vii) of
Section 6.01(a); minus
(g) non-cash charges added back in a previous period pursuant to
clause (b) above to the extent any such charge has become a cash item in
the current period (including interest-equivalent costs that are
associated with any Permitted Receivables Financing, whether accounted for
as interest expense or loss on the sale of Receivables).
"Excluded Taxes" means, with respect to the Agents, any Lender, the
Issuing Banks or any other recipient of any payment to be made by or on account
of any obligation of Parent or the Borrowers hereunder, (a) income, branch
profits (or functionally similar Taxes) or franchise Taxes imposed on (or
15
measured by) its net income by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable lending office is located and (b) in the case of a Foreign Lender
(other than an assignee or new lending office designated pursuant to a request
by the U.S. Borrower or the Canadian Borrower, as applicable, under Section
2.19(b)), any withholding Tax that is (i) imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement
(or designates a new lending office), except to the extent that (A) such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts from the U.S.
Borrower with respect to any withholding Tax pursuant to Section 2.17(a), (B)
such withholding Tax is attributable to the designation of a Subsidiary after
the date upon which such Foreign Lender becomes a party to this Agreement or (C)
such withholding tax is imposed on payments made (x) to a Foreign Lender
following a CAM Exchange or (y) attributable to such Foreign Lender's failure to
comply with Section 2.17(f).
"Existing Canadian Credit Agreement" means the Credit Agreement
dated as of February 24, 1995, among the Canadian Borrower, the Canadian lenders
party thereto and The Bank of Nova Scotia, as administrative agent, and
Barclays, as collateral agent (as amended from time to time).
"Existing Canadian Note" means CDW Realco's outstanding 8% First
Mortgage Note due February 28, 2001.
"Existing Credit Agreements" means the Existing Canadian Credit
Agreement and the Existing U.S. Credit Agreement.
"Existing Notes" means the Existing Canadian Note and the Existing
U.S. Note.
"Existing Stockholders" means the holders of the Class A Common
Stock immediately prior to the Redemption.
"Existing Stock Purchase" has the meaning set forth in the
introductory statement of this Agreement.
"Existing U.S. Credit Agreement" means the Credit Agreement dated as
of February 24, 1995, among the U.S. Borrower, the lenders party thereto and
Barclays, as administrative agent and collateral agent (as amended from time to
time).
"Existing U.S. Note" means CDW Realco's outstanding Zero Coupon
First Mortgage Note due February 28, 2001.
"Federal Funds Effective Rate" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the U.S. Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Fees" means the Commitment Fees, the Participation Fees and the
Fronting Fees.
"Fife Transaction" means the one-time investment, in an aggregate
amount of approximately $7,500,000, by the U.S. Borrower in Fife Electrical
Supply, LLC ("Fife LLC") in a transaction that results in the U.S. Borrower
having approximately a 49% voting interest and approximately an 85% economic
interest in Fife LLC.
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer, assistant treasurer or controller of the
applicable Loan Party.
"Foreign Lender" means any Lender that is organized under the laws
of a jurisdiction other than that in which the applicable Borrower is located.
For purposes of this definition, the United States of America, each state
thereof and the District of Columbia shall be one jurisdiction.
"Foreign Pension Plan" means any pension plan or other deferred
compensation plan, program or arrangement maintained by the Canadian Borrower,
any Canadian Borrower Subsidiary or any Foreign Subsidiary.
16
"Foreign Subsidiary" means any Subsidiary that is organized under
the laws of a jurisdiction other than (i) the United States of America or any
State thereof or the District of Columbia or (ii) Canada or any province
thereof.
"Fronting Fees" has the meaning set forth in Section 2.12(c).
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means the government of the United States
of America, any other nation or any political subdivision thereof, whether
state, provincial or local, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity (including the National
Association of Insurance Commissioners) exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation, provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business.
"Guarantee Agreements" means the Parent Guarantee Agreement, the
Canadian Affiliate Guarantee Agreement, the U.S. Borrower Guarantee Agreement
and the Subsidiary Guarantee Agreements.
"Hazardous Materials" means all explosive or radioactive substances
or wastes and all hazardous or toxic substances, materials, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances, materials or wastes of any nature
regulated pursuant to any Environmental Law, including any material listed as a
hazardous substance pursuant to Section 101(14) of CERCLA.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments (other than the obligations evidenced
by (i) any subordinated note issued to the U.S. Borrower or any Subsidiary under
the U.S. Receivables Sale Agreement and (ii) any subordinated note issued to the
Canadian Borrower or any Subsidiary under the Canadian Receivables Sale
Agreement), (c) all obligations of such Person upon which interest charges are
customarily paid, (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property acquired by such Person,
(e) all obligations of such Person in respect of the deferred purchase price of
property or services (excluding accounts payable (other than accounts payable
from U.S. customers remaining unpaid more than 120 days from the date due and
accounts payable from non-U.S. customers remaining unpaid more than 180 days
from the date due) incurred in the ordinary course of business), (f) all
Indebtedness of others secured by any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g)
all Guarantees by such Person of Indebtedness of others described in clauses
(a)-(f) and (h)-(j) of this definition, (h) all Capital Lease Obligations of
such Person, (i) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit and letters of guaranty and (j)
all obligations, contingent or otherwise, of such Person in respect of bankers'
acceptances, provided that inventory assistance programs customary in the U.S.
Borrower's industry shall be deemed not to be Indebtedness. The Indebtedness of
any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person's ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.
17
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnity, Subrogation and Contribution Agreement" means the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit F, among the U.S. Borrower, the Domestic U.S. Borrower Subsidiaries and
the U.S. Administrative Agent.
"Information Memorandum" means the Confidential Information
Memorandum dated May 1998 relating to the Borrowers and the Transactions.
"Interest Election Request" means a request by the U.S. Borrower or
the Canadian Borrower, as applicable, to convert or continue a Revolving
Borrowing or Term Borrowing in accordance with Section 2.07.
"Interest Payment Date" means (a) with respect to any ABR Loan and
Canadian Prime Rate Loan, the last Business Day of each March, June, September
and December (commencing in September 1998) and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each Business Day prior to
the last day of such Interest Period that occurs at intervals of three months'
duration after the first day of such Interest Period.
"Interest Period" means, with respect to any Eurodollar Borrowing,
the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or
six months thereafter (or nine or twelve months thereafter if, at the time of
the relevant Borrowing, all Lenders make interest periods of such length
available), as the U.S. Borrower may elect, provided that (i) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (ii) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Borrowing.
"Investor" means Thor Acquisitions L.L.C., a Delaware limited
liability company.
"Investor Group" means, collectively, Cypress, any entities
Controlled by Cypress, Chase Equity, Equity Partners, any management investors
and certain other investors reasonably satisfactory to the U.S. Administrative
Agent.
"Issuing Banks" means the Canadian Issuing Banks and the U.S.
Issuing Banks and their respective Affiliates.
"Joint Venture" means, as to a Person, any corporation, partnership
or other legal entity or arrangement (a) in which such Person has any direct or
indirect equity interest and (b) that is not a subsidiary of such Person.
"Judgment Currency" has the meaning set forth in Section 10.14.
"Judgment Currency Conversion Date" has the meaning set forth in
Section 10.14.
"LC Disbursements" means the C $ LC Disbursements and the U.S. $ LC
Disbursements.
"LC Exposure" means, at any time, the sum of (a) the aggregate U.S.
$ LC Exposure plus (b) the aggregate C $ LC Exposure.
"LC Reserve Account" has the meaning set forth in Section 9.02(a).
"Lenders" means the Persons listed on Schedule 2.01 and any other
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance permitted under Section 10.04, other than any such Person that ceases
to be a party hereto pursuant to an Assignment and Acceptance. Unless the
context otherwise requires, the term "Lenders" includes the U.S. Swingline
Lender and the Canadian Swingline Lender.
18
"Letters of Credit" means the U.S. $ Letters of Credit and the C $
Letters of Credit.
"Leverage Ratio" means, on any date, the ratio of (a) Total Debt as
of such date to (b) Consolidated EBITDA for the period of four consecutive
fiscal quarters of Parent most recently ended as of such date, all determined on
a consolidated basis in accordance with GAAP.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the U.S.
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the U.S. Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, the Letters of Credit, the
Guarantee Agreements, the Indemnity, Subrogation and Contribution Agreement and
the Security Documents.
"Loan Parties" means Parent, the Borrowers and any Subsidiary party
to any Loan Document.
"Loans" means the Revolving Loans, the Additional Revolving Loans,
the Swingline Loans and the Term Loans.
"Majority Lenders" means, with respect to any Credit Facility on any
date, Lenders having Loans (excluding Swingline Loans) and unused Commitments
(excluding commitments to issue Letters of Credit or make Swingline Loans)
representing more than 50% of the sum of all Loans (excluding Swingline Loans)
and unused Commitments (excluding commitments to issue Letters of Credit or make
Swingline Loans) under such Credit Facility on such date. For purposes of
determining the Majority Lenders, any amounts denominated in Canadian Dollars
shall be translated into Dollars at the Spot Exchange Rates in effect on the
Closing Date.
"Margin Stock" has the meaning assigned to such term in Regulation
U.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations, properties or financial condition (or, with
respect to the initial Borrowing only, prospects) of Parent, the Borrowers and
the Subsidiaries taken as a whole since December 31, 1997, (b) the ability of
any Loan Party to perform any of its respective obligations under any Loan
Document or (c) the rights of or remedies available to the Lenders under any
Loan Document.
"Material Indebtedness" means Indebtedness (other than the Loans and
Letters of Credit), or obligations in respect of one or more Hedging Agreements,
of any one or more of Parent, the Borrowers and the Subsidiaries in an aggregate
principal amount exceeding $20,000,000. For purposes of determining the amount
of Material Indebtedness at any time, the "principal amount" of the obligations
of Parent, the Borrowers or any Subsidiary in respect of any Hedging Agreement
at such time shall be the maximum aggregate amount (giving effect to any netting
agreements) that Parent, the Borrowers or such Subsidiary would be required to
pay if such Hedging Agreement were terminated at such time.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means a mortgage, deed of trust, assignment of leases and
rents, leasehold mortgage or other security document granting a Lien on any
Mortgaged Property to secure the Obligations, each substantially in the form of
Exhibit I.
19
"Mortgaged Property" means, initially, each parcel of real property
and the improvements thereto owned or leased by a Loan Party and identified on
Schedule 1.01(a), and includes each other parcel of real property and
improvements thereto with respect to which a Mortgage is granted pursuant to
Section 5.12 or 5.13.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any event, (a) the cash
proceeds received in respect of such event including (i) any cash received in
respect of any noncash proceeds, but only as and when received, (ii) in the case
of a casualty, insurance proceeds in excess of $1,000,000, and (iii) in the case
of a condemnation or similar event, condemnation awards and similar payments in
excess of $1,000,000, net of (b) the sum of (i) all reasonable fees and
out-of-pocket expenses paid by Parent, the Borrowers and the Subsidiaries to
third parties in connection with such event, (ii) in the case of a sale,
transfer or other disposition of an asset (including pursuant to a sale and
leaseback transaction or a casualty or other insured damage or condemnation or
similar proceeding), the amount of all payments required to be made by Parent,
the Borrowers and the Subsidiaries as a result of such event to repay
Indebtedness (other than Loans) secured by such asset or otherwise subject to
mandatory prepayment as a result of such event and to pay any related prepayment
premiums or penalties, (iii) the amount of all taxes paid (or reasonably
estimated to be payable) by Parent, the Borrowers and the Subsidiaries
(including withholding taxes incurred in connection with cross-border
transactions, if applicable), and the amount of any reserves established by
Parent, the Borrowers and the Subsidiaries to fund contingent liabilities
reasonably estimated to be payable, in each case during the year that such event
occurred or the next succeeding year and that are directly attributable to such
event (as determined reasonably and in good faith by the chief financial officer
of the applicable Borrower, provided that, to the extent and at the time any
such unexpended amounts are released from any such reserve, such amounts shall
constitute Net Proceeds); provided, however, that, (i) with respect to any sale,
transfer or other disposition of an asset (including pursuant to a sale and
leaseback transaction or a casualty or other insured damage or condemnation or
similar proceeding), if the applicable Borrower shall deliver a certificate of a
Financial Officer to the U.S. Administrative Agent at the time of such sale,
transfer or other disposition setting forth the applicable Borrower's intent to
use the proceeds of such sale, transfer or other disposition (A) to replace or
repair the assets that are the subject of such sale, transfer or other
disposition with other assets to be used in the same or a similar line of
business, (B) to purchase capital stock of a Person in the same or a similar
line of business in connection with a Permitted Acquisition or (C) to make other
investments permitted under Section 6.04, in each case within 18 months of
receipt of such proceeds, and no Default or Event of Default shall have occurred
and shall be continuing at the time of such certificate or at the proposed time
of the application of such proceeds, such proceeds shall not constitute Net
Proceeds except to the extent not so used at the end of such 18-month period, at
that time such proceeds shall be deemed Net Proceeds and (ii) with respect to
any sale, transfer or other disposition of Receivables pursuant to any Permitted
Receivables Financing, the proceeds of such sale, transfer or other disposition
shall not constitute Net Proceeds.
"Net Working Capital" means, at any date, (a) the consolidated
current assets of Parent and its consolidated subsidiaries as of such date
(excluding cash and Permitted Investments) minus (b) the consolidated current
liabilities of Parent and its consolidated subsidiaries as of such date
(excluding current liabilities in respect of Indebtedness). Net Working Capital
at any date may be a positive or negative number. Net Working Capital increases
when it becomes more positive or less negative and decreases when it becomes
less positive or more negative.
"New Stock Purchase" has the meaning set forth in the introductory
statement of this Agreement.
"Notes" means any promissory note of the Borrowers issued pursuant
to this Agreement.
"Notice of Interest Rate Election" means a notice delivered to the
U.S. Administrative Agent or the Canadian Administrative Agent, as applicable,
pursuant to Section 2.07.
"Obligation Currency" has the meaning set forth in Section 10.14.
"Obligations" has the meaning assigned to such term in (a) the
Security Agreements, (b) the Pledge Agreements, (c) the Guarantee Agreements and
(d) the Mortgages.
"Other Taxes" means any and all current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made under any Loan Document or from the
execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.
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"Parent" means WESCO International, Inc., a Delaware corporation
owning all the capital stock of the U.S. Borrower.
"Parent Guarantee Agreement" means the Parent Guarantee Agreement,
substantially in the form of Exhibit D, made by Parent in favor of the U.S.
Administrative Agent for the benefit of the Secured Parties.
"Participation Fees" has the meaning set forth in Section 2.12(c).
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA and any successor entity performing similar functions.
"Perfection Certificate" means a certificate in the form of Annex 1
to the Security Agreements or any other form approved by the Collateral Agents.
"Permitted Acquisition" means the acquisition, by merger or
otherwise, by the U.S. Borrower, the Canadian Borrower or any Subsidiary of
assets or capital stock or other equity interests so long as (a) immediately
after giving effect thereto, no Default or Event of Default shall have occurred
and be continuing or would result therefrom, (b) all transactions related
thereto shall be consummated in accordance in all material respects with
applicable laws, (c) in the case of any acquisition of capital stock or other
equity interests in any Person, such acquisition is an acquisition of 100% of
the capital stock or other equity interests of such Person, (d) in case of an
acquisition of assets, such assets (other than assets to be retired or disposed
of) are to be used, and in the case of an acquisition of capital stock or other
equity interests, the Person so acquired is engaged, in the same or similar line
of business as the U.S. Borrower, (e) Parent and the Borrowers shall be in
compliance, on a pro forma basis after giving effect to such acquisition
(including any Indebtedness assumed or permitted to exist in connection with
such acquisition), with the covenants set forth in Sections 6.13, 6.14, 6.15 and
6.16, and shall deliver to the U.S. Administrative Agent a certificate of a
Financial Officer of the U.S. Borrower to such effect, (f) such acquisition
shall be made on a non-hostile basis and shall not have been preceded by an
unsolicited tender offer by Parent, the Borrowers or any Subsidiary, (g) the
U.S. Borrower shall have received a certificate of a Financial Officer
certifying that such acquisition has been approved by the target company's board
of directors and (h) immediately after giving effect thereto, the Senior
Leverage Ratio shall not be more than (i) on any date prior to June 5, 2000,
4.20 to 1.00 and (ii) on June 5, 2000 or any date thereafter, 4.15 to 1.00;
provided, however, that the aggregate amount paid (including any Indebtedness
assumed in connection therewith) in connection with (i) any such Permitted
Acquisition shall not exceed $200,000,000 and (ii) all such Permitted
Acquisitions shall not exceed $400,000,000 during the term of this Agreement.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.05;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary
course of business and securing obligations that are not overdue by more
than 30 days or are being contested in compliance with Section 5.05;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) Liens incurred or deposits made to secure the performance of
bids, trade contracts, leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature, in each
case in the ordinary course of business;
(e) judgment liens in respect of judgments that do not constitute an
Event of Default under clause (k) of Article VII;
(f) easements, zoning restrictions, minor defects or irregularities
in title, rights-of-way and similar charges or encumbrances on real
property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and do not materially detract from
the value of the affected property or interfere with the ordinary conduct
of business of Parent, the Borrowers or any of the Subsidiaries;
21
(g) leases or subleases granted to others not interfering in any
material respect with the business of Parent, the Borrowers or any of the
Subsidiaries; and
(h) with respect to any Mortgaged Property, the exceptions listed in
the title insurance policy covering such Mortgaged Property;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 397 days from
the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State
thereof that has a combined capital and surplus and undivided profits of
not less than $250,000,000;
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in
clause (c) above;
(e) investments in money market funds, provided that substantially
all of the assets of such money market funds comprise securities described
in clauses (a), (b), (c) and (d) above; and
(f) with respect to investments denominated in Canadian Dollars, (i)
direct obligations of Canada or any agency thereof or obligations
guaranteed by Canada or any agency thereof; (ii) time deposit accounts,
certificates of deposit and money market deposits maturing within 180 days
of the date of acquisition thereof issued by (A) any bank or trust company
that is organized under the laws of the United States of America, Canada,
any state or province thereof or any foreign country recognized by the
United States of America or Canada having capital, surplus and undivided
profits aggregating in excess of $250,000,000 (or the foreign currency
equivalent thereof) and whose long-term debt, or whose parent holding
company's long-term debt, is rated A (or such similar equivalent rating or
higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act of 1933, as
amended)), (B) any bank listed under Schedule I to the Bank Act (Canada)
or (C) any other bank that is organized under the laws of Canada or any
province thereof whose long-term debt, or whose parent holding company's
long-term debt, is rated at least A by Canadian Bond Rating Service, Inc.
and the Dominion Bond Rating Service Limited; and (iii) commercial paper,
maturing not more than 397 days after the date of acquisition, issued by a
corporation (other than an Affiliate of any Loan Party) organized and in
existence under the laws of the United States of America, Canada, any
state or province thereof or any foreign country recognized by the United
States of America or Canada with a rating at the time as of which an
investment therein is made of A1 (or higher) according to Canadian Bond
Rating Service, Inc. and R1 (high) according to Dominion Bond Rating
Service Limited.
"Permitted Receivables Financing" means any transaction entered into
pursuant to and in accordance with the Receivables Sale Agreements, the
Receivables Pooling Agreement and the Receivables Supplemental Pooling Agreement
or any other financing by the Borrowers or any Subsidiary of Receivables in any
transaction or series of transactions that may be entered into by the Borrowers
or any Subsidiary pursuant to which (a) the Borrowers or any Subsidiary sells,
conveys or otherwise transfers to the Receivables Subsidiary and (b) the
Receivables Subsidiary sells, conveys or otherwise transfers to any other Person
or grants a security interest to any Person in, any Receivables (whether now
existing or hereafter acquired) of the Borrowers or any Subsidiary, and any
assets related thereto including all collateral securing such Receivables, all
contracts and all Guarantees or other obligations in respect of such
Receivables, proceeds of such Receivables and other assets that are customarily
transferred or in respect of which security interests are customarily granted in
connection with asset securitization transactions involving Receivables,
provided that (i)
22
the Board of Directors of the U.S. Borrower shall have determined in good faith
that such Permitted Receivables Financing is economically fair and reasonable to
the Borrowers and the Receivables Subsidiary and (ii) all sales of Receivables
and Related Property to the Receivables Subsidiary are made at fair market value
(as determined in good faith by the U.S. Borrower).
"Permitted Subordinated Refinancing Debt" means Indebtedness of the
U.S. Borrower that (a) is issued in exchange for all of, or the net proceeds of
which are used to refinance, replace, defease or refund in whole and not in
part, the Senior Subordinated Notes or other subordinated Indebtedness issued in
accordance with Section 6.01(a)(x) and (b) is subordinated to the Obligations,
provided that (i) the principal amount of such Permitted Subordinated
Refinancing Debt does not exceed the principal amount (or accreted value, if
applicable) of the Senior Subordinated Notes or other subordinated Indebtedness,
as applicable, so refinanced, replaced, defeased or refunded, plus the amount of
premiums, prepayment penalties and other amounts required to be paid in
connection therewith and the reasonable and customary fees and expenses incurred
in connection therewith, (ii) no material terms applicable to such Permitted
Subordinated Refinancing Debt (including the subordination provisions thereof)
are materially less favorable to the U.S. Borrower or the Lenders than the terms
that are applicable under the Senior Subordinated Notes Indenture or the
instrument giving rise to such other subordinated Indebtedness, as applicable,
prior to such refinancing, (iii) the timing and amounts of principal repayments
(including any sinking fund therefor) on such Permitted Subordinated Refinancing
Debt are no sooner and no greater, respectively, than the timing and amounts of
principal repayments under the Senior Subordinated Notes or other subordinated
Indebtedness, as applicable, being refinanced, (iv) such Permitted Subordinated
Refinancing Debt is unsecured and (v) such Permitted Subordinated Refinancing
Debt accrues interest at a rate determined in good faith by the Board of
Directors of Parent to be a market rate of interest for such Permitted
Subordinated Refinancing Debt at the time of issuance thereof.
"Per-Share Purchase Price" means $621.08.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which any Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreements" means the U.S. Pledge Agreement and the Canadian
Pledge Agreement.
"Prepayment Event" means:
(a) any sale, transfer or other disposition (including pursuant to a
sale and leaseback transaction) of any property or asset of Parent, either
of the Borrowers or any Subsidiary, other than sales, transfers or other
dispositions described in clauses (a), (b), (c) and (e) of Section 6.05;
(b) any casualty or other insured damage to, or any taking under
power of eminent domain or by condemnation or similar proceeding of, any
property or asset of Parent, either of the Borrowers or any Subsidiary;
(c) the issuance by Parent, either of the Borrowers or any
Subsidiary of any equity securities, or the receipt by Parent, either of
the Borrowers or any Subsidiary of any capital contribution, other than
(i) any such issuance of equity securities to, or receipt of any such
capital contribution from, Parent, either of the Borrowers or any
Subsidiary, (ii) the Stock Purchase and (iii) the issuance of equity
securities as a result of the exercise of stock options; or
(d) the incurrence by Parent, either of the Borrowers or any
Subsidiary of any Indebtedness, other than Indebtedness permitted by
Section 6.01(a).
"Primary Canadian Issuing Bank" means (a) The Toronto-Dominion Bank,
in its capacity as an issuer of C $ Letters of Credit hereunder, and (b) its
successors in such capacity as provided in Section 2.05A(i).
"Primary Issuing Banks" means Primary U.S. Issuing Bank and the
Primary Canadian Issuing Bank.
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"Primary U.S. Issuing Bank" means (a) Chase Manhattan Bank Delaware,
in its capacity as an issuer of U.S. $ Letters of Credit hereunder, and (b) its
successors in such capacity as provided in Section 2.05(i).
"Prime Rate" means, in respect of ABR Loans, the rate of interest
per annum publicly announced from time to time by the U.S. Administrative Agent
as its prime rate in effect at its principal office in New York City; each
change in the Prime Rate shall be effective on the date such change is publicly
announced as being effective.
"Reallocation Notice" has the meaning set forth in Section 2.22.
"Recapitalization" means the recapitalization of Parent pursuant to,
and in accordance with the terms of, the Recapitalization Agreement.
"Recapitalization Agreement" means the Recapitalization Agreement
dated as of March 27, 1998, among Parent, the U.S. Borrower, Investor and
certain of the Existing Stockholders.
"Receivable" means the indebtedness and payment obligations of any
Person to either of the Borrowers or any of the Subsidiaries or acquired by
either of the Borrowers or any of the Subsidiaries (including obligations
constituting an account or general intangible or evidenced by a note,
instrument, contract, security agreement, chattel paper or other evidence of
indebtedness or security) arising from a sale of merchandise or the provision of
services by such Borrower or Subsidiary or the Person from which such
indebtedness and payment obligation were acquired by either of the Borrowers or
any of the Subsidiaries, including (a) any right to payment for goods sold or
for services rendered and (b) the right to payment of any interest, sales taxes,
finance charges, returned check or late charges and other obligations of such
Person with respect thereto.
"Receivables Pooling Agreement" means the Pooling Agreement dated as
of June 5, 1998, among the Receivables Subsidiary, the U.S. Borrower, as
servicer, and The Chase Manhattan Bank, as Funding Agent and as trustee, as the
same may be amended, modified or supplemented from time to time in accordance
with the terms hereof and thereof and any other supplement to the Receivables
Pooling Agreement entered into in connection with a Permitted Receivables
Financing.
"Receivables Sale Agreements" means the U.S. Receivables Sale
Agreement and the Canadian Receivables Sale Agreement.
"Receivables Subsidiary" means WESCO Receivables Corp., a Delaware
corporation that is a newly formed, wholly owned, bankruptcy-remote, special
purpose subsidiary of the U.S. Borrower or any wholly owned Subsidiary of the
U.S. Borrower (a) that engages in no activities other than in connection with
the financing of Receivables, all proceeds thereof and all rights (contractual
or other), collateral and other assets relating thereto, and any business or
activities incidental or related to such business, (b) that is designated by the
Board of Directors of the U.S. Borrower (as provided below) as a Receivables
Subsidiary and (c) of which no portion of its Indebtedness or any other
obligations (contingent or otherwise) (i) is Guaranteed by Parent, the Borrowers
or any Subsidiary (excluding Guarantees of Obligations (other than the principal
of, and interest on, Indebtedness) pursuant to Standard Securitization
Undertakings), (ii) is recourse to or obligates Parent, the Borrowers or any
Subsidiary in any way other than pursuant to Standard Securitization
Undertakings or (iii) subjects any property or asset of Parent, the Borrowers or
any Subsidiary, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings. Upon any such designation, a Financial Officer of the U.S.
Borrower shall deliver a certificate to the U.S. Administrative Agent certifying
(a) the resolution of the Board of Directors of the U.S. Borrower giving effect
to such designation, (b) that such designation complied with the foregoing
conditions, (c) that after giving effect to such designation (including any
Indebtedness permitted to exist in connection with such designation), Parent and
the Borrowers shall be in compliance, on a pro forma basis, with the covenants
set forth in Section 6.13, 6.14, 6.15 and 6.16 and (d) immediately after giving
effect to such designation no Default or Event of Default shall have occurred
and be continuing.
"Receivables Supplemental Pooling Agreement" means the Series 1998-1
Supplement, dated as of June 5, 1998, to the Receivables Pooling Agreement,
among the Receivables Subsidiary, the U.S. Borrower , as servicer, Park Avenue
Receivables Corporation, certain banks or financial institutions party thereto,
and The Chase Manhattan Bank, as Funding Agent and as trustee, as the same may
be amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof, and any other
24
supplement to the Receivables Pooling Agreement entered into in connection with
a Permitted Receivables Financing.
"Redemption" means the redemption by Parent from the Existing
Stockholders (other than Investor and the Remaining Stockholders) of all the
Class A Common Stock owned by such Existing Stockholders pursuant to the
Recapitalization Agreement.
"Register" has the meaning set forth in Section 10.04.
"Regulation T" shall mean Regulation T of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Reinvestment Assets" means assets that are employed in the business
of Parent and the Subsidiaries and purchased pursuant to the proviso to the
definition of the term "Net Proceeds".
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, trustees, officers, employees,
agents and advisors of such Person and of such Person's Affiliates.
"Related Property" shall mean, with respect to each Receivable:
(a) all of the interest of the applicable Borrower or
Subsidiary in the goods, if any, sold and delivered to an obligor
relating to the sale which gave rise to such Receivable,
(b) all other security interests or Liens, and the interest of
the applicable Borrower or Subsidiary in the property subject
thereto, from time to time purporting to secure payment of such
Receivable, together with all financing statements signed by an
obligor describing any collateral securing such Receivable and
(c) all guarantees, insurance, letters of credit and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable,
in the case of clauses (b) and (c), whether pursuant to the contract
related to such Receivable or otherwise or pursuant to any obligations
evidenced by a note, instrument, contract, security agreement, chattel
paper or other evidence of indebtedness or security and the proceeds
thereof.
"Release" has the meaning set forth in Section 101(22) of CERCLA.
"Remaining Stockholders" means certain members of management of
Parent that will continue to own Class A Common Stock and options to purchase
Class A Common Stock after the Closing Date.
"Repurchased Shares" means the Class A Common Stock repurchased by
Parent in the Redemption pursuant to the Recapitalization Agreement.
"Required Lenders" means, at any time, Lenders having Loans
(excluding Swingline Loans), U.S. $ LC Exposure, C $ LC Exposure, U.S. $
Swingline Exposure, C $ Swingline Exposure and unused Commitments (excluding
commitments to issue Letters of Credit or make Swingline Loans) representing a
majority of the sum of all Loans (excluding Swingline Loans), U.S. $ LC
Exposure, C $ LC Exposure, U.S. $ Swingline Exposure, C $ Swingline Exposure and
unused Commitments (excluding commitments to issue Letters of Credit or make
Swingline Loans) at such time. For purposes of determining the Required Lenders,
any amounts denominated in Canadian Dollars shall be translated into Dollars at
the Spot Exchange Rate in effect on the Closing Date.
"Reset Date" has the meaning set forth in Section 2.21(a)(ii).
25
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any shares of
any class of capital stock of Parent, the Borrowers or any Subsidiary, or any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancelation or termination of (a) any such shares of capital stock
of Parent, the Borrowers or any Subsidiary or (b) any option, warrant or other
right to acquire any such shares of capital stock of Parent, the Borrowers or
any Subsidiary.
"Revolving Commitments" means the U.S. $ Revolving Commitments and
the C $ Revolving Commitments.
"Revolving Exposures" means the U.S. $ Revolving Exposures and the C
$ Revolving Exposures.
"Revolving Lenders" means the U.S. $ Revolving Lenders and the C $
Revolving Lenders.
"Revolving Loans" means the U.S. $ Revolving Loans and C $ Revolving
Loans.
"Revolving Maturity Date" means June 5, 2004.
"Roll-Over Equity" has the meaning set forth in the introductory
statement of this Agreement.
"S&P" means Standard & Poor's Ratings Service.
"Schedule I Reference Banks" means such Schedule I chartered banks
under the Bank Act (Canada) as are mutually agreed upon by the Canadian
Administrative Agent and the Canadian Borrower.
"Schedule II Reference Banks" means such Schedule II chartered banks
under the Bank Act (Canada) as are mutually agreed upon by the Canadian
Administrative Agent and the Canadian Borrower.
"Security Agreements" means the U.S. Security Agreement and the
Canadian Security Agreement.
"Security Documents" means the Security Agreements, the Pledge
Agreements, the Mortgages and each other security agreement or other instrument
or document executed and delivered pursuant to Section 5.12 or 5.13 to secure
any of the Obligations.
"Secured Parties" has the meaning assigned to such term in the U.S.
Security Agreement.
"Senior Discount Notes" means Parent's 11 1/8% Senior Unsecured
Discount Notes due 2008 issued on the Closing Date as contemplated by Section
4.01(l) (and shall include any substantially identical discount notes of Parent
in the same aggregate principal amount issued after the Closing Date in exchange
therefor pursuant to a registered exchange offer or shelf registration statement
in accordance with the Senior Discount Notes Indenture).
"Senior Discount Notes Indenture" means the indenture to be entered
into by Parent in connection with the issuance of the Senior Discount Notes,
together with all instruments and other agreements entered into by Parent in
connection therewith, all in form and substance reasonably satisfactory to the
U.S. Administrative Agent and the Documentation Agent, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
Section 6.12.
"Senior Leverage Ratio" means, on any date, the ratio of (a) Total
Senior Debt as of such date to (b) Consolidated EBITDA for the period of four
consecutive fiscal quarters of Parent most recently ended as of such date, all
determined on a consolidated basis in accordance with GAAP.
"Senior Subordinated Notes" means the U.S. Borrower's 9 1/8% Senior
Subordinated Notes due 2008 issued on the Closing Date as contemplated by
Section 4.01(l) (and shall include any substantially identical senior
subordinated notes of the U.S. Borrower in the same aggregate principal amount
issued after the Closing Date in exchange therefor pursuant to a registered
exchange offer or shelf registration statement in accordance with the Senior
Subordinated Notes Indenture).
"Senior Subordinated Notes Indenture" means the indenture to be
entered into by the U.S. Borrower and certain Subsidiaries in connection with
the issuance of the Senior Subordinated Notes, together
26
with all instruments and other agreements entered into by the U.S. Borrower and
such Subsidiaries in connection therewith, all in form and substance reasonably
satisfactory to the U.S. Administrative Agent and the Documentation Agent, as
the same may be amended, supplemented or otherwise modified from time to time in
accordance with Section 6.12.
"Spot Exchange Rate" means, on any day, with respect to Canadian
Dollars, the spot rate at which Dollars are offered on such day by the Canadian
Administrative Agent in Toronto for Canadian Dollars at approximately 11:00 a.m.
(Toronto time). For purposes of determining the Spot Exchange Rate in connection
with a Canadian Dollar Borrowing, such Spot Exchange Rate shall be determined as
of the Denomination Date for such Borrowing.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by Parent, the Borrowers or
any Subsidiary that the U.S. Borrower has determined in good faith to be
customary in a Receivables transaction including those relating to the servicing
of assets of the Receivables Subsidiary.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the U.S. Administrative Agent is subject (a)
with respect to the Base CD Rate, for new negotiable nonpersonal time deposits
in Dollars of over $100,000 with maturities approximately equal to three months
and (b) with respect to the Adjusted LIBO Rate, for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of the
Board). Such reserve percentages shall include those imposed pursuant to such
Regulation D or any successor regulation or law. Eurodollar Loans shall be
deemed to constitute eurocurrency funding and to be subject to such reserve
requirements without benefit of or credit for proration, exemptions or offsets
that may be available from time to time to any Lender under such Regulation D or
any comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Stock Purchase" has the meaning set forth in the introductory
statement of this Agreement.
"subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or, in the case
of a partnership, more than 50% of the general partnership interests are, as of
such date, owned, controlled or held by the parent and one or more subsidiaries
of the parent.
"Subsidiary" means any subsidiary of the U.S. Borrower other than
the Canadian Borrower.
"Subsidiary Guarantee Agreements" means the U.S. Subsidiary
Guarantee Agreement and the Canadian Subsidiary Guarantee Agreement.
"Swingline Exposures" means the C $ Swingline Exposure and the U.S.
$ Swingline Exposure.
"Swingline Lenders" means the U.S. Swingline Lender and the Canadian
Swingline Lender.
"Swingline Loans" means the U.S. $ Swingline Loans and the C $
Swingline Loans.
"Syndication Agent" means The Chase Manhattan Bank, in its capacity
as syndication agent for the Lenders hereunder.
"Taxes" means any and all current or future taxes, levies, imposts,
duties, deductions, charges or with Parent imposed by any Governmental
Authority.
"Term Borrowing" means a Borrowing comprised of Term Loans.
"Term Loan Lenders" means the Tranche A Lenders, the Tranche B
Lenders and the Delayed Draw Lenders.
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"Term Loans" means Tranche A Term Loans, Tranche B Term Loans and
Delayed Draw Term Loans.
"Three-Month Secondary CD Rate" means, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day is not a Business Day, on the next preceding Business Day) by the U.S.
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.
"Total Additional Revolving Commitment" means, at any time, the
aggregate amount of the Additional Revolving Commitments, as in effect at such
time. The Total Additional Revolving Commitment on the Closing Date is $0.
"Total C $ Revolving Commitment" means, at any time, the aggregate
amount of the C $ Revolving Commitments, as in effect at such time, but not to
exceed $40,754,717.02. The Total C $ Revolving Commitment on the Closing Date is
U.S. $40,754,717.02.
"Total Debt" means, as of any date of determination, without
duplication, the sum of (a) the aggregate principal amount of Indebtedness of
Parent, the Borrowers and the Subsidiaries outstanding as of such date, net of
cash or cash equivalents held in an account with the U.S. Administrative Agent
or such other bank that is reasonably acceptable to the U.S. Administrative
Agent, in which the applicable Administrative Agent has a perfected security
interest, determined on a consolidated basis in accordance with GAAP (other than
Revolving Loans and Indebtedness of the type referred to in clause (i) of the
definition of the term "Indebtedness", except to the extent such Indebtedness is
required to be recorded on the consolidated balance sheet of Parent and its
subsidiaries in accordance with GAAP), and (b) the average monthly aggregate
principal amount of Revolving Loans outstanding during the immediately preceding
four fiscal quarters of Parent, provided that such average amount shall be
deemed to be $10,000,000 from and including the Closing Date through and
including December 31, 1998. For purposes of clause (b) of the immediately
preceding sentence, the average monthly aggregate principal amount of Revolving
Loans outstanding during any four-fiscal-quarter period shall be calculated by
(a) adding the aggregate principal amount of Revolving Loans outstanding on the
last day of each month ending during such period and (b) dividing such amount by
twelve. Notwithstanding the foregoing, there shall be excluded from Total Debt
any Indebtedness relating to amounts received from the sale of Receivables to an
un-affiliated purchaser pursuant to a Permitted Receivables Financing by the
Receivables Subsidiary.
"Total Senior Debt" means, as of any date of determination, (a) the
sum of (i) the average monthly aggregate principal amount of Revolving Loans
outstanding during the immediately preceding four fiscal quarters of Parent,
(ii) the aggregate principal amount of Swingline Loans outstanding as of such
date, (iii) the aggregate principal amount of any unreimbursed LC Disbursements
as of such date, (iv) the aggregate principal amount of Term Loans outstanding
as of such date and (v) the aggregate principal amount of any Capital Lease
Obligations of Parent, the Borrowers and the Subsidiaries outstanding as of such
date, plus (b) the amount received from the sale of Receivables to an
un-affiliated purchaser pursuant to a Permitted Receivables Financing by the
Receivables Subsidiary, which Receivables have not yet been collected. For
purposes of clause (a)(i) of the immediately preceding sentence, the average
monthly aggregate principal amount of Revolving Loans outstanding during any
four-fiscal-quarter period shall be calculated by (a) adding the aggregate
principal amount of Revolving Loans outstanding on the last day of each month
ending during such period and (b) dividing such amount by twelve.
"Total U.S. $ Revolving Commitment" means, at any time, the
aggregate amount of the U.S. $ Revolving Commitments, as in effect at such time.
The Total U.S. $ Revolving Commitment on the Closing Date is $59,245,282.98.
"Tranche A Commitment" means, with respect to each Tranche A Lender,
the commitment of such Lender to make a Tranche A Term Loan hereunder on the
Closing Date, expressed as an amount representing the maximum principal amount
of the Tranche A Term Loan to be made by such Lender hereunder. The initial
amount of each Tranche A Lender's Tranche A Commitment is set forth on Schedule
2.01, or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed its
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Tranche A Commitment, as applicable. The aggregate amount of the Tranche A
Lenders' Tranche A Commitments is $80,000,000.
"Tranche A Lender" means a Lender with an outstanding Tranche A Term
Loan.
"Tranche A Maturity Date" means June 5, 2004.
"Tranche A Term Loan" means a Loan made pursuant to clause (a) of
Section 2.01.
"Tranche B Commitment" means, with respect to each Tranche B Lender,
the commitment of such Lender to make a Tranche B Term Loan hereunder on the
Closing Date, expressed as an amount representing the maximum principal amount
of the Tranche B Term Loan to be made by such Lender hereunder. The initial
amount of each Tranche B Lender's Tranche B Commitment is set forth on Schedule
2.01, or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed its Tranche B Commitment, as applicable. The aggregate amount of
the Tranche B Lenders' Tranche B Commitments is $90,000,000.
"Tranche B Lender" means a Lender with an outstanding Tranche B Term
Loan.
"Tranche B Maturity Date" means June 5, 2006.
"Tranche B Term Loan" means a Loan made pursuant to clause (b) of
Section 2.01.
"Transaction Costs" means any amounts paid or payable by Investor,
Parent, the Borrowers or any Subsidiary in connection with financing fees,
investment banking and consulting fees and legal and accounting and other
similar fees incurred in connection with the Transactions.
"Transactions" means the Recapitalization, the incurrence of Loans
and the issuance of Letters of Credit hereunder on the Closing Date, the
issuance of the Senior Subordinated Notes, the issuance of the Senior Discount
Notes and the Permitted Receivables Financing.
"Type", when used in respect of any Loan or Borrowing, shall refer
to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, the term "Rate"
shall include the Adjusted LIBO Rate, the Alternate Base Rate, the Canadian
Prime Rate and the Discount Rate applicable to B/As or B/A Equivalent Notes.
"U.S. $ Commitment Fee" has the meaning set forth in Section
2.12(a).
"U.S. $ LC Availability Period" means the period from and including
the Closing Date to but excluding the earlier of (a) the date that is five
Business Days prior to the Revolving Maturity Date and (b) the date of
termination of the U.S. $ Revolving Commitments.
"U.S. $ LC Disbursement" means a payment or disbursement made by the
U.S. Issuing Bank pursuant to a U.S. $ Letter of Credit.
"U.S. $ LC Exposure" means, at any time, the sum of (a) the
aggregate undrawn amount of all outstanding U.S. $ Letters of Credit at such
time plus (b) the aggregate principal amount of all U.S. $ LC Disbursements that
have not yet been reimbursed at such time. The U.S. $ LC Exposure of any U.S. $
Revolving Lender at any time shall mean its Applicable Percentage of the
aggregate U.S. $ LC Exposure at such time.
"U.S. $ LC Participation Fee" has the meaning set forth in Section
2.12(b).
"U.S. $ Letter of Credit" means any letter of credit issued by the
U.S. Issuing Bank pursuant to Section 2.05.
"U.S. $ Revolving Availability Period" means the period from and
including the Closing Date to but excluding the earlier of (a) the Revolving
Maturity Date and (b) the date of termination of the U.S. $ Revolving
Commitments.
"U.S. $ Revolving Borrowing" means a Borrowing comprised of U.S. $
Revolving Loans.
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"U.S. $ Revolving Commitment" means, with respect to any Lender, the
commitment, if any, of such Lender to make U.S. $ Revolving Loans during the
U.S. $ Revolving Availability Period and to acquire participations in U.S. $
Letters of Credit and U.S. $ Swingline Loans hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender's U.S. $ Revolving
Exposure hereunder, as such commitment may be (a) reduced from time to time
pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 2.19 or 10.04. The
initial amount of each U.S. $ Revolving Lender's U.S. $ Revolving Commitment is
set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to
which such Lender shall have assumed its U.S. $ Revolving Commitment, as
applicable. The initial aggregate amount of the U.S. $ Revolving Lenders' U.S. $
Revolving Commitments is $59,245,282.98.
"U.S. $ Revolving Exposure" means, with respect to any U.S. $
Revolving Lender at any time, the sum of (a) the aggregate principal amount at
such time of all outstanding U.S. $ Revolving Loans of such Lender, plus (b) the
aggregate amount at such time of such Lender's U.S. $ LC Exposure, plus (c) the
aggregate amount at such time of such Lender's U.S. $ Swingline Exposure.
"U.S. $ Revolving Lender" means a Lender with a U.S. $ Revolving
Commitment.
"U.S. $ Revolving Loan" means any loan made by a U.S. $ Revolving
Lender pursuant to its U.S. $ Revolving Commitment.
"U.S. $ Swingline Exposure" means at any time the aggregate
principal amount at such time of all outstanding U.S. $ Swingline Loans. The
U.S. $ Swingline Exposure of any U.S. $ Revolving Lender at any time shall mean
its Applicable Percentage of the aggregate U.S. $ Swingline Exposure at such
time.
"U.S. $ Swingline Loan" means a Loan made pursuant to Section 2.04.
"U.S. Administrative Agent" means The Chase Manhattan Bank, in its
capacity as administrative agent for the Lenders hereunder.
"U.S. Borrower" means WESCO Distribution, Inc., a Delaware
corporation owning all the capital stock of the Canadian Borrower.
"U.S. Borrower Subsidiary" means any Subsidiary other than the
Canadian Borrower and the Canadian Borrower Subsidiaries.
"U.S. Borrower Guarantee Agreement" means the Guarantee Agreement,
substantially in the form of Exhibit M, between the U.S. Borrower and the
Canadian Collateral Agent for the benefit of the Canadian Secured Parties.
"U.S. Collateral Agent" means the "U.S. Collateral Agent", as
defined in the U.S. Security Agreement.
"U.S. Fronting Fee" has the meaning set forth in Section 2.12(b).
"U.S. Issuing Bank" means (a) the Primary U.S. Issuing Bank and (b)
each other Lender designated by the U.S. Borrower from time to time, with the
consent of the U.S. Administrative Agent (not to be unreasonably withheld) and
such Lender, to act as an issuer of U.S. $ Letters of Credit hereunder. Each
U.S. Issuing Bank may, in its discretion, arrange for one or more U.S. $ Letters
of Credit to be issued by Affiliates of such U.S. Issuing Bank, in which case
the term "U.S. Issuing Bank" shall include any such Affiliate with respect to
U.S. $ Letters of Credit issued by such Affiliate.
"U.S. Pledge Agreement" means the Pledge Agreement, substantially in
the form of Exhibit G, among Parent, the U.S. Borrower, the Canadian Borrower,
the Subsidiaries and the U.S. Collateral Agent for the benefit of the Secured
Parties.
"U.S. Receivables Sale Agreement" means the U.S. Receivables Sale
Agreement dated as of June 5, 1998, among the Receivables Subsidiary, the U.S.
Borrower and WESCO Equity Corporation, as the same may be amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof
(including to add additional parties), and any successor or replacement
receivables sale agreement entered into in connection with a new Permitted
Receivables Financing to replace the Permitted Receivables Financing
contemplated at the Closing Date.
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"U.S. Security Agreement" means the Security Agreement,
substantially in the form of Exhibit H, among Parent, the U.S. Borrower, the
Domestic U.S. Borrower Subsidiaries (other than the Receivables Subsidiary) and
the U.S. Collateral Agent for the benefit of the Secured Parties.
"U.S. Security Documents" means the U.S. Security Agreement, the
U.S. Pledge Agreement, the Parent Guarantee Agreement, the U.S. Subsidiary
Guarantee Agreement, certain Mortgages and each other security agreement or
other instrument or document executed and delivered pursuant to Section 5.12 and
5.13 to secure any of the Obligations.
"U.S. Subsidiary Guarantee Agreement" means the Subsidiary Guarantee
Agreement, substantially in the form of Exhibit E, made by the Domestic U.S.
Borrower Subsidiaries in favor of the U.S. Administrative Agent for the benefit
of the Secured Parties.
"U.S. Swingline Lender" means The Chase Manhattan Bank, in its
capacity as lender of U.S. $ Swingline Loans hereunder.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Working Capital Ratio" means, on any date, the ratio of (a) the sum
of (i) inventory (as would be shown on Parent's consolidated balance sheet in
accordance with GAAP) and (ii) Receivables to (b) Total Senior Debt that is
secured.
SECTION 1.02. Classification of Loans and Borrowings. For purposes
of this Agreement, Loans may be classified and referred to by Class (e.g., a
"Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type
(e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and
referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a
"Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving
Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
permitted assigns, (c) the words "herein", "hereof" and "hereunder", and words
of similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e)
the words "asset" and "property" shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time, provided
that, if the U.S. Borrower notifies the U.S. Administrative Agent that the U.S.
Borrower requests an amendment to any provision hereof to eliminate the effect
of any change occurring after the date hereof in GAAP or in the application
thereof on the operation of such provision (or if the U.S. Administrative Agent
notifies the U.S. Borrower that the Required Lenders request an amendment to any
provision hereof for such purpose), regardless of whether any such notice is
given before or after such change in GAAP or in the application thereof, then
such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance
herewith.
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ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions set
forth herein, (a) each Tranche A Lender agrees to make Tranche A Term Loans to
the U.S. Borrower on the Closing Date, in Dollars, in a principal amount not
exceeding its Tranche A Commitment, (b) each Tranche B Lender agrees to make
Tranche B Term Loans to the U.S. Borrower on the Closing Date, in Dollars, in a
principal amount not exceeding its Tranche B Commitment, (c) each Delayed Draw
Lender agrees to make Delayed Draw Term Loans to the U.S. Borrower during the
Delayed Draw Availability Period, in Dollars, in an aggregate principal amount
not exceeding its Delayed Draw Commitment, (d) each U.S. $ Revolving Lender
agrees to make U.S. $ Revolving Loans to the U.S. Borrower from time to time
during the U.S. $ Revolving Availability Period, in Dollars, in an aggregate
principal amount that will not result in such Lender's U.S. $ Revolving Exposure
exceeding such Lender's U.S. $ Revolving Commitment, (e) each C $ Revolving
Lender agrees to make C $ Revolving Loans, including by means of a B/A or B/A
Equivalent Note, to the Canadian Borrower from time to time during the C $
Revolving Availability Period, in Canadian Dollars, in an aggregate principal
amount that will not result in such Lender's C $ Revolving Exposure exceeding
such Lender's C $ Revolving Commitment and (f) each Additional Revolving Lender
agrees to make Additional Revolving Loans to the U.S. Borrower from time to time
during the Additional Revolving Availability Period, in Dollars, in an aggregate
principal amount that will not result in the aggregate principal amount of such
Lender's Additional Revolving Loans exceeding such Lender's Additional Revolving
Commitment. Within the foregoing limits and subject to the terms and conditions
set forth herein, the Borrowers may borrow, prepay and reborrow Revolving Loans
and Additional Revolving Loans. Amounts repaid in respect of Term Loans may not
be reborrowed.
SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than the
Swingline Loans) shall be made as part of a Borrowing consisting of Loans of the
same Class and Type made by the Lenders ratably in accordance with their
respective Commitments of the applicable Class. The failure of any Lender to
make any Loan required to be made by it shall not relieve any other Lender of
its obligations hereunder, provided that the Commitments of the Lenders are
several and no Lender shall be responsible for any other Lender's failure to
make Loans as required. The Loans comprising any Borrowing shall, subject to
Section 2.20 in the case of B/A Borrowings, be in an aggregate principal amount
that is (i) an integral multiple of $1,000,000 (or, in the case of Swingline
Loans, $100,000) or (ii) equal to the remaining available balance of the
applicable Commitments, provided that ABR U.S. $ Revolving Loans and Canadian
Prime Rate C $ Revolving Loans used to finance the reimbursement of an LC
Disbursement may be in the amount of such LC Disbursement. The Loans comprising
each Canadian Dollar Borrowing shall be made in the amount specified in the
applicable Borrowing Request for such Borrowing; provided, however, that for
purposes of clause (i) above, each Canadian Dollar Borrowing shall be deemed to
be in an aggregate principal amount equal to the Dollar Equivalent of the amount
specified in such Borrowing Request. Borrowings of more than one Type and Class
may be outstanding at the same time, provided that there shall not at any time
be more than 15 Eurodollar Borrowings or 6 B/A Borrowings outstanding hereunder
at any time.
(b) Subject to Section 2.14, each (i) U.S. $ Revolving Borrowing,
Additional Revolving Borrowing and Term Borrowing shall be comprised entirely of
ABR Loans or Eurodollar Loans as the U.S. Borrower may request in accordance
herewith and (ii) each C $ Revolving Borrowing shall be comprised entirely of
B/A Borrowings or Canadian Prime Rate Borrowings as the Canadian Borrower may
request pursuant to Section 2.03. Notwithstanding anything to the contrary
contained herein, (i) all Borrowings (other than C $ Revolving Borrowings) made
on the Closing Date shall be ABR Borrowings and (ii) all C $ Revolving
Borrowings made on the Closing Date shall be Canadian Prime Rate Borrowings.
Each U.S. $ Swingline Loan shall be an ABR Loan. Each C $ Swingline Loan shall
be a Canadian Prime Rate Loan. Each Lender at its option may make any Eurodollar
Loan by causing any domestic or foreign branch or Affiliate of such Lender to
make such Loan, provided that any exercise of such option shall not affect the
obligation of the U.S. Borrower to repay such Loan in accordance with the terms
of this Agreement and such Lender shall not be entitled to any amount payable
under Section 2.15 or 2.17 in respect of costs arising as a result of such
exercise.
(c) Notwithstanding any other provision of this Agreement, the
Borrowers shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period or Contract Period (in the case of a B/A
Borrowing) requested with respect thereto would end after the Revolving Maturity
Date, the Tranche A Maturity Date, the Tranche B Maturity Date or the Delayed
Draw Maturity Date, as applicable.
(d) (i) The U.S. Administrative Agent shall notify the U.S. Borrower
and the U.S. $ Revolving Lenders of the amount of the aggregate U.S. $ Revolving
Exposure, (ii) the Canadian Administrative Agent shall notify the Canadian
Borrower and the C $ Revolving Lenders of the amount of the aggregate C $
Revolving Exposure and (iii) the U.S. Administrative Agent shall notify the U.S.
Borrower and the Additional Revolving Lenders of the amount of the
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aggregate Additional Revolving Loans, in each case promptly following the last
day of each March, June, September and December.
SECTION 2.03. Requests for Borrowings. To request a U.S. $ Revolving
Borrowing, Additional Revolving Borrowing or Term Borrowing, the U.S. Borrower
shall notify the U.S. Administrative Agent, and to request a C $ Revolving
Borrowing, the Canadian Borrower shall notify the Canadian Administrative Agent,
of such request by telephone (a) in the case of a Eurodollar Borrowing, not
later than 10:00 a.m., New York City time, three Business Days before the date
of the proposed Borrowing, (b) in the case of an ABR Borrowing, not later than
11:00 a.m., New York City time, one Business Day before the date of the proposed
Borrowing, provided that any such notice of an ABR U.S. $ Revolving Borrowing to
finance the reimbursement of a U.S. $ LC Disbursement as contemplated by Section
2.05(e) may be given not later than 11:00 a.m., New York City time, on the date
of the proposed Borrowing, (c) in the case of a B/A Borrowing, not later than
10:00 a.m., Toronto time, three Business Days before the date of such proposed
Borrowing and (d) in the case of a Canadian Prime Rate Borrowing, not later than
11:00 a.m., Toronto time, one Business Day before the date of such proposed
Borrowing, provided that any such notice of a Canadian Prime Rate C $ Revolving
Borrowing to finance the reimbursement of a C $ LC Disbursement as contemplated
by Section 2.05A(e) may be given not later than 10:00 a.m., Toronto time, on the
date of the proposed Borrowing. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
U.S. Administrative Agent c/o The Loan and Agency Services Group or the Canadian
Administrative Agent c/o Funding Officer, as applicable, of a written Borrowing
Request in a form approved by the applicable Administrative Agent and signed by
the applicable Borrower. Each such telephonic and written Borrowing Request
shall specify the following information in compliance with Section 2.02:
(i) the Borrower requesting such Borrowing;
(ii) whether the requested Borrowing is to be a U.S. $ Revolving
Borrowing, Additional Revolving Borrowing, C $ Revolving Borrowing,
Tranche A Term Borrowing, Tranche B Term Borrowing or Delayed Draw Term
Borrowing;
(iii) the aggregate amount of such Borrowing (which shall be
expressed in Dollars, except when such Borrowing is a Canadian Dollar
Borrowing) or, in the case of a B/A Borrowing, the face amount of the
Bankers' Acceptance being requested;
(iv) the date of such Borrowing, which shall be a Business Day;
(v) subject to the second sentence of Section 2.02(b), whether such
Borrowing is to be an ABR Borrowing, a Eurodollar Borrowing, a B/A
Borrowing or a Canadian Prime Rate Borrowing;
(vi) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period";
(vii) if such Borrowing is to be a B/A Borrowing, the Contract
Period and maturity date thereof, which shall be a period contemplated by
the definition of the term "Contract Period";
(viii) the location and number of the applicable Borrower's account
to which funds are to be disbursed, which shall comply with the
requirements of Section 2.06; and
(ix) the currency of such Borrowing (which (A) shall be Dollars, in
the case of any Term Borrowing, U.S. $ Revolving Borrowing or Additional
Revolving Borrowing and (B) shall be Canadian Dollars, in the case of any
C $ Revolving Borrowing).
If no election as to the Type of Borrowing is specified in any such
notice, then the requested Borrowing shall be an ABR Borrowing if a U.S. $
Revolving Borrowing, Additional Revolving Borrowing or Term Borrowing and a
Canadian Prime Rate Borrowing if a C $ Revolving Borrowing. The applicable
Administrative Agent shall promptly (and in any event on the same day that such
Administrative Agent receives such notice, if received by 2:00 p.m., local time,
on such day) advise the applicable Lenders of any notice given pursuant to this
Section 2.03 and of each Lender's portion of the requested Borrowing and, in the
case of a C $ Revolving Borrowing, of the Canadian Dollar amount of such
Borrowing and the Spot Exchange Rate utilized to determine such amount.
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SECTION 2.04. U.S. $ Swingline Loans. (a) Subject to the terms and
conditions set forth herein, the U.S. Swingline Lender agrees to make U.S. $
Swingline Loans to the U.S. Borrower from time to time during the U.S. $
Revolving Availability Period, in an aggregate principal amount at any time
outstanding that will not result in (i) the aggregate principal amount of
outstanding U.S. $ Swingline Loans exceeding $20,000,000 or (ii) the sum of the
aggregate U.S. $ Revolving Exposures exceeding the Total U.S. $ Revolving
Commitments, provided that the U.S. Swingline Lender shall not be required to
make a U.S. $ Swingline Loan to refinance an outstanding U.S. $ Swingline Loan.
Within the foregoing limits and subject to the terms and conditions set forth
herein, the U.S. Borrower may borrow, prepay and reborrow U.S. $ Swingline
Loans.
(b) To request a U.S. $ Swingline Loan, the U.S. Borrower shall
notify the U.S. Administrative Agent of such request by telephone (confirmed by
telecopy), not later than 12:00 noon, New York City time, on the day of a
proposed U.S. $ Swingline Loan. Each such notice shall be irrevocable and shall
specify the requested date (which shall be a Business Day) and amount of the
requested U.S. $ Swingline Loan. The U.S. Administrative Agent will promptly
advise the U.S. Swingline Lender of any such notice received from the U.S.
Borrower. The U.S. Swingline Lender shall make each U.S. $ Swingline Loan
available to the U.S. Borrower by means of a credit to the general deposit
account of the U.S. Borrower with the U.S. Swingline Lender (or, in the case of
a U.S. $ Swingline Loan made to finance the reimbursement of a U.S. $ LC
Disbursement as provided in Section 2.05(e), by remittance to the applicable
U.S. Issuing Bank) by 3:00 p.m., New York City time, on the requested date of
such U.S. $ Swingline Loan.
(c) The U.S. Swingline Lender may by written notice given to the
U.S. Administrative Agent not later than 1:00 p.m., New York City time, on any
Business Day require the U.S. $ Revolving Lenders to acquire participations on
such Business Day in all or a portion of the U.S. $ Swingline Loans outstanding.
Such notice shall specify the aggregate amount of U.S. $ Swingline Loans in
which U.S. $ Revolving Lenders will participate. Promptly upon receipt of such
notice, the U.S. Administrative Agent will give notice thereof to each U.S. $
Revolving Lender, specifying in such notice such U.S. $ Revolving Lender's
Applicable Percentage of such U.S. $ Swingline Loan or Loans. Each U.S. $
Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of
notice as provided above, to pay to the U.S. Administrative Agent, for the
account of the U.S. Swingline Lender, such Lender's Applicable Percentage of
such U.S. $ Swingline Loan or Loans. Each U.S. $ Revolving Lender acknowledges
and agrees that its obligation to acquire participations in U.S. $ Swingline
Loans pursuant to this paragraph is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Each U.S. $ Revolving Lender shall comply with its
obligation under this paragraph by wire transfer of immediately available funds,
in the same manner as provided in Section 2.06 with respect to Loans made by
such U.S. $ Revolving Lender (and Section 2.06 shall apply, mutatis mutandis, to
the payment obligations of the U.S. $ Revolving Lenders), and the U.S.
Administrative Agent shall promptly pay to the U.S. Swingline Lender the amounts
so received by it from the U.S. $ Revolving Lenders. The U.S. Administrative
Agent shall notify the U.S. Borrower of any participations in any U.S. $
Swingline Loan acquired pursuant to this paragraph, and thereafter payments in
respect of such U.S. $ Swingline Loan shall be made to the U.S. Administrative
Agent and not to the U.S. Swingline Lender. Any amounts received by the U.S.
Swingline Lender from the U.S. Borrower (or other party on behalf of the U.S.
Borrower) in respect of a U.S. $ Swingline Loan after receipt by the U.S.
Swingline Lender of the proceeds of a sale of participations therein shall be
promptly remitted to the U.S. Administrative Agent; any such amounts received by
the U.S. Administrative Agent shall be promptly remitted by the U.S.
Administrative Agent to the U.S. $ Revolving Lenders that shall have made their
payments pursuant to this paragraph and to the U.S. Swingline Lender, as their
interests may appear. The purchase of participations in a U.S. $ Swingline Loan
pursuant to this paragraph shall not relieve the U.S. Borrower of any default in
the payment thereof.
SECTION 2.04A. C $ Swingline Loans. (a) Subject to the terms and
conditions set forth herein, the Canadian Swingline Lender agrees to make C $
Swingline Loans in Canadian Dollars to the Canadian Borrower from time to time
during the C $ Revolving Availability Period, in an aggregate principal amount
at any time outstanding that will not result in (i) the aggregate principal
amount of outstanding C $ Swingline Loans exceeding $5,000,000 or (ii) the sum
of the aggregate C $ Revolving Exposures exceeding the Total C $ Revolving
Commitments, provided that the Canadian Swingline Lender shall not be required
to make a C $ Swingline Loan to refinance an outstanding C $ Swingline Loan.
Within the foregoing limits and subject to the terms and conditions set forth
herein, the Canadian Borrower may borrow, prepay and reborrow C $ Swingline
Loans.
(b) To request a C $ Swingline Loan, the Canadian Borrower shall
notify the Canadian Administrative Agent of such request by telephone (confirmed
by telecopy), not later than 12:00 noon, Toronto
34
time, on the day of a proposed C $ Swingline Loan. Each such notice shall be
irrevocable and shall specify the requested date (which shall be a Business Day)
and amount of the requested C $ Swingline Loan. The Canadian Administrative
Agent will promptly advise the Canadian Swingline Lender of any such notice
received from the Canadian Borrower. The Canadian Swingline Lender shall make
each C $ Swingline Loan available to the Canadian Borrower by means of a credit
to the general deposit account of the Canadian Borrower with the Canadian
Swingline Lender (or, in the case of a C $ Swingline Loan made to finance the
reimbursement of a C $ LC Disbursement as provided in Section 2.05A(e), by
remittance to the applicable Canadian Issuing Bank) by 3:00 p.m., Toronto time,
on the requested date of such C $ Swingline Loan.
(c) The Canadian Swingline Lender may by written notice given to the
Canadian Administrative Agent not later than 10:00 a.m., Toronto time, on any
Business Day require the C $ Revolving Lenders to acquire participations on such
Business Day in all or a portion of the C $ Swingline Loans outstanding. Such
notice shall specify the aggregate amount of C $ Swingline Loans in which C $
Revolving Lenders will participate. Promptly upon receipt of such notice, the
Canadian Administrative Agent will give notice thereof to each C $ Revolving
Lender, specifying in such notice such C $ Revolving Lender's Applicable
Percentage of such C $ Swingline Loan or Loans. Each C $ Revolving Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Canadian Administrative Agent, for the account of the Canadian
Swingline Lender, such Lender's Applicable Percentage of such C $ Swingline Loan
or Loans. Each C $ Revolving Lender acknowledges and agrees that its obligation
to acquire participations in C $ Swingline Loans pursuant to this paragraph is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default or reduction
or termination of the Commitments, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever. Each C $
Revolving Lender shall comply with its obligation under this paragraph by wire
transfer of immediately available funds, in the same manner as provided in
Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall
apply, mutatis mutandis, to the payment obligations of the C $ Revolving
Lenders), and the Canadian Administrative Agent shall promptly pay to the
Canadian Swingline Lender the amounts so received by it from the C $ Revolving
Lenders. The Canadian Administrative Agent shall notify the Canadian Borrower of
any participations in any C $ Swingline Loan acquired pursuant to this
paragraph, and thereafter payments in respect of such C $ Swingline Loan shall
be made to the Canadian Administrative Agent and not to the Canadian Swingline
Lender. Any amounts received by the Canadian Swingline Lender from the Canadian
Borrower (or other party on behalf of the Canadian Borrower) in respect of a C $
Swingline Loan after receipt by the Canadian Swingline Lender of the proceeds of
a sale of participations therein shall be promptly remitted to the Canadian
Administrative Agent; any such amounts received by the Canadian Administrative
Agent shall be promptly remitted by the Canadian Administrative Agent to the C $
Revolving Lenders that shall have made their payments pursuant to this paragraph
and to the Canadian Swingline Lender, as their interests may appear. The
purchase of participations in a C $ Swingline Loan pursuant to this paragraph
shall not relieve the Canadian Borrower of any default in the payment thereof.
SECTION 2.05. U.S. $ Letters of Credit. (a) General. Subject to the
terms and conditions set forth herein, the U.S. Borrower may request the
issuance of U.S. $ Letters of Credit for its own account, in a form reasonably
acceptable to the U.S. Administrative Agent and the applicable U.S. Issuing
Bank, at any time and from time to time during the U.S. $ LC Availability
Period. In the event of any inconsistency between the terms and conditions of
this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the U.S. Borrower to, or entered
into by the U.S. Borrower with, a U.S. Issuing Bank relating to any U.S. $
Letter of Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a U.S. $ Letter of Credit (or the
amendment, renewal or extension of an outstanding U.S. $ Letter of Credit), the
U.S. Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the applicable
U.S. Issuing Bank) to a U.S. Issuing Bank and the U.S. Administrative Agent
(reasonably in advance of the requested date of issuance, amendment, renewal or
extension) a notice requesting the issuance of a U.S. $ Letter of Credit, or
identifying the U.S. $ Letter of Credit to be amended, renewed or extended, and
specifying the date of issuance, amendment, renewal or extension (which shall be
a Business Day), the date on which such U.S. $ Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such U.S.
$ Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
U.S. $ Letter of Credit. If requested by the applicable U.S. Issuing Bank, the
U.S. Borrower also shall submit a letter of credit application on such U.S.
Issuing Bank's standard form in connection with any request for a U.S. $ Letter
of Credit. A U.S. $ Letter of Credit shall be issued, amended, renewed or
extended only if (and upon issuance, amendment, renewal or extension of each
U.S. $ Letter of Credit the U.S. Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
35
extension (i) the U.S. $ LC Exposure shall not exceed $25,000,000 and (ii) the
aggregate U.S. $ Revolving Exposures shall not exceed the aggregate U.S. $
Revolving Commitments.
(c) Expiration Date. Each U.S. $ Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after the
date of the issuance of such U.S. $ Letter of Credit (or, in the case of any
renewal or extension thereof, one year after such renewal or extension) and (ii)
the date that is five Business Days prior to the Revolving Maturity Date.
(d) Participations. By the issuance of a U.S. $ Letter of Credit (or
an amendment to a U.S. $ Letter of Credit increasing the amount thereof) and
without any further action on the part of the applicable U.S. Issuing Bank or
the U.S. $ Revolving Lenders, such U.S. Issuing Bank hereby grants to each U.S.
$ Revolving Lender, and each U.S. $ Revolving Lender hereby acquires from such
U.S. Issuing Bank, a participation in such U.S. $ Letter of Credit equal to such
U.S. $ Revolving Lender's Applicable Percentage of the aggregate amount
available to be drawn under such U.S. $ Letter of Credit. In consideration and
in furtherance of the foregoing, each U.S. $ Revolving Lender hereby absolutely
and unconditionally agrees to pay to the U.S. Administrative Agent, for the
account of the applicable U.S. Issuing Bank, such U.S. $ Revolving Lender's
Applicable Percentage of each U.S. $ LC Disbursement made by such U.S. Issuing
Bank and not reimbursed by the U.S. Borrower on the date due as provided in
paragraph (e) of this Section, or of any reimbursement payment required to be
refunded to the U.S. Borrower for any reason. Each U.S. $ Revolving Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of U.S. $ Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any U.S. $ Letter of Credit or
the occurrence and continuance of a Default or reduction or termination of the
U.S. $ Revolving Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If a U.S. Issuing Bank shall make any U.S. $ LC
Disbursement in respect of a U.S. $ Letter of Credit issued by such U.S. Issuing
Bank, the U.S. Borrower shall reimburse such U.S. $ LC Disbursement by paying to
the U.S. Administrative Agent an amount equal to such U.S. $ LC Disbursement not
later than 12:00 noon, New York City time, on the date that such U.S. $ LC
Disbursement is made, if the U.S. Borrower shall have received notice of such
U.S. $ LC Disbursement prior to 10:00 a.m., New York City time, on such date,
or, if such notice has not been received by the U.S. Borrower prior to such time
on such date, then not later than 12:00 noon, New York City time, on (i) the
Business Day that the U.S. Borrower receives such notice, if such notice is
received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii)
the Business Day immediately following the day that the U.S. Borrower receives
such notice, if such notice is not received prior to such time on the day of
receipt, provided that the U.S. Borrower may, subject to the conditions to
borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that
such payment be financed with an ABR U.S. $ Revolving Borrowing or U.S. $
Swingline Loan in an equivalent amount and, to the extent so financed, the U.S.
Borrower's obligation to make such payment shall be discharged and replaced by
the resulting ABR U.S. $ Revolving Borrowing or U.S. $ Swingline Loan. If the
U.S. Borrower fails to make such payment when due, the U.S. Administrative Agent
shall notify each U.S. $ Revolving Lender of the applicable U.S. $ Revolving LC
Disbursement, the payment then due from the U.S. Borrower in respect thereof and
such U.S. $ Revolving Lender's Applicable Percentage thereof. Promptly following
receipt of such notice, each U.S. $ Revolving Lender shall pay to the U.S.
Administrative Agent its Applicable Percentage of the payment then due from the
U.S. Borrower, in the same manner as provided in Section 2.06 with respect to
Loans made by such U.S. $ Revolving Lender (and Section 2.06 shall apply,
mutatis mutandis, to the payment obligations of the U.S. $ Revolving Lenders),
and the U.S. Administrative Agent shall promptly pay to the applicable U.S.
Issuing Bank the amounts so received by it from the U.S. $ Revolving Lenders.
Promptly following receipt by the U.S. Administrative Agent of any payment from
the U.S. Borrower pursuant to this paragraph, the U.S. Administrative Agent
shall distribute such payment to the applicable U.S. Issuing Bank or, to the
extent that U.S. $ Revolving Lenders have made payments pursuant to this
paragraph to reimburse such U.S. Issuing Bank, then to such U.S. $ Revolving
Lenders and such U.S. Issuing Bank as their interests may appear. Any payment
made by a U.S. $ Revolving Lender pursuant to this paragraph to reimburse any
U.S. Issuing Bank for any U.S. $ LC Disbursement (other than the funding of ABR
U.S. $ Revolving Loans or a U.S. $ Swingline Loan as contemplated above) shall
not constitute a Loan and shall not relieve the U.S. Borrower of its obligation
to reimburse such U.S. $ LC Disbursement.
(f) Obligations Absolute. The U.S. Borrower's obligation to
reimburse U.S. $ LC Disbursements as provided in paragraph (e) of this Section
shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any U.S. $ Letter of Credit or this Agreement, or any term or
provision therein or herein, (ii) any draft or other document presented under a
U.S. $ Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect
(unless the applicable U.S. Issuing Bank has actual knowledge of such
36
forgery or fraud), (iii) payment by the applicable U.S. Issuing Bank under a
U.S. $ Letter of Credit against presentation of a draft or other document that
does not comply with the terms of such U.S. $ Letter of Credit or (iv) any other
event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section, constitute a
legal or equitable discharge of, or provide a right of setoff against, the U.S.
Borrower's obligations hereunder, except to the extent that the applicable U.S.
Issuing Bank's payment under any U.S. $ Letter of Credit constituted gross
negligence or wilful misconduct of such U.S. Issuing Bank. Neither the U.S.
Administrative Agent, the Lenders nor any U.S. Issuing Bank, nor any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any U.S. $ Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any U.S. $ Letter of Credit (including
any document required to make a drawing thereunder), any error in interpretation
of technical terms or any consequence arising from causes beyond the control of
such U.S. Issuing Bank, provided that the foregoing shall not be construed to
excuse the applicable U.S. Issuing Bank from liability to the U.S. Borrower to
the extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the U.S. Borrower to the extent permitted
by applicable law) suffered by the U.S. Borrower that are caused by such U.S.
Issuing Bank's failure to exercise care when determining whether drafts and
other documents presented under a U.S. $ Letter of Credit comply with the terms
thereof. The parties hereto expressly agree that, in the absence of gross
negligence or wilful misconduct on the part of the applicable U.S. Issuing Bank,
such U.S. Issuing Bank shall be deemed to have exercised care in each such
determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
that appear on their face to be in substantial compliance with the terms of a
U.S. $ Letter of Credit, the applicable U.S. Issuing Bank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such U.S. $ Letter of Credit.
(g) Disbursement Procedures. Each U.S. Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a U.S. $ Letter of Credit issued by such U.S. Issuing
Bank. The applicable U.S. Issuing Bank shall promptly notify the U.S.
Administrative Agent and the U.S. Borrower by telephone (confirmed by telecopy)
of such demand for payment and whether such U.S. Issuing Bank has made or will
make a U.S. $ LC Disbursement thereunder, provided that any failure to give or
delay in giving such notice shall not relieve the U.S. Borrower of its
obligation to reimburse such U.S. Issuing Bank and the U.S. $ Revolving Lenders
with respect to any such U.S. $ LC Disbursement.
(h) Interim Interest. If any U.S. Issuing Bank shall make any U.S. $
LC Disbursement, then, unless the U.S. Borrower shall reimburse such U.S. $ LC
Disbursement in full on the date such U.S. $ LC Disbursement is made, the unpaid
amount thereof shall bear interest, for each day from and including the date
such U.S. $ LC Disbursement is made to but excluding the date that the U.S.
Borrower reimburses such U.S. $ LC Disbursement, at the rate per annum then
applicable to ABR U.S. $ Revolving Loans, provided that, if the U.S. Borrower
fails to reimburse such U.S. $ LC Disbursement when due pursuant to paragraph
(e) of this Section, then Section 2.13(e) shall apply. Interest accrued pursuant
to this paragraph shall be for the account of the applicable U.S. Issuing Bank,
except that interest accrued on and after the date of payment by any U.S. $
Revolving Lender pursuant to paragraph (e) of this Section to reimburse such
U.S. Issuing Bank shall be for the account of such Lender to the extent of such
payment.
(i) Replacement of the Primary U.S. Issuing Bank. The Primary U.S.
Issuing Bank may be replaced at any time by written agreement among the U.S.
Borrower, the U.S. Administrative Agent, the replaced Primary U.S. Issuing Bank
and the successor Primary U.S. Issuing Bank. The U.S. Administrative Agent shall
notify the Lenders of any such replacement of the Primary U.S. Issuing Bank. At
the time any such replacement shall become effective, the U.S. Borrower shall
pay all unpaid fees accrued for the account of the replaced Primary U.S. Issuing
Bank pursuant to Section 2.12(b). From and after the effective date of any such
replacement, (i) the successor Primary U.S. Issuing Bank shall have all the
rights and obligations of the Primary U.S. Issuing Bank under this Agreement
with respect to U.S. $ Letters of Credit to be issued thereafter and (ii)
references herein to the term "Primary U.S. Issuing Bank" shall be deemed to
refer to such successor or to any previous Primary U.S. Issuing Bank, or to such
successor and all previous Primary U.S. Issuing Banks, as the context shall
require. After the replacement of a Primary U.S. Issuing Bank hereunder, the
replaced Primary U.S. Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of a U.S. Issuing Bank under
this Agreement with respect to U.S. $ Letters of Credit issued by it prior to
such replacement, but shall not be required to issue additional U.S. $ Letters
of Credit.
37
(j) Resignation of U.S. Issuing Banks. Any U.S. Issuing Bank (other
than the Primary U.S. Issuing Bank) may resign at any time upon not less than 30
days' prior written notice to the U.S. Borrower and the U.S. Administrative
Agent. At the time any such resignation shall become effective, the U.S.
Borrower shall pay all unpaid fees accrued for the account of the resigning U.S.
Issuing Bank pursuant to Section 2.12(b). After the resignation of a U.S.
Issuing Bank hereunder, such U.S. Issuing Bank shall remain a party hereto and
shall continue to have all the rights and obligations of a U.S. Issuing Bank
under this Agreement with respect to U.S. $ Letters of Credit issued by it prior
to such resignation, but shall not be required to issue additional U.S. $
Letters of Credit.
(k) Cash Collateralization. If any Event of Default shall occur and
be continuing, on the Business Day that the U.S. Borrower receives notice from
the U.S. Administrative Agent or the Required Lenders (or, if the maturity of
the Loans has been accelerated, U.S. $ Revolving Lenders with U.S. $ LC Exposure
representing greater than 50% of the aggregate U.S. $ LC Exposure) demanding the
deposit of cash collateral pursuant to this paragraph, the U.S. Borrower shall
deposit in an account with the U.S. Administrative Agent, in the name of the
U.S. Administrative Agent and for the benefit of the U.S. $ Revolving Lenders,
an amount equal to the U.S. $ LC Exposure as of such date plus any accrued and
unpaid interest thereon, provided that the obligation to deposit such cash
collateral shall become effective immediately, and such deposit shall become
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to the U.S. Borrower
described in clause (h) or (i) of Article VII. Each such deposit shall be held
by the U.S. Administrative Agent as collateral for the payment and performance
of the obligations of the U.S. Borrower under this Agreement. The U.S.
Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits, which investments shall be made at the
option and sole discretion of the U.S. Administrative Agent and at the U.S.
Borrower's risk and expense, such deposits shall not bear interest. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys in
such account shall be applied by the U.S. Administrative Agent to reimburse the
applicable U.S. Issuing Bank for U.S. $ LC Disbursements for which it has not
been reimbursed and, to the extent not so applied, shall be held for the
satisfaction of the reimbursement obligations of the U.S. Borrower for the U.S.
$ LC Exposure at such time or, if the maturity of the Loans has been accelerated
(but subject to the consent of U.S. $ Revolving Lenders with U.S. $ LC Exposure
representing greater than 50% of the aggregate U.S. $ LC Exposure), be applied
to satisfy other obligations of the U.S. Borrower under this Agreement. If the
U.S. Borrower is required to provide an amount of cash collateral hereunder as a
result of the occurrence of an Event of Default, such amount (to the extent not
applied as aforesaid) shall be returned to the U.S. Borrower within one Business
Day after all Events of Default have been cured or waived.
SECTION 2.05A. C $ Letters of Credit. (a) General. Subject to the
terms and conditions set forth herein, the Canadian Borrower may request the
issuance of C $ Letters of Credit denominated in Canadian Dollars for its own
account, in a form reasonably acceptable to the Canadian Administrative Agent
and the applicable Canadian Issuing Bank, at any time and from time to time
during the C $ LC Availability Period. In the event of any inconsistency between
the terms and conditions of this Agreement and the terms and conditions of any
form of letter of credit application or other agreement submitted by any
Canadian Borrower to, or entered into by the Canadian Borrower with, a Canadian
Issuing Bank relating to any C $ Letter of Credit, the terms and conditions of
this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a C $ Letter of Credit (or the amendment,
renewal or extension of an outstanding C $ Letter of Credit), the Canadian
Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the applicable
Canadian Issuing Bank) to a Canadian Issuing Bank and the Canadian
Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a C $
Letter of Credit, or identifying the C $ Letter of Credit to be amended, renewed
or extended, and specifying the date of issuance, amendment, renewal or
extension (which shall be a Business Day), the date on which such C $ Letter of
Credit is to expire (which shall comply with paragraph (c) of this Section), the
amount of such C $ Letter of Credit, the name and address of the beneficiary
thereof and such other information as shall be necessary to prepare, amend,
renew or extend such C $ Letter of Credit. If requested by the applicable
Canadian Issuing Bank, the Canadian Borrower also shall submit a letter of
credit application on such Canadian Issuing Bank's standard form in connection
with any request for a C $ Letter of Credit. A C $ Letter of Credit shall be
issued, amended, renewed or extended only if (and upon issuance, amendment,
renewal or extension of each C $ Letter of Credit the Canadian Borrower shall be
deemed to represent and warrant that), after giving effect to such issuance,
amendment, renewal or extension (i) the C $ LC Exposure shall not exceed
$5,000,000, and (ii) the aggregate C $ Revolving Exposures shall not exceed the
aggregate C $ Revolving Commitments. Promptly after the issuance of or amendment
to any C $ Letter of Credit, the Canadian Administrative Agent shall notify the
C $ Revolving Lenders of such issuance or amendment, shall provide a copy of the
issued C $ Letter of Credit or
38
amendment, as the case may be, and shall indicate the Spot Exchange Rate used in
determining the Assigned Dollar Value thereof.
(c) Expiration Date. Each C $ Letter of Credit shall expire at or
prior to the close of business on the earlier of (i) the date one year after the
date of the issuance of such C $ Letter of Credit (or, in the case of any
renewal or extension thereof, one year after such renewal or extension) and (ii)
the date that is five Business Days prior to the Revolving Maturity Date.
(d) Participations. By the issuance of a C $ Letter of Credit (or an
amendment to a C $ Letter of Credit increasing the amount thereof) and without
any further action on the part of the applicable Canadian Issuing Bank or the C
$ Revolving Lenders, such Canadian Issuing Bank hereby grants to each C $
Revolving Lender, and each C $ Revolving Lender hereby acquires from such
Canadian Issuing Bank, a participation in such C $ Letter of Credit equal to
such C $ Revolving Lender's Applicable Percentage of the aggregate amount
available to be drawn under such C $ Letter of Credit. In consideration and in
furtherance of the foregoing, each C $ Revolving Lender hereby absolutely and
unconditionally agrees to pay to the Canadian Administrative Agent, for the
account of the applicable Canadian Issuing Bank, such C $ Revolving Lender's
Applicable Percentage of each C $ LC Disbursement made by such Canadian Issuing
Bank and not reimbursed by the Canadian Borrower on the date due as provided in
paragraph (e) of this Section, or of any reimbursement payment required to be
refunded to the Canadian Borrower for any reason. Each C $ Revolving Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of C $ Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any C $ Letter of Credit or the
occurrence and continuance of a Default or reduction or termination of the C $
Revolving Commitments, and that each such payment shall be made without any
offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If a Canadian Issuing Bank shall make any C $ LC
Disbursement in respect of a C $ Letter of Credit issued by such Canadian
Issuing Bank, the Canadian Borrower shall reimburse such C $ LC Disbursement by
paying to the Canadian Administrative Agent an amount equal to such C $ LC
Disbursement not later than 12:00 noon, Toronto time, on the date that such C $
LC Disbursement is made, if the Canadian Borrower shall have received notice of
such C $ LC Disbursement prior to 10:00 a.m., Toronto time, on such date, or, if
such notice has not been received by the Canadian Borrower prior to such time on
such date, then not later than 12:00 noon, Toronto time, on (i) the Business Day
that the Canadian Borrower receives such notice, if such notice is received
prior to 10:00 a.m., Toronto time, on the day of receipt, or (ii) the Business
Day immediately following the day that the Canadian Borrower receives such
notice, if such notice is not received prior to such time on the day of receipt,
provided that the Canadian Borrower may, subject to the conditions to borrowing
set forth herein, request in accordance with Section 2.03 or 2.04 that such
payment be financed with an Canadian Prime Rate C $ Revolving Borrowing or C $
Swingline Loan in an equivalent amount and, to the extent so financed, the
Canadian Borrower's obligation to make such payment shall be discharged and
replaced by the resulting Canadian Prime Rate C $ Revolving Borrowing or C $
Swingline Loan. If the Canadian Borrower fails to make such payment when due,
the Canadian Administrative Agent shall notify each C $ Revolving Lender of the
applicable C $ LC Disbursement, the payment then due from the Canadian Borrower
in respect thereof and such C $ Revolving Lender's Applicable Percentage
thereof. Promptly following receipt of such notice, each C $ Revolving Lender
shall pay to the Canadian Administrative Agent its Applicable Percentage of the
payment then due from the Canadian Borrower, in the same manner as provided in
Section 2.06 with respect to Loans made by such C $ Revolving Lender (and
Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the C
$ Revolving Lenders), and the Canadian Administrative Agent shall promptly pay
to the applicable Canadian Issuing Bank the amounts so received by it from the C
$ Revolving Lenders. Promptly following receipt by the Canadian Administrative
Agent of any payment from the Canadian Borrower pursuant to this paragraph, the
Canadian Administrative Agent shall distribute such payment to the applicable
Canadian Issuing Bank or, to the extent that C $ Revolving Lenders have made
payments pursuant to this paragraph to reimburse such Canadian Issuing Bank,
then to such C $ Revolving Lenders and such Canadian Issuing Bank as their
interests may appear. Any payment made by a C $Revolving Lender pursuant to this
paragraph to reimburse any Canadian Issuing Bank for any C $ LC Disbursement
(other than the funding of Canadian Prime Rate C $ Revolving Loans or a C $
Swingline Loan as contemplated above) shall not constitute a Loan and shall not
relieve the Canadian Borrower of its obligation to reimburse such C $ LC
Disbursement.
(f) Obligations Absolute. The Canadian Borrower's obligation to
reimburse C $ LC Disbursements as provided in paragraph (e) of this Section
shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any C $ Letter of Credit or this Agreement, or any term or
provision therein or herein, (ii) any draft or other document presented under a
C $ Letter of Credit proving to be forged, fraudulent or invalid in any respect
or any statement therein being untrue
39
or inaccurate in any respect (unless the applicable Canadian Issuing Bank has
actual knowledge of such forgery or fraud), (iii) payment by the applicable
Canadian Issuing Bank under a C $ Letter of Credit against presentation of a
draft or other document that does not comply with the terms of such C $ Letter
of Credit or (iv) any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this
Section, constitute a legal or equitable discharge of, or provide a right of
setoff against, the Canadian Borrower's obligations hereunder, except to the
extent that the applicable Canadian Issuing Bank's payment under any C $ Letter
of Credit constituted gross negligence or wilful misconduct of such Canadian
Issuing Bank. Neither the Canadian Administrative Agent, the C $ Revolving
Lenders nor any Canadian Issuing Bank, nor any of their Related Parties, shall
have any liability or responsibility by reason of or in connection with the
issuance or transfer of any C $ Letter of Credit or any payment or failure to
make any payment thereunder (irrespective of any of the circumstances referred
to in the preceding sentence), or any error, omission, interruption, loss or
delay in transmission or delivery of any draft, notice or other communication
under or relating to any C $ Letter of Credit (including any document required
to make a drawing thereunder), any error in interpretation of technical terms or
any consequence arising from causes beyond the control of such Canadian Issuing
Bank, provided that the foregoing shall not be construed to excuse the
applicable Canadian Issuing Bank from liability to the Canadian Borrower to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Canadian Borrower to the extent
permitted by applicable law) suffered by the Canadian Borrower that are caused
by such Canadian Issuing Bank's failure to exercise care when determining
whether drafts and other documents presented under a C $ Letter of Credit comply
with the terms thereof. The parties hereto expressly agree that, in the absence
of gross negligence or wilful misconduct on the part of the applicable Canadian
Issuing Bank, such Canadian Issuing Bank shall be deemed to have exercised care
in each such determination. In furtherance of the foregoing and without limiting
the generality thereof, the parties agree that, with respect to documents
presented that appear on their face to be in substantial compliance with the
terms of a C $ Letter of Credit, the applicable Canadian Issuing Bank may, in
its sole discretion, either accept and make payment upon such documents without
responsibility for further investigation or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such C $ Letter of Credit.
(g) Disbursement Procedures. Each Canadian Issuing Bank shall,
promptly following its receipt thereof, examine all documents purporting to
represent a demand for payment under a C $ Letter of Credit issued by such
Canadian Issuing Bank. The applicable Canadian Issuing Bank shall promptly
notify the Canadian Administrative Agent and the Canadian Borrower by telephone
(confirmed by telecopy) of such demand for payment and whether such Canadian
Issuing Bank has made or will make a C $ LC Disbursement thereunder, provided
that any failure to give or delay in giving such notice shall not relieve the
Canadian Borrower of its obligation to reimburse such Canadian Issuing Bank and
the C $ Revolving Lenders with respect to any such C $ LC Disbursement.
(h) Interim Interest. If any Canadian Issuing Bank shall make any C
$ LC Disbursement, then, unless the Canadian Borrower shall reimburse such C $
LC Disbursement in full on the date such C $ LC Disbursement is made, the unpaid
amount thereof shall bear interest, for each day from and including the date
such C $ LC Disbursement is made to but excluding the date that the Canadian
Borrower reimburses such C $ LC Disbursement, at the rate per annum then
applicable to Canadian Prime Rate C $ Revolving Loans, provided that, if the
Canadian Borrower fails to reimburse such C $ LC Disbursement when due pursuant
to paragraph (e) of this Section, then Section 2.13(e) shall apply. Interest
accrued pursuant to this paragraph shall be for the account of the applicable
Canadian Issuing Bank, except that interest accrued on and after the date of
payment by any C $ Revolving Lender pursuant to paragraph (e) of this Section to
reimburse such Canadian Issuing Bank shall be for the account of such C $
Revolving Lender to the extent of such payment.
(i) Replacement of the Primary Canadian Issuing Bank. The Primary
Canadian Issuing Bank may be replaced at any time by written agreement among the
Canadian Borrower, the Canadian Administrative Agent, the replaced Primary
Canadian Issuing Bank and the successor Primary Canadian Issuing Bank. The
Canadian Administrative Agent shall notify the C $ Revolving Lenders of any such
replacement of the Primary Canadian Issuing Bank. At the time any such
replacement shall become effective, the Canadian Borrower shall pay all unpaid
fees accrued for the account of the replaced Primary Canadian Issuing Bank
pursuant to Section 2.12(c). From and after the effective date of any such
replacement, (i) the successor Primary Canadian Issuing Bank shall have all the
rights and obligations of the Primary Canadian Issuing Bank under this Agreement
with respect to C $ Letters of Credit to be issued thereafter and (ii)
references herein to the term "Primary Canadian Issuing Bank" shall be deemed to
refer to such successor or to any previous Primary Canadian Issuing Bank, or to
such successor and all previous Primary Canadian Issuing Banks, as the context
shall require. After the replacement of a Primary Canadian Issuing Bank
hereunder, the replaced Primary Canadian Issuing Bank shall remain a party
hereto and shall continue to have all the rights and obligations a Canadian
Issuing Bank under this Agreement with respect to C $ Letters of Credit issued
by it prior to such replacement, but shall not be required to issue additional C
$ Letters of Credit.
40
(j) Resignation of Canadian Issuing Banks. Any Canadian Issuing Bank
(other than the Primary Canadian Issuing Bank) may resign at any time upon not
less than 30 days' prior written notice to the Canadian Borrower and the
Administrative Agents. At the time any such resignation shall become effective,
the Canadian Borrower shall pay all unpaid fees accrued for the account of the
resigning a Canadian Issuing Bank pursuant to Section 2.12(c). After the
resignation of a Canadian Issuing Bank hereunder, such Canadian Issuing Bank
shall remain a party hereto and shall continue to have all the rights and
obligations of a Canadian Issuing Bank under this Agreement with respect to C $
Letters of Credit issued by it prior to such resignation, but shall not be
required to issue additional C $ Letters of Credit.
(k) Cash Collateralization. If any Event of Default shall occur and
be continuing, on the Business Day that the Canadian Borrower receives notice
from the either the Canadian Administrative Agent, the U.S. Administrative Agent
or the Required Lenders (or, if the maturity of the Loans has been accelerated,
C $ Revolving Lenders with C $ LC Exposure representing greater than 50% of the
aggregate C $ LC Exposure) demanding the deposit of cash collateral pursuant to
this paragraph, the Canadian Borrower shall deposit in an account with the
Canadian Administrative Agent, in the name of the Canadian Administrative Agent
and for the benefit of the C $ Revolving Lenders, an amount equal to the C $ LC
Exposure as of such date plus any accrued and unpaid interest thereon, provided
that the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default
with respect to the Canadian Borrower described in clause (h) or (i) of Article
VII. Each such deposit shall be held by the Canadian Administrative Agent as
collateral for the payment and performance of the obligations of the Canadian
Borrower under this Agreement. The Canadian Administrative Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account. Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Canadian Administrative Agent and at the Canadian Borrower's risk and
expense, such deposits shall not bear interest. Interest or profits, if any, on
such investments shall accumulate in such account. Moneys in such account shall
be applied by the Canadian Administrative Agent to reimburse the applicable
Canadian Issuing Bank for C $ LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction
of the reimbursement obligations of the Canadian Borrower for the C $ LC
Exposure at such time or, if the maturity of the Loans has been accelerated (but
subject to the consent of C $ Revolving Lenders with C $ LC Exposure
representing greater than 50% of the aggregate C $ LC Exposure), be applied to
satisfy other obligations of the Canadian Borrower under this Agreement. If the
Canadian Borrower is required to provide an amount of cash collateral hereunder
as a result of the occurrence of an Event of Default, such amount (to the extent
not applied as aforesaid) shall be returned to the Canadian Borrower within one
Business Day after all Events of Default have been cured or waived.
SECTION 2.06. Funding of Borrowings. (a) Each Term Loan Lender, U.S.
$ Revolving Lender and Additional Revolving Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 noon, New York City time, to the account of
the U.S. Administrative Agent most recently designated by the U.S.
Administrative Agent for such purpose by notice to the Term Loan Lenders, the
U.S. $ Revolving Lenders and the Additional Revolving Lenders, as applicable,
provided that U.S. $ Swingline Loans shall be made as provided in Section 2.04.
The U.S. Administrative Agent will make such Term Loans, U.S. $ Revolving Loans
and Additional Revolving Loans available to the U.S. Borrower by promptly
crediting the amounts so received, in like funds, to an account of the U.S.
Borrower maintained with the U.S. Administrative Agent in New York City and
designated by the U.S. Borrower in the applicable Borrowing Request and then
promptly transferring such funds to PNC Bank, Pittsburgh, PA (Account No.
1001145919; ABA 043000096), provided that ABR U.S. $ Revolving Loans made to
finance the reimbursement of a U.S. $ LC Disbursement as provided in Section
2.05(e) shall be remitted by the U.S. Administrative Agent to the applicable
U.S. Issuing Bank and (b) each C $ Revolving Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 noon, Toronto time, to the account of the
Canadian Administrative Agent most recently designated by the Canadian
Administrative Agent for such purposes by notice to the C $ Revolving Lenders,
provided that C $ Swingline Loans shall be made as provided in Section 2.04A.
The Canadian Administrative Agent will make such Loans available to the Canadian
Borrower by promptly crediting the amounts so received, in like funds, to an
account of the Canadian Borrower maintained with the Canadian Administrative
Agent in Toronto and designated by the Canadian Borrower in the applicable
Borrowing Request and then promptly transferring such funds to The
Toronto-Dominion Bank, Toronto, Canada (Account No. 06900319932; Transit No.
10202), provided that Canadian Prime Rate C $ Revolving Loans made to finance
the reimbursement of a C $ LC Disbursement as provided in Section 2.05A(e) shall
be remitted by the Canadian Administrative Agent to the applicable Canadian
Issuing Bank.
(b) Unless the applicable Administrative Agent shall have received
notice from a Lender prior to the proposed date of any Borrowing that such
Lender will not make available to such Administrative
41
Agent such Lender's share of such Borrowing, such Administrative Agent may
assume that such Lender has made such share available on such date in accordance
with paragraph (a) of this Section and may, in reliance upon such assumption,
make available to the applicable Borrower a corresponding amount in the required
currency. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to such Administrative Agent, then the applicable
Lender agrees to pay to such Administrative Agent forthwith on demand such
corresponding amount with interest thereon, for each day from and including the
date such amount is made available to the applicable Borrower to but excluding
the date of payment to such Administrative Agent, in the case of Term Loans,
U.S. $ Revolving Loans, Additional Revolving Loans or U.S. $ Swingline Loans, at
the Federal Funds Effective Rate or, if the Federal Funds Effective Rate cannot
be determined, a rate determined by the U.S. Administrative Agent in accordance
with banking industry rules on interbank compensation, and in the case of C $
Revolving Loans and C $ Swingline Loans, at a rate determined by the Canadian
Administrative Agent to represent its cost of overnight or short-term funds
(which determination shall be conclusive absent manifest error). In the event
that the applicable Lender has not made its share of the applicable Borrowing
available within three Business Days, the applicable Borrower shall pay such
amount to the applicable Administrative Agent together with interest from the
date of such Borrowing at the rate applicable to the Loans so made available. If
such Lender pays such amount to the applicable Administrative Agent then such
amount shall constitute such Lender's Loan included in such Borrowing.
SECTION 2.07. Interest Elections. (a) Each U.S. $ Revolving
Borrowing, C $ Revolving Borrowing, Additional Revolving Borrowing and Term
Borrowing initially shall be of the Type specified in the applicable Borrowing
Request and, in the case of a Eurodollar Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request and, in the case of a B/A
Borrowing, shall have a Contract Period and maturity date as specified in such
Borrowing Request. Thereafter, the applicable Borrower may from time to time
elect to convert or continue the Type of, or the duration of the Interest Period
or Contract Period and maturity date (in the case of a B/A Borrowing) applicable
to, the Loans included in any Borrowing. The applicable Borrower may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing. This Section shall not apply
to Swingline Borrowings, which may not be converted or continued.
(b) To make an election pursuant to this Section, the applicable
Borrower shall notify the applicable Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section
2.03 if such Borrower were requesting a U.S. $ Revolving Borrowing, C $
Revolving Borrowing or Additional Revolving Borrowing, as applicable, of the
Type resulting from such election to be made on the effective date of such
election. Each such telephonic Interest Election Request shall be irrevocable
and shall be confirmed promptly by hand delivery or telecopy to the applicable
Administrative Agent of a written Interest Election Request in a form approved
by the applicable Administrative Agent and signed by the applicable Borrower.
Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:
(i) the Borrower making such Interest Election Request;
(ii) the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to
clauses (iv) and (v) below shall be specified for each resulting
Borrowing);
(iii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iv) whether the resulting Borrowing is to be an ABR Borrowing, a
Eurodollar Borrowing, a Canadian Prime Rate Borrowing or a B/A Borrowing;
(v) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period"; and
(vi) if the resulting Borrowing is a B/A Borrowing, the Contract
Period to be applicable thereto after giving effect to such election,
which shall be a period contemplated by the definition of the term
"Contract Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the U.S. Borrower shall be deemed to have
selected an Interest Period of one month's duration. If any
42
such Interest Election Request requests a B/A Borrowing but does not specify a
maturity date or Contract Period, then the Canadian Borrower shall be deemed to
have selected a maturity date that is 30 days following the date of such B/A
Borrowing.
(c) Promptly following receipt of an Interest Election Request, the
applicable Administrative Agent shall advise each applicable Lender of the
details thereof and of such Lender's portion of each resulting Borrowing.
(d) If the U.S. Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. If the Canadian Borrower fails to deliver a timely Interest
Election Request with respect to a B/A Borrowing prior to the maturity date
applicable thereto, then, unless such Borrowing is repaid as provided herein, at
the end of such Contract Period such Borrowing shall be converted to a Canadian
Prime Rate Borrowing.
(e) Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the U.S. Administrative Agent, at the
request of the Required Lenders, so notifies the Borrowers, then so long as an
Event of Default is continuing, (i) each outstanding Eurodollar Loan shall be
converted to or continued as an ABR Loan on the last day of its Interest Period
and any additional Eurodollar Loans shall be made as ABR Loans and (ii) each
outstanding B/A Borrowing shall be converted or continued as a Canadian Prime
Rate Loan on its maturity date and any additional C $ Revolving Loans shall be
made as Canadian Prime Rate Loans. The foregoing is without prejudice to the
other rights and remedies available hereunder upon an Event of Default.
SECTION 2.08. Termination and Reduction of Commitments. (a) The
Tranche A Commitments and Tranche B Commitments shall terminate at 5:00 p.m.,
New York City time, on the Closing Date. The Delayed Draw Commitments shall
terminate at 5:00 p.m., New York City time, on the Delayed Draw Commitment
Termination Date. Prior to the termination thereof in full, the Delayed Draw
Term Commitments shall be automatically and permanently reduced at 5:00 p.m.,
New York City time, on each Delayed Draw Term Loan Closing Date, by an aggregate
principal amount equal to the aggregate principal amount of the Delayed Draw
Term Loans made on such date. Unless previously terminated, the Revolving
Commitments and the Additional Revolving Commitments shall terminate on the
Revolving Maturity Date.
(b) The U.S. Borrower or the Canadian Borrower, as applicable, may
at any time terminate, or from time to time reduce, the Delayed Draw
Commitments, the U.S. $ Revolving Commitments, the C $ Revolving Commitments or
the Additional Revolving Commitments, provided that (i) each partial reduction
of the Delayed Draw Commitments shall be in an amount that is an integral
multiple of $1,000,000 and not less than $2,000,000 (or, if less, the remaining
amount of the Delayed Draw Commitments), (ii) each partial reduction of any of
the U.S. $ Revolving Commitments, the C $ Revolving Commitments or the
Additional Revolving Commitments shall be in an amount that is an integral
multiple of $500,000 and not less than $1,000,000 (or, if less, the remaining
amount of the applicable Commitment), (iii) the Total U.S. $ Revolving
Commitment shall not be reduced to an amount that is less than the aggregate
U.S. $ Revolving Exposure of the U.S. $ Revolving Lenders at the time, (iv) the
Total C $ Revolving Commitment shall not be reduced to an amount that is less
than the aggregate C $ Revolving Exposure of the C $ Revolving Lenders at the
time and (v) the Total Additional Revolving Commitment shall not be reduced to
an amount that is less than the aggregate principal amount of Additional
Revolving Loans outstanding at such time.
(c) The applicable Borrower shall notify the applicable
Administrative Agent of any election to terminate or reduce the Delayed Draw
Commitments, the U.S. $ Revolving Commitments, the C $ Revolving Commitments or
the Additional Revolving Commitments under paragraph (b) of this Section at
least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any such notice, the applicable Administrative Agent shall
advise the relevant Lenders of the contents thereof. Each notice delivered by
either of the Borrowers pursuant to this Section shall be irrevocable, provided
that a notice of termination with respect to any Revolving Commitment or
Additional Revolving Commitment may state that such notice is conditioned upon
the effectiveness of other credit facilities, in which case such notice may be
revoked by such Borrower (by notice to the applicable Administrative Agent on or
prior to the specified effective date) if such condition is not satisfied. Any
termination or reduction of the Delayed Draw Commitments or the U.S. $ Revolving
Commitments and, subject to Section 2.22, the C $ Revolving Commitments or the
Additional Revolving Commitments shall be permanent. Each reduction of the
Delayed Draw Commitments, the U.S. $ Revolving Commitments, the C $ Revolving
Commitments and the Additional Revolving Commitments shall be made
43
ratably among the Delayed Draw Lenders, the U.S. $ Revolving Lenders, the C $
Revolving Lenders and the Additional Revolving Lenders in accordance with their
respective Delayed Draw Commitments, U.S. $ Revolving Commitments, C $ Revolving
Commitments and Additional Revolving Commitments. The applicable Borrower shall
pay to the applicable Administrative Agent for the account of the applicable
Lenders, on the date of each termination or reduction (including pursuant to
Section 2.22), the Commitment Fees and, to the extent applicable, Participation
Fees on the amount of the Commitments so terminated or reduced accrued to but
excluding the date of such termination or reduction.
SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) Each
Borrower hereby unconditionally promises to pay, without regard to any rights of
setoff or counterclaim, (i) to the U.S. Administrative Agent for the account of
each U.S. $ Revolving Lender the then unpaid principal amount of each U.S. $
Revolving Loan of such Lender on the earlier of the date of termination of the
U.S. $ Revolving Commitments and the Revolving Maturity Date, (ii) to the U.S.
Administrative Agent for the account of each Additional Revolving Lender the
then unpaid principal amount of each Additional Revolving Loan of such Lender on
the earlier of the date of termination of the Additional Revolving Commitment
and the Revolving Maturity Date, (iii) to the U.S. Administrative Agent for the
account of each Term Loan Lender the then unpaid principal amount of each Term
Loan of such Lender as provided in Section 2.10, (iv) to the U.S. Swingline
Lender the then unpaid principal amount of each U.S. $ Swingline Loan on the
earliest of the date of termination of the U.S. $ Revolving Commitments and the
Revolving Maturity Date, (v) to the Canadian Administrative Agent for the
account of each C $ Revolving Lender the then unpaid principal amount of each C
$ Revolving Loan of such Lender on the earlier of the date of termination of the
C $ Revolving Commitments and the Revolving Maturity Date and (vi) to the
Canadian Swingline Lender the then unpaid principal amount of each C $ Swingline
Loan on the earliest of the date of termination of the C $ Revolving Commitments
and the Revolving Maturity Date, provided that (A) on each date that a U.S. $
Revolving Borrowing is made, the U.S. Borrower shall repay all U.S. $ Swingline
Loans then outstanding and (B) on each date that a C $ Revolving Borrowing is
made, the Canadian Borrower shall repay all C $ Swingline Loans then
outstanding.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the applicable Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The applicable Administrative Agent shall maintain accounts in
which it will record (i) the amount of each Loan made and the Credit Facility
under which each Loan is made hereunder, (ii) the Type of each Loan made and the
Interest Period (if a Eurodollar Borrowing) or maturity date and Contract Period
(if a B/A Borrowing) applicable thereto, (iii) with respect to each C $
Revolving Loan, (A) the Denomination Date for such Loan, (B) the Assigned Dollar
Value for such Loan and (C) the Spot Exchange Rate used to calculate such
Assigned Dollar Value, (iv) the amount of any principal or interest due and
payable or to become due and payable from the applicable Borrower to each Lender
hereunder and (v) the amount of any sum received by such Administrative Agent
hereunder from the applicable Borrower and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein, provided that the
failure of any Lender or the Administrative Agents to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrowers
to repay the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it be
evidenced by a promissory note. In such event, the applicable Borrower shall
prepare, execute and deliver to such Lender a promissory note payable to the
order of such Lender (or, if requested by such Lender, to such Lender and its
registered assigns) and in a form approved by the applicable Administrative
Agent. Thereafter, the Loans evidenced by such promissory note and interest
thereon shall at all times (including after assignment pursuant to Section
10.04) be represented by one or more promissory notes in such form payable to
the order of the payee named therein (or, if such promissory note is a
registered note, to such payee and its registered assigns).
SECTION 2.10. Amortization of Term Loans. (a) Subject to adjustment
pursuant to paragraph (e) of this Section, the U.S. Borrower shall repay Tranche
A Term Borrowings on each date set forth below in the aggregate principal amount
set forth opposite such date:
44
Date Amount
---- ------
March 31, 1999 $1,000,000
June 30, 1999 $1,000,000
September 30, 1999 $1,000,000
December 31, 1999 $1,000,000
March 31, 2000 $2,000,000
June 30, 2000 $2,000,000
September 30, 2000 $2,000,000
December 31, 2000 $2,000,000
March 31, 2001 $3,000,000
June 30, 2001 $3,000,000
September 30, 2001 $3,000,000
December 31, 2001 $3,000,000
March 31, 2002 $4,000,000
June 30, 2002 $4,000,000
September 30, 2002 $4,000,000
December 31, 2002 $4,000,000
March 31, 2003 $5,000,000
June 30, 2003 $5,000,000
September 30, 2003 $5,000,000
December 31, 2003 $5,000,000
March 31, 2004 $10,000,000
Tranche A Maturity Date $10,000,000
45
(b) Subject to adjustment pursuant to paragraph (e) of this Section,
the U.S. Borrower shall repay Tranche B Term Borrowings on each date set forth
below in the aggregate principal amount set forth opposite such date:
Date Amount
---- ------
September 30, 1998 $250,000
December 31, 1998 $250,000
March 31, 1999 $125,000
June 30, 1999 $125,000
September 30, 1999 $125,000
December 31, 1999 $125,000
March 31, 2000 $125,000
June 30, 2000 $125,000
September 30, 2000 $125,000
December 31, 2000 $125,000
March 31, 2001 $125,000
June 30, 2001 $125,000
September 30, 2001 $125,000
December 31, 2001 $125,000
March 31, 2002 $125,000
June 30, 2002 $125,000
September 30, 2002 $125,000
December 31, 2002 $125,000
March 31, 2003 $125,000
June 30, 2003 $125,000
September 30, 2003 $125,000
December 31, 2003 $125,000
March 31, 2004 $125,000
June 30, 2004 $125,000
September 30, 2004 $125,000
December 31, 2004 $125,000
March 31, 2005 $8,550,000
June 30, 2005 $8,550,000
September 30, 2005 $8,550,000
December 31, 2005 $8,550,000
March 31, 2006 $26,150,000
Tranche B Maturity Date $26,150,000
(c) Subject to adjustment pursuant to paragraph (e) of this Section,
the U.S. Borrower shall repay Delayed Draw Term Borrowings on each date set
forth below in the aggregate principal amount set forth opposite such date:
Date Amount
---- ------
March 31, 2002 $6,250,000
June 30, 2002 $6,250,000
September 30, 2002 $6,250,000
December 31, 2002 $6,250,000
March 31, 2003 $6,250,000
June 30, 2003 $6,250,000
September 30, 2003 $6,250,000
December 31, 2003 $6,250,000
March 31, 2004 $6,250,000
June 30, 2004 $6,250,000
September 30, 2004 $6,250,000
December 31, 2004 $6,250,000
March 31, 2005 $12,500,000
Delayed Draw Maturity Date $12,500,000
46
(d) To the extent not previously paid, (i) all Tranche A Term Loans
shall be due and payable on the Tranche A Maturity Date, (ii) all Tranche B Term
Loans shall be due and payable on the Tranche B Maturity Date and (iii) all
Delayed Draw Term Loans shall be due and payable on the Delayed Draw Maturity
Date.
(e) During the Delayed Draw Availability Period, scheduled
repayments of Delayed Draw Term Borrowings shall be made on the last day of each
fiscal quarter of the U.S. Borrower on which Delayed Draw Borrowings are
outstanding in an aggregate principal amount equal to 1/4 of 1% of the Delayed
Draw Term Borrowings outstanding on such date, provided that scheduled
repayments of the Delayed Draw Term Borrowings to be made pursuant to Section
2.10(c) shall be reduced ratably by an amount equal to the aggregate amount of
such repayments. If the initial aggregate amount of the Lenders' Delayed Draw
Term Commitments exceeds the aggregate principal amount of Delayed Draw Term
Loans that are made during the Delayed Draw Availability Period, then the
scheduled repayments of the Delayed Draw Term Borrowings to be made pursuant to
this Section shall be reduced ratably by an aggregate amount equal to such
excess. Any prepayment of a Term Borrowing of any Class shall be applied to
reduce the subsequent scheduled repayments of the Term Borrowings of such Class
to be made pursuant to this Section ratably, provided that any prepayment made
pursuant to Section 2.11(c) shall be applied, first to reduce the next four
quarterly scheduled repayments of the Term Borrowings of such Class in order of
maturity and, second, as otherwise provided in this Section 2.10(e).
(f) Prior to any repayment of any Term Borrowings of any Class
hereunder, the U.S. Borrower shall select the Borrowing or Borrowings of the
applicable Class to be repaid and shall notify the U.S. Administrative Agent by
telephone (confirmed by telecopy) of such selection not later than 11:00 a.m.,
New York City time, three Business Days before the scheduled date of such
repayment. Each repayment of a Term Borrowing shall be applied ratably to the
Loans included in the repaid Borrowing. Repayments of Term Borrowings shall be
accompanied by accrued interest on the amount repaid.
SECTION 2.11. Prepayment of Loans. (a) Each Borrower shall have the
right at any time and from time to time to prepay any Borrowing in whole or in
part, subject to the requirements of this Section.
(b) In the event and on each occasion that any Net Proceeds are
received by or on behalf of Parent, the Borrowers or any Subsidiary in respect
of any Prepayment Event, the U.S. Borrower shall, immediately after such Net
Proceeds are received, prepay Term Borrowings and, subject to paragraph (d),
repay Revolving Borrowings and Additional Revolving Borrowings, cash
collateralize Letters of Credit and reduced unused Delayed Draw Commitments, in
an aggregate amount equal to such Net Proceeds.
(c) Following the end of each fiscal year of Parent, commencing with
the fiscal year ending December 31, 1999, the U.S. Borrower shall prepay Term
Borrowings and, subject to paragraph (d), repay Revolving Borrowings and
Additional Revolving Borrowings, cash collateralize Letters of Credit and
reduced unused Delayed Draw Commitments, in an aggregate amount equal to 75% of
Excess Cash Flow for such fiscal year, provided that such percentage shall be
reduced from 75% to 50% with respect to the mandatory prepayment under this
paragraph (c) in respect of any fiscal year ending on or after December 31,
2000, if at any time during such year the U.S. Borrower's long-term senior
unsecured debt is rated BBB- or higher by S&P or Baa3 or higher by Moody's. Each
prepayment pursuant to this paragraph shall be made on or before the date on
which financial statements are delivered pursuant to Section 5.01 with respect
to the fiscal year for which Excess Cash Flow is being calculated (and in any
event within 90 days after the end of such fiscal year).
(d) Prior to any optional or mandatory prepayment of Borrowings
hereunder, the U.S. Borrower shall select the Borrowing or Borrowings to be
prepaid and shall specify such selection in the notice of such prepayment
pursuant to paragraph (e) of this Section. In the event of any optional or
mandatory prepayment of Term Borrowings made at a time when Term Borrowings of
more than one Class remain outstanding, the U.S. Borrower shall select Term
Borrowings to be prepaid so that the aggregate amount of such prepayment is
allocated between the Tranche A Term Borrowings, Tranche B Term Borrowings and
Delayed Draw Term Borrowings ratably based on the aggregate principal amount of
outstanding Borrowings of each such Class, provided that if such repayment is a
mandatory prepayment pursuant to paragraph (b) or (c) of this Section, and to
the extent Tranche A Term Loans remain outstanding on the prepayment date, each
Tranche B Lender and Delayed Draw Lender may elect, by notice to the U.S.
Administrative Agent by telephone (confirmed by telecopy) at least one Business
Day prior to the prepayment date, to decline all or any portion of any
prepayment of its Tranche B Term Loans or its Delayed Draw Term Loans pursuant
to this Section, in which case the aggregate amount of the prepayment that would
have been applied to prepay Tranche B Term Loans and Delayed Draw Term Loans but
was so declined shall be applied to prepay Tranche A Term Borrowings. When there
are no longer outstanding Term Loans, mandatory prepayments will be applied to
(i) reduce Revolving Loans and Additional Revolving Borrowings ratably based on
the aggregate
47
principal amount of outstanding Borrowings of each such Class, (ii) following
the prepayment of all such outstanding Revolving Loans and Additional Revolving
Loans, to cash-collateralize outstanding Letters of Credit under the Revolving
Facilities and (iii) after all such Letters of Credit have been cash
collateralized in an amount equal to 100% of the LC Exposure, then to reduce
unused Commitments under the Delayed Draw Term Facility (to the extent such
Commitments remain outstanding).
(e) Each of the Borrowers shall notify the applicable Administrative
Agent (and, in the case of prepayment of Swingline Loans, the U.S. Swingline
Lender or the Canadian Swingline Lender, as applicable) by telephone (confirmed
by telecopy) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three
Business Days before the date of prepayment, (ii) in the case of prepayment of
an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business
Day before the date of prepayment, (iii) in the case of prepayment of a Canadian
Prime Rate Borrowing not later than 11:00 a.m., Toronto time, three Business
Days before the date of prepayment, or (iv) in the case of prepayment of
Swingline Loans, not later than 11:00 a.m., New York City time or Toronto time,
as the case may be, on the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date, the principal amount of each
Borrowing or portion thereof to be prepaid and, in the case of a mandatory
prepayment, a reasonably detailed calculation of the amount of such prepayment,
provided that, if a notice of optional prepayment is given in connection with a
conditional notice of termination of the U.S. $ Revolving Commitments, C $
Revolving Commitments, Delayed Draw Commitments or Additional Revolving
Commitments as contemplated by Section 2.08, then such notice of prepayment may
be revoked if such notice of termination is revoked in accordance with Section
2.08. Promptly following receipt of any such notice (other than a notice
relating solely to the Swingline Loans), the applicable Administrative Agent
shall advise the relevant Lenders of the contents thereof. Each partial
prepayment of any Borrowing shall be in an amount that would be permitted in the
case of an advance of a Borrowing of the same Type as provided in Section 2.02,
except as necessary to apply fully the required amount of a mandatory
prepayment. Each prepayment of a Borrowing shall be applied ratably to the Loans
included in the prepaid Borrowing. Prepayments shall be accompanied by accrued
interest to the extent required by Section 2.13.
(f) If, on any Reset Date, the aggregate C $ Revolving Exposure
(expressed in Dollars) exceeds an amount equal to 105% of the Total C $
Revolving Commitment, then (A) the Canadian Administrative Agent shall give
notice thereof to the C $ Revolving Lenders and the Borrowers and (B) the U.S.
Borrower shall, or shall cause the Canadian Borrower to, on the next succeeding
Business Day, apply an amount equal to such excess to repay or prepay
outstanding C $ Revolving Borrowings (or cash collateralize Bankers' Acceptances
or C $ Letters of Credit in accordance with paragraph (g) below).
(g) All repayments or prepayments of C $ Revolving Borrowings under
this Section 2.11 shall be applied first, to repay or prepay the C $ Swingline
Loans, second, to repay or prepay outstanding C $ Revolving Loans that are
Canadian Prime Rate Loans, and third, to cash collateralize outstanding Bankers'
Acceptances, B/A Equivalent Notes and C $ Letters of Credit, on terms and
subject to documentation satisfactory to the Canadian Administrative Agent as
security for the Canadian Borrower's obligations under such Bankers'
Acceptances, B/A Equivalent Notes and C $ Letters of Credit until the maturity
and repayment of such Bankers' Acceptances, B/A Equivalent Notes and C $ Letters
of Credit. Notwithstanding anything herein to the contrary, no Bankers'
Acceptance or B/A Equivalent Note may be prepaid prior to the maturity date
thereof, except as provided in Article VII.
SECTION 2.12. Fees. (a) The U.S. Borrower agrees to pay, or to cause
the Canadian Borrower to pay, as applicable, (i) to the U.S. Administrative
Agent for the account of each Delayed Draw Lender, U.S. $ Revolving Lender and
Additional Revolving Lender a commitment fee (a "U.S. $ Commitment Fee"), which
shall accrue at the Applicable Rate on the average daily unused amount of the
Delayed Draw Commitment, U.S. $ Revolving Commitment or Additional Revolving
Commitment of such Lender during the period from and including the Closing Date
(or, in the case of the Additional Revolving Commitment, the first day that a
reallocation of Commitments pursuant to Section 2.22 shall become effective) to
but excluding the date on which such Delayed Draw Commitment, U.S. $ Revolving
Commitment or Additional Revolving Commitment terminates and (ii) to the
Canadian Administrative Agent, for the account of each C $ Revolving Lender a
commitment fee (the "Canadian Commitment Fee" and, together with the U.S. $
Commitment Fee, the "Commitment Fees"), which shall accrue at the Applicable
Rate on the average daily unused amount of the C $ Revolving Commitment of such
Lender during the period from and including the Closing Date to but excluding
the date on which such C $ Revolving Commitment terminates. Accrued Commitment
Fees shall be payable in arrears on the last Business Day of March, June,
September and December of each year and on the date on which the U.S. $
Revolving Commitments, the C $ Revolving Commitments or Additional Revolving
Commitments, as applicable, terminate, commencing on the first such date to
occur after the date hereof. All Commitment Fees shall be computed on the basis
of a year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). For purposes of computing
the
48
Commitment Fees, (i) a U.S. $ Revolving Commitment of a U.S. $ Revolving Lender
shall be deemed to be used to the extent of the outstanding U.S. $ Revolving
Loans and U.S. $ LC Exposure of such Lender (and the U.S. $ Swingline Exposure
of such Lender shall be disregarded for such purpose), and (ii) a C $ Revolving
Commitment of a C $ Revolving Lender shall be deemed to be used to the extent of
the outstanding C $ Revolving Loans and C $ LC Exposure of such Lender (and the
C $ Swingline Exposure of such Lender shall be disregarded for such purpose).
(b) The U.S. Borrower agrees to pay (i) to the U.S. Administrative
Agent for the account of each U.S. $ Revolving Lender a participation fee (a
"U.S. $ LC Participation Fee") with respect to its participations in U.S. $
Letters of Credit, which shall accrue (A) in the case of standby U.S. $ Letters
of Credit, at the same Applicable Rate as is used to determine the rate of
interest on Eurodollar U.S. $ Revolving Loans and (B) in the case of trade U.S.
$ Letters of Credit, at 60% of such Applicable Rate, in each case on the average
daily amount of such U.S. $ Revolving Lender's U.S. $ LC Exposure (excluding any
portion thereof attributable to unreimbursed U.S. $ LC Disbursements) during the
period from and including the Closing Date to but excluding the later of the
date on which such Lender's U.S. $ Revolving Commitment terminates and the date
on which such Lender ceases to have any U.S. $ LC Exposure, and (ii) to each
U.S. Issuing Bank, a fronting fee (a "U.S. Fronting Fee"), which shall accrue at
the rate that shall be agreed upon in writing by the U.S. Borrower and such U.S.
Issuing Bank on the average daily amount of the portion of the U.S. $ LC
Exposure (excluding any portion thereof attributable to unreimbursed U.S. $ LC
Disbursements) attributable to U.S. $ Letters of Credit issued by such U.S.
Issuing Bank, in each case during the period from and including the Closing Date
to but excluding the later of the date of termination of the U.S. $ Revolving
Commitments and the date on which there ceases to be any U.S. $ LC Exposure, as
well as such U.S. Issuing Bank's standard fees with respect to the issuance,
amendment, renewal or extension of any U.S. $ Letter of Credit or processing of
drawings thereunder.
(c) The U.S. Borrower agrees to pay, or to cause the Canadian
Borrower to pay (i) to the Canadian Administrative Agent for the account of each
C $ Revolving Lender a participation fee (a "C $ LC Participation Fee" and,
together with the U.S. $ LC Participation Fee, the "Participation Fees") with
respect to its participations in C $ Letters of Credit, which shall accrue in
the case of C $ Letters of Credit, at the same Applicable Rate as is used to
determine the rate of interest on C $ Revolving Loans during the period from and
including the Closing Date to but excluding the later of the date on which such
Lender's C $ Revolving Commitment terminates and the date on which such Lender
ceases to have any C $ LC Exposure, and (ii) to each Canadian Issuing Bank, a
fronting fee (a "Canadian Fronting Fee" and, together with the U.S. Fronting
Fee, the "Fronting Fees"), which shall accrue at the rate that shall be agreed
upon in writing by the Canadian Borrower and such Canadian Issuing Bank on the
average daily amount of the portion of the C $ LC Exposure (excluding any
portion thereof attributable to unreimbursed C $ LC Disbursements) attributable
to C $ Letters of Credit issued by such Canadian Issuing Bank, in each case
during the period from and including the Closing Date to but excluding the later
of the date of termination of the C $ Revolving Commitments and the date on
which there ceases to be any C $ LC Exposure, as well as such Canadian Issuing
Bank's standard fees with respect to the issuance, amendment, renewal or
extension of any C $ Letter of Credit or processing of drawings thereunder.
(d) Participation Fees and Fronting Fees accrued through and
including the last Business Day of March, June, September and December of each
year shall be payable on such day, commencing on September 30, 1998, provided
that all such fees with respect to any Revolving Commitment shall be payable on
the date on which such Revolving Commitment terminates and any such fees
accruing after the date on which such Revolving Commitment terminates shall be
payable on demand. Any other fees payable to the Issuing Banks pursuant to (b)
and (c) above shall be payable within 10 days after demand by such U.S. Issuing
Bank or Canadian Issuing Bank. All Participation Fees and Fronting Fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
(e) The U.S. Borrower agrees to pay to the U.S. Administrative
Agent, for its own account, fees payable in the amounts and at the times
separately agreed upon in writing between the U.S. Borrower and the U.S.
Administrative Agent.
(f) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the applicable Administrative Agent (or to the
U.S. Issuing Bank or Canadian Issuing Bank, as applicable, in the case of fees
payable to the Issuing Banks), for distribution, in the case of Commitment Fees
and Participation Fees, to the Revolving Lenders entitled thereto. All Fees
payable to the U.S. Administrative Agent, the U.S. Issuing Bank, the U.S.
Swingline Lender, the Term Lenders, the U.S. $ Revolving Lenders and the
Additional Revolving Lenders shall be payable in Dollars, and all Fees payable
to the Canadian Admini-
49
strative Agent, the Canadian Issuing Bank, the Canadian Swingline Lender and the
C $ Revolving Credit Lenders shall be payable in Canadian Dollars. Fees paid
shall not be refundable under any circumstances.
SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing
shall bear interest at the Alternate Base Rate plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate.
(c) The Loans comprising any Canadian Prime Rate Borrowing shall
bear interest at the Canadian Prime Rate plus the Applicable Rate.
(d) The Loans comprising each B/A Borrowing shall be subject to an
Acceptance Fee calculated and payable at a rate per annum equal to the
applicable B/A Spread from time to time in effect and payable as set forth in
Section 2.20.
(e) Notwithstanding the foregoing, if any principal of or interest
on any Loan or any fee or other amount payable by the Borrowers hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, to the extent permitted by law, after as
well as before judgment, at a rate per annum equal to (i) in the case of overdue
principal of any Loan, 2% plus the rate otherwise applicable to such Loan as
provided in the preceding paragraphs of this Section or (ii) in the case of any
other amount, 2% plus the rate applicable to ABR U.S. $ Revolving Loans as
provided in paragraph (a) of this Section.
(f) Accrued interest on each Loan (other than pursuant to a B/A
Borrowing) shall be payable in arrears on each Interest Payment Date for such
Loan and, in the case of U.S. $ Revolving Loans, C $ Revolving Loans and
Additional Revolving Loans, upon termination of the U.S. $ Revolving
Commitments, the C $ Revolving Commitments and the Additional Revolving
Commitments, as the case may be, provided that (i) interest accrued pursuant to
paragraph (e) of this Section shall be payable on demand, (ii) in the event of
any repayment or prepayment of any Loan (other than a prepayment of an ABR U.S.
$ Revolving Loan or Additional Revolving Loan, as the case may be, prior to the
end of the U.S. $ Revolving Availability Period or the Additional Revolving Loan
Availability Period, as the case may be), accrued interest on the principal
amount repaid or prepaid shall be payable on the date of such repayment or
prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior
to the end of the current Interest Period therefor, accrued interest on such
Loan shall be payable on the effective date of such conversion.
(g) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to (i) the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate and
(ii) the Canadian Prime Rate shall be computed on the basis of a year of 365
days (or 366 days in a leap year), and in each case shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day). The applicable Alternate Base Rate or Canadian Prime Rate for each day, or
Adjusted LIBO Rate for each Interest Period, shall be determined by the U.S.
Administrative Agent or the Canadian Administrative Agent (in the case of
Canadian Prime Rate Borrowings), and such determination shall be conclusive
absent manifest error. The applicable Administrative Agent shall give the
applicable Borrower prompt notice of each such determination.
(h) For the purposes of the Interest Act (Canada) and disclosure
thereunder, whenever interest to be paid hereunder or in connection herewith is
to be calculated on the basis of a year of 360 days or any other period of time
that is less than a calendar year, the yearly rate of interest to which the rate
determined pursuant to such calculation is equivalent is the rate so determined
multiplied by the actual number of days in the calendar year in which the same
is to be ascertained and divided by either 360 or such other period of time, as
the case may be. The rates of interest under this Agreement are nominal rates,
and not effective rates or yields. The principle of deemed reinvestment of
interest does not apply to any interest calculation under this Agreement.
(i) If any provision of this Agreement would oblige the Canadian
Borrower to make any payment of interest or other amount payable to any C $
Revolving Lender in respect of any C $ Revolving Loan made by such C $ Revolving
Lender in an amount or calculated at a rate that would be prohibited by law or
would result in a receipt by such C $ Revolving Lender of "interest" at a
"criminal rate" (as such terms are construed under the Criminal Code (Canada)),
then notwithstanding such provision, such amount or rate shall be deemed to have
been adjusted with retroactive effect to the maximum amount or rate of interest,
as the case
50
may be, as would not be so prohibited by law or so result in a receipt by such C
$ Revolving Lender of "interest" at a "criminal rate", such adjustment to be
effected, to the extent necessary, as follows:
(i) first, by reducing the amount or rate of interest or the
amount or rate of any Acceptance Fee required to be paid to
the affected C $ Revolving Lender under this Section 2.13; and
(ii) thereafter, by reducing any fees, commissions, premiums and
other amounts required to be paid to the affected C $
Revolving Lender that would constitute interest for purposes
of Section 347 of the Criminal Code (Canada).
SECTION 2.14. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurodollar Borrowing or the Contract
Period for a B/A Borrowing the U.S. Administrative Agent (in the case of a Term
Loan or U.S. $ Revolving Loan) or the Canadian Administrative Agent (in the case
of a C $ Revolving Loan) shall have determined (a) that deposits in the
principal amounts of the Loans comprising such Borrowing and in the currency in
which such Loans are to be denominated are not generally available in the London
interbank market or in the Canadian market for bankers' acceptances, as
applicable, or that the rates at which such deposits are being offered will not
adequately and fairly reflect the cost to the Majority Lenders in respect of the
affected Credit Facility of making or maintaining its Eurodollar Loan during
such Interest Period or (b) its B/A Borrowing or B/A Equivalent Note during such
Contract Period, as applicable, or that reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the Discount Rate, as applicable, such
Administrative Agent shall, as soon as practicable thereafter, give written or
telecopy notice of such determination to the applicable Borrower and the
applicable Lenders. In the event of any such determination, until the applicable
Administrative Agent shall have advised the applicable Borrower and the
applicable Lenders that the circumstances giving rise to such notice no longer
exist, any request by the U.S. Borrower or the Canadian Borrower for a
Eurodollar Borrowing or a B/A Borrowing, as applicable, pursuant to Section 2.03
or 2.07 shall be deemed to be a request for an ABR Borrowing (if a Eurodollar
Borrowing has been requested) or a Canadian Prime Rate Loan (if a B/A Borrowing
had been requested). Each determination by the Administrative Agents hereunder
shall be conclusive absent manifest error.
SECTION 2.15. Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender (except any such reserve requirement
reflected in the Adjusted LIBO Rate), any U.S. Issuing Bank or any
Canadian Issuing Bank; or
(ii) impose on any Lender, any U.S. Issuing Bank or any Canadian
Issuing Bank, as the case may be, or the London interbank market or any
other relevant market any other condition affecting this Agreement, any
U.S. $ Letter of Credit or C $ Letter of Credit (or any participation with
respect thereto), any Eurodollar Loans or any C $ Revolving Loans;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan or any C $ Revolving Loan
(or of maintaining its obligation to make any such Loan) or to increase the cost
to such Lender, such U.S. Issuing Bank or Canadian Issuing Bank, as the case may
be, of participating in, issuing or maintaining any U.S. $ Letter of Credit or C
$ Letter of Credit or to reduce the amount of any sum received or receivable by
such Lender, such U.S. Issuing Bank or Canadian Issuing Bank, as the case may
be, hereunder (whether of principal, interest or otherwise), then the U.S.
Borrower will pay (or cause the Canadian Borrower to pay) to such Lender, such
U.S. Issuing Bank or such Canadian Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender, such U.S. Issuing
Bank or Canadian Issuing Bank, for such additional costs incurred or reduction
suffered.
(b) If any Lender or any of the Issuing Banks determines that any
Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's or such Issuing Bank's capital or
on the capital of such Lender's or such Issuing Bank's holding company, if any,
as a consequence of this Agreement or the Loans made by, or participations in
Letters of Credit held by, such Lender, or the Letters of Credit issued by any
of the Issuing Banks, to a level below that which such Lender or any of the
Issuing Banks or such Lender's or any of the Issuing Banks' holding companies
could have achieved but for such Change in Law (taking into consideration such
Lender's or any of the Issuing Banks' policies and the policies of such Lender's
or any of the Issuing Banks' holding companies with respect to capital
adequacy), then from time to time the U.S. Borrower will pay (or cause the
Canadian Borrower to pay) to such Lender or any of the Issuing Banks such
additional amount or amounts as will compensate such Lender or such Issuing
Banks or such Lender's or such Issuing Banks' holding companies for any such
reduction suffered.
51
(c) A certificate of a Lender, U.S. Issuing Bank or Canadian Issuing
Bank setting forth the amount or amounts necessary to compensate such Lender or
such Issuing Bank or their respective holding companies, as the case may be, as
specified in paragraph (a) or (b) of this Section shall be delivered to the U.S.
Borrower (with a copy to the Administrative Agents) and shall be conclusive
absent manifest error. The U.S. Borrower shall pay (or cause the Canadian
Borrower to pay) such Lender or such Issuing Banks, as applicable, the amount
shown as due on any such certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or any of the Issuing
Banks to demand compensation pursuant to this Section shall not constitute a
waiver of such Lender's or any Issuing Banks' right to demand such compensation,
provided that the U.S. Borrower shall not be required to compensate a Lender or
any Issuing Banks pursuant to this Section for any increased costs or reductions
incurred more than 180 days prior to the date that such Lender, any Issuing
Banks (or the U.S. Administrative Agent, as applicable), notifies the U.S.
Borrower of the Change in Law giving rise to such increased costs or reductions
and of such Lender's or such Issuing Banks' intention to claim compensation
therefor, and provided further that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 180-day period referred
to above shall be extended to include the period of retroactive effect thereof.
SECTION 2.16. Break Funding Payments. In the event of (a) the
payment of any principal of any Eurodollar Loan or Bankers' Acceptance other
than on the last day of an Interest Period or Contract Period applicable thereto
(including as a result of an Event of Default), (b) the conversion of, or the
exchange pursuant to Article IX of, any Eurodollar Loan or Bankers' Acceptance
other than on the last day of the Interest Period or Contract Period applicable
thereto, (c) the failure to borrow, convert, continue or prepay any Revolving
Loan or Term Loan on the date specified in any notice delivered pursuant hereto
(regardless of whether such notice may be revoked under Section 2.08(c) and is
revoked in accordance therewith) or (d) the assignment of any Eurodollar Loan or
Bankers' Acceptance other than on the last day of the Interest Period or
Contract Period applicable thereto as a result of a request by the applicable
Borrower pursuant to Section 2.19, then, in any such event, the applicable
Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event. In the case of a Eurodollar Loan or Bankers'
Acceptance, such loss, cost or expense to any Lender shall be deemed to include
an amount determined by such Lender to be the excess, if any, of (i) the amount
of interest that would have accrued on the principal amount of such Loan had
such event not occurred, at the Adjusted LIBO Rate or the B/A Spread that would
have been applicable to such Loan, for the period from the date of such event to
the last day of the then current Interest Period or Contract Period therefor
(or, in the case of a failure to borrow, convert or continue, for the period
that would have been the Interest Period or Contract Period for such Loan), over
(ii) the amount of interest that would accrue on such principal amount for such
period at the LIBO Rate or the B/A Spread at the commencement of such period. A
certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section shall be delivered to the
applicable Borrower and shall be conclusive absent manifest error. The
applicable Borrower shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof, provided that the applicable
Borrower shall not be required to pay to a Lender any amount under this Section
for any loss, cost or expense attributable to an event that occurred more than
180 days prior to the date the applicable Borrower receives such certificate
from such Lender. Nothing in this Section 2.16 shall be construed to permit a
voluntary prepayment of a B/A Borrowing other than on the last day of an
Interest Period.
SECTION 2.17. Taxes. (a) Any and all payments by or on account of
any obligation of any Borrower hereunder or under any other Loan Document shall
be made free and clear of and without deduction for any Indemnified Taxes or
Other Taxes, provided that if any Borrower shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
the applicable Administrative Agent, Lender, U.S. Issuing Bank or Canadian
Issuing Bank (as the case may be) shall receive an amount equal to the sum it
would have received had no such deductions been made, (ii) the applicable
Borrower shall make such deductions and (iii) the applicable Borrower shall pay
the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.
(b) In addition, the applicable Borrower shall pay any Other Taxes
to the relevant Governmental Authority in accordance with applicable law.
(c) The applicable Borrower shall indemnify the applicable
Administrative Agent, each Lender and each U.S. Issuing Bank or Canadian Issuing
Bank, within 30 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by such Administrative Agent, such Lender
or such U.S. Issuing Bank or Canadian Issuing Bank, as applicable on or with
respect to any payment by or on account of any obligation of the applicable
Borrower hereunder or under any other Loan Document (including
52
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such
payment or liability delivered to the applicable Borrower by a Lender or a U.S.
Issuing Bank or Canadian Issuing Bank, or by the applicable Administrative Agent
on its own behalf or on behalf of a Lender, a U.S. Issuing Bank or a Canadian
Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by either of the Borrowers to a Governmental Authority, such
Borrower shall deliver to the U.S. Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the U.S. Administrative Agent.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.17
shall survive the payment in full of principal and interest hereunder, the
expiration of the U.S. $ Letters of Credit and the C $ Letters of Credit and the
termination of the Commitments.
(f) Upon the written request of either of the Borrowers, each Lender
promptly will provide to such Borrower and to the applicable Administrative
Agent, or file with the relevant taxing authority (with a copy to the applicable
Administrative Agent) such form, certification or similar documentation that it
is legally able to provide (each duly completed, accurate and signed) as is
required by the relevant jurisdiction in order to obtain an exemption from, or
reduced rate of Taxes or Other Taxes to which such Lender or the applicable
Administrative Agent is entitled pursuant to an applicable tax treaty or the law
of the relevant jurisdiction, provided, however, such Lender will not be
required to (i) disclose information, that in its reasonable judgment, it deems
confidential or proprietary or (ii) incur a disadvantage if such disadvantage
would, in its reasonable judgment, be substantial.
(g) If either Administrative Agent or any Lender receives a refund
with respect to Indemnified Taxes or Other Taxes paid by either of the
Borrowers, which refund is (in the sole discretion of such Lender) allocable to
such payment, such Administrative Agent or such Lender, as applicable, shall
promptly pay such refund, to such Borrower, net of all out-of-pocket expenses of
such Administrative Agent or the applicable Lender incurred in obtaining such
refund; provided, however, that such Borrower agrees to promptly return such
refund (together with any interest or penalties imposed by the applicable
Governmental Authority on such amounts) to such Administrative Agent or the
applicable Lender, as applicable, if such Borrower receives notice from such
Administrative Agent or applicable Lender that such Administrative Agent or
Lender is required to repay such refund. In no event may amounts payable under
this Section 2.17(g) exceed the amount of Indemnified Taxes previously paid by
the Borrowers to such Administrative Agent or such Lender, as applicable.
(h) Nothing contained in this Section 2.17 shall require any Lender
or any U.S. Issuing Bank, any Canadian Issuing Bank or the Administrative Agents
to make available any of its tax returns (or any other information that it deems
to be confidential or proprietary).
SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs. (a) Each of the Borrowers shall make each payment required to be made
by it hereunder or under any other Loan Document (whether of principal,
interest, fees or reimbursement of U.S. $ LC Disbursements or C $ LC
Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or
otherwise) prior to 12:00 noon, local time at the place of payment, on the date
when due, in immediately available funds, without set-off or counterclaim. Any
amounts received after such time on any date may, in the discretion of the U.S.
Administrative Agent or the Canadian Administrative Agent, as applicable, be
deemed to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All payments to the U.S. Administrative Agent
shall be made c/o The Loan and Agency Services Group at its offices at One Chase
Manhattan Plaza, 8th Floor, New York, New York, 10081, except payments to be
made directly to a U.S. Issuing Bank or the U.S. Swingline Lender as expressly
provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17
and 10.03 shall be made directly to the Persons entitled thereto and payments
pursuant to other Loan Documents shall be made to the Persons specified therein.
All payments to the Canadian Administrative Agent shall be made c/o Royal Bank
of Canada, Correspondent Banking Division, Financial Institution Account
Services, 180 Wellington Street, 6th Floor, Toronto, Ontario M5J2J5, except
payments to be made directly to a Canadian Issuing Bank or the Canadian
Swingline Lender as expressly provided herein and except that payments pursuant
to Sections 2.15, 2.16, 2.17 and 10.03 shall be made directly to the Persons
entitled thereto and payments pursuant to other Loan Documents shall be made to
the
53
Persons specified therein. The applicable Administrative Agent shall distribute
any such payments received by either of them for the account of any other Person
to the appropriate recipient promptly following receipt thereof. If any payment
under any Loan Document shall be due on a day that is not a Business Day, the
date for payment shall be extended to the next succeeding Business Day, and, in
the case of any payment accruing interest, interest thereon shall be payable for
the period of such extension.
(b) If at any time insufficient funds are received by and available
to (i) the U.S. Administrative Agent to pay fully all amounts of principal,
unreimbursed U.S. $ LC Disbursements, interest and fees then due with respect to
the U.S. $ Revolving Commitments and the U.S. $ Revolving Loans hereunder, such
funds shall be applied (A) first, towards payment of interest and fees then due
hereunder with respect thereto, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(B) second, towards payment of principal and unreimbursed U.S. $ LC
Disbursements then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed U.S. $ LC
Disbursements then due to such parties, (ii) the Canadian Administrative Agent
to pay fully all amounts of principal, unreimbursed C $ LC Disbursements,
interest and fees then due with respect to the C $ Revolving Commitments and the
C $ Revolving Loans hereunder, such funds shall be applied (A) first, towards
payment of interest and fees then due hereunder with respect thereto, ratably
among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (B) second, towards payment of principal
and unreimbursed C $ LC Disbursements then due with respect to the C $ Revolving
Commitments and C $ Revolving Loans hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed C
$ LC Disbursements then due to such parties and (iii) the U.S. Administrative
Agent to pay fully all amounts of principal, interest and fees then due with
respect to the Additional Revolving Commitments and Additional Revolving Loans
hereunder, such funds shall be applied (A) first, towards payment of interest
and fees then due hereunder with respect thereto, ratably among the parties
entitled thereto in accordance with the amounts of interest and fees then due to
such parties and (B) second, towards payment of principal then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its U.S. $ Revolving Loans, C $ Revolving Loans, Additional
Revolving Loans, Term Loans, participations in U.S. $ LC Disbursements or C $ LC
Disbursements or participations in U.S. $ Swingline Loans or C $ Swingline Loans
resulting in such Lender receiving payment of a greater proportion of the
aggregate amount of its U.S. $ Revolving Loans, C $ Revolving Loans, Additional
Revolving Loans, Term Loans, participations in U.S. $ LC Disbursements or C $ LC
Disbursements and participations in U.S. $ Swingline Loans or C $ Swingline
Loans and accrued interest thereon than the proportion received by any other
Lender, then the Lender receiving such greater proportion shall purchase (for
cash at face value) participations in the U.S. $ Revolving Loans, C $ Revolving
Loans, Additional Revolving Loans, Term Loans, participations in U.S. $ LC
Disbursements or C $ LC Disbursements and participations in U.S. $ Swingline
Loans or C $ Swingline Loans of other Lenders to the extent necessary so that
the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective U.S. $ Revolving Loans, C $ Revolving Loans, Additional
Revolving Loans, Term Loans, participations in U.S. $ LC Disbursements or C $ LC
Disbursements and participations in U.S. $ Swingline Loans or C $ Swingline
Loans, provided that (i) if any such participations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such
recovery, without interest, and (ii) the provisions of this paragraph shall not
be construed to apply to any payment made by the Borrowers pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by a
Lender as consideration for the assignment of or sale of a participation in any
of its Loans or participations in U.S. $ LC Disbursements or C $ LC
Disbursements to any assignee or participant, other than to the Borrowers or any
Subsidiary or Affiliate thereof (as to which the provisions of this paragraph
shall apply). The Borrowers consent to the foregoing and agree, to the extent it
may effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against the
Borrowers rights of set-off and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of the Borrowers in the amount
of such participation.
(d) Unless the applicable Administrative Agent shall have received
notice from the applicable Borrower prior to the date on which any payment is
due to such Administrative Agent for the account of the Lenders or the Issuing
Banks hereunder that the applicable Borrower will not make such payment, the
applicable Administrative Agent may assume that such Borrower has made such
payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders or the Issuing Banks, as applicable, the
amount due. In such event, if the applicable Borrower has not in fact made such
payment, then each of the Lenders or the applicable Issuing Banks, as
applicable, severally agrees to repay to the applicable Administrative Agent
forthwith on demand the amount so distributed to such Lender or such
54
Issuing Banks with interest thereon, for each day from and including the date
such amount is distributed to it to but excluding the date of payment to the
applicable Administrative Agent, (i) in the case of payments to the U.S.
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the U.S. Administrative Agent in accordance with banking
industry rules on interbank compensation and (ii) in the case of payments to the
Canadian Administrative Agent, the greater of a rate determined by the Canadian
Administrative Agent to represent its cost of overnight or short-term funds and
a rate in accordance with applicable banking industry rules on interbank
compensation.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.04(c), 2.04A(c), 2.05(d) or (e), 2.05A(d) or (e),
2.06(b), 2.18(d) or 10.03(c), then the applicable Administrative Agent may, in
its discretion (notwithstanding any contrary provision hereof), apply any
amounts thereafter received by the such Administrative Agent for the account of
such Lender to satisfy such Lender's obligations under such Sections until all
such unsatisfied obligations are fully paid.
SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If
any Lender requests compensation under Section 2.15, or if either of the
Borrowers is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
then such Lender shall use reasonable efforts but shall be under no obligation
either to designate a different lending office for funding or booking its Loans
hereunder to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. Each of the Applicable Borrower and the
Canadian Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.15, or if
either of the Borrowers is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section
2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then
the applicable Borrower may, at its sole expense and effort, upon notice to such
Lender and the applicable Administrative Agent require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 10.04), all its interests, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment), provided that (i)
the applicable Borrower shall have received the prior written consent of the
applicable Administrative Agent (and, if a U.S. $ Revolving Commitment is being
assigned, the U.S. Issuing Bank and the U.S. Swingline Lender and, if a C $
Revolving Commitment is being assigned, the Canadian Issuing Bank and the
Canadian Swingline Lender), which consent, in each case, shall not unreasonably
be withheld, (ii) such Lender shall have received payment of an amount equal to
the outstanding principal of its Loans, participations in U.S. $ LC
Disbursements and C $ LC Disbursements, as applicable, and participations in
U.S. $ Swingline Loans and C $ Swingline Loans, as applicable, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the applicable Borrower (in the case of all other amounts), and (iii)
at the time of such assignment, no Default has occurred and is continuing. A
Lender shall not be required to make any such assignment and delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling the applicable Borrower to require such assignment and
delegation cease to apply.
SECTION 2.20. Bankers' Acceptances. (a) Subject to the terms and
conditions of this Agreement, the Canadian Borrower may request a C $ Revolving
Borrowing by presenting drafts for acceptance and purchase as B/As by the C $
Revolving Lenders.
(b) To facilitate B/A Borrowings, the Canadian Borrower hereby
appoints each C $ Revolving Lender as its attorney to sign and endorse on its
behalf, in handwriting or by facsimile or mechanical signature as and when
deemed necessary by such Lender, blank forms of B/As in the form requested by
such Lender. In this respect, it is each C $ Revolving Lender's responsibility
to maintain an adequate supply of blank forms of B/As for acceptance under this
Agreement. The Canadian Borrower recognizes and agrees that all B/As signed
and/or endorsed on its behalf by a C $ Revolving Lender shall bind the Canadian
Borrower as fully and effectually as if signed in the handwriting of and duly
issued by the proper signing officers of the Canadian Borrower. Each C $
Revolving Lender is hereby authorized to issue such B/As endorsed in blank in
such face amounts as may be determined by such Lender, provided that the
aggregate amount thereof is equal to the aggregate amount of B/As required to be
accepted and purchased by such Lender. No C $ Revolving Lender shall be liable
for any damage, loss or other claim arising by reason of any loss or improper
use of any such instrument except the gross negligence or wilful misconduct of
such Lender or its officers, employees,
55
agents or representatives. Each C $ Revolving Lender shall maintain a record
with respect to B/As (i) received by it in blank hereunder, (ii) voided by it
for any reason, (iii) accepted and purchased by it hereunder and (iv) canceled
at their respective maturities. Each C $ Revolving Lender further agrees to
retain such records in the manner and for the statutory periods provided in the
various provincial or federal statutes and regulations that apply to such
Lender. Each C $ Revolving Lender agrees to provide a copy of such records to
the Canadian Borrower at the Canadian Borrower's expense upon request. On
request by or on behalf of the Canadian Borrower, a C $ Revolving Lender shall
cancel all forms of B/A that have been pre-signed or pre-endorsed on behalf of
the Canadian Borrower and that are held by such Lender and are not required to
be issued in accordance with the Canadian Borrower's irrevocable notice.
(c) Drafts of the Canadian Borrower to be accepted as B/As hereunder
shall be signed as set forth in this Section 2.20. Notwithstanding that any
person whose signature appears on any B/A may no longer be an authorized
signatory for any C $ Revolving Lender or the Canadian Borrower at the date of
issuance of a B/A, such signature shall nevertheless be valid and sufficient for
all purposes as if such authority had remained in force at the time of such
issuance and any such B/A so signed shall be binding on the Canadian Borrower.
(d) Promptly following receipt of a Borrowing Request or notice of
rollover pursuant to Section 2.03 by way of B/As, the Canadian Administrative
Agent shall so advise the C $ Revolving Lenders and shall advise each C $
Revolving Lender of the aggregate face amount of the B/As to be accepted by it
and the applicable Contract Period (which shall be identical for all C $
Revolving Lenders). The aggregate face amount of the B/As to be accepted by a C
$ Revolving Lender shall be a whole multiple of $100,000, and such face amount
shall be in the C $ Revolving Lenders' pro rata portions of such C $ Revolving
Borrowing, provided that the Canadian Administrative Agent may in its sole
discretion increase or reduce any C $ Revolving Lender's portion of such B/A
Borrowing to the nearest $100,000.
(e) Upon acceptance of a B/A by a C $ Revolving Lender, such Lender
shall purchase, or arrange the purchase of, each B/A from the Canadian Borrower
at the Discount Rate for such Lender applicable to such B/A accepted by it and
provide to the Canadian Administrative Agent the Discount Proceeds for the
account of the Borrower. The Acceptance Fee payable by the Canadian Borrower to
a C $ Revolving Lender under Section 2.06 in respect of each B/A accepted by
such Lender shall be set off against the Discount Proceeds payable by such
Lender under this Section 2.20.
(f) Each C $ Revolving Lender may at any time and from time to time
hold, sell, rediscount or otherwise dispose of any or all B/As accepted and
purchased by it.
(g) If a C $ Revolving Lender is not a chartered bank under the Bank
Act (Canada) or if a C $ Revolving Lender notifies the Canadian Administrative
Agent in writing that it is otherwise unable to accept Bankers' Acceptances,
such Lender will, instead of accepting and purchasing Bankers' Acceptances,
purchase from the Canadian Borrower a non-interest bearing note (a "B/A
Equivalent Note"), in the form of Exhibit J, issued by the Canadian Borrower in
the amount and for the same term as the draft that such Lender would otherwise
have been required to accept and purchase hereunder, at a purchase price
calculated on the same basis as Bankers' Acceptances are discounted pursuant to
this Agreement. Each such Lender will provide to the Canadian Administrative
Agent the proceeds of such purchase for the account of the Canadian Borrower.
The Canadian Borrower will, upon purchase of a B/A Equivalent Note, pay to the
Canadian Administrative Agent on behalf of the C $ Revolving Lender that
purchased from the Canadian Borrower the B/A Equivalent Note an Acceptance Fee
in respect of such B/A Equivalent Note. The Acceptance Fee payable by the
Canadian Borrower to a C $ Revolving Lender under this Section 2.20(g) in
respect of each B/A Equivalent Note purchased by such Lender shall be set off
against the Discount Proceeds payable by such Lender under this Section 2.20(g).
(h) With respect to each B/A Borrowing, at or before 10:00 a.m.,
Toronto time, one Business Day before the maturity date of such B/As, the
Canadian Borrower shall notify the Canadian Administrative Agent at the Canadian
Administrative Agent's address set forth in Section 10.01 by irrevocable
telephone notice, followed by a notice of rollover on the same day, if the
Canadian Borrower intends to issue B/As on such maturity date to provide for the
payment of such maturing B/As. If the Canadian Borrower fails to notify the
Canadian Administrative Agent of its intention to issue B/As on such maturity
date, the Canadian Borrower shall provide payment to the Canadian Administrative
Agent on behalf of the C $ Revolving Lenders of an amount equal to the aggregate
face amount of such B/As on the maturity date of such B/As. If the Canadian
Borrower fails to make such payment, such maturing B/As shall, subject to
satisfaction of the conditions set forth in Section 4.02, be deemed to have been
converted on their maturity date into a Canadian Prime Rate Loan in an amount
equal to the face amount of such B/A as provided in Section 2.07 and the
Canadian Borrower shall on demand pay any losses, costs or penalties that may
have been incurred by the
56
Canadian Administrative Agent or any C $ Revolving Lender due to the failure of
the Canadian Borrower to make such payment.
(i) The Canadian Borrower waives presentment for payment and any
other defense, in respect of a B/A accepted and purchased by it pursuant to this
Agreement, that might exist solely by reason of such B/A being held, at the
maturity thereof, by such Lender in its own right and the Canadian Borrower
agrees not to claim any days of grace if such Lender as holder sues the Canadian
Borrower on the B/A for payment of the amount payable by the Canadian Borrower
thereunder. On the specified maturity date of a B/A, or such earlier date as may
be required or permitted pursuant to the provisions of this Agreement, the
Canadian Borrower shall pay, through the Canadian Administrative Agent, the C $
Revolving Lender that has accepted and purchased such B/A the full face amount
of such B/A and after such payment, the Canadian Borrower shall have no further
liability in respect of such B/A and such Lender shall be entitled to all
benefits of, and be responsible for all payments due to third parties under,
such B/A.
(j) If a C $ Revolving Lender grants a participation in a portion of
its rights under this Agreement to a participant under Section 10.04(f), then in
respect of any B/A Borrowing, a portion thereof may, at the option of such
Lender, be by way of Bankers' Acceptance accepted by such participant. In such
event, the Canadian Borrower shall upon request of the Canadian Administrative
Agent or the C $ Revolving Lender granting the participation execute and deliver
a form of Bankers' Acceptance undertaking in favor of such participant for
delivery to such participant.
SECTION 2.21. Spot Exchange Rate Calculations. (a)(i) Not later than
2:00 p.m., Toronto time, on each Calculation Date, the Canadian Administrative
Agent shall (A) determine the Spot Exchange Rate as of such Calculation Date
with respect to Canadian Dollars if at such time C $ Revolving Loans are then
outstanding and (B) give notice thereof to the Canadian Borrower and the C $
Revolving Lenders.
(ii) The Spot Exchange Rates determined pursuant to this Section
2.21(a) shall become effective on the second Business Day immediately following
the relevant Calculation Date (a "Reset Date") and shall remain effective until
the next succeeding Reset Date.
(b) Not later than 2:00 p.m., Toronto time, on the Business Day
immediately following the delivery of any notice pursuant to Section 2.08(b) or
2.11(g) in connection with the repayment of C $ Revolving Loans, the Canadian
Administrative Agent shall (i) determine as of such date the Assigned Dollar
Value, based on the Spot Exchange Rate then in effect, of each C $ Revolving
Loan then outstanding (after giving effect to any C $ Revolving Loan repaid in
connection therewith) and (ii) notify the Canadian Borrower and the C $
Revolving Lenders of the results of such determination.
SECTION 2.22. Reallocation. (a) Subject to Section 2.22(b), the
Borrowers may, from time to time, from and after July 1, 1998, until the earlier
of (i) the Revolving Maturity Date and (ii) the termination of the C $ Revolving
Commitments and the Additional Revolving Commitments, upon giving an irrevocable
joint written notice (each, a "Reallocation Notice") to the Canadian
Administrative Agent and the U.S. Administrative Agent at least ten Business
Days prior to the beginning of the next calendar quarter of the Canadian
Administrative Agent (including, with respect to any reallocation to be
effective as of July 1, 1998, the calendar quarter ended June 1998), temporarily
reduce (but not below zero), in whole or in part, the C $ Revolving Commitments
or the Additional Revolving Commitments, as applicable. Each reduction in the C
$ Revolving Commitments shall result in an automatic corresponding increase in
the Additional Revolving Commitments, and each reduction in the Additional
Revolving Commitments shall result in an automatic and corresponding increase in
the C $ Revolving Commitments. Any amount of C $ Revolving Commitments
reallocated under this Section 2.22(a) to Additional Revolving Commitments will
not be available to the Canadian Borrower, and any amount of Additional
Revolving Commitments reallocated under this Section 2.22(a) to C $ Revolving
Commitments will not be available to the U.S. Borrower, in each case unless and
until such amounts are reallocated back to the C $ Revolving Commitments or the
Additional Revolving Commitments, as applicable, in accordance with the terms
and subject to the conditions of this Section 2.22.
(b) The Borrowers shall be permitted to reallocate the C $ Revolving
Commitments and the Additional Revolving Commitments in accordance with this
Section 2.22 subject to the conditions that (i) any such reallocation shall only
be made on, and be effective as of, the first day of a calendar quarter of the
Canadian Administrative Agent, (ii) each partial reallocation shall be in an
integral multiple of $1,000,000 (or, if less, the remaining amount of the
applicable Commitments being reduced), (iii) the Total C $ Revolving Commitment
shall not be reduced to an amount that is less than the aggregate C $ Revolving
Exposure of the C $ Revolving Lenders at such time, (iv) the Total Additional
Revolving Commitment shall not be reduced to an amount that is less than the
aggregate principal amount of Additional Revolving Loans outstanding at such
time and (v) on the date of any reduction of the Additional Revolving
Commitments (and a corresponding
57
increase in the C $ Revolving Commitments), (A) the representations and
warranties set forth in each Loan Document shall be true and correct in all
material respects with the same effect as though made on and as of such date,
except to the extent such representations and warranties expressly relate to an
earlier date, and (B) immediately after giving effect to such reduction and
corresponding increase no Default or Event of Default shall have occurred and be
continuing.
(c) Each Reallocation Notice shall specify the amount (expressed in
Dollars) of any (i) reduction in the C $ Revolving Commitments and the
corresponding increase in the Additional Revolving Commitments or (ii) reduction
in the Additional Revolving Commitments and the corresponding increase in the C
$ Revolving Commitments. Each reduction in the C $ Revolving Commitments and
each increase in the C $ Revolving Commitments (if the C $ Revolving Commitments
at such time are greater than zero) shall be made ratably among the C $
Revolving Lenders based on their respective C $ Revolving Commitments. Each
increase in the C $ Revolving Commitments (if the C $ Revolving Commitments at
such time are equal to zero) shall be made ratably among the C $ Revolving
Lenders based on their respective Additional Revolving Commitments, provided
that, for this purpose, the Additional Revolving Commitment of any C $ Revolving
Lender that makes Additional Revolving Loans through its Designated U.S.
Affiliate shall be deemed to be equal to the Additional Revolving Commitment of
such Designated U.S. Affiliate. Each reduction in the Additional Revolving
Commitments and each increase in the Additional Revolving Commitments (if the
Additional Revolving Commitments at such time are greater than zero) shall be
made ratably among the Additional Revolving Lenders based on their respective
Additional Revolving Commitments. Each increase in the Additional Revolving
Commitments (if the Additional Revolving Commitments at such time are equal to
zero) shall be made ratably among the Additional Revolving Lenders based on
their respective C $ Revolving Commitments, provided that, for this purpose, the
C $ Revolving Commitment of any Additional Revolving Lender that is a Designated
U.S. Affiliate shall be deemed to be equal to the C $ Revolving Commitment of
its Affiliate that is a C $ Revolving Lender. Promptly after receiving a
Reallocation Notice, the Canadian Administrative Agent or the U.S.
Administrative Agent, as applicable, shall notify each C $ Revolving Lender and
Additional Revolving Lender, as applicable, of the amount of its C $ Revolving
Commitment or Additional Revolving Commitment, as applicable, to be reallocated
pursuant to this Section 2.22 and the date of such reallocation.
(d) Notwithstanding anything to the contrary contained in this
Agreement, (i) the Additional Revolving Commitments shall be available to the
U.S. Borrower in addition to the U.S. $ Revolving Commitments, (ii) Swingline
Loans and Letters of Credit are not available under the Additional Revolving
Commitments and (iii) the Additional Revolving Lenders shall be entitled to the
same rights and subject to the same obligations with respect to the Additional
Revolving Commitments as are the U.S. $ Revolving Lenders with respect to the
U.S. $ Revolving Commitments.
ARTICLE III
Representations and Warranties
Each of Parent and the Borrowers represents and warrants to the
Lenders that with respect to itself and its subsidiaries, that:
SECTION 3.01. Organization; Powers. Each of Parent, the Borrowers
and the Subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, has all requisite power
and authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.
SECTION 3.02. Authorization; Enforceability. The Transactions to be
entered into by each Loan Party are within such Loan Party's corporate powers
and have been duly authorized by all necessary corporate and, if required,
stockholder action. This Agreement has been duly executed and delivered by each
of Parent and the Borrowers and constitutes, and each other Loan Document to
which any Loan Party is to be a party, when executed and delivered by such Loan
Party, will constitute, a legal, valid and binding obligation of Parent, the
Borrowers or such Loan Party (as the case may be), enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law, and an implied covenant of good faith and fair dealing.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental
58
Authority, except (i) such as have been obtained or made and are in full force
and effect or which the failure to obtain could not reasonably be expected to
have a Material Adverse Effect, (ii) filings necessary to perfect Liens created
under the Loan Documents, (iii) filings necessary to perfect Liens created in
connection with any Permitted Receivables Financing and (iv) filings in
connection with the issuance of the Senior Subordinated Notes or the Senior
Discount Notes, (b) will not violate any applicable law or regulation or the
charter, by-laws or other organizational documents of Parent, the Borrowers or
any of the Subsidiaries or any order of any Governmental Authority, (c) will not
violate or result in a default under any material indenture, agreement or other
instrument binding upon Parent, the Borrowers or any of the Subsidiaries or
their assets, or give rise to a right thereunder to require any payment to be
made by Parent, the Borrowers or any of the Subsidiaries, and (d) will not
result in the creation or imposition of any Lien on any asset of Parent, the
Borrowers or any of the Subsidiaries, except Liens created under the Loan
Documents and in connection with any Permitted Receivables Financing.
SECTION 3.04. Financial Condition; No Material Adverse Change. (a)
Each of Parent and the Borrowers has heretofore furnished to the Lenders its
consolidated balance sheets and statements of income, stockholders' equity and
cash flows (i) as of and for the fiscal year ended December 31, 1997, reported
on by Coopers & Lybrand L.L.P., independent public accountants, and (ii) as of
and for the fiscal quarter and the portion of the fiscal year ended March 31,
1998, certified by its Financial Officer. Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of each of Parent and its consolidated subsidiaries as
of such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii) above.
(b) Parent has heretofore furnished to the Lenders its pro forma
consolidated balance sheet as of March 31, 1998, prepared giving effect to the
Transactions as if the Transactions had occurred on such date. Such pro forma
estimated consolidated balance sheet (i) has been prepared in good faith based
on the same assumptions used to prepare the pro forma financial statements
included in the Information Memorandum (which assumptions are believed by Parent
and the U.S. Borrower to be reasonable) and (ii) presents fairly, in all
material respects, the pro forma financial position of Parent and its
consolidated subsidiaries as of the Closing Date as if the Transactions had
occurred on such date.
(c) Except as disclosed in the financial statements referred to
above or the notes thereto or in the Information Memorandum, after giving effect
to the Transactions, none of Parent, the Borrowers or the Subsidiaries has, as
of the Closing Date, any material contingent liabilities, unusual long-term
commitments or unrealized losses.
(d) Since December 31, 1997, there has been no material adverse
change in the business, assets, operations, properties or financial condition
or, as of the Closing Date only, prospects of Parent, the Borrowers and the
Subsidiaries, taken as a whole.
SECTION 3.05. Properties. (a) Each of Parent, the Borrowers and the
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business (including its Mortgaged
Properties), except for minor defects in title that do not interfere with its
ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes and except as could not reasonably be
expected to have a Material Adverse Effect.
(b) Each of Parent, the Borrowers and the Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by Parent,
the Borrowers and the Subsidiaries does not infringe upon the rights of any
other Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(c) Schedule 3.05 sets forth the address of each real property that
is owned or leased by Parent, the Borrowers or any of the Subsidiaries as of the
Closing Date after giving effect to the Transactions.
(d) As of the Closing Date, none of Parent, the Borrowers or any of
the Subsidiaries has received written notice of, and no Financial Officer of
Parent, the Borrowers or any Subsidiary has knowledge of, any pending or
contemplated condemnation proceeding affecting any Mortgaged Property or any
sale or disposition thereof in lieu of condemnation. Neither any Mortgaged
Property nor any interest therein is subject to any right of first refusal,
option or other contractual right to purchase such Mortgaged Property or
interest therein except such rights or options that, individually and in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
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SECTION 3.06. Litigation and Environmental Matters. (a) There are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of Parent or the Borrowers,
threatened against or affecting Parent, the Borrowers or any of the Subsidiaries
(i) as to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, could reasonably be expected, individually or
in the aggregate, to result in a Material Adverse Effect (other than the
Disclosed Matters) or (ii) that could reasonably be expected to have a Material
Adverse Effect on the consummation of the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, none of Parent, the Borrowers
or any of the Subsidiaries (i) has failed to comply with any Environmental Law
or to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received written notice of any claim with
respect to any Environmental Liability or (iv) knows of any facts, circumstances
or conditions that could reasonably be expected to form the basis for any
Environmental Liability.
(c) Since the date of this Agreement, to the U.S. Borrower's and the
Canadian Borrower's knowledge, there has been no change in the status of the
Disclosed Matters that, individually or in the aggregate, has resulted in, or
could reasonably be expected to result in, a Material Adverse Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of Parent,
the Borrowers and the Subsidiaries is in compliance with all laws, regulations
and orders of any Governmental Authority applicable to it or its property and
all indentures, agreements and other instruments binding upon it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect. No
Default has occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. None of Parent,
the Borrowers or any of the Subsidiaries is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
or (b) a "holding company" as defined in, or subject to regula tion under, the
Public Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of Parent, the Borrowers and the
Subsidiaries has timely filed or caused to be filed all Tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes required
to have been paid by it, except (a) Taxes that are being contested in good faith
by appropriate proceedings and for which Parent, the Borrowers or such
Subsidiary, as applicable, has set aside on its books adequate reserves in
accordance with GAAP or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed the fair
market value of the assets of such Plan in an amount that would be likely to
result in a Materially Adverse Effect, and the present value of all accumulated
benefit obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not, as of
the date of the most recent financial statements reflecting such amounts, exceed
the fair market value of the assets of all such underfunded Plans in an amount
that would be likely to result in a Materially Adverse Effect. Each Foreign
Pension Plan is in compliance in all material respects with the applicable laws
of any foreign jurisdictions and no Foreign Pension Plan has any unfunded
liabilities which, individually or in the aggregate, would be likely to result
in a Materially Adverse Effect.
SECTION 3.11. Disclosure. (a) There is no fact known to Parent or
the Borrowers that could reasonably be expected to result in a Material Adverse
Effect that has not been disclosed herein or in any document, certificate or
agreement furnished to the Lenders in connection with the Transactions. None of
the reports, financial statements, certificates or other information furnished
by or on behalf of the Investor Group or any Loan Party to the Administrative
Agents or any Lender in connection with the negotiation of this Agreement or any
other Loan Document or delivered hereunder or thereunder (as modified or
supplemented by other information so furnished prior to the time when this
representation is being made or deemed made) other than projected financial
information, taken as a whole, contains any material misstatement of fact or
omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
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(b) The projections and pro forma financial information contained in
the information and data referred to in paragraph (a) above were based on good
faith estimates and assumptions believed by such Persons to be reasonable at the
time made, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results.
SECTION 3.12. Subsidiaries. As of the Closing Date, Parent does not
have any subsidiaries other than the subsidiaries listed on Schedule 3.12.
Schedule 3.12 sets forth the name of, and the direct or indirect ownership
interest of Parent in, each subsidiary listed thereon as of the Closing Date.
SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of
all insurance maintained by or on behalf of Parent, the Borrowers and the
Subsidiaries as of the Closing Date.
SECTION 3.14. Labor Matters. As of the Closing Date, there are no
strikes, lockouts or slowdowns against Parent, the Borrowers or any Subsidiary
pending or, to the knowledge of Parent or either of the Borrowers, threatened,
except those that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. None of Parent, the Borrowers or any
Subsidiary is engaged in any unfair labor practice that could reasonably be
expected to have a Material Adverse Effect. The consummation of the Transactions
will not give rise to any right of termination or right of renegotiation on the
part of any union under any collective bargaining agreement to which Parent, the
Borrowers or any Subsidiary is bound other than collective bargaining agreements
that, individually and in the aggregate, are not material to Parent, the
Borrowers and the Subsidiaries taken as a whole.
SECTION 3.15. Solvency. With respect to the time that is immediately
after the consummation of the Transactions to occur on the Closing Date and
immediately following the making of each Loan made on the Closing Date and after
giving effect to the application of the proceeds of such Loans, (i) the fair
value of the assets of Parent and its subsidiaries on a consolidated basis, at a
fair valuation, will exceed the debts and liabilities of Parent and its
subsidiaries on a consolidated basis, subordinated, contingent or otherwise;
(ii) the present fair saleable value of the property of Parent and its
subsidiaries on a consolidated basis will be greater than the amount that will
be required to pay the probable liability of the debts and other liabilities of
Parent and its subsidiaries on a consolidated basis, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured;
(iii) Parent and its subsidiaries on a consolidated basis will be able to pay
the debts and liabilities of Parent and its subsidiaries on a consolidated
basis, subordinated, contingent or otherwise, as such debts and liabilities
become absolute and matured; and (iv) Parent and its subsidiaries on a
consolidated basis will not have unreasonably small capital with which to
conduct the business in which they are engaged as such business is now conducted
and is proposed to be conducted following the Closing Date.
SECTION 3.16. Security Documents. (a) When executed and delivered,
the Pledge Agreements (and/or, as applicable, in the case of the Canadian
Borrower, the Canadian Borrower Subsidiaries or the Foreign Subsidiaries, the
making of requisite filings or registrations) will be effective to create in
favor of the applicable Collateral Agent, for the ratable benefit of the
applicable Secured Parties, a legal, valid and enforceable security interest in
the Collateral (as defined in the applicable Pledge Agreement) and, when the
portion of the Collateral constituting certificated securities (as defined in
the Uniform Commercial Code or such other local law as may apply) is delivered
to the applicable Collateral Agent (and/or, as applicable, in the case of the
Canadian Borrower, the Canadian Borrower Subsidiaries or the Foreign
Subsidiaries, the requisite filings or registrations are made), the Pledge
Agreements shall constitute a fully perfected first priority Lien on, and
security interest in, all right, title and interest of the pledgor thereunder in
such Collateral, in each case prior and superior in right to any other Person.
(b) The Security Agreements are effective to create in favor of the
applicable Collateral Agent, for the ratable benefit of the applicable Secured
Parties, a legal, valid and enforceable security interest in the Collateral (as
defined in the applicable Security Agreement) and, when financing statements or
such other filings required by local law in appropriate form are filed in the
offices specified on Schedule 6 to each of the Perfection Certificates, the
Security Agreements shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the grantors thereunder in such
Collateral to the extent perfection can be obtained by filing Uniform Commercial
Code financing statements or such other filings required by local law (and/or,
as applicable, in the case of the Canadian Borrower, the Canadian Borrower
Subsidiaries and the Foreign Subsidiaries, the making of requisite filings or
registrations), other than the Intellectual Property (as defined in the
applicable Security Agreements) in which a security interest may be perfected by
filing, recording or registering a security agreement, financing statement or
analogous document in the United States Patent and Trademark Office, the United
States Copyright Office or in such other office or with such other authority as
required by local law, as applicable, in each case prior and superior in right
to any other Person to
61
the extent perfection can be obtained by filing Uniform Commercial Code
financing statements or other such filings as may be required by local law,
other than with respect to Liens expressly permitted by Section 6.02.
(c) When the U.S. Security Agreement is filed in the United States
Patent and Trademark Office and the United States Copyright Office, the security
interest created thereunder shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties in the
Intellectual Property (as defined in the U.S. Security Agreement) in which a
security interest may be perfected by filing, recording or registering a
security agreement, financing statement or analogous document in the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, in each case prior and superior in right to any other Person, other
than with respect to the rights of Persons pursuant to Liens expressly permitted
by Section 6.02 (it being understood that subsequent recordings in the United
States Patent and Trademark Office and the United States Copyright Office may be
necessary to perfect a lien on registered trademarks, trademark applications and
copyrights acquired by the Loan Parties after the date hereof).
(d) The Mortgages are effective to create, subject to the exceptions
listed in each title insurance policy covering such Mortgage, in favor of the
U.S. Collateral Agent or the Canadian Collateral Agent, as applicable, as
security for the Obligations secured thereby, a legal, valid and enforceable
Lien on all of the Loan Parties' right, title and interest in and to the
Mortgaged Properties thereunder and the proceeds thereof, and when the Mortgages
are filed in the offices specified on Schedule 3.16(d), the Mortgages shall
constitute a Lien on, and security interest in, all right, title and interest of
the Loan Parties in such Mortgaged Properties and the proceeds thereof, in each
case prior and superior in right to any other person, other than with respect to
the rights of Persons pursuant to Liens expressly permitted by Section 6.02.
SECTION 3.17. Federal Reserve Regulations. (a) None of Parent, the
Borrowers or any of the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will
be used, whether directly or indirectly, and whether immediately, incidentally
or ultimately, for any purpose that entails a violation of, or that is
inconsistent with, the provisions of the Regulations of the Board, including
Regulation T, U or X.
SECTION 3.18. Recapitalization. (a) The Recapitalization Agreement
has been duly authorized, executed and delivered by Parent and Investor, and
constitutes a legal, valid and binding obligation of each such entity,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law, and an implied covenant of good
faith and fair dealing. A true, correct and complete copy of the
Recapitalization Agreement has been furnished to the U.S. Administrative Agent.
(b) As of the Closing Date, each of the representations and
warranties made by Parent and Investor in the Recapitalization Agreement is true
and correct in all material respects.
SECTION 3.19. Capitalization of Parent. As of the date of this
Agreement, the authorized capital stock of Parent consists of 2,000,000 shares
of Class A Common Stock, par value $.01 per share, of which 1,026,510 shares are
issued and outstanding, and 2,000,000 shares of Class B Common Stock, par value
$.01 per share, of which no shares are outstanding. All such outstanding shares
of stock are fully paid and nonassessable.
SECTION 3.20. Year 2000 Compliance. To the best of Parent's and the
Borrowers' knowledge, any reprogramming required to permit the proper
functioning, in and following the year 2000, of (a) the computer systems of
Parent, the Borrowers and any of the Subsidiaries and (b) equipment containing
embedded microchips and the testing of all such systems and equipment, as so
reprogrammed, will be completed in all material respects by June 30, 1999. To
the best of Parent's and the Borrowers' knowledge, the cost to Parent, the
Borrowers and any of the Subsidiaries of such reprogramming and testing and of
the reasonably foreseeable consequences of year 2000 to Parent, the Borrowers
and any of the Subsidiaries (including reprogramming errors and the failure of
others' systems or equipment) will not result in a Default or a Material Adverse
Effect.
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ARTICLE IV
Conditions
SECTION 4.01. Closing Date. The obligations of the Lenders to make
Loans and of any Issuing Banks to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 10.02):
(a) The U.S. Administrative Agent (or its counsel) shall have
received from each party hereto either (i) a counterpart of this Agreement
signed on behalf of such party or (ii) written evidence satisfactory to
the U.S. Administrative Agent (which may include telecopy transmission of
a signed signature page of this Agreement) that such party has signed a
counterpart of this Agreement.
(b) The U.S. Administrative Agent shall have received a favorable
written opinion (addressed to the Administrative Agents and the Lenders
and dated the Closing Date) of each of (i) Debevoise & Plimpton, counsel
for Parent and the Borrowers prior to the Recapitalization, substantially
in the form of Exhibit B-1, (ii) Simpson Thacher & Bartlett, special New
York counsel for, prior to the Recapitalization, Investor and, immediately
following the consummation of the Recapitalization, Parent and the
Borrowers, substantially in the form of Exhibit B-2, (iii) Jeffrey B.
Kramp, General Counsel of Parent, substantially in the form of Exhibit
B-3, (iv) Amster, Rothstein & Ebenstein, special counsel for Parent and
the Borrowers, substantially in the form of Exhibit B-4, (v) U.S. local
counsel for the U.S. Administrative Agent, substantially in the form of
Exhibit C-1, (vi) Canadian local counsel for the Canadian Administrative
Agent, substantially in the form of Exhibit C-2 and (vii) Canadian local
counsel for Parent and the Borrowers, substantially in the form of Exhibit
C-2 and, in the case of each such opinion required by this paragraph,
covering such other matters relating to the Loan Parties, the Loan
Documents or the Transactions as the Required Lenders shall reasonably
request. Parent and the Borrowers hereby request such counsel to deliver
such opinions to the U.S. Administrative Agent or its counsel.
(c) The U.S. Administrative Agent shall have received such documents
and certificates as the U.S. Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good
standing of each Loan Party, the authorization of the Transactions and any
other legal matters relating to the Loan Parties, the Loan Documents or
the Transactions, all in form and substance reasonably satisfactory to the
U.S. Administrative Agent and its counsel.
(d) The U.S. Administrative Agent shall have received a certificate,
dated the Closing Date and signed by the President, a Vice President or a
Financial Officer of the U.S. Borrower, confirming compliance with the
conditions set forth in paragraphs (a) and (b) of Section 4.02.
(e) The Administrative Agents shall have received all fees and other
amounts due and payable on or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by any Loan Party hereunder or under any
other Loan Document.
(f) The U.S. Administrative Agent shall have received counterparts
of the U.S. Pledge Agreement signed on behalf of Parent, the U.S.
Borrower, the Canadian Borrower and the Subsidiaries, together with stock
certificates representing all the outstanding shares of capital stock of
the U.S. Borrower, the Canadian Borrower and the Subsidiaries owned by or
on behalf of Parent, the U.S. Borrower, the Canadian Borrower and the
Subsidiaries as of the Closing Date after giving effect to the
Transactions (except that, with respect to the Obligations of the U.S.
Borrower, stock certificates representing shares of common stock of the
Canadian Borrower, the Canadian Borrower Subsidiaries and any Foreign
Subsidiary may be limited to 65% of the outstanding shares of common stock
of the Canadian Borrower, the Canadian Borrower Subsidiaries and any
Foreign Subsidiary), promissory notes evidencing all intercompany
Indebtedness owed to any applicable Loan Party by the U.S. Borrower, any
U.S. Borrower Subsidiary, the Canadian Borrower or any Foreign Subsidiary
(other than the U.S. Receivables Subsidiary) as of the Closing Date after
giving effect to the Transactions and undated stock powers and instruments
of transfer, endorsed in blank, with respect to such stock certificates
and promissory notes.
(g) The U.S. Administrative Agent shall have received counterparts
of the U.S. Security Agreement signed on behalf of Parent, the U.S.
Borrower and each Domestic U.S. Borrower Subsidiary, together with the
following:
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(i) all documents and instruments, including Uniform
Commercial Code financing statements, required by law, or reasonably
requested by the U.S. Administrative Agent, to be filed, registered
or recorded to create or perfect the Liens intended to be created
under the U.S. Security Agreement; and
(ii) a completed Perfection Certificate dated the Closing Date
and signed by an executive officer or Financial Officer of each of
Parent and the U.S. Borrower, together with all attachments
contemplated thereby, including the results of a search of the
Uniform Commercial Code (or equivalent) filings made with respect to
Parent, the U.S. Borrower and the U.S. Borrower Subsidiaries in the
jurisdictions contemplated by the Perfection Certificate and copies
of the financing statements (or similar documents) disclosed by such
search and evidence reasonably satisfactory to the U.S.
Administrative Agent that the Liens indicated by such financing
statements (or similar documents) are permitted by Section 6.02 or
have been released.
(h) The Canadian Administrative Agent shall have received
counterparts of the Canadian Security Agreement signed on behalf of the
Canadian Borrower, each Canadian Borrower Subsidiary and each Foreign
Subsidiary, together with the following:
(i) all documents and instruments, including financing
statements or other such documents, filings or instruments required
by local law or reasonably requested by the Canadian Administrative
Agent, to be filed, registered or recorded to create or perfect the
Liens intended to be created under the Canadian Security Agreement;
and
(ii) a completed Perfection Certificate dated the Closing Date
and signed by an executive officer or Financial Officer of each of
the Canadian Borrower and the Canadian Borrower Subsidiaries,
together with all attachments contemplated thereby, including the
results of a lien search made with respect to the Canadian Borrower
and each of the Canadian Borrower Subsidiaries in the jurisdictions
contemplated by the Perfection Certificate and copies of the results
disclosed by such search and evidence reasonably satisfactory to the
Canadian Administrative Agent that the Liens indicated by such
financing statements (or similar documents) are permitted by Section
6.02 or have been released.
(i) The U.S. Administrative Agent shall have received (i)
counterparts of the Parent Guarantee Agreement signed on behalf of Parent,
(ii) counterparts of the U.S. Borrower Guarantee Agreement signed on
behalf of the U.S. Borrower, (iii) counterparts of the U.S. Subsidiary
Guarantee Agreement signed on behalf of each Domestic U.S. Borrower
Subsidiary (other than the U.S. Receivables Subsidiary), (iv) counterparts
of the Canadian Subsidiary Guarantee Agreement signed on behalf of each
Canadian Borrower Subsidiary, (v) counterparts of the Canadian Affiliate
Guarantee Agreement signed on behalf of each Foreign Subsidiary and (vi)
counterparts of the Indemnity, Subrogation and Contribution Agreement
signed on behalf of the U.S. Borrower and each Domestic U.S. Borrower
Subsidiary.
(j) The U.S. Administrative Agent shall have received evidence
satisfactory to it that the insurance required by Section 5.07 is in
effect.
(k) The Recapitalization shall be consummated simultaneously with
the closing under this Agreement in accordance with applicable law and the
Recapitalization Agreement and with related documentation reasonably
satisfactory to the Lenders, and the Lenders shall be reasonably satisfied
with the capitalization, structure and equity ownership of Parent, the
Borrowers and the Subsidiaries after giving effect to the Transactions.
(l) (i) The U.S. Borrower shall have received not less than
$300,000,000 in gross cash proceeds from the issuance of the Senior
Subordinated Notes; and (ii) Parent shall have received not less than
$50,000,000 in gross cash proceeds from the issuance of the Senior
Discount Notes.
(m) Cypress and certain of its Affiliates shall have contributed the
Contributed Amount to Investor.
(n) The consummation of the Transactions shall not (i) violate any
applicable law, statute, rule or regulation or (ii) conflict with, or
result in a default or event of default under, any material agreement of
Parent, the Borrowers or any of the Subsidiaries that will be in effect
following the consummation of the Recapitalization.
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(o) The Administrative Agents and the Documentation Agent shall be
reasonably satisfied that the Transaction Costs shall not exceed
$60,000,000.
(p) All loans outstanding, interest thereon and other amounts due
and payable under the Existing Credit Agreements and the Existing Notes
and under each other agreement related thereto shall have been repaid in
full, and the U.S. Administrative Agent shall have received duly executed
documentation, in form and substance reasonably satisfactory to it,
evidencing or necessary for (i) the termination of the Existing Credit
Agreements and the Existing Notes and (ii) the cancelation of all related
agreements, guarantees and security interests granted by Parent, the
Borrowers, the Subsidiaries or any other Person in connection therewith
and the discharge of all obligations or interests thereunder.
(q) After giving effect to the Transactions and the other
transactions contemplated hereby, on the Closing Date, Parent, the
Borrowers and the Subsidiaries shall have outstanding no indebtedness or
capital stock other than (i) the Loans and other extensions of credit
hereunder, (ii) the Senior Subordinated Notes, (iii) the Senior Discount
Notes, (iv) the Assumed Debt, (v) the capital stock of the Borrowers and
the Subsidiaries, all of which shall be owned by Parent, (vi) the Class A
Common Stock and (vii) Indebtedness pursuant to any Permitted Receivables
Financing.
(r) The U.S. Administrative Agent and the Documentation Agent shall
have received a pro forma consolidated balance sheet of Parent required by
Section 3.04(b), which balance sheet shall not be materially inconsistent
with the forecasts previously provided to the U.S. Administrative Agent.
(s) The U.S. Administrative Agent shall have received a letter, in
form and substance reasonably satisfactory to the Administrative Agents
and the Documentation Agent, from Valuation Research Corporation together
with such other evidence reasonably requested by the Lenders as to the
solvency of Parent, the Borrowers and the Subsidiaries on a consolidated
basis after giving effect to the Transactions and the consummation of the
other transactions contemplated hereby.
(t) All requisite Governmental Authorities and third parties shall
have approved or consented to the Transactions and the other transactions
contemplated hereby to the extent required, all applicable appeal periods
shall have expired and there shall be no action by any Governmental
Authority, actual or threatened, that has a reasonable likelihood of
restraining, preventing or imposing unduly burdensome conditions on the
Transactions or the other transactions contemplated hereby.
(u) The Administrative Agents and the Documentation Agent shall be
reasonably satisfied in all respects with any tax sharing agreements
among, Parent, the Borrowers and the Subsidiaries after giving effect to
the Transactions.
(v) The U.S. Administrative Agent shall have received (i)
counterparts of a Mortgage with respect to each Mortgaged Property listed
on Schedule 1.01(a), signed on behalf of the record owner of such
Mortgaged Property, (ii) a policy or policies of title insurance issued by
a nationally recognized title insurance company, insuring the Lien of each
such Mortgage as a valid first Lien on the Mortgaged Property described
therein, free of any other Liens except as permitted by Section 6.02, in
form and substance reasonably acceptable to the Collateral Agents,
together with such endorsements, coinsurance and reinsurance as the
Collateral Agents or the Required Lenders may reasonably request, (iii)
such current certified surveys as the Administrative Agents or the
Required Lenders may reasonably request, (iv) a copy of the original
permanent certificate or temporary certificate of occupancy as the same
may have been amended or issued from time to time, covering each
improvement located upon the Mortgaged Properties, that were required to
have been issued by the appropriate Governmental Authority for such
improvement and (v) written confirmation from the applicable zoning
commission or other appropriate Governmental Authority stating that with
respect to each Mortgaged Property as built it complies with existing land
use and zoning ordinances, regulations and restrictions applicable to such
Mortgaged Property to the extent each of Parent, the U.S. Borrower and the
Canadian Borrower, as applicable, are able to obtain such written
confirmation using commercially reasonable efforts.
(w) The initial closing under the Receivables Sale Agreements, the
Receivables Pooling Agreement and the Receivables Supplemental Pooling
Agreement shall have been consummated and the Borrowers shall have
received an aggregate amount of not less than $250,000,000 as proceeds of
the initial sale of receivables thereunder.
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The U.S. Administrative Agent shall notify the Borrowers and the Lenders of the
Closing Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of any of the
Issuing Banks to issue Letters of Credit hereunder shall not become effective
unless each of the foregoing conditions is satisfied (or waived pursuant to
Section 10.02) at or prior to 5:00 p.m., New York City time, on June 5, 1998
(and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).
SECTION 4.02. Each Credit Event. The obligation of each Lender to
make a Loan on the occasion of any Borrowing, and of any U.S. Issuing Bank or
Canadian Issuing Bank to issue, amend, renew or extend any U.S. $ Letter of
Credit or C $ Letter of Credit, as the case may be, is subject to the
satisfaction of the following conditions:
(a) The representations and warranties of each Loan Party set forth
in the Loan Documents shall be true and correct in all material respects
on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such U.S. $ Letter of Credit or C $
Letter of Credit, as applicable, except to the extent that such
representations and warranties expressly relate to an earlier date, in
which case such representations and warranties, shall, to such extent, be
true and correct in all material respects as of such earlier date.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such U.S. $
Letter of Credit or C $ Letter of Credit, as applicable, no Default shall
have occurred and be continuing.
(c) With respect to any Delayed Draw Term Borrowing, at the time of
and immediately after giving effect to such Borrowing (and the Permitted
Acquisition financed in connection therewith), the Senior Leverage Ratio
shall not exceed (i) on any date prior to June 5, 2000, 4.20 to 1.00 and
(ii) on June 5, 2000 or any date thereafter, 4.15 to 1.00.
(d) The U.S. Administrative Agent and, in the case of a C $
Revolving Borrowing, the Canadian Administrative Agent, shall have
received a Borrowing Request executed by the U.S. Borrower, and, in the
case of a C $ Revolving Borrowing, the Canadian Borrower.
Each Borrowing and each issuance, amendment, renewal or extension of a U.S. $
Letter of Credit or C $ Letter of Credit shall be deemed to constitute a
representation and warranty by Parent and the Borrowers on the date thereof as
to the matters specified in paragraphs (a) and (b) of this Section and, with
respect to any Delayed Draw Term Borrowing, paragraph (c) of this Section.
ARTICLE V
Affirmative Covenants
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all U.S. $ LC Disbursements and C $ LC Disbursements shall have been reimbursed,
each of Parent and the Borrowers covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. Each of
Parent and the U.S. Borrower will furnish to the U.S. Administrative Agent and
each Lender:
(a) within 90 days after the end of each fiscal year of each of
Parent and the U.S. Borrower, its audited consolidated balance sheets and
related statements of operations, stockholders' equity and cash flows as
of the end of and (other than with respect to cash flows) for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by Coopers & Lybrand L.L.P. or other
independent public accountants of recognized national standing (without a
"going concern" or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect
that such consolidated financial statements present fairly in all material
respects the financial condition and results of operations of (i) Parent
and its consolidated subsidiaries and (ii) the U.S. Borrower and its
consolidated subsidiaries on a consolidated basis in accordance with GAAP
consistently applied (except as noted therein);
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of each of Parent and the U.S. Borrower, its
consolidated balance sheet and related statements of
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operations, stockholders' equity and cash flows as of the end of and
(other than with respect to cash flows) for such fiscal quarter and the
then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of
(or, in the case of the balance sheet, as of the end of) the previous
fiscal year, all certified by one of its Financial Officers as presenting
fairly in all material respects the financial condition and results of
operations of (i) Parent and its consolidated subsidiaries and (ii) the
U.S. Borrower and its consolidated subsidiaries on a consolidated basis in
accordance with GAAP consistently applied (except as noted therein),
subject to normal year-end audit adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer of the U.S.
Borrower (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Sections
6.13, 6.14, 6.15 and 6.16 and (iii) stating whether any change in GAAP or
in the application thereof has occurred since the date of Parent's and the
U.S. Borrower's most-recently delivered audited financial statements and,
if any such change has occurred, specifying the effect of such change on
the financial statements accompanying such certificate;
(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any
Default (which certificate may be limited to the extent required by
accounting rules or guidelines);
(e) no later than 90 days after the end of each fiscal year of
Parent (commencing with the fiscal year of Parent ending in December
1998), a detailed consolidated budget for such fiscal year (including a
projected consolidated balance sheet and related statements of projected
operations and cash flow as of the end of and for such fiscal year and for
each fiscal quarter of such fiscal year);
(f) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
Parent, the U.S. Borrower, the Canadian Borrower or any Subsidiary with
the Securities and Exchange Commission, or any Governmental Authority
succeeding to any or all of the functions of said Commission, or with any
national securities exchange, or distributed by Parent to its shareholders
generally, as the case may be; and
(g) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of
Parent, the Borrowers or any Subsidiary, or compliance with the terms of
any Loan Document, as the Administrative Agents or any Lender may
reasonably request.
SECTION 5.02. Notices of Material Events. The U.S. Borrower, as soon
as practicable after a Financial Officer or other executive officer of either of
the Borrowers or Parent knows or reasonably should know thereof, will furnish to
the U.S. Administrative Agent and each Lender prompt written notice of the
following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by
or before any arbitrator or Governmental Authority against or affecting
Parent, the Borrowers or any of their Affiliates that could reasonably be
expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred, could reasonably be expected to
result in liability of Parent, the U.S. Borrower and the Subsidiaries in
an aggregate amount exceeding $5,000,000;
(d) the occurrence of any event or action that results in an
unfunded liability that, alone or together with any other unfunded
liabilities that have occurred in respect of a Foreign Pension Plan that
could reasonably be expected to result in liability of Parent, the U.S.
Borrower, the Canadian Borrower or any Subsidiary in an aggregate amount
exceeding $5,000,000; and
(e) any other development that results in, or could (either in the
reasonable judgment of the U.S. Borrower or in the reasonable judgment of
the Person delivering such certificate) be expected to result in, a
Material Adverse Effect.
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Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the U.S. Borrower setting
forth the details of the event or development requiring such notice and any
action taken or proposed to be taken with respect thereto.
SECTION 5.03. Information Regarding Collateral. The U.S. Borrower
will furnish to the U.S. Administrative Agent prompt written notice of any
change (a) in any Loan Party's corporate name or in any trade name used to
identify it in the conduct of its business or in the ownership of its
properties, (b) in the location of any Loan Party's chief executive office, its
principal place of business, any office in which it maintains books or records
relating to Collateral owned by it or any office or facility at which Collateral
owned by it is located (including the establishment of any such new office or
facility), (c) in any Loan Party's identity or corporate structure or (d) in any
Loan Party's Federal Taxpayer Identification Number. Parent and the Borrowers
agree not to effect or permit any change referred to in the preceding sentence
unless all filings have been made under the Uniform Commercial Code or otherwise
that are required in order for the U.S. Collateral Agent or the Canadian
Collateral Agent, as applicable, to continue at all times following such change
to have a valid, legal and perfected security interest in all the Collateral.
Parent and the Borrowers also agree promptly to notify the U.S. Administrative
Agent if any material portion of the Collateral is damaged or destroyed.
SECTION 5.04. Existence; Conduct of Business. Each of Parent and the
Borrowers will, and will cause each of the Subsidiaries to, do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, privileges, franchises,
patents, copyrights, trademarks and trade names material to the conduct of its
business, provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.03.
SECTION 5.05. Payment of Obligations. Each of Parent and the
Borrowers will, and will cause each of the Subsidiaries to, pay its Material
Indebtedness and Tax liabilities before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) Parent, the Borrowers or such
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to pay could not reasonably be expected
to have a Material Adverse Effect.
SECTION 5.06. Maintenance of Properties. Each of Parent and the
Borrowers will, and will cause each of the Subsidiaries to, keep and maintain
all property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted.
SECTION 5.07. Insurance. Each of Parent and the Borrowers will, and
will cause each of the Subsidiaries to, at all times maintain in full force and
effect insurance on all their property in at least such amounts and against at
least such risks insured against in the same general area by companies engaged
in the same or a similar business and such other insurance as may be required by
law, provided that any self-insurance maintained by Parent, the Borrowers and
the Subsidiaries pursuant to this Section 5.07 shall not exceed $10,000,000 in
the aggregate. Each of Parent and the Borrowers will, and will cause each
Subsidiary to, furnish to the U.S. Administrative Agent or the Canadian
Administrative Agent, upon written request of the applicable Administrative
Agent a summary of the insurance carried together with certificates of insurance
and other evidence of such insurance, if any, naming the applicable Collateral
Agent as an additional insured and/or loss payee.
SECTION 5.08. Casualty and Condemnation. (a) Parent and the
Borrowers will furnish to the U.S. Administrative Agent and the Lenders prompt
written notice of any casualty or other insured damage to any portion of any
Collateral having a fair market value of $1,000,000 or more, or the commencement
of any action or proceeding for the taking of any Collateral or any part thereof
or interest therein under power of eminent domain or by condemnation or similar
proceeding.
(b) If any event described in paragraph (a) of this Section results
in Net Proceeds, the U.S. Administrative Agent is authorized to collect such Net
Proceeds and, if received by Parent, either of the Borrowers or any Subsidiary,
such Net Proceeds shall be paid over to the applicable Administrative Agent,
provided that (i) if the aggregate Net Proceeds in respect of such event (other
than proceeds of business interruption insurance) are less than $1,000,000, such
Net Proceeds shall be paid over to the applicable Borrower unless a Default has
occurred and is continuing, and (ii) all proceeds of business interruption
insurance shall be paid over to the U.S. Borrower unless a Default has occurred
and is continuing. All such Net Proceeds retained by or paid over to the
applicable Administrative Agent shall be held by the applicable Administrative
Agent and released from time to time to pay the costs of repairing, restoring or
replacing the affected property in accordance with the terms of the applicable
Security Document, subject to the provisions of the applicable Security Document
regarding application of such Net Proceeds during a Default.
68
(c) If any Net Proceeds retained by or paid over to the applicable
Administrative Agent as provided above continue to be held by such
Administrative Agent on the date that is 18 months after the receipt of such Net
Proceeds, then such Net Proceeds shall be applied to prepay Term Borrowings as
provided in Section 2.11(b).
SECTION 5.09. Books and Records; Inspection and Audit Rights. Each
of Parent and the Borrowers will, and will cause each of the Subsidiaries to,
keep proper books of record and account in which full, true and correct entries
are made of all material dealings and transactions in relation to its business
and activities. Each of Parent and the Borrowers will, and will cause each of
the Subsidiaries to, permit any representatives designated by the U.S.
Administrative Agent, the Canadian Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested.
SECTION 5.10. Compliance with Laws. Each of Parent and the Borrowers
will, and will cause each of the Subsidiaries to, comply with all laws, rules,
regulations and orders of any Governmental Authority applicable to it or its
property, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.11. Use of Proceeds and Letters of Credit. The proceeds of
the Tranche A Term Loans and Tranche B Term Loans will be used by the U.S.
Borrower, together with (a) the net proceeds of the issuance of the Senior
Subordinated Notes and the Senior Discount Notes and (b) the proceeds from the
initial sale of Receivables under the Permitted Receivables Financing on the
Closing Date, solely (i) to repay all amounts outstanding under the Existing
Credit Agreements on the Closing Date, (ii) to repay in full the Existing Notes
on the Closing Date and (iii) after such repayments, to make an intercompany
loan to Parent to be used by Parent, together with the cash proceeds of the
Stock Purchase, solely (A) to pay the Aggregate Redemption Price in accordance
with the Recapitalization Agreement and (B) to pay the Transaction Costs. The
proceeds of the Revolving Loans and Additional Revolving Loans will be used by
the Borrowers for general corporate purposes, including the use for Permitted
Acquisitions in an aggregate amount not to exceed $25,000,000 at any time
outstanding. The proceeds of the Delayed Draw Term Loans will be used by the
U.S. Borrower for Permitted Acquisitions. The proceeds of the Swingline Loans
will be used only for general corporate purposes. No part of the proceeds of any
Loan will be used, whether directly or indirectly, for any purpose that entails
a violation of any of the Regulations of the Board, including Regulations T, U
and X. Letters of Credit will be issued only for general corporate purposes.
SECTION 5.12. Additional Subsidiaries. If any additional direct or
indirect Subsidiary is formed or acquired after the Closing Date, Parent will
notify the applicable Administrative Agent thereof and (a) if such Subsidiary is
a Domestic U.S. Borrower Subsidiary, Parent will cause such Subsidiary to become
a party to the U.S. Subsidiary Guarantee Agreement, the Indemnity, Subrogation
and Contribution Agreement and each other applicable U.S. Security Document in
the manner provided therein within 30 Business Days after such Subsidiary is
formed or acquired and promptly take such actions to create and perfect Liens on
such Subsidiary's assets to secure the Obligations as the U.S. Administrative
Agent or the Required Lenders shall reasonably request, (b) if such Subsidiary
is a Canadian Borrower Subsidiary, Parent will cause such Subsidiary to become a
party to the Canadian Subsidiary Guarantee Agreement and each other applicable
Canadian Security Document in the manner provided therein within 30 Business
Days after such Subsidiary is formed or acquired and promptly take such actions
to create and perfect Liens on such Subsidiary's assets to secure the
Obligations as the Canadian Administrative Agent or the Required Lenders shall
reasonably request, (c) if such Subsidiary is a Foreign Subsidiary, Parent will
cause such Subsidiary to become a party to the Canadian Security Agreement, the
Canadian Affiliate Guarantee Agreement or the Canadian Borrower Subsidiary
Agreement, as applicable, and each other applicable Security Document in the
manner provided therein within 30 Business Days after such Subsidiary is formed
or acquired and promptly take such actions to create and perfect liens on such
Subsidiary's assets to secure the Obligations as the Administrative Agents or
the Required Lenders shall reasonably request, (d) if any shares of capital
stock or Indebtedness of any such additional Subsidiary are owned by or on
behalf of any Loan Party, Parent will cause such shares and promissory notes
evidencing such Indebtedness to be pledged pursuant to the applicable Pledge
Agreement within 30 Business Days after such Subsidiary is formed or acquired
(except that, if such Subsidiary is a Canadian Borrower Subsidiary or a Foreign
Subsidiary, shares of common stock of such Subsidiary to be pledged pursuant to
the U.S. Pledge Agreement to secure the obligations of the U.S. Borrower and the
Domestic U.S. Borrower Subsidiaries may be limited to 65% of the outstanding
shares of common stock of such Subsidiary).
SECTION 5.13. Further Assurances. (a) Each of Parent and the
Borrowers will, and will cause each other Loan Party to, execute any and all
further documents, financing statements, agreements and
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instruments, and take all such further actions (including the filing and
recording of financing statements, fixture filings, mortgages, deeds of trust
and other documents), that may be required under any applicable law, or which
the U.S. Administrative Agent, the Canadian Administrative Agent or the Required
Lenders may reasonably request, to effectuate the transactions contemplated by
the Loan Documents or to grant, preserve, protect or perfect the Liens created
or intended to be created by the Security Documents or the validity or priority
of any such Lien (subject to Liens permitted by Section 6.02), all at the
expense of the Loan Parties.
(b) If any material assets (including any real property or
improvements thereto or any interest therein) are acquired (including by means
of a Permitted Acquisition) by Parent, either of the Borrowers or any other Loan
Party after the Closing Date (other than assets constituting Collateral under
either of the Security Agreements that become subject to the Lien of either of
the Security Agreements upon acquisition thereof), Parent and the Borrowers will
notify the U.S. Administrative Agent, the Canadian Administrative Agent and the
Lenders thereof, and, if requested by the U.S. Administrative Agent, the
Canadian Administrative Agent or the Required Lenders, will cause such assets
(except for Receivables of the Borrowers and certain of their subsidiaries party
to the Receivables Sale Agreements that are sold pursuant to the Permitted
Receivables Financing) to be subjected to a Lien securing the Obligations and
will take, and cause such Loan Parties to take, such actions as shall be
necessary or reasonably requested by the U.S. Administrative Agent or the
Canadian Administrative Agent to grant and perfect such Liens, including actions
described in paragraph (a) of this Section, all at the expense of the applicable
Loan Parties.
SECTION 5.14. Landlord Consents. (a) Each of Parent and the
Borrowers will, and will cause the Subsidiaries to, at its own expense, use
commercially reasonable efforts to obtain (i) a consent substantially in the
form of Exhibit K or such other form as may be reasonably satisfactory to the
U.S. Administrative Agent or Canadian Administrative Agent, as applicable, from
the landlord of each leased property (including pursuant to any Capital Lease)
listed on Schedule 3.05, in which such landlord acknowledges the U.S.
Administrative Agent's or the Canadian Administrative Agent's, as applicable,
first priority security interest in any Collateral located on such leased
property and pledged to the applicable Collateral Agent and (ii) prior to
entering into a lease of a facility in which any Collateral will be located on
or after the Closing Date, a consent from each landlord of any such facility, in
which such landlord acknowledges the applicable Collateral Agent's first
priority security interest in any Collateral to be located on such leased
property and pledged to such Collateral Agent.
(b) Within 90 days after the Closing Date, the Borrowers shall have
obtained a consent substantially in the form of Exhibit K from the landlord with
respect to (i) the U.S. Borrower's regional distribution centers in Sparks, NV,
and Warrendale, PA, in which such landlord acknowledges the U.S. Administrative
Agent's first-priority security interest in any Collateral located on such
leased property and pledged to the U.S. Collateral Agent and (ii) the Canadian
Borrower's regional distribution center in Dorval, Quebec, in which such
landlord acknowledges the Canadian Administrative Agent's first-priority
security interest in any Collateral located on such leased property and pledged
to the Canadian Collateral Agent.
SECTION 5.15. Surveys. Within 90 days after the Closing Date, for
each Mortgaged Property, the Borrowers shall deliver or cause to be delivered an
A.L.T.A. survey in form and substance reasonably satisfactory to the U.S.
Administrative Agent and endorsements to the title policies required by Section
4.01(v)(ii) providing for survey-related coverage reasonably satisfactory to the
U.S. Administrative Agent.
ARTICLE VI
Negative Covenants
Until the Commitments have expired or terminated and the principal
of and interest on each Loan and all fees payable hereunder have been paid in
full and all Letters of Credit have expired or terminated and all U.S. $ LC
Disbursements and C $ LC Disbursements shall have been reimbursed, each of
Parent and the Borrowers covenants and agrees with the Lenders that:
SECTION 6.01. Indebtedness; Certain Equity Securities. (a) Parent
and the Borrowers will not, and will not permit any Subsidiary to, create,
incur, assume or permit to exist any Indebtedness, except:
(i) Indebtedness created under the Loan Documents;
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(ii) Indebtedness (other than the Senior Subordinated Notes and the
Senior Discount Notes) existing on the date hereof and set forth in
Schedule 6.01 and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount thereof
or result in an earlier maturity date or decreased weighted average life
thereof;
(iii) Indebtedness (A) of the U.S. Borrower or any Domestic
Subsidiary (other than the Receivables Subsidiary) to the U.S. Borrower,
the Canadian Borrower or any Subsidiary (other than the Receivables
Subsidiary), (B) of the Canadian Borrower or any Canadian Borrower
Subsidiary to the Canadian Borrower or any Canadian Borrower Subsidiary,
(C) of the Canadian Borrower or any Canadian Borrower Subsidiary to the
U.S. Borrower or any Domestic Subsidiary (other than the Receivables
Subsidiary) and (D) of any Foreign Subsidiary or Joint Venture to the U.S.
Borrower or any Domestic Subsidiary (other than the Receivables
Subsidiary); provided, however, that any Indebtedness incurred pursuant to
clause (C) or (D) above shall be subject to the provisions of Section
6.04;
(iv) Guarantees (A) by the U.S. Borrower, the Canadian Borrower or
any Subsidiary (other than the Receivables Subsidiary) of Indebtedness of
the U.S. Borrower or any Domestic Subsidiary (other than the Receivables
Subsidiary), (B) by the Canadian Borrower, any Canadian Borrower
Subsidiary or any Foreign Subsidiary of Indebtedness of the Canadian
Borrower or any Canadian Borrower Subsidiary, (C) by the U.S. Borrower or
any Domestic Subsidiary (other than the Receivables Subsidiary) of
Indebtedness of the Canadian Borrower or any Canadian Borrower Subsidiary
and (D) by the U.S. Borrower or any Domestic Subsidiary (other than the
Receivables Subsidiary) of Indebtedness of any Foreign Subsidiary or Joint
Venture; provided, however, that any Guarantees pursuant to clause (C) or
(D) above shall be subject to the provisions of Section 6.04;
(v) Indebtedness of the U.S. Borrower, the Canadian Borrower or any
Subsidiary (other than the Receivables Subsidiary) incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in
connection with the acquisition of any such assets or secured by a Lien on
any such assets prior to the acquisition thereof, provided that such
Indebtedness is incurred prior to or within 90 days after such acquisition
or the completion of such construction or improvement, and extensions,
renewals and replacements of any such Indebtedness that do not increase
the outstanding principal amount thereof or result in an earlier maturity
date or decreased weighted average life thereof, and provided further that
the aggregate principal amount of Indebtedness permitted by this clause
(v) that is incurred following the Closing Date shall not exceed at any
time $75,000,000 less the aggregate amount of Indebtedness outstanding at
such time pursuant to Section 6.01(xii);
(vi) Indebtedness of any Person that becomes a Subsidiary after the
date hereof, provided that (A) such Indebtedness exists at the time such
Person becomes a Subsidiary and is not created in contemplation of or in
connection with such Person becoming a Subsidiary and (B) the aggregate
principal amount of Indebtedness permitted by this clause (vi) shall not
exceed $15,000,000 at any time outstanding;
(vii) (A) up to $300,000,000 in aggregate principal amount of the
Senior Subordinated Notes, (B) $87,000,000 in aggregate amount of the
Senior Discount Notes resulting in aggregate proceeds to the Parent of
approximately $50,000,000 and (C) Permitted Subordinated Refinancing Debt
issued in respect of the Senior Subordinated Notes or the Senior Discount
Notes;
(viii) Indebtedness of the Borrowers and the Subsidiaries incurred
pursuant to any Permitted Receivables Financing;
(ix) Indebtedness (in addition to Indebtedness otherwise permitted
by this Section) in an aggregate principal amount not exceeding
$30,000,000 at any time outstanding, provided that the aggregate principal
amount of Indebtedness of the Subsidiaries permitted by this clause (ix)
shall not exceed $10,000,000 at any time outstanding;
(x) (A) other subordinated Indebtedness of Parent or the U.S.
Borrower (together with any Permitted Subordinated Refinancing
Indebtedness incurred to refinance such Indebtedness) in an aggregate
principal amount of up to $100,000,000 at any time outstanding, provided
that such Indebtedness shall (v) be subject to subordination provisions
that, in the reasonable judgment of the U.S. Administrative Agent, are no
less favorable to the Lenders than the subordination provisions of the
Senior Subordinated Notes, (w) be subject to no covenant more restrictive
in any material respect than those contained in the Senior Subordinated
Notes Indenture, (x) provide for no principal
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payments (including any sinking fund therefore) earlier than the 91st day
after the Tranche B Maturity Date, (y) accrue interest at a rate
determined in good faith by the Board of Directors of Parent to be a
market rate of interest for such other subordinated Indebtedness at the
time of issuance thereof and (z) be reasonably satisfactory in all other
respects to the U.S. Administrative Agent, and (B) any Permitted
Subordinated Refinancing Debt with respect to such other subordinated
Indebtedness, provided that at the time of the incurrence of such
subordinated Indebtedness or Permitted Subordinated Refinancing Debt with
respect to such other subordinated Indebtedness and after giving effect to
the incurrence thereof, no Default or Event of Default has occurred and is
continuing;
(xi) Indebtedness representing the obligations of Parent to make
payments in connection with the cancelation or repurchase of common stock
of officers, employees and directors of Parent, the Borrowers and the
Subsidiaries to the extent permitted by Section 6.08, provided that (A)
the aggregate principal amount of Indebtedness permitted by this clause
(xi) shall not exceed $5,000,000 at any time outstanding and (B) such
Indebtedness shall be subordinated to the Obligations on a basis no less
favorable to the Lenders than the subordination provisions of the Senior
Subordinated Notes;
(xii) Indebtedness arising under Capital Leases entered into in
connection with any sale and lease-back transaction permitted under
Section 6.06 in an aggregate amount not to exceed at any time $75,000,000
less the aggregate amount of Indebtedness outstanding at such time
pursuant to Section 6.01(v);
(xiii) Indebtedness of the Borrowers or any Subsidiary in connection
with any Permitted Acquisition in respect of customary "earn-out"
provisions or other similar deferred purchase price obligations, in each
case on terms substantially similar to those outstanding on the date
hereof, in an aggregate amount not to exceed $50,000,000 at any time
outstanding; and
(xiv) Guarantees by the U.S. Borrower of loans to officers,
directors and employees of the U.S. Borrower from PNC Bank for the purpose
of purchasing capital stock of the U.S. Borrower; provided, however, that
any Guarantees pursuant to this clause (xiv) shall be subject to Section
6.04(v).
(b) Neither Parent nor the Borrowers will, nor will they permit any
Subsidiary to, issue any preferred stock except for (i) preferred stock (A) all
dividends in respect of which are to be paid (and all other payments in respect
of which are to be made) in additional shares of such preferred stock, in lieu
of cash, until June 5, 2006, (B) that is not subject to redemption prior to June
5, 2006, other than redemption at the option of the issuer of such preferred
stock, (C) that is, upon any such redemption, subject to subordination
provisions that, in the reasonable judgment of the U.S. Administrative Agent,
are no less favorable to the Borrowers or the Lenders than the subordination
provisions of the Senior Subordinated Notes, (D) that contains no covenants and
(E) the aggregate liquidation preference of which shall at no time exceed the
difference between (x) $100,000,000 and (y) the aggregate principal amount of
any subordinated Indebtedness issued as permitted by Section 6.01(a)(x) and
outstanding at such time or (ii) preferred stock (A) issued by Parent in
exchange for Class A Common Stock, (B) all dividends in respect of which are to
be paid (and all other payments in respect of which are to be made) in
additional shares of such preferred stock, in lieu of cash, (C) that is not
subject to redemption other than redemption at the option of Parent, (D) that
is, upon any such redemption, subject to subordination provisions that, in the
reasonable judgment of the U.S. Administrative Agent, are no less favorable to
the Borrowers or the Lenders than the subordination provisions of the Senior
Subordinated Notes and (E) that contains no covenants.
(c) Except as expressly permitted under Section 6.08, neither Parent
nor the Borrowers will, nor will they permit any Subsidiary to, be or become
liable in respect of any obligation (contingent or otherwise) to purchase,
redeem, retire, acquire or make any other payment in respect of any shares of
capital stock of Parent, the Borrowers or any Subsidiary or any option, warrant
or other right to acquire any such shares of capital stock except for
obligations pursuant to the Recapitalization Agreement.
SECTION 6.02. Liens. Parent and the Borrowers will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter
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acquired by it, or assign or sell any income or revenues (including accounts
receivable) or rights in respect of any thereof, except:
(a) Liens created under the Loan Documents;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of the Borrowers or any
Subsidiary existing on the date hereof and set forth in Schedule 6.02,
provided that (i) such Lien shall not apply to any other property or asset
of Parent, the Borrowers or any Subsidiary and (ii) such Lien shall secure
only those obligations that it secures on the date hereof and extensions,
renewals and replacements thereof that do not increase the outstanding
principal amount thereof;
(d) any Lien existing on any property or asset prior to the
acquisition thereof by Parent, the Borrowers or any Subsidiary or existing
on any property or asset of any Person that becomes a Subsidiary after the
date hereof prior to the time such Person becomes a Subsidiary, provided
that (A) such Lien is not created in contemplation of or in connection
with such acquisition or such Person becoming a Subsidiary, as the case
may be, (B) such Lien shall not apply to any other property or assets of
Parent, the Borrowers or any Subsidiary and (C) such Lien shall secure
only those obligations that it secures on the date of such acquisition or
the date such Person becomes a Subsidiary, as the case may be, and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;
(e) Liens on fixed or capital assets acquired, constructed or
improved by the Borrowers or any Subsidiary, provided that (A) such
security interests secure Indebtedness permitted by clause (v) of Section
6.01(a), (B) such security interests and the Indebtedness secured thereby
are incurred prior to or within 90 days after such acquisition or the
completion of such construction or improvement, (C) the Indebtedness
secured thereby does not exceed 75% of the cost of acquiring, constructing
or improving such fixed or capital assets and (D) such security interests
shall not apply to any other property or assets of Parent, the Borrowers
or any Subsidiary;
(f) Liens arising from UCC financing statements regarding leases
permitted by this Agreement with respect to property subject to such
leases;
(g) Liens imposed pursuant to Environmental Laws or ERISA to the
extent not in violation of any of the representations, warranties or
covenants in respect of Environmental Laws or ERISA made by Parent or the
Borrowers in this Agreement;
(h) "Permitted Encumbrances" under and as such term or its
equivalent is defined in the respective Mortgages;
(i) Liens (other than those permitted by paragraphs (a) through (h)
above) securing Indebtedness permitted hereunder in an aggregate amount
not exceeding $35,000,000 at any time outstanding; and
(j) Liens on Receivables and Related Property sold, financed,
pledged or otherwise transferred in connection with any Permitted
Receivables Financing.
SECTION 6.03. Fundamental Changes. (a) Parent and the Borrowers will
not, and will not permit any Subsidiary to, merge into or consolidate with any
other Person, or permit any other Person to merge into or consolidate with it,
or liquidate or dissolve, except that, if at the time thereof and immediately
after giving effect thereto no Default shall have occurred and be continuing (i)
any Subsidiary (other than the Receivables Subsidiary) may merge into the U.S.
Borrower or any Domestic Subsidiary (other than the Receivables Subsidiary) in a
transaction in which the U.S. Borrower or such Domestic Subsidiary is the
surviving corporation, (ii) any Canadian Borrower Subsidiary or Foreign
Subsidiary may merge into the Canadian Borrower or any Canadian Borrower
Subsidiary in a transaction in which the Canadian Borrower or such Canadian
Borrower Subsidiary is the surviving entity, (iii) any Foreign Subsidiary may
merge into any other Foreign Subsidiary and (iv) any Subsidiary may liquidate or
dissolve if the U.S. Borrower determines in good faith that such liquidation or
dissolution is in the best interests of the U.S. Borrower and is not materially
disadvantageous to the Lenders, provided that any such merger involving a Person
that is not a wholly owned Subsidiary immediately prior to such merger shall not
be permitted unless also permitted by Section 6.04.
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(b) The Borrowers will not, and will not permit any of the
Subsidiaries (other than the Receivables Subsidiary) to, engage to any material
extent in any business other than businesses of the type conducted by the
Borrowers and the Subsidiaries on the date of execution of this Agreement and
businesses reasonably related thereto.
(c) Parent will not engage in any business or activity other than
the ownership of all the outstanding shares of capital stock of the U.S.
Borrower, actions contemplated by the Recapitalization Agreement and the Loan
Documents, activities reasonably related to those being conducted on the Closing
Date and activities incidental thereto. Parent will not own or acquire any
assets (other than shares of capital stock of the U.S. Borrower, any personal
property owned by Parent on the Closing Date, cash and Permitted Investments) or
incur any liabilities (other than liabilities under the Recapitalization
Agreement, the Loan Documents, liabilities existing on the Closing Date,
liabilities imposed by law, including tax liabilities, and other liabilities
incidental to its existence and permitted business and activities).
(d) The Receivables Subsidiary will not engage in any business other
than the purchase and sale or other transfer of Receivables (or participation
interests therein) in connection with any Permitted Receivables Financing,
together with activities directly related thereto.
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions. Parent and the Borrowers will not, and will not permit any of the
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger
with any Person that was not a wholly owned Subsidiary prior to such merger) any
capital stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, Guarantee any obligations of, or make
or permit to exist any investment or any other interest in, any other Person, or
purchase or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person constituting a business unit, except:
(a) pursuant to the Recapitalization Agreement;
(b) Permitted Acquisitions;
(c) the U.S. Borrower and its subsidiaries may acquire and hold
receivables owing to them, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms
(including the dating of receivables and extensions of payment in the ordinary
course of business consistent with past practices) of the U.S. Borrower or such
subsidiary;
(d) Permitted Investments;
(e) investments existing on the date hereof and set forth on
Schedule 6.04, to the extent such investments would not be permitted under any
other clause of this Section;
(f) investments by the U.S. Borrower in the capital stock of the
Canadian Borrower and the Subsidiaries (other than the Receivables Subsidiary),
provided that (i) any such shares of capital stock shall be pledged pursuant to
the U.S. Pledge Agreement (subject to the limitations applicable to common stock
of a Foreign Subsidiary referred to in Section 5.12), (ii) the amount of
investments by the U.S. Borrower and any Domestic Subsidiaries in the Canadian
Borrower and the Canadian Borrower Subsidiaries shall not exceed in the
aggregate at any time outstanding an amount equal to $50,000,000 minus the
amount of any investments made pursuant to Section 6.04(g)(ii), (h)(i) and
(n)(i) and (iii) the amount of investments by the U.S. Borrower in the Foreign
Subsidiaries or any Joint Venture shall not exceed in the aggregate at any time
outstanding an amount equal to the lesser at such time of (A) $25,000,000 minus
the amount of any investments made pursuant to Section 6.04(g)(iii) and (n)(ii)
and (B) $60,000,000 minus the amount of any investments made pursuant to Section
6.04(g)(iii), (h)(ii) and (n)(ii);
(g) loans or advances (i) made by the U.S. Borrower to any Domestic
Subsidiary (other than the Receivables Subsidiary), (ii) made by the U.S.
Borrower to the Canadian Borrower or any Canadian Borrower Subsidiary in an
aggregate amount not to exceed at any time outstanding an amount equal to
$50,000,000 minus the amount of any investments made pursuant to Section
6.04(f)(ii), (h)(i) and (n)(i), (iii) made by the U.S. Borrower to any Foreign
Subsidiary or any Joint Venture in an aggregate amount not to exceed at any time
outstanding an amount equal to the lesser at such time of (A) $25,000,000 minus
the amount of any investments made pursuant to Section 6.04(f)(iii) and (n)(ii)
and (B) $60,000,000 minus the amount of any investments made pursuant to Section
6.04(f)(iii), (h)(ii) and (n)(ii), and (iv) made by the Canadian Borrower to the
U.S. Borrower, the Canadian Borrower Subsidiaries or any Domestic Subsidiary
74
(other than the Receivables Subsidiary), provided that any such loans and
advances made by a Loan Party shall be evidenced by a promissory note pledged
pursuant to the U.S. Pledge Agreement;
(h) Guarantees constituting Indebtedness permitted by Section 6.01
(other than Section 6.01(xiv)), provided that Guarantees (i) made by the U.S.
Borrower and any Domestic Subsidiaries of Indebtedness of the Canadian Borrower
or any Canadian Borrower Subsidiary shall not exceed at any time outstanding an
amount equal to $50,000,000 minus the amount of any investments made pursuant to
Section 6.04(f)(ii), (g)(ii) and (n)(i) and (ii) made by the U.S. Borrower and
any Domestic Subsidiaries of Indebtedness of the Foreign Subsidiaries or any
Joint Venture shall not exceed at any time outstanding an amount equal to the
lesser at such time of (A) $35,000,000 and (B) $60,000,000 minus the amount of
any investment made pursuant to Section 6.04(f)(iii), (g)(iii) and (n)(ii);
(i) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;
(j) loans and advances to officers, directors or employees in the
ordinary course of business, provided that such loans and advances shall not
exceed in the aggregate at any time outstanding an amount equal to $20,000,000
minus the amount of any investment made pursuant to Section 6.04(v);
(k) investments otherwise permitted by Section 6.03(a) and Section
6.07;
(l) acquisitions of property, plant and equipment that constitute a
business unit and are Capital Expenditures otherwise permitted by Section 6.13;
(m) investments in any Subsidiary with proceeds of dividends paid in
accordance with Section 6.08(a)(iv) to the extent such investments are used by
such Subsidiary to discharge liabilities of Parent, either of the Borrowers or
such Subsidiary otherwise permitted to be discharged under this Agreement;
(n) investments by Parent in the Borrowers or any Subsidiary,
provided that the aggregate amount of such investments to (i) the Canadian
Borrower and the Canadian Borrower Subsidiaries shall not exceed at any time
outstanding an amount equal to $50,000,000 minus the amount of any investments
made pursuant to Section 6.04(f)(ii), (h)(i) and (g)(ii) and (ii) to the Foreign
Subsidiaries or any Joint Venture shall not exceed at any time outstanding an
amount equal to the lesser at such time of (A) $25,000,000 minus the amount of
any investments made pursuant to Section 6.04(f)(iii) or (g)(iii) and (B)
$60,000,000 minus the amount of any investments made pursuant to Section
6.04(f)(iii), (g)(iii) and (h)(ii);
(o) trade credit extended to customers of the Borrowers in the
ordinary course of business;
(p) investments (in addition to investments otherwise permitted by
this Section) in an aggregate amount not to exceed $25,000,000 at any time
outstanding;
(q) investments by the Borrowers or any Subsidiary in (i) the
capital stock of the Receivables Subsidiary and (ii) other interests in the
Receivables Subsidiary, in each case to the extent determined by the Borrowers
in their judgment to be reasonably necessary in connection with or required by
the terms of the Permitted Receivables Financing;
(r) investments in the Fife LLC in connection with the Fife
Transaction;
(s) investments of any Person existing at the time such Person
becomes a Subsidiary or at the time such Person merges or consolidates with
either of the Borrowers or any of the Subsidiaries, in either case in compliance
with the terms of this Agreement, provided that such investments were not made
by such Person in connection with, or in anticipation or contemplation of, such
Person becoming a Subsidiary or such merger or consolidation;
(t) loans to the Receivables Subsidiary evidenced by any
subordinated notes issued to the U.S. Borrower or any Subsidiary under the U.S.
Receivables Sale Agreement or any subordinated notes issued to the Canadian
Borrower or any Subsidiary under the Canadian Receivables Sale Agreement;
(u) interests acquired or retained by the Receivables Subsidiary in
the trust created under the Receivables Supplemental Pooling Agreement; and
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(v) Guarantees constituting Indebtedness pursuant to Section
6.01(xiv), provided that such Guarantees shall not be given with respect to
Indebtedness that exceeds in the aggregate at any time outstanding $20,000,000
minus the amount of any investment pursuant to Section 6.04(j).
SECTION 6.05. Asset Sales. Parent and the Borrowers will not, and
will not permit any of the Subsidiaries to, sell, transfer, lease or otherwise
dispose of any asset, including any capital stock, nor will Parent or the U.S.
Borrower permit the U.S. Borrower, the Canadian Borrower or any of the
Subsidiaries to issue any additional shares of its capital stock or other
ownership interest in the U.S. Borrower, the Canadian Borrower or such
Subsidiary, as the case may be, except:
(a) sales or other dispositions of inventory, used or surplus
equipment and Permitted Investments in the ordinary course of business;
(b) sales, transfers and dispositions to the U.S. Borrower, the
Canadian Borrower or a Subsidiary (other than, except as set forth in
clause (e), the Receivables Subsidiary), provided that any such sales,
transfers or dispositions from the U.S. Borrower or any Domestic
Subsidiary to the Canadian Borrower, any Canadian Borrower Subsidiary or
any Foreign Subsidiary shall be made in compliance with Section 6.09 and
shall not exceed $5,000,000 during the term of this Agreement;
(c) sales, transfers and dispositions of assets (other than capital
stock of the Borrowers or any Subsidiary) that are not permitted by any
other clause of this Section, provided that the aggregate fair market
value of all assets sold, transferred or otherwise disposed of in reliance
upon this clause (c) shall not exceed $5,000,000 during any fiscal year of
the U.S. Borrower or $20,000,000 in the aggregate during the term of this
Agreement;
(d) pursuant to a transaction permitted by Section 6.03(a);
(e) the Borrowers and the Subsidiaries may sell or discount, in each
case without recourse (other than customary representations, warranties
and retained interests), Receivables to the Receivables Subsidiary, and
the Receivables Subsidiary may sell Receivables and Related Property or an
undivided interest therein to any other Person, pursuant to any Permitted
Receivables Financing, and convert or exchange Receivables and Related
Property into or for notes receivable in connection with the compromise or
collection thereof;
(f) sales of assets in connection with a sale and lease-back
transaction permitted by Section 6.06; and
(g) sales of assets to Fife LLC in connection with the Fife
Transaction.
provided that all sales, transfers, leases and other dispositions permitted
under paragraphs (a), (b) and (c) above shall be made for fair market value and
for cash consideration equal to at least 75% of such fair market value.
SECTION 6.06. Sale and Lease-Back Transactions. Parent and the
Borrowers will not, and will not permit any Subsidiary to, enter into any
arrangement, directly or indirectly, with any Person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred, provided that the Borrowers
and the Subsidiaries (other than the Receivables Subsidiary) may enter into any
such transaction with respect to assets having a fair market value not in excess
of $75,000,000 in the aggregate during the term of this Agreement.
SECTION 6.07. Hedging Agreements. Parent and the Borrowers will not,
and will not permit any Subsidiary to, enter into any Hedging Agreement, other
than (a) Hedging Agreements entered into in the ordinary course of business to
hedge or mitigate risks to which the Borrowers or the Subsidiaries are exposed
in the conduct of their business or the management of their liabilities and (b)
Hedging Agreements that are reasonably acceptable to the U.S. Administrative
Agent and are entered into in connection with any Permitted Receivables
Financing.
SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness.
(a) Parent and the Borrowers will not, and will not permit any Subsidiary to,
declare or make, or agree to declare or make, directly or indirectly, any
Restricted Payment, except (i) Parent may declare and pay dividends with respect
to its capital stock payable solely in additional shares of its common stock or
options, warrants or other rights to
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purchase common stock, (ii) the Subsidiaries and the Canadian Borrower may
declare and pay dividends ratably with respect to their capital stock, (iii)
Parent may make payments to officers, employees and directors of Parent, the
Borrowers and the Subsidiaries (or to the respective estate or permitted
transferee under such plans or agreements of any such officer, employee or
director) in connection with the cancelation or repurchase of common stock (or
options, warrants or other rights to purchase common stock) previously issued to
such officers, employees and directors pursuant to and in accordance with stock
option plans or other benefit plans or compensation agreements (or agreements
entered into in connection therewith) entered into in the ordinary course of
business for officers, employees and directors of Parent, the Borrowers and the
Subsidiaries, either in the form of cash paid to repurchase such common stock or
cash paid with respect to Indebtedness previously issued as permitted by Section
6.01(a)(xi) to repurchase such common stock, provided that all payments pursuant
to this clause (iii) do not exceed (A) during any fiscal year, an aggregate
amount equal to $5,000,000 plus the cash proceeds to Parent of any sale or
resale of common stock during such fiscal year to other or new employees,
officers or directors of Parent, the Borrowers or any Subsidiary or (B) during
the term of this Agreement, an aggregate amount equal to $20,000,000 plus the
cash proceeds to Parent of any sale or resale of common stock during the term of
this Agreement to other or new employees, officers or directors of Parent, the
Borrowers or any Subsidiary, (iv) the U.S. Borrower may pay dividends to Parent
at such times and in such amounts, not exceeding $1,000,000 during any fiscal
year, as shall be necessary to permit Parent to discharge liabilities of Parent,
the Borrowers and the Subsidiaries otherwise permitted to be discharged under
this Agreement, (v) the Borrowers and the Subsidiaries may make Restricted
Payments to Parent in order to pay Parent's Taxes, (vi) the Borrowers and the
Subsidiaries may make Restricted Payments to Parent in order for Parent (A) to
satisfy obligations (other than in respect of Transaction Costs) incurred
pursuant to transactions permitted under Section 6.09(d), (e) or (f) and (B) to
pay Transaction Costs up to $60,000,000, consisting of transaction advisory
fees, fees to Cypress and its Affiliates, consulting fees and other
miscellaneous fees and expenses and (vii) the Borrowers and the Subsidiaries may
make Restricted Payments to Parent at any time after the fifth anniversary of
the Closing Date in order to enable Parent to pay cash interest on the Senior
Discount Notes in accordance with their terms, provided that (A) at the time of
any such Restricted Payment no Default or Event of Default shall have occurred
and be continuing, (B) after giving effect to any such Restricted Payment,
Parent and the Borrowers shall be in compliance, on a pro forma basis, with the
covenants set forth in Sections 6.14, 6.15 and 6.16 and (C) such Restricted
Payments shall not exceed in any quarterly period the amounts due with respect
to the Senior Discount Notes for such quarter.
(b) Parent and the Borrowers will not, and will not permit any
Subsidiary to, make or agree to pay or make, directly or indirectly, any payment
or other distribution (whether in cash, securities or other property) of or in
respect of principal of or interest on any Indebtedness, or any payment or other
dis tribution (whether in cash, securities or other property), including any
sinking fund or similar deposit, on account of the purchase, redemption,
retirement, acquisition, cancelation or termination of any Indebtedness, except:
(i) payment of Indebtedness created under the Loan Documents;
(ii) payment of regularly scheduled interest and principal payments
as and when due in respect of any Indebtedness;
(iii) refinancings of Indebtedness to the extent permitted by
Section 6.01; and
(iv) payments in respect of any Permitted Receivables Financing.
SECTION 6.09. Transactions with Affiliates. Other than the
Transactions, Parent and the Borrowers will not, and will not permit any
Subsidiary to, sell, lease or otherwise transfer any property or assets to, or
purchase, lease or otherwise acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except (a)
transactions in the ordinary course of business that do not involve Parent or
Investor and are at prices and on terms and conditions not less favorable to the
Borrowers or any Subsidiary than could be obtained on an arm's-length basis from
unrelated third parties, (b) transactions between or among the Borrowers and the
Subsidiaries not involving any other Affiliate, (c) any Restricted Payment
permitted by Section 6.08, (d) the payment by Parent or the U.S. Borrower of
fees, expenses or other amounts to Cypress and its Affiliates in connection with
the Transactions (provided that the Transaction Costs shall not exceed
$60,000,000) and payments by Parent, the Borrowers and the Subsidiaries to
Cypress and its Affiliates made pursuant to any financial, advisory, consulting,
financing, underwriting or placement agreement, or in respect of other
investment banking activities, in each case to the extent that the Board of
Directors of such Person has determined in good faith that such amounts are
reasonable in light of current market practices with respect to payment for such
services, (e) employment and compensation arrangements entered into in the
ordinary course of business with officers of Parent, the Borrowers and the
Subsidiaries, (f) customary fees paid to members of the Board of Directors of
Parent, the Borrowers and the Subsidiaries for their services as directors and
(g) any Permitted Receivables Financing.
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SECTION 6.10. Other Indebtedness. Parent and the Borrowers will not
permit any waiver, supplement, modification, amendment, termination or release
of any indenture, instrument or agreement pursuant to which any Material
Indebtedness of Parent, the Borrowers or any Subsidiary is outstanding to the
extent that any such waiver, supplement, modification, amendment, termination or
release would be adverse to the Lenders.
SECTION 6.11. Restrictive Agreements. Parent and the Borrowers will
not, and will not permit any Subsidiary to, directly or indirectly, enter into,
incur or permit to exist any agreement or other arrangement that prohibits,
restricts or imposes any condition upon (a) the ability of Parent, the Borrowers
or any Subsidiary (other than the Receivables Subsidiary) to create, incur or
permit to exist any Lien upon any of its property or assets to secure the
Obligations, or (b) the ability of the Canadian Borrower or any Subsidiary to
pay dividends or other distributions with respect to any shares of its capital
stock or to make or repay loans or advances to the U.S. Borrower, the Canadian
Borrower, any Domestic Subsidiary or any Canadian Borrower Subsidiary or to
Guarantee Indebtedness of the U.S. Borrower, the Canadian Borrower, any Domestic
Subsidiary or any Canadian Borrower Subsidiary, provided that (i) the foregoing
shall not apply to restrictions and conditions imposed by law or by any Loan
Document, (ii) the foregoing shall not apply to restrictions and conditions
existing on the date hereof identified on Schedule 6.11 (but shall apply to any
extension or renewal of, or any amendment or modification expanding the scope
of, any such restriction or condition), (iii) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating to the
sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (iv) clause (a) of this Section shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness, (v) clause (a)
of this Section shall not apply to customary provisions in leases restricting
the assignment thereof and (vi) the foregoing shall not apply to restrictions
and conditions imposed by any Permitted Receivables Financing.
SECTION 6.12. Amendment of Material Documents. (a) Parent and the
Borrowers will not, and will not permit any Subsidiary to, amend, modify or
waive any of its rights under (i) its certificate of incorporation, by-laws or
other organizational documents, (ii) the Recapitalization Agreement, (iii) the
Senior Subordinated Note Indenture, (iv) the Senior Discount Note Indenture or
(v) documents in respect of any Permitted Subordinated Refinancing Debt, if any,
to the extent that such amendment, modification or waiver would be adverse to
the Lenders.
(b) Parent and the Borrowers will not, and will not permit any
Subsidiary to, amend, modify or waive any of its material rights under (i) the
Receivables Sale Agreements, (ii) the Receivables Pooling Agreement, (iii) the
Receivables Supplemental Pooling Agreement or (iv) any other Permitted
Receivables Financing, if any, to the extent that such amendment, modification
or waiver would be materially adverse to the Lenders.
SECTION 6.13. Capital Expenditures. (a) Parent and the U.S. Borrower
will not permit the aggregate amount of Capital Expenditures made by Parent, the
Borrowers and the Subsidiaries in any fiscal year to exceed the amount set forth
below opposite such year, provided that for any period set forth below, the
dates constituting the beginning and end of such period shall refer to the first
and last day of the fiscal year of Parent beginning and ending, respectively, on
or about such dates:
Fiscal Year Amount
----------- ------
January 1, 1998--December 31, 1998 $25,000,000
January 1, 1999--December 31, 1999 $25,000,000
January 1, 2000--December 31, 2000 $30,000,000
January 1, 2001--December 31, 2001 $30,000,000
January 1, 2002--December 31, 2002 $35,000,000
January 1, 2003--December 31, 2003 $35,000,000
January 1, 2004--December 31, 2004 $35,000,000
January 1, 2005--December 31, 2005 $35,000,000
January 1, 2006--Tranche B Maturity Date $35,000,000
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(b) Notwithstanding the foregoing, in the event that the amount of
Capital Expenditures permitted to be made pursuant to clause (a) in any fiscal
year is greater than the amount of Capital Expenditures made during such fiscal
year, 50% of such excess may be carried forward and utilized in the immediately
succeeding fiscal year (it being understood and agreed that (i) no amount may be
carried forward beyond the year immediately succeeding the fiscal year in which
it arose and (ii) no portion of the carry-forward amount available in any fiscal
year may be used until the entire amount of Capital Expenditures permitted to be
made in such fiscal year (without giving effect to such carry-forward amount)
shall have been made).
SECTION 6.14. Leverage Ratio. Parent and the U.S. Borrower will not
permit the Leverage Ratio as of the end of any four-fiscal-quarter period ending
during any period set forth below to be in excess of the ratio set forth below
opposite such period, provided that for any period set forth below, the dates
constituting the beginning and end of such period shall refer to the last day of
the fiscal period of Parent ending on or about such dates:
Period Ratio
------ -----
January 1, 1998--December 31, 1998 5.00 to 1.00
January 1, 1999--December 31, 1999 4.50 to 1.00
January 1, 2000--December 31, 2000 3.75 to 1.00
January 1, 2001--December 31, 2001 3.00 to 1.00
January 1, 2002--December 31, 2002 2.50 to 1.00
January 1, 2003--December 31, 2003 2.25 to 1.00
January 1, 2004--December 31, 2004 2.25 to 1.00
January 1, 2005--December 31, 2005 2.25 to 1.00
January 1, 2006--Tranche B Maturity Date 2.25 to 1.00
SECTION 6.15. Consolidated Net Cash Interest Expense Coverage Ratio.
Parent and the U.S. Borrower will not permit the ratio of (a) Consolidated
EBITDA to (b) Consolidated Net Cash Interest Expense for any four-fiscal-quarter
period ending on any date or during any period set forth below to be less than
the ratio set forth below opposite such period, provided that for any period set
forth below, the dates constituting the beginning and end of such period shall
refer to the first and last day of the fiscal period of Parent ending on or
about such dates:
Period Ratio
------ -----
January 1, 1998--December 31, 1998 1.65 to 1.00
January 1, 1999--December 31, 1999 1.80 to 1.00
January 1, 2000--December 31, 2000 2.00 to 1.00
January 1, 2001--December 31, 2001 2.25 to 1.00
January 1, 2002--December 31, 2002 2.50 to 1.00
January 1, 2003--December 31, 2003 2.50 to 1.00
January 1, 2004--December 31, 2004 2.75 to 1.00
January 1, 2005--December 31, 2005 2.75 to 1.00
January 1, 2006--Tranche B Maturity Date 2.75 to 1.00
SECTION 6.16. Working Capital Covenant. Parent and the U.S. Borrower
will not permit the Working Capital Ratio to be less than 1.20 to 1.00 at any
time.
SECTION 6.17. Additional Subsidiaries. Parent and the Borrowers will
not, and will not permit any Subsidiary to, create any additional Subsidiary
(other than the Receivables Subsidiary) unless such Subsidiary is a Loan Party.
SECTION 6.18. Fiscal Year. Parent and the Borrowers will not, and
will not permit the Subsidiaries to, change the financial reporting convention
by which Parent, the Borrowers and the Subsidiaries determine the dates on which
their fiscal years and fiscal quarters will end; provided, however, that Parent,
the
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Borrowers and the Subsidiaries may, upon 30 days' prior written notice to the
U.S. Administrative Agent, change the financial reporting convention so long as
(a) such change applies to Parent, the Borrowers and all the Subsidiaries and
(b) such financial reporting convention specified above is reasonably acceptable
to the U.S. Administrative Agent, in which case Parent and the U.S.
Administrative Agent will, and are hereby authorized by the Lenders to, make any
adjustments to this Agreement that are necessary in order to reflect such change
in financial reporting convention.
ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall occur:
(a) either of the Borrowers shall fail to pay any principal of any
Loan or any reimbursement obligation in respect of any LC Disbursement
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise;
(b) either of the Borrowers shall fail to pay any interest on any
Loan or any fee or any other amount (other than an amount referred to in
clause (a) of this Article) payable under this Agreement or any other Loan
Document, when and as the same shall become due and payable, and such
failure shall continue unremedied for a period of five days;
(c) any representation or warranty made or deemed made by or on
behalf of Parent, the Borrowers or any Subsidiary in or in connection with
any Loan Document or any amendment or modification thereof or waiver
thereunder, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document or
any amendment or modification thereof or waiver thereunder, shall prove to
have been incorrect in any material respect when made or deemed made;
(d) Parent or either of the Borrowers shall fail to observe or
perform any covenant, condition or agreement contained in Section 5.02,
5.04 (with respect to the existence of Parent or either of the Borrowers),
5.11 or in Article VI;
(e) any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document (other than those
specified in clause (a), (b) or (d) of this Article), and such failure
shall continue unremedied for a period of 30 days after notice thereof
from the U.S. Administrative Agent or the Canadian Administrative Agent,
as applicable, to the U.S. Borrower or the Canadian Borrower, as
applicable (which notice will be given at the request of any Lender);
(f) Parent, either of the Borrowers or any Subsidiary shall fail to
make any payment (whether of principal or interest and regardless of
amount) in respect of any Material Indebtedness (subject to relevant grace
periods therein), when and as the same shall become due and payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become
due (after any applicable grace periods therein), or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its
scheduled maturity, provided that this clause (g) shall not apply to
secured Indebtedness that becomes due as a result of the voluntary sale or
transfer of the property or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of any of Parent, the Borrowers or any Subsidiary or its
debts, or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any of
Parent, the Borrowers or any Subsidiary or for a substantial part of its
assets, and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of
the foregoing shall be entered;
(i) Parent, either of the Borrowers or any Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal,
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state or foreign bankruptcy, insolvency, receivership or similar law now
or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition
described in clause (h) of this Article, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for Parent, either of the Borrowers or any Subsidiary
or for a substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing;
(j) Parent, either of the Borrowers or any Subsidiary shall admit in
writing its inability or fail generally to pay its debts as they become
due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $20,000,000 shall be rendered against Parent, either
of the Borrowers or any Subsidiary or any combination thereof and the same
shall remain undischarged for a period of 45 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor to attach or levy upon any assets of Parent,
either of the Borrowers or any Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in liability of
Parent, either of the Borrowers or any Subsidiary in an aggregate amount
exceeding (i) $10,000,000 in any year or (ii) $20,000,000 for all periods;
(m) (i) any Loan Document (other than any U.S. $ Letter of Credit or
C $ Letter of Credit) shall, at any time, cease to be in full force and
effect (unless released as permitted under this Agreement) or shall be
declared null and void, or the validity or enforceability in any respect
thereof shall be contested by any Loan Party or (ii) any Lien purported to
be created under any of the Security Documents shall cease to be, or shall
be asserted by any Loan Party not to be, a valid and perfected Lien on
Collateral with a fair market value of $1,000,000 or more, with the
priority required by the applicable Security Document, except (a) as a
result of the sale or other disposition of the applicable Collateral in a
transaction permitted under the Loan Documents or (B) as a result of the
U.S. Administrative Agent's failure to maintain possession of any stock
certificates, promissory notes or other instruments delivered to it under
the U.S. Pledge Agreement or to file any continuation statements with
respect to the Collateral; or
(n) a Change in Control shall occur; or
(o) any default or other event shall have occurred under the
Receivables Sale Agreements, the Receivables Pooling Agreement, the
Receivables Supplemental Pooling Agreement or any other document governing
any Permitted Receivables Financing if the effect of such default or other
event is to cause the termination of any Permitted Receivables Financing;
then, and in every such event (other than an event with respect to Parent or
either of the Borrowers described in clause (h) or (i) of this Article), and at
any time thereafter during the continuance of such event, the U.S.
Administrative Agent or the Canadian Administrative Agent, as applicable, may,
and at the request of the Required Lenders shall, by notice to the applicable
Borrower take either or both of the following actions, at the same or different
times: (i) terminate the Commitments, and thereupon the Commitments shall
terminate immediately, and (ii) declare the Loans then outstanding to be due and
payable in whole (or in part, in which case any principal not so declared to be
due and payable may thereafter be declared to be due and payable), and thereupon
the principal of the Loans so declared to be due and payable, together with
accrued interest thereon and all fees and other obligations of the Borrowers
accrued hereunder, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrowers; and in case of any event with respect to Parent
or either of Borrowers described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall automatically become due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers.
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ARTICLE VIII
The Administrative Agents and the Collateral Agents
In order to expedite the transactions contemplated by this
Agreement, The Chase Manhattan Bank is hereby appointed to act as U.S.
Administrative Agent and U.S. Collateral Agent on behalf of the Term Lenders,
the U.S. $ Revolving Lenders, the Additional Revolving Lenders and the U.S.
Issuing Banks, and The Chase Manhattan Bank of Canada is hereby appointed to act
as Canadian Administrative Agent and Canadian Collateral Agent on behalf of the
C $ Revolving Lenders and the Canadian Issuing Banks (for purposes of this
Article VIII, the U.S. Administrative Agent, the Canadian Administrative Agent,
the U.S. Collateral Agent and the Canadian Collateral Agent are referred to
collectively as the "Agents"). The Canadian Collateral Agent hereby agrees to
act as the fonde de pouvoir (i.e., holder of the power of attorney) of the
Canadian Secured Parties to the extent necessary or desirable for the purposes
of creating, maintaining or enforcing any security interest created or
established or to be created or established under any of the Canadian Security
Documents including entering into the Canadian Security Documents and exercising
all or any of the rights, powers, trusts or duties conferred upon the Canadian
Collateral Agent therein or conferred upon the Canadian Collateral Agent
hereunder with respect to such security interest, and each Canadian Secured
Party by executing this Credit Agreement accepts the Canadian Collateral Agent
as the fonde de pouvoir of such Canadian Secured Party for such purposes. Each
of the Lenders and Issuing Banks hereby irrevocably authorizes the Agents to
take such actions on its behalf and to exercise such powers as are delegated to
the Agents by the terms and provisions hereof and of the other Loan Documents,
together with such actions and powers as are reasonably incidental thereto.
The banks serving as Administrative Agents hereunder shall have the
same rights and powers in their capacity as a Lender as any other Lender and may
exercise the same as though they were not the Administrative Agents, and such
banks and their Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with Parent, either of the Borrowers, any
Subsidiary or other Affiliate thereof or Investor as if they were not the
Administrative Agents hereunder.
The Agents shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) the Agents shall not be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) the Agents shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated by the Loan Documents that the Agents are required to
exercise upon the receipt of a written request by the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 10.02), and (c) except as expressly set
forth in the Loan Documents, the Agents shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to
Parent, either of the Borrowers or any of the Subsidiaries that is communicated
to or obtained by such Agent or any of its Affiliates in any capacity. No Agent
shall be liable for any action taken or not taken by it with the consent or at
the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
10.02) or in the absence of its own gross negligence or wilful misconduct. No
Agent shall be deemed to have knowledge of any Default unless and until written
notice thereof is given to such Agent by Parent, either of the Borrowers or a
Lender, and no Agent shall be responsible for or have any duty to ascertain or
inquire into (i) any statement, warranty or representation made in or in
connection with any Loan Document, (ii) the contents of any certificate, report
or other document delivered thereunder or in connection therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth in any Loan Document, (iv) the validity, enforceability,
effectiveness or genuineness of any Loan Document or any other agreement,
instrument or document or (v) the satisfaction of any condition set forth in
Article IV or elsewhere in any Loan Document, other than to confirm receipt of
items expressly required to be delivered to such Agent.
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. Each Agent may consult with legal counsel (who may be counsel for the
Borrowers), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.
Each Agent may perform any and all of its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by such
Agent. Each Agent and any such sub-agent may
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perform any and all of its duties and exercise its rights and powers through its
Related Parties. The exculpatory provisions of the preceding paragraphs shall
apply to any such sub-agent and to the Related Parties of each Agent and any
such sub-agent, and shall apply to their respective activities in connection
with the syndication of the credit facilities provided for herein as well as
activities as Agent.
Subject to the appointment and acceptance of a successor Agent as
provided in this paragraph, any Agent may resign at any time by notifying the
Lenders, the Issuing Banks, Parent and the Borrowers. Upon any such resignation,
the Required Lenders shall have the right, in consultation with Parent and the
U.S. Borrower, to appoint a successor, provided that, in the case of the
resignation of the Canadian Administrative Agent or the Canadian Collateral
Agent, Lenders holding a majority of the C $ Revolving Loans shall have such
right in consultation with the Canadian Borrower. If no successor shall have
been so appointed by the Required Lenders (or the C $ Revolving Lenders, in the
case of the Canadian Administrative Agent or the Canadian Collateral Agent) and
shall have accepted such appointment within 30 days after the retiring Agent
gives notice of its resignation, then the retiring Agent may, on behalf of the
Lenders and the Issuing Banks, appoint a successor Agent that shall be a bank
with an office in New York, New York, or an Affiliate of any such bank (or in
the case of a successor to the Canadian Administrative Agent or the Canadian
Collateral Agent, a Canadian bank with an office in Toronto having a combined
capital and surplus of at least $500,000,000). Upon the acceptance of its
appointment as an Agent hereunder by a successor, such successor shall succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the applicable Borrower to a
successor Agent shall be the same as those payable to its predecessor unless
otherwise agreed between the applicable Borrower and such successor. After the
applicable Agent's resignation hereunder, the provisions of this Article and
Section 10.03 shall continue in effect for the benefit of such retiring Agent,
its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while it was acting as an Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agents or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agents or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document or related agreement or any document furnished hereunder
or thereunder.
ARTICLE IX
Collection Allocation Mechanism
SECTION 9.01. Implementation of CAM. (a) On the CAM Exchange Date,
(i) the Commitments shall automatically and without further act be terminated as
provided in Article VII and (ii) the Lenders shall automatically and without
further act (and without regard to the provisions of Section 10.04) be deemed to
have exchanged interests in the Credit Facilities such that in lieu of the
interest of each Lender in each Credit Facility in which it shall participate as
of such date (including such Lender's interest in the Designated Obligations of
each Loan Party in respect of each such Credit Facility), such Lender shall hold
an interest in every one of the Credit Facilities (including the Designated
Obligations of each Loan Party in respect of each such Credit Facility and each
LC Reserve Account established pursuant to Section 9.02 below), whether or not
such Lender shall previously have participated therein, equal to such Lender's
CAM Percentage thereof. Each Lender and each Loan Party hereby consents and
agrees to the CAM Exchange, and each Lender agrees that the CAM Exchange shall
be binding upon its successors and assigns and any person that acquires a
participation in its interests in any Credit Facility. Each Loan Party agrees
from time to time to execute and deliver to the U.S. Administrative Agent all
such Notes and other instruments and documents as the U.S. Administrative Agent
shall reasonably request to evidence and confirm the respective interests of the
Lenders after giving effect to the CAM Exchange, and each Lender agrees to
surrender any Notes originally received by it in connection with its Loans
hereunder to the U.S. Administrative Agent against delivery of new Notes
evidencing its interests in the Credit Facilities; provided, however, that the
failure of any Loan Party to execute or deliver or of any Lender to accept any
such Note, instrument or document shall not affect the validity or effectiveness
of the CAM Exchange.
(b) As a result of the CAM Exchange, upon and after the CAM Exchange
Date, each pay ment received by the Administrative Agents or the Collateral
Agents pursuant to any Loan Document in respect of the Designated Obligations,
and each distribution made by the Collateral Agents pursuant to any Security
Documents in respect of the Designated Obligations, shall be distributed to the
Lenders pro rata in accordance
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with their respective CAM Percentages. Any direct payment received by a Lender
upon or after the CAM Exchange Date, including by way of setoff, in respect of a
Designated Obligation shall be paid over to the U.S. Administrative Agent or the
Canadian Administrative Agent, as applicable, for distribution to the Lenders in
accordance herewith.
SECTION 9.02. Letters of Credit. (a) In the event that on the CAM
Exchange Date any U.S. $ Letter of Credit or C $ Letter of Credit shall be
outstanding and undrawn in whole or in part, or any amount drawn under a U.S. $
Letter of Credit or C $ Letter of Credit shall not have been reimbursed either
by the U.S. Borrower or the Canadian Borrower, as applicable, or with the
proceeds of a U.S. $ Revolving Borrowing or a C $ Revolving Borrowing, as
applicable, (i) each U.S. $ Revolving Lender shall promptly pay over to the U.S.
Administrative Agent, in immediately available funds, an amount equal to such
U.S. $ Revolving Lender's Applicable Percentage (as notified to such Lender by
the U.S. Administrative Agent) of such U.S. $ Letter of Credit undrawn face
amount or (to the extent it has not already done so) such U.S. $ Letter of
Credit unreimbursed drawing, together with interest thereon from the CAM
Exchange Date to the date on which such amount shall be paid to the U.S.
Administrative Agent at the rate that would be applicable at the time to an ABR
U.S. $ Revolving Loan in a principal amount equal to such amount, as the case
may be, and (ii) each C $ Revolving Lender shall promptly pay over to the
Canadian Administrative Agent (which amounts shall be promptly paid over to the
U.S. Administrative Agent), in immediately available funds, an amount equal to
such C $ Revolving Lender's Applicable Percentage of such C $ Letter of Credit
undrawn face amount or (to the extent it has not already done so) such C $
Letter of Credit unreimbursed drawing, as the case may be, together with
interest thereon from the CAM Exchange Date to the date on which such amount
shall be paid to the Canadian Administrative Agent at the rate that would be
applicable at the time to a Canadian Prime Rate C $ Revolving Loan in a
principal amount equal to such amount. The U.S. Administrative Agent shall
establish a separate account or accounts for each Lender (each, an "LC Reserve
Account") for the amounts received with respect to each such U.S. $ Letter of
Credit and C $ Letter of Credit pursuant to the preceding sentence. The U.S.
Administrative Agent shall deposit in each Lender's LC Reserve Account such
Lender's CAM Percentage of the amounts received from the U.S. $ Revolving
Lenders and the C $ Revolving Lenders as provided above. The U.S. Administrative
Agent shall have sole dominion and control over each LC Reserve Account, and the
amounts deposited in each LC Reserve Account shall be held in such LC Reserve
Account until withdrawn as provided in paragraph (b), (c), (d) or (e) below. The
U.S. Administrative Agent shall maintain records enabling it to determine the
amounts paid over to it and deposited in the LC Reserve Accounts in respect of
each U.S. $ Letter of Credit and C $ Letter of Credit and the amounts on deposit
in respect of each U.S. $ Letter of Credit and C $ Letter of Credit attributable
to each Lender's CAM Percentage. The amounts held in each Lender's LC Reserve
Account shall be held as a reserve against the U.S. $ LC Exposure and C $ LC
Exposure, shall be the property of such Lender, shall not constitute Loans to or
give rise to any claim of or against any Loan Party and shall not give rise to
any obligation on the part of any Borrower to pay interest to such Lender, it
being agreed that the reimbursement obligations in respect of U.S. $ Letters of
Credit and C $ Letters of Credit shall arise only at such times as drawings are
made thereunder, as provided in Sections 2.05 and 2.05A.
(b) In the event that after the CAM Exchange Date any drawing shall
be made in respect of a U.S. $ Letter of Credit or C $ Letter of Credit, the
U.S. Administrative Agent shall, at the request of the U.S. Issuing Bank or
Canadian Issuing Bank, as applicable, withdraw from the LC Reserve Account of
each Lender any amounts, up to the amount of such Lender's CAM Percentage of
such drawing, deposited in respect of such U.S. $ Letter of Credit or C $ Letter
of Credit and remaining on deposit and deliver such amounts to the U.S. Issuing
Bank or Canadian Issuing Bank, as applicable, in satisfaction of the
reimbursement obligations of the U.S. $ Revolving Lenders or C $ Revolving
Lenders under Sections 2.05(e) and 2.05A(e) (but not of the U.S. Borrower and
the Canadian Borrower under Sections 2.05(f) and 2.05A(f), respectively). In the
event any U.S. $ Revolving Lender or C $ Revolving Lender shall default on its
obligation to pay over any amount to the U.S. Administrative Agent in respect of
any U.S. $ Letter of Credit or C $ Letter of Credit as provided in this Section
9.02, the applicable U.S. Issuing Bank or Canadian Issuing Bank shall, in the
event of a drawing thereunder, have a claim against such U.S. $ Revolving Lender
or C $ Revolving Lender to the same extent as if such Lender had defaulted on
its obligations under Sections 2.05(e) and 2.05A(e), but shall have no claim
against any other Lender in respect of such defaulted amount, notwithstanding
the exchange of interests in the Borrowers' reimbursement obligations pursuant
to Section 9.01. Each other Lender shall have a claim against such defaulting
U.S. $ Revolving Lender or C $ Revolving Lender for any damages sustained by it
as a result of such default, including, in the event such U.S. $ Letter of
Credit or C $ Letter of Credit shall expire undrawn, its CAM Percentage of the
defaulted amount.
(c) In the event that after the CAM Exchange Date any U.S. $ Letter
of Credit or C $ Letter of Credit shall expire undrawn, the U.S. Administrative
Agent shall withdraw from the LC Reserve Account of each Lender the amount
remaining on deposit therein in respect of such Letter of Credit and distribute
such amount to such Lender.
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(d) With the prior written approval of the U.S. Administrative Agent
and the applicable U.S. Issuing Bank or Canadian Issuing Bank (not to be
unreasonably withheld), any Lender may withdraw the amount held in its LC
Reserve Account in respect of the undrawn amount of any U.S. $ Letter of Credit
or C $ Letter of Credit. Any Lender making such a withdrawal shall be
unconditionally obligated, in the event there shall subsequently be a drawing
under such U.S. $ Letter of Credit or C $ Letter of Credit, to pay over to the
U.S. Administrative Agent, for the account of the U.S. Issuing Bank or Canadian
Issuing Bank, as applicable, on demand, its CAM Percentage of such drawing.
(e) Pending the withdrawal by any Lender of any amounts from its LC
Reserve Account as contemplated by the above paragraphs, the U.S. Administrative
Agent will, at the direction of such Lender and subject to such rules as the
U.S. Administrative Agent may prescribe for the avoidance of inconvenience,
invest such amounts in Permitted Investments. Each Lender that has not withdrawn
its CAM Percentage of amounts in its LC Reserve Account as provided in paragraph
(d) above shall have the right, at intervals reasonably specified by the U.S.
Administrative Agent, to withdraw the earnings on investments so made by the
U.S. Administrative Agent with amounts in its LC Reserve Account and to retain
such earnings for its own account.
SECTION 9.03. Conversion. In the event the CAM Exchange Date shall
occur, Obligations owed by the Loan Parties denominated in Canadian Dollars
shall, automatically and with no further act required, be converted to
obligations of the same Loan Parties denominated in Dollars. Such conversion
shall be effected based upon the Spot Exchange Rate in effect with respect to
Canadian Dollars on the CAM Exchange Date. On and after any such conversion, all
amounts accruing and owed to any Lender in respect of its Obligations shall
accrue and be payable in Dollars at the rates otherwise applicable hereunder
(and, in the case of interest on Loans, at the default rate applicable to ABR
Loans hereunder). Notwithstanding the foregoing provisions of this Section 9.03,
any Lender may, by notice to the U.S. Borrower and the U.S. Administrative Agent
prior to the CAM Exchange Date, elect not to have the provisions of this Section
9.03 apply with respect to all Obligations owed to such Lender immediately
following the CAM Exchange Date, and, if such notice is given, all Obligations
owed to such Lender immediately following the CAM Exchange Date shall remain
designated in Canadian Dollars.
ARTICLE X
Miscellaneous
SECTION 10.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to Parent, the U.S. Borrower or the Canadian Borrower, to it
at CDW Holding Corporation c/o WESCO Distribution Inc. Commerce Court, 4
Station Square, Suite 700, Pittsburgh, PA 15219, Attention: Jeffrey B.
Kramp, Esq. (Telecopy No. (412) 454-2505);
(b) if to Investor, to it at Thor Acquisitions L.L.C., c/o The
Cypress Group, 65 East 55th Street, 19th Floor, New York, New York 10022,
Attention: James L. Singleton (Telecopy No. (212) 705-0199);
(c) if to the U.S. Administrative Agent or the U.S. Collateral
Agent, to The Chase Manhattan Bank, c/o The Loan and Agency Services
Group, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081,
Attention of Janet Belden (Telecopy No. (212) 552-5658), with a copy to
The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017,
Attention of William Caggiano (Telecopy No. (212) 972-0009);
(d) if to the Canadian Administrative Agent or the Canadian
Collateral Agent, to The Chase Manhattan Bank of Canada, 1 First Canadian
Place, 100 King Street West, Suite 6900, Toronto, Canada M5X 1A4, and with
respect to any funding and/or repayment-related notice, Attention of
Funding Officer (Telecopy No. (416) 216-4162), and with respect to any
other notice, Attention of Vice President, Portfolio Management (Telecopy
No. (416) 216-4161);
(e) if to the Primary U.S. Issuing Bank, to Chase Manhattan Bank
Delaware, Letter of Credit Department, 8th Floor, 1201 Market Street,
Wilmington, Delaware 19801, Attention of Michael Handago (Telecopy No.
(302) 428-3390);
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(f) if to the Primary Canadian Issuing Bank, to The Toronto-Dominion
Bank, 55 King Street West, 9th Floor, Toronto Dominion Tower, Toronto,
Ontario M5K 1A2, Attention of Credit Administration (Telecopy No. (416)
982-6630); and
(g) if to any other Lender or U.S. Issuing Bank or Canadian Issuing
Bank, to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 10.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agents, any U.S. Issuing Bank, any Canadian Issuing Bank or any
Lender in exercising any right or power hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Administrative Agents, any U.S. Issuing Bank, any Canadian Issuing Bank, the
U.S. Swingline Lender, the Canadian Swingline Lender and the other Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of any Loan Document or consent to any departure by any Loan Party
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given. Without limiting the generality of the foregoing, the making of a Loan or
issuance of a U.S. $ Letter of Credit or C $ Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agents, the U.S. Swingline Lender, the Canadian Swingline Lender, any other
Lender, any U.S. Issuing Bank or any Canadian Issuing Bank may have had notice
or knowledge of such Default at the time.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the U.S. Administrative Agent, the Canadian Administrative
Agent, Parent, the Borrowers and the Required Lenders or, in the case of any
other Loan Document, pursuant to an agreement or agreements in writing entered
into by the U.S. Administrative Agent or the Canadian Administrative Agent, as
applicable, and the Loan Party or Loan Parties that are parties thereto, in each
case with the consent of the Required Lenders, provided that no such agreement
shall (i) increase the Commitment of any Lender without the written consent of
such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or
reduce the rate of interest thereon, or reduce any fees payable hereunder,
without the written consent of each Lender affected thereby, (iii) postpone the
scheduled date of payment of the principal amount of any Loan or LC
Disbursement, or any interest thereon, or any fees payable hereunder, or reduce
the amount of, waive or excuse any such payment, or postpone the scheduled date
of expiration of any Commitment, without the written consent of each Lender
affected thereby, (iv) change Section 2.18(b) or (c), in a manner that would
alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, (v) change any of the provisions of this Section or the
definition of the term "Required Lenders", "Majority Lenders" or any other
provision of any Loan Document specifying the number or percentage of Lenders
(or Lenders of any Class) required to waive, amend or modify any rights
thereunder or make any determination or grant any consent thereunder, without
the written consent of each Lender (or each Lender of such Class, as the case
may be), (vi) release Parent, the U.S. Borrower or any Subsidiary from its
Guarantee under the applicable Guarantee Agreements (except as expressly
provided in such Guarantee Agreements), or limit its liability in respect of
such Guarantee, without the written consent of each Lender, (vii) release all or
substantially all of the Collateral from the Liens of the Security Documents
(except as expressly permitted by the Loan Documents), without the written
consent of each Lender, (viii) change any provisions of any Loan Document in a
manner that by its terms adversely affects the rights in respect of payments due
to Lenders holding Loans of any Class differently than those holding Loans of
any other Class, without the written consent of Lenders holding a majority in
interest of the outstanding Loans and unused Commitments of each affected Class,
(ix) change the rights of the Tranche B Lenders or the Delayed Draw Lenders to
decline mandatory prepayments as provided in Section 2.11, without the written
consent of Tranche B Lenders or Delayed Draw Lenders, as applicable, holding a
majority of the outstanding Tranche B Loans or Delayed Draw Loans, as applicable
or (x) amend, modify or waive any condition precedent to any extension of credit
under the Revolving Commitments, the Additional Revolving Commitment or the
Delayed Draw Commitment set forth in Section 4.02 in connection with, or in
contemplation of, such extension of credit without the written consent of the
Majority Lenders of the affected Class (it being understood that no amendment,
modification or waiver of any representation or warranty, covenant or Default or
Event of Default shall be deemed effective for purposes of determining whether
the conditions precedent set forth in Section 4.02 have been satisfied at such
time unless such Majority Lenders shall have consented to such amendment or
waiver); and provided further that (A) no such agreement
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shall amend, modify or otherwise affect the rights or duties of the U.S.
Administrative Agent, the Canadian Administrative Agent, any U.S. Issuing Bank,
any Canadian Issuing Bank, the U.S. Swingline Lender or the Canadian Swingline
Lender without the prior written consent of the U.S. Administrative Agent, the
Canadian Administrative Agent, the U.S. Issuing Bank, the Canadian Issuing Bank,
the U.S. Swingline Lender or the Canadian Swingline Lender, as the case may be,
and (B) any waiver, amendment or modification of this Agreement that by its
terms affects the rights or duties under this Agreement of the U.S. $ Revolving
Lenders (but not the Tranche A Lenders, the Tranche B Lenders, the Delayed Draw
Lenders, the C $ Revolving Lenders and the Additional Revolving Lenders), the C
$ Revolving Lenders and Additional Revolving Lenders (but not the U.S. $
Revolving Lenders, the Tranche A Lenders, the Delayed Draw Lenders and the
Tranche B Lenders), the Tranche A Lenders (but not the U.S. $ Revolving Lenders,
the C $ Revolving Lenders, the Additional Revolving Lenders, Delayed Draw
Lenders and the Tranche B Lenders), the Tranche B Lenders (but not the U.S. $
Revolving Lenders, the C $ Revolving Lenders, the Additional Revolving Lenders,
the Delayed Draw Lenders and the Tranche A Lenders) or the Delayed Draw Lenders
(but not the U.S. $ Revolving Lenders, the C $ Revolving Lenders, the Additional
Revolving Lenders, the Tranche A Lenders and the Tranche B Lenders) may be
effected by an agreement or agreements in writing entered into by Parent, the
Borrowers and the requisite percentage in interest of the affected Class of
Lenders.
SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) Parent and
the Borrowers shall pay (i) all reasonable out-of-pocket expenses incurred by
the Agents and their respective Affiliates, including the reasonable fees,
charges and disbursements of a single counsel for the Agents in each
jurisdiction, in connection with the syndication of the credit facilities
provided for herein, the preparation and administration of the Loan Documents or
any amendments, modifications or waivers of the provisions thereof (whether or
not the transactions contemplated hereby or thereby shall be consummated), (ii)
all reasonable out-of-pocket expenses incurred by any U.S. Issuing Bank or any
Canadian Issuing Bank in connection with the issuance, amendment, renewal or
extension of any U.S. $ Letter of Credit or C $ Letter of Credit by such U.S.
Issuing Bank or Canadian Issuing Bank or any demand for payment thereunder and
(iii) all out-of-pocket expenses incurred by the Agents, any U.S. Issuing Bank,
any Canadian Issuing Bank, the U.S. Swingline Lender, the Canadian Swingline
Lender or any other Lender, including the fees, charges and disbursements of any
counsel for the Agents, any U.S. Issuing Bank, any Canadian Issuing Bank, the
U.S. Swingline Lender, the Canadian Swingline Lender or any other Lender, in
connection with the enforcement or protection of their rights in connection with
the Loan Documents, including their rights under this Section, or in connection
with the Loans made or U.S. $ Letters of Credit or C $ Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiations in respect of such Loans or U.S. $
Letters of Credit or C $ Letters of Credit.
(b) Each of Parent and the Borrowers shall indemnify the Agents,
each U.S. Issuing Bank, each Canadian Issuing Bank, the U.S. Swingline Lender,
the Canadian Swingline Lender and each other Lender, and each Related Party of
any of the foregoing Persons (each such Person being called an "Indemnitee")
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the reasonable fees,
charges and disbursements of any single counsel for such Indemnitee, and any
other Indemnitees as to which no conflict of interest exists, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of any Loan Document or any other
agreement or instrument contemplated hereby, the performance by the parties to
the Loan Documents of their respective obligations thereunder or the
consummation of the Transactions or any other transactions contemplated hereby,
(ii) any Loan or U.S. $ Letter of Credit or a C $ Letter of Credit or the use of
the proceeds therefrom (including any refusal by a U.S. Issuing Bank or Canadian
Issuing Bank to honor a demand for payment under a U.S. $ Letter of Credit or a
C $ Letter of Credit issued by such U.S. Issuing Bank or Canadian Issuing Bank
if the documents presented in connection with such demand do not strictly comply
with the terms of such U.S. $ Letter of Credit or C $ Letter of Credit), (iii)
any actual or alleged presence or Release of Hazardous Materials at, on or from
any Mortgaged Property or any other property currently or formerly owned, leased
or operated by Parent, the Borrowers or any of the Subsidiaries, or any
Environmental Liability related in any way to the Borrowers or any of the
Subsidiaries or (iv) any actual or prospective claim, litigation, investigation
or proceeding relating to any of the foregoing, whether based on contract, tort
or any other theory and regardless of whether any Indemnitee is a party thereto,
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
resulted from the gross negligence or wilful misconduct of such Indemnitee or
any Affiliate of such Indemnitee (or of any officer, director, employee, advisor
or agent of such Indemnitee or any such Indemnitee's Affiliates).
(c) To the extent that any Loan Party fails to pay any amount
required to be paid by it to the Agents, any U.S. Issuing Bank, any Canadian
Issuing Bank, the U.S. Swingline Lender or the Canadian Swingline Lender under
paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the
Agents, such U.S. Issuing Bank, such Canadian Issuing Bank, the U.S. Swingline
Lender or the Canadian Swingline
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Lender, as the case may be, such Lender's pro rata share (determined as of the
time that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount, provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Agents, such U.S. Issuing Bank, such Canadian Issuing
Bank, the U.S. Swingline Lender or the Canadian Swingline Lender in its capacity
as such. For purposes hereof, a Lender's "pro rata share" shall be determined
based upon its share of the sum of the aggregate Revolving Exposures,
outstanding Term Loans and unused Commitments at the time.
(d) To the extent permitted by applicable law, Parent and the
Borrowers shall not assert, and each hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the Transactions, any Loan, any U.S. $ Letter of
Credit or C $ Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable reasonably
promptly after written demand therefor.
SECTION 10.04. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby (including any
Affiliate of any U.S. Issuing Bank or Canadian Issuing Bank that issues any U.S.
$ Letter of Credit or C $ Letter of Credit), except that neither Parent nor the
Borrowers may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrowers without such consent shall be null and
void). Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby (including any Affiliate of any U.S.
Issuing Bank or Canadian Issuing Bank that issues any U.S. $ Letter of Credit or
C $ Letter of Credit) and, to the extent expressly contemplated hereby, the
Related Parties of each of the Agents, the U.S. Issuing Bank, the Canadian
Issuing Bank and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it), provided that (i)
except in the case of an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund (unless such assignment to an Affiliate or an Approved Fund will
result in additional amounts being payable by either of the Borrowers under
Section 2.15 or 2.17), in each case, the U.S. Borrower and, if applicable, the
Canadian Borrower, and either the U.S. Administrative Agent (and, in the case of
an assignment of all or a portion of a U.S. $ Revolving Commitment or any
Lender's obligations in respect of its U.S. $ LC Exposure or U.S. Swingline
Exposure, each U.S. Issuing Bank and the U.S. Swingline Lender) or the Canadian
Administrative Agent (and, in the case of an assignment of all or a portion of
the C $ Revolving Commitment or any Lender's obligations in respect of its C $
LC Exposure or C $ Swingline Exposure, each Canadian Issuing Bank and the
Canadian Swingline Lender), as applicable, must each give its prior written
consent to such assignment (which consent shall not in either case be
unreasonably withheld or delayed), (ii) except in the case of an assignment to a
Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the
entire remaining amount of the assigning Lender's Commitment or Loans, the
amount of the Commitment or Loans of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the U.S. Administrative Agent or the Canadian
Administrative Agent, as applicable) shall not be less than $5,000,000 unless
each of the U.S. Borrower and the U.S. Administrative Agent or the Canadian
Administrative Agent, as applicable, otherwise consent, (iii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender's rights and obligations under this Agreement, except that,
subject to clause (vi), this clause (iii) shall not be construed to prohibit the
assignment of a proportionate part of all the assigning Lender's rights and
obligations in respect of one Class of Commitments or Loans, (iv) the parties to
each assignment shall execute and deliver to the U.S. Administrative Agent or
the Canadian Administrative Agent, as applicable, an Assignment and Acceptance,
together with a processing and recordation fee of $3,500, (v) the assignee, if
it shall not be a Lender, shall deliver to the U.S. Administrative Agent an
Administrative Questionnaire and (vi) each assignment by a C $ Revolving Lender
(or, in the case of a C $ Revolving Lender that is not a Canadian Schedule I
chartered bank, its Designated U.S. Affiliate) shall be (A) to an assignee that
is able to comply with the reallocation mechanism set forth in Section 2.22
after giving effect to such assignment, (B) to an assignee that agrees to make
(individually or together with a U.S. Affiliate) C $ Revolving Loans and
Additional Revolving Loans as required pursuant to Section 2.22 (and, if such
assignee is not a Canadian Schedule I chartered bank, such assignee must
designate in the applicable Assignment and Acceptance a U.S. Affiliate for
purposes of making Additional Revolving Loans) and (C) comprised of all or a pro
rata portion of such Lender's C $ Revolving Commitments and Additional Revolving
Commitments, provided further that any
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consent of the U.S. Borrower or the Canadian Borrower otherwise required under
this paragraph shall not be required if an Event of Default under clause (h) or
(i) of Article VII has occurred and is continuing. Upon acceptance and recording
pursuant to paragraph (d) of this Section, from and after the effective date
specified in each Assignment and Acceptance 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,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of the assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.15, 2.16, 2.17 and 10.03). Any assignment or transfer by
a Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) Each of the U.S. Administrative Agent and the Canadian
Administrative Agent, acting for this purpose as an agent of the Borrowers,
shall maintain at its address referred to Section 10.01 a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans (whether or not evidenced by a promissory note) and LC
Disbursements owing to, each Lender pursuant to the terms hereof from time to
time (each, a "Register"). The entries in a Register shall be conclusive, and
Parent, the Borrowers, the Administrative Agents, each U.S. Issuing Bank, each
Canadian Issuing Bank and the Lenders may treat each Person whose name is
recorded in a Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. Each
Register shall be available for inspection by the Borrowers, any U.S. Issuing
Bank, any Canadian Issuing Bank and any Lender, at any reasonable time and from
time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the U.S. Administrative Agent or the Canadian
Administrative Agent, as applicable, shall accept such Assignment and Acceptance
and record the information contained therein in its Register. An assignment of
all or part of a Loan evidenced by a promissory note shall be registered on the
Register only upon the surrender for registration of assignment of the Note
evidencing such Loan, and thereupon one or more new promissory notes in the same
aggregate principal amount shall be issued to the designated assignee and the
old promissory notes shall be returned by the applicable Administrative Agent to
the applicable Borrower marked "canceled". No assignment shall be effective for
purposes of this Agreement unless it has been recorded in a Register as provided
in this paragraph.
(e) Any Lender may, without the consent of any party, sell
participations to one or more banks or other entities (a "Participant") in all
or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it),
provided 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 and (iii) the Borrowers, the
Administrative Agents, any U.S. Issuing Bank, any Canadian Issuing Bank, the
U.S. Swingline Lender, the Canadian Swingline Lender and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce the Loan Documents and
to approve any amendment, modification or waiver of any provision of the Loan
Documents, provided that such agreement or instrument may provide that such
Lender will not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the first proviso to Section 10.02(b) that
affects such Participant. Subject to paragraph (f) of this Section, the
Borrowers agree that each Participant shall be entitled to the benefits of
Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section.
To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 10.08 as though it were a Lender, provided such Participant
agrees to be subject to Section 2.18(c) as though it were a Lender.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.15, 2.16 or 2.17 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the U.S. Borrower's or the Canadian Borrower's prior written consent and,
prior to giving such consent, the U.S. Borrower or the Canadian Borrower is made
aware of any additional costs to which such Participant may be entitled.
89
(g) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest, provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.
SECTION 10.05. Survival. All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
U.S. $ Letters of Credit or C $ Letters of Credit, and shall continue in full
force and effect as long as the principal of or any accrued interest on any Loan
or any fee or any other amount payable under this Agreement is outstanding and
unpaid or any U.S. $ Letter of Credit or C $ Letter of Credit is outstanding and
so long as the Commitments have not expired or terminated. The provisions of
Sections 2.15, 2.16, 2.17 and 10.03 and Article VIII shall survive and remain in
full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, the expiration or termination
of the U.S. $ Letters of Credit, the C $ Letters of Credit and the Commitments
or the termination of this Agreement or any provision hereof or any assignment
or participation pursuant to Section 10.04.
SECTION 10.06. Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Documents and any separate letter agreements with respect to fees
payable to the Agents constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Agents and when the U.S. Administrative Agent shall
have received counterparts hereof that, when taken together, bear the signatures
of each of the other parties hereto, and thereafter shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 10.07. Severability. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 10.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of either
of the Borrowers against any of and all the obligations of either of the
Borrowers now or hereafter existing under this Agreement held by such Lender,
and then due and owing, whether by acceleration or otherwise. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) that such Lender may have. Notwithstanding
anything to the contrary contained in any of the Loan Documents, no proceeds of
the exercise of any such lien, setoff or similar right against the Canadian
Borrower or its subsidiaries shall be applied to the payment of any amounts
other than amounts owing by the Canadian Borrower hereunder in respect of C $
Revolving Borrowings.
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of
Process. (a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) Each of Parent and the Borrowers hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to any Loan Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to the
extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in
90
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement or any other Loan Document shall affect any right
that the Agents, any U.S. Issuing Bank, any Canadian Issuing Bank or any Lender
may otherwise have to bring any action or proceeding relating to this Agreement
or any other Loan Document against Parent, the Borrowers or its properties in
the courts of any jurisdiction.
(c) Each of Parent and the Borrowers hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
any other Loan Document in any court referred to in paragraph (b) of this
Section. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10.01. Nothing in this
Agreement or any other Loan Document will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 10.11. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 10.12. Confidentiality. Each of the Agents, the Issuing
Banks, the Swingline Lenders and the other Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors, and to any
direct or indirect contractual counterparty in swap agreements or to such
contractual counterparty's professional advisor (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to any
assignee of or Participant in, or any prospective assignee of or Participant in,
any of its rights or obligations under this Agreement, (g) with the consent of
Parent and the Borrowers or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or (ii)
becomes available to the Agents, any U.S. Issuing Bank, any Canadian Issuing
Bank or any Lender on a nonconfidential basis from a source other than Parent or
the Borrowers. For the purposes of this Section, the term "Information" means
all information received from Parent or the Borrowers relating to Parent, the
Borrowers, the Subsidiaries or their respective business other than any such
information that is available to the Agents, any U.S. Issuing Bank, any Canadian
Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by
Parent or the Borrowers, provided that, in the case of information received from
Parent or the Borrowers after the date hereof (other than any such information
received pursuant to Section 5.01) such information is clearly identified at the
time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
SECTION 10.13. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts that are treated as interest
on such Loan under applicable law (collectively, the "Charges"), shall exceed
the maximum lawful rate (the "Maximum Rate") that may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in
accordance with applicable law, the rate of interest payable in respect of such
91
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate or Canadian
Prime Rate, as applicable, to the date of repayment, shall have been received by
such Lender.
SECTION 10.14. Judgment Currency. (a) The Borrowers' obligations
hereunder and under the other Loan Documents to make payments in Dollars or in
Canadian Dollars (the "Obligation Currency") shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than the Obligation Currency, except to the
extent that such tender or recovery results in the effective receipt by the
Administrative Agents, the Collateral Agents or a Lender of the full amount of
the Obligation Currency expressed to be payable to such Administrative Agent,
Collateral Agent or Lender under this Agreement or the other Loan Documents. If,
for the purpose of obtaining or enforcing judgment against either of the
Borrowers or any other Loan Party in any court or in any jurisdiction, it
becomes necessary to convert into or from any currency other than the Obligation
Currency (such other currency being hereinafter referred to as the "Judgment
Currency") an amount due in the Obligation Currency, the conversion shall be
made, at the Dollar Equivalent of such amount, in the case of any Canadian
Dollars or Dollars, and, in the case of other currencies, the rate of exchange
(as quoted by the U.S. Administrative Agent or if the U.S. Administrative Agent
does not quote a rate of exchange on such currency, by a known dealer in such
currency designated by the U.S. Administrative Agent) determined, in each case,
as of the date immediately preceding the day on which the judgment is given
(such Business Day being hereinafter referred to as the "Judgment Currency
Conversion Date").
(b) If there is a change in the rate of exchange prevailing between
the Judgment Currency Conversion Date and the date of actual payment of the
amount due, the Borrowers covenant and agree to pay, or cause to be paid, such
additional amounts, if any (but in any event not a lesser amount), as may be
necessary to ensure that the amount paid in the Judgment Currency, when
converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of Judgment Currency stipulated in the judgment or judicial
award at the rate of exchange prevailing on the Judgment Currency Conversion
Date.
(c) For purposes of determining the Dollar Equivalent or rate of
exchange for this Section, such amounts shall include any premium and costs
payable in connection with the purchase of the Obligation Currency.
SECTION 10.15. Limitation on Liability. Notwithstanding anything to
the contrary in this Agreement, the Canadian Borrower shall not have any
liability to any party with respect to any representation or warranty made
pursuant hereto other than to the applicable Administrative Agents and to the C
$ Revolving Lenders (and assignees thereof pursuant to Section 9.01 or Section
10.04).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
WESCO INTERNATIONAL, INC.,
by
-------------------------
Name:
Title:
WESCO DISTRIBUTION, INC.,
by
-------------------------
Name:
Title:
92
WESCO DISTRIBUTION - CANADA, INC.
by
-------------------------
Name:
Title:
93
THE CHASE MANHATTAN BANK, individually
and as U.S. Administrative Agent,
U.S. Collateral Agent and U.S.
Swingline Lender,
by
-------------------------
Name:
Title:
THE CHASE MANHATTAN BANK OF CANADA,
individually and as Canadian
Administrative Agent and Canadian
Swingline Lender,
by
-------------------------
Name:
Title:
CHASE MANHATTAN BANK DELAWARE, as
Primary U.S. Issuing Bank,
by
-------------------------
Name:
Title:
94
LEHMAN COMMERCIAL PAPER INC.,
individually and as Documentation Agent,
by
-------------------------
Name:
Title:
================================================================================
WESCO RECEIVABLES CORP.
AND
WESCO DISTRIBUTION, INC.
AND
THE OTHER SELLERS NAMED HEREIN
-------------------------------
U.S. RECEIVABLES SALE AGREEMENT
-------------------------------
DATED AS OF JUNE 5, 1998
================================================================================
TABLE OF CONTENTS
PAGE
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ARTICLE I
DEFINITIONS............................. 1
SECTION 1.01. CERTAIN DEFINED TERMS....................................... 1
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS............................... 6
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES.................... 7
SECTION 2.01. PURCHASE AND SALE OF RECEIVABLES............................ 7
SECTION 2.02. PURCHASE PRICE.............................................. 10
SECTION 2.03. PAYMENT OF PURCHASE PRICE................................... 10
SECTION 2.04. NO REPURCHASE............................................... 11
SECTION 2.05. REBATES, ADJUSTMENTS, RETURNS AND REDUCTIONS; MODIFICATIONS. 11
SECTION 2.06. LIMITED REPURCHASE OBLIGATION............................... 11
SECTION 2.07. OBLIGATIONS UNAFFECTED...................................... 12
SECTION 2.08. CERTAIN CHARGES............................................. 12
SECTION 2.09. CERTAIN ALLOCATIONS......................................... 12
SECTION 2.10. FURTHER ASSURANCES.......................................... 13
SECTION 2.11. PURCHASE OF SELLERS' INTEREST IN RECEIVABLES
AND RECEIVABLES PROPERTY................................. 13
ARTICLE III
CONDITIONS TO PURCHASES........................ 14
SECTION 3.01. CONDITIONS PRECEDENT TO COMPANY'S INITIAL PURCHASE.......... 14
SECTION 3.02. CONDITIONS PRECEDENT TO THE ADDITION OF A SELLER............ 16
SECTION 3.03. CONDITIONS PRECEDENT TO ALL THE COMPANY'S PURCHASES
OF RECEIVABLES........................................... 19
SECTION 3.04. CONDITION PRECEDENT TO EACH SELLER'S OBLIGATIONS............ 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES..................... 20
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE SELLERS............... 20
SECTION 4.02. REPRESENTATIONS AND WARRANTIES OF THE SELLERS RELATING TO THE
RECEIVABLES.............................................. 25
SECTION 4.03. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 25
ARTICLE V
GENERAL COVENANTS........................... 26
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE SELLERS........................ 26
SECTION 5.02. REPORTING REQUIREMENTS...................................... 32
-I-
PAGE
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SECTION 5.03. NEGATIVE COVENANTS.......................................... 33
ARTICLE VI
PURCHASE TERMINATION EVENTS...................... 34
SECTION 6.01. PURCHASE TERMINATION EVENTS................................. 34
SECTION 6.02. ADDITIONAL REMEDIES......................................... 37
ARTICLE VII
INDEMNIFICATION; EXPENSES; COSTS.................... 37
SECTION 7.01. INDEMNITIES BY THE SELLERS.................................. 37
SECTION 7.02. INDEMNITIES BY THE COMPANY.................................. 39
ARTICLE VIII
SELLER NOTE .............................. 39
SECTION 8.01. SELLER NOTE................................................. 39
SECTION 8.02. RESTRICTIONS ON TRANSFER OF SELLER NOTE..................... 40
SECTION 8.03. AGGREGATE AMOUNT............................................ 40
ARTICLE IX
MISCELLANEOUS............................. 40
SECTION 9.01. AMENDMENT................................................... 40
SECTION 9.02. NOTICES, ETC................................................ 40
SECTION 9.03. NO WAIVER; REMEDIES......................................... 41
SECTION 9.04. SUCCESSORS AND ASSIGNS...................................... 41
SECTION 9.05. GOVERNING LAW............................................... 41
SECTION 9.06. WAIVER OF JURY TRIAL........................................ 42
SECTION 9.07. JURISDICTION; CONSENT TO SERVICE OF PROCESS................. 42
SECTION 9.08. INTEGRATION................................................. 43
SECTION 9.09. CAPTIONS AND CROSS REFERENCES............................... 43
SECTION 9.10. EXECUTION IN COUNTERPARTS................................... 43
SECTION 9.11. NO PETITION IN BANKRUPTCY................................... 43
SECTION 9.12. ADDITION OF SELLERS......................................... 43
SECTION 9.13. TREATMENT OF SELLERS OTHER THAN WESCO; TERMINATION THEREOF.. 43
SECTION 9.14. TERMINATION................................................. 44
EXHIBIT A FORM OF SELLER NOTE
EXHIBIT B FORM OF ADDITIONAL SELLER SUPPLEMENT
EXHIBIT C FORM OF UCC CERTIFICATE
SCHEDULE 1 SELLERS' AUTHORIZED OFFICERS
-II-
PAGE
----
SCHEDULE 2 LOCATION OF EACH SELLER'S CHIEF EXECUTIVE OFFICE
SCHEDULE 3 LOCKBOX BANKS, THE LOCKBOX PROCESSORS, AND ELIGIBLE
SEGREGATED ACCOUNT BANKS
SCHEDULE 4 ADDRESS FOR NOTICE TO SERVICER
SCHEDULE 5 SELLER TRADE NAMES
SCHEDULE 6 DEFINITION OF DISCOUNTED PERCENTAGE
SCHEDULE 7 ERISA MATTERS
SCHEDULE 8 FORM OF FINANCIAL STATEMENT NOTE
SCHEDULE 9 FORM OF GENERAL LEGEND
-III-
U.S. RECEIVABLES SALE AGREEMENT
THIS U.S. RECEIVABLES SALE AGREEMENT DATED AS OF JUNE 5, 1998 (THIS
"AGREEMENT"), IS AMONG WESCO DISTRIBUTION, INC., A DELAWARE CORPORATION
("WESCO"), WESCO EQUITY CORPORATION, A DELAWARE CORPORATION ("EQUITY CORP.");
WESCO AND EQUITY CORP., BEING COLLECTIVELY REFERRED TO HEREIN AS THE "SELLERS"
AND INDIVIDUALLY AS A "SELLER"), WESCO RECEIVABLES CORP., A DELAWARE CORPORATION
(THE "COMPANY") AND WESCO, IN ITS CAPACITY AS SERVICER (THE "SERVICER").
W I T N E S S E T H:
WHEREAS, THE SELLERS INTEND TO SELL RECEIVABLES AND RECEIVABLES
PROPERTY (BOTH AS HEREINAFTER DEFINED) TO THE COMPANY ON THE TERMS AND SUBJECT
TO THE CONDITIONS SET FORTH IN THIS AGREEMENT;
WHEREAS, THE COMPANY DESIRES TO PURCHASE RECEIVABLES AND RECEIVABLES
PROPERTY FROM THE SELLERS ON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH
IN THIS AGREEMENT;
WHEREAS, THE SELLERS AND THE COMPANY DESIRE THE TRANSFER OF
RECEIVABLES AND RECEIVABLES PROPERTY FROM THE SELLERS TO THE COMPANY TO BE A
TRUE SALE PROVIDING THE COMPANY WITH THE FULL BENEFITS OF OWNERSHIP OF THE
RECEIVABLES; AND
WHEREAS, TO OBTAIN THE NECESSARY FUNDS TO PURCHASE SUCH RECEIVABLES
AND RECEIVABLES PROPERTY, THE COMPANY HAS ENTERED INTO THE POOLING AGREEMENT (AS
HEREINAFTER DEFINED);
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE MUTUAL
COVENANTS AND AGREEMENTS CONTAINED HEREIN, THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. UNLESS OTHERWISE DEFINED
HEREIN, CAPITALIZED TERMS WHICH ARE USED HEREIN SHALL HAVE THE MEANINGS ASSIGNED
TO SUCH TERMS IN SECTION 1.1 OF THE POOLING AGREEMENT, AMONG THE COMPANY, THE
SERVICER AND THE TRUSTEE. AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS SHALL
HAVE THE FOLLOWING MEANINGS (SUCH MEANINGS TO BE EQUALLY APPLICABLE TO BOTH THE
SINGULAR AND PLURAL FORMS OF THE TERMS DEFINED):
"ADDITIONAL SELLER SUPPLEMENT" MEANS AN INSTRUMENT SUBSTANTIALLY IN
THE FORM OF EXHIBIT B HERETO PURSUANT TO WHICH A SUBSIDIARY OF WESCO BECOMES A
SELLER PARTY HERETO.
2
"AUTHORIZED OFFICERS" MEANS THOSE OFFICERS OF THE SELLERS DESIGNATED
IN SCHEDULE 1 HERETO (OR IN SUCH OTHER SCHEDULE AS MAY BE DELIVERED BY THE
SELLERS TO THE OTHER PARTIES HERETO FROM TIME TO TIME) AS DULY AUTHORIZED TO
EXECUTE AND DELIVER THIS AGREEMENT AND ANY INSTRUMENTS OR DOCUMENTS IN
CONNECTION HEREWITH ON BEHALF OF THE SELLERS AND TO TAKE, FROM TIME TO TIME, ALL
OTHER ACTIONS ON BEHALF OF THE SELLERS IN CONNECTION HEREWITH.
"CLOSING DATE" MEANS THE DATE OF THE INITIAL ISSUANCE OF THE
INVESTOR CERTIFICATES.
"CODE" SHALL MEAN THE INTERNAL REVENUE CODE OF 1986, AND REGULATIONS
PROMULGATED THEREUNDER OR ANY SUCCESSOR STATUTE AND RELATED REGULATIONS.
"COLLECTIONS" SHALL MEAN ALL COLLECTIONS, INCLUDING THE AGGREGATE
UNCLEARED FUNDS AMOUNT, AND ALL AMOUNTS RECEIVED IN RESPECT OF THE RECEIVABLES,
INCLUDING RECOVERIES, SELLER REPURCHASE PAYMENTS, SELLER ADJUSTMENT PAYMENTS,
SERVICER INDEMNIFICATION AMOUNTS PAID BY THE SERVICER AND ANY OTHER PAYMENTS
RECEIVED IN RESPECT OF DILUTION ADJUSTMENTS, TOGETHER WITH ALL COLLECTIONS
RECEIVED IN RESPECT OF THE RELATED PROPERTY IN THE FORM OF CASH, CHECKS, WIRE
TRANSFERS OR ANY OTHER FORM OF CASH PAYMENT, AND ALL PROCEEDS OF RECEIVABLES AND
COLLECTIONS THEREOF (INCLUDING, WITHOUT LIMITATION, COLLECTIONS CONSTITUTING AN
ACCOUNT OR GENERAL INTANGIBLE OR EVIDENCED BY A NOTE, INSTRUMENT, LETTER OF
CREDIT, SECURITY, CONTRACT, SECURITY AGREEMENT, CHATTEL PAPER OR OTHER EVIDENCE
OF INDEBTEDNESS OR SECURITY, WHATEVER IS RECEIVED UPON THE SALE, EXCHANGE,
COLLECTION OR OTHER DISPOSITION OF, OR ANY INDEMNITY, WARRANTY OR GUARANTY
PAYABLE IN RESPECT OF, THE FOREGOING AND ALL "PROCEEDS", AS DEFINED IN SECTION
9-306 OF THE UCC AS IN EFFECT IN THE STATE OF NEW YORK, OF THE FOREGOING).
"CONTRACT" MEANS A CONTRACT BETWEEN ANY SELLER AND ANY PERSON
PURSUANT TO OR UNDER WHICH SUCH PERSON SHALL BE OBLIGATED TO MAKE PAYMENTS TO
SUCH SELLER.
"DISCOUNTED PERCENTAGE" HAS THE MEANING SPECIFIED IN SCHEDULE 6
HERETO.
"EARLY TERMINATION" SHALL HAVE THE MEANING SPECIFIED IN SECTION
6.01.
"EFFECTIVE DATE" MEANS (I) WITH RESPECT TO EACH SELLER ON THE DATE
HEREOF, THE DATE HEREOF AND (II) WITH RESPECT TO EACH SUBSIDIARY OF WESCO ADDED
AS A SELLER PURSUANT TO SECTION 9.12, THE SELLER ADDITION DATE WITH RESPECT TO
EACH SUCH SUBSIDIARY.
"EXCLUDED RECEIVABLE" MEANS RECEIVABLES (WITHOUT GIVING EFFECT TO
THE EXCLUSION OF EXCLUDED RECEIVABLES FROM THE DEFINITION THEREOF) (I) OWED BY
OBLIGORS NOT RESIDENT IN THE UNITED STATES, WHICH ARE DENOMINATED IN A CURRENCY
OTHER THAN U.S. DOLLARS, (II) OWED TO A SELLER BY A VENDOR OF MERCHANDISE TO
SUCH SELLER, WHICH RELATES TO THE MERCHANDISE SOLD BY SUCH VENDOR OR PROMOTIONAL
PROGRAMS OF SUCH VENDOR OR (III) ORIGINATED BY THE NEW YORK CITY BRANCH, THE
FIFE BRANCH AND THE TAMPA MAJOR PROJECTS BRANCH, IDENTIFIED ON WESCO'S SYSTEM AS
BRANCH NOS. 1225, 7147 AND 3840, RESPECTIVELY.
"ERISA AFFILIATE" SHALL MEAN, WITH RESPECT TO ANY PERSON, ANY TRADE
OR BUSINESS (WHETHER OR NOT INCORPORATED) THAT IS A MEMBER OF A GROUP OF WHICH
SUCH PERSON IS A MEMBER AND WHICH IS TREATED AS A SINGLE EMPLOYER UNDER SECTION
414 OF THE INTERNAL REVENUE CODE.
3
"INSOLVENCY EVENT" WITH RESPECT TO THE SELLER, SHALL MEAN THE
OCCURRENCE OF ANY ONE OR MORE OF THE PURCHASE TERMINATION EVENTS SPECIFIED IN
SUBSECTION 6.01(G).
"LIEN" SHALL MEAN, WITH RESPECT TO ANY ASSET, (A) ANY MORTGAGE, DEED
OF TRUST, LIEN, PLEDGE, ENCUMBRANCE, CHARGE OR SECURITY INTEREST IN OR ON SUCH
ASSET, (B) THE INTEREST OF A VENDOR OR A LESSOR UNDER ANY CONDITIONAL SALE
AGREEMENT, CAPITAL LEASE OR TITLE RETENTION AGREEMENT RELATING TO SUCH ASSET AND
(C) IN THE CASE OF SECURITIES, ANY PURCHASE OPTION, CALL OR OTHER SIMILAR RIGHT
OF A THIRD PARTY WITH RESPECT TO SUCH SECURITIES; PROVIDED, HOWEVER, THAT IF A
LIEN IS IMPOSED UNDER SECTION 412(N) OF THE CODE OR SECTION 302(F) OF ERISA FOR
A FAILURE TO MAKE A REQUIRED INSTALLMENT OR OTHER PAYMENT TO A PLAN TO WHICH
SECTION 412(N) OF THE CODE OR SECTION 302(F) OF ERISA APPLIES, THEN SUCH LIEN
SHALL NOT BE TREATED AS A "LIEN" FROM AND AFTER THE TIME ANY PERSON WHO IS
OBLIGATED TO MAKE SUCH PAYMENT PAYS TO SUCH PLAN THE AMOUNT OF SUCH LIEN
DETERMINED UNDER SECTION 412(N)(3) OF THE CODE OR SECTION 302(F)(3) OF ERISA, AS
THE CASE MAY BE, AND PROVIDES TO THE TRUSTEE, ANY AGENT AND EACH RATING AGENCY A
WRITTEN STATEMENT OF THE AMOUNT OF SUCH LIEN TOGETHER WITH WRITTEN EVIDENCE OF
PAYMENT OF SUCH AMOUNT, OR SUCH LIEN EXPIRES PURSUANT TO SECTION 412(N)(4)(B) OF
THE CODE OR SECTION 302(F)(4)(B) OF ERISA.
"MATERIAL ADVERSE EFFECT" SHALL MEAN, WITH RESPECT TO ANY SELLER,
(A) A MATERIAL IMPAIRMENT OF THE ABILITY OF SUCH SELLER TO PERFORM ITS
OBLIGATIONS UNDER THE TRANSACTION DOCUMENTS, (B) A MATERIAL IMPAIRMENT OF THE
VALIDITY OR ENFORCEABILITY OF ANY OF THE TRANSACTION DOCUMENTS AGAINST SUCH
SELLER, (C) A MATERIAL IMPAIRMENT OF THE COLLECTIBILITY OF THE RECEIVABLES
ORIGINATED BY SUCH SELLER TAKEN AS A WHOLE OR (D) A MATERIAL IMPAIRMENT OF THE
INTERESTS, RIGHTS OR REMEDIES OF THE COMPANY UNDER THE TRANSACTION DOCUMENTS OR
THE RECEIVABLES TAKEN AS A WHOLE.
"MULTIEMPLOYER PLAN" SHALL MEAN, WITH RESPECT TO ANY PERSON, A
"MULTIEMPLOYER PLAN" (WITHIN THE MEANING OF SECTION 4001(A)(3) OF ERISA) AS TO
WHICH SUCH PERSON OR ANY ERISA AFFILIATE OF SUCH PERSON (OTHER THAN ONE
CONSIDERED AN ERISA AFFILIATE ONLY PURSUANT TO SUBSECTION (M) OR (O) OF SECTION
414 OF THE CODE) IS MAKING OR ACCRUING AN OBLIGATION TO MAKE CONTRIBUTIONS, OR
HAS WITHIN ANY OF THE PRECEDING FIVE YEARS MADE OR ACCRUED AN OBLIGATION TO MAKE
CONTRIBUTIONS.
"PAYMENT DATE" HAS THE MEANING SPECIFIED IN SUBSECTION 2.03(A).
"PLAN" SHALL MEAN, WITH RESPECT TO ANY PERSON, ANY PENSION PLAN
(OTHER THAN A MULTIEMPLOYER PLAN) SUBJECT TO THE PROVISIONS OF TITLE IV OF ERISA
OR SECTION 412 OF THE INTERNAL REVENUE CODE WHICH IS MAINTAINED FOR EMPLOYEES OF
SUCH PERSON OR ANY ERISA AFFILIATE OF SUCH PERSON.
"POOLING AGREEMENT" MEANS THE POOLING AGREEMENT DATED AS OF THE DATE
HEREOF, AMONG THE COMPANY, THE SERVICER AND THE TRUSTEE ON BEHALF OF THE
CERTIFICATEHOLDERS, AS SUCH AGREEMENT MAY BE AMENDED, SUPPLEMENTED, WAIVED, OR
OTHERWISE MODIFIED FROM TIME TO TIME, INCLUDING, WITHOUT LIMITATION, THE SERIES
1998-1 SUPPLEMENT DATED AS OF THE DATE HEREOF AMONG THE COMPANY, THE SERVICER
AND THE TRUSTEE.
4
"POTENTIAL PURCHASE TERMINATION EVENT" MEANS ANY CONDITION OR ACT
SPECIFIED IN SECTION 6.01 THAT, WITH THE GIVING OF NOTICE OR THE LAPSE OF TIME
OR BOTH, WOULD BECOME A PURCHASE TERMINATION EVENT.
"PURCHASED RECEIVABLE" MEANS, AT ANY TIME, ANY RECEIVABLE SOLD TO
THE COMPANY BY ANY SELLER PURSUANT TO, AND IN ACCORDANCE WITH THE TERMS OF, THIS
AGREEMENT AND NOT THERETOFORE RESOLD TO SUCH SELLER PURSUANT TO SUBSECTION
2.01(B) OR SECTIONS 2.06 OR 2.11.
"PURCHASED RECEIVABLES PERCENTAGE" MEANS, WITH RESPECT TO ANY SELLER
AS TO WHICH WESCO HAS SUBMITTED A SELLER TERMINATION REQUEST, THE PERCENTAGE
EQUIVALENT OF A FRACTION, THE NUMERATOR OF WHICH IS AN AMOUNT EQUAL TO THE
AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF PURCHASED RECEIVABLES SOLD BY SUCH
SELLER AS OF THE APPLICABLE SELLER TERMINATION REQUEST DATE, AND THE DENOMINATOR
OF WHICH IS AN AMOUNT EQUAL TO THE AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF ALL
PURCHASED RECEIVABLES AS OF SUCH DATE.
"PURCHASE PRICE" HAS THE MEANING SPECIFIED IN SECTION 2.02.
"PURCHASE TERMINATION DATE" MEANS, WITH RESPECT TO ANY SELLER, THE
DATE ON WHICH THE COMPANY'S OBLIGATION TO PURCHASE RECEIVABLES FROM SUCH SELLER
SHALL TERMINATE, WHICH SHALL BE THE DATE ON WHICH AN EARLY TERMINATION OCCURS
WITH RESPECT TO SUCH SELLER.
"PURCHASE TERMINATION EVENT" HAS THE MEANING SPECIFIED IN SECTION
6.01.
"RECEIVABLE" SHALL MEAN THE INDEBTEDNESS AND PAYMENT OBLIGATIONS OF
ANY PERSON TO A SELLER OR ACQUIRED BY A SELLER (INCLUDING, WITHOUT LIMITATION,
OBLIGATIONS CONSTITUTING AN ACCOUNT OR GENERAL INTANGIBLE OR EVIDENCED BY A
NOTE, INSTRUMENT, CONTRACT, SECURITY AGREEMENT, CHATTEL PAPER OR OTHER EVIDENCE
OF INDEBTEDNESS OR SECURITY) ARISING FROM A SALE OF MERCHANDISE OR THE PROVISION
OF SERVICES BY SUCH SELLER OR THE PERSON FROM WHOM SUCH INDEBTEDNESS AND PAYMENT
OBLIGATION WAS ACQUIRED BY A SELLER, INCLUDING, WITHOUT LIMITATION, ANY RIGHT TO
PAYMENT FOR GOODS SOLD OR FOR SERVICES RENDERED, AND INCLUDING THE RIGHT TO
PAYMENT OF ANY INTEREST, SALES TAXES, FINANCE CHARGES, RETURNED CHECK OR LATE
CHARGES AND OTHER OBLIGATIONS OF SUCH PERSON WITH RESPECT THERETO OTHER THAN
EXCLUDED RECEIVABLES; PROVIDED, HOWEVER, THAT FOR PURPOSES OF ARTICLE II HEREOF
IN THE EVENT THAT AN EXCLUDED RECEIVABLE IS INCLUDED ON ANY DAILY REPORT, SUCH
EXCLUDED RECEIVABLE SHALL BE DEEMED TO BE A RECEIVABLE BUT NOT AN ELIGIBLE
RECEIVABLE.
"RECEIVABLES PROPERTY" HAS THE MEANING SPECIFIED IN SECTION 2.01.
"REFERENCE RATE" SHALL MEAN, FOR ANY DAY, A RATE PER ANNUM (ROUNDED
UPWARDS, IF NECESSARY, TO THE NEXT 1/16 OF 1%) EQUAL TO THE GREATER OF (A) THE
PRIME RATE IN EFFECT ON SUCH DAY AND (B) THE FEDERAL FUNDS EFFECTIVE RATE IN
EFFECT ON SUCH DAY PLUS 1/2 OF 1%. IF THE CHASE MANHATTAN BANK SHALL HAVE
DETERMINED (WHICH DETERMINATION SHALL BE CONCLUSIVE ABSENT MANIFEST ERROR) THAT
IT IS UNABLE TO ASCERTAIN THE FEDERAL FUNDS EFFECTIVE RATE FOR ANY REASON,
INCLUDING THE FAILURE OF THE FEDERAL RESERVE BANK OF NEW YORK TO PUBLISH RATES
OR THE INABILITY OF THE CHASE MANHATTAN BANK TO OBTAIN QUOTATIONS IN ACCORDANCE
WITH THE TERMS OF THE DEFINITION THEREOF, THE REFERENCE RATE SHALL BE DETERMINED
WITHOUT REGARD TO CLAUSE (B) OF THE IMMEDIATELY PRECEDING SENTENCE, AS
APPROPRIATE, UNTIL THE CIRCUMSTANCES GIVING RISE TO SUCH
5
INABILITY NO LONGER EXIST. ANY CHANGE IN THE REFERENCE RATE DUE TO A CHANGE IN
THE PRIME RATE OR THE FEDERAL FUNDS EFFECTIVE RATE SHALL BE EFFECTIVE ON THE
EFFECTIVE DATE OF SUCH CHANGE IN THE PRIME RATE OR THE FEDERAL FUNDS EFFECTIVE
RATE, RESPECTIVELY. THE TERM "PRIME RATE" SHALL MEAN THE RATE OF INTEREST PER
ANNUM PUBLICLY ANNOUNCED FROM TIME TO TIME BY THE CHASE MANHATTAN BANK AS ITS
PRIME RATE IN EFFECT AT ITS PRINCIPAL OFFICE IN NEW YORK CITY; EACH CHANGE IN
THE PRIME RATE SHALL BE EFFECTIVE ON THE DATE SUCH CHANGE IS PUBLICLY ANNOUNCED
AS BEING EFFECTIVE. THE TERM "FEDERAL FUNDS EFFECTIVE RATE" SHALL MEAN, FOR ANY
DAY, THE WEIGHTED AVERAGE OF THE RATES ON OVERNIGHT FEDERAL FUNDS TRANSACTIONS
WITH MEMBERS OF THE FEDERAL RESERVE SYSTEM ARRANGED BY FEDERAL FUNDS BROKERS, AS
PUBLISHED ON THE NEXT SUCCEEDING BUSINESS DAY BY THE FEDERAL RESERVE BANK OF NEW
YORK, OR, IF SUCH RATE IS NOT SO PUBLISHED FOR ANY DAY THAT IS A BUSINESS DAY,
THE AVERAGE OF THE QUOTATIONS FOR THE DAY FOR SUCH TRANSACTIONS RECEIVED BY THE
CHASE MANHATTAN BANK FROM THREE FEDERAL FUNDS BROKERS OF RECOGNIZED STANDING
SELECTED BY IT.
"RELATED PROPERTY" SHALL MEAN, WITH RESPECT TO EACH RECEIVABLE:
(A) ALL OF THE APPLICABLE SELLER'S INTEREST IN THE GOODS, IF
ANY, SOLD AND DELIVERED TO AN OBLIGOR WHICH GAVE RISE TO SUCH RECEIVABLE;
(B) ALL OTHER SECURITY INTERESTS OR LIENS PURPORTING TO SECURE
PAYMENT OF SUCH RECEIVABLE, TOGETHER WITH ALL FINANCING STATEMENTS SIGNED
BY AN OBLIGOR DESCRIBING ANY COLLATERAL SECURING SUCH RECEIVABLE; AND
(C) ALL GUARANTEES, CREDIT OR SIMILAR TYPES OF INSURANCE,
LETTERS OF CREDIT AND OTHER AGREEMENTS OR ARRANGEMENTS OF WHATEVER
CHARACTER FROM TIME TO TIME SUPPORTING OR SECURING PAYMENT OF SUCH
RECEIVABLE;
IN THE CASE OF CLAUSES (B) AND (C), WHETHER PURSUANT TO THE CONTRACT RELATED TO
SUCH RECEIVABLE OR OTHERWISE OR INCLUDING, WITHOUT LIMITATION, PURSUANT TO ANY
OBLIGATIONS EVIDENCED BY A NOTE, INSTRUMENT, CONTRACT, SECURITY AGREEMENT,
CHATTEL PAPER OR OTHER EVIDENCE OF INDEBTEDNESS OR SECURITY AND THE PROCEEDS
THEREOF.
"RELEVANT UCC STATE" MEANS EACH JURISDICTION IN WHICH THE FILING OF
A UCC FINANCING STATEMENT IS NECESSARY OR DESIRABLE TO PERFECT THE COMPANY'S
INTEREST IN THE RECEIVABLES.
"REPORTABLE EVENT" SHALL MEAN ANY REPORTABLE EVENT AS DEFINED IN
SECTION 4043(B) OF ERISA OR THE REGULATIONS ISSUED THEREUNDER WITH RESPECT TO A
PLAN (OTHER THAN A PLAN MAINTAINED BY AN ERISA AFFILIATE WHICH IS CONSIDERED AN
ERISA AFFILIATE ONLY PURSUANT TO SUBSECTION (M) OR (O) OF SECTION 414 OF THE
CODE).
"SEC" MEANS THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.
"SELLER ADDITION DATE" HAS THE MEANING SPECIFIED IN SECTION 3.02.
"SELLER ADJUSTMENT PAYMENT" HAS THE MEANING SPECIFIED IN SECTION
2.05.
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"SELLER REPURCHASE PAYMENT" HAS THE MEANING SPECIFIED IN SECTION
2.06.
"SELLER TERMINATION REQUEST" HAS THE MEANING SPECIFIED IN SUBSECTION
9.13(B).
"SELLER TERMINATION REQUEST DATE" HAS THE MEANING SPECIFIED IN
SUBSECTION 9.13(B).
"SELLER NOTE" HAS THE MEANING SPECIFIED IN SECTION 8.01.
"WESCO PERSONS" MEANS EACH SELLER AND EACH OF ITS AFFILIATES OTHER
THAN THE COMPANY.
"WITHDRAWAL LIABILITIES" SHALL MEAN LIABILITY TO A MULTIEMPLOYER
PLAN AS A RESULT OF A COMPLETE OR PARTIAL WITHDRAWAL FROM SUCH MULTIEMPLOYER
PLAN, AS SUCH TERMS ARE DEFINED IN PART I OF SUBTITLE E OF TITLE IV OF ERISA.
SECTION 1.02. OTHER DEFINITIONAL PROVISIONS. (A) ALL TERMS DEFINED
HEREIN OR IN THE POOLING AGREEMENT OR ANY SUPPLEMENT SHALL HAVE THEIR DEFINED
MEANINGS WHEN USED IN ANY CERTIFICATE OR OTHER DOCUMENT MADE OR DELIVERED
PURSUANT HERETO UNLESS OTHERWISE DEFINED THEREIN.
(B) AS USED HEREIN AND IN ANY CERTIFICATE OR OTHER DOCUMENT MADE OR
DELIVERED PURSUANT HERETO OR THERETO, ACCOUNTING TERMS NOT DEFINED IN SECTION
1.1 OF THE POOLING AGREEMENT OR ANY SUPPLEMENT, AND ACCOUNTING TERMS PARTLY
DEFINED IN SECTION 1.1 OF THE POOLING AGREEMENT OR ANY SUPPLEMENT TO THE EXTENT
NOT DEFINED, SHALL HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM UNDER GAAP. TO THE
EXTENT THAT THE DEFINITIONS OF ACCOUNTING TERMS HEREIN ARE INCONSISTENT WITH THE
MEANINGS OF SUCH TERMS UNDER GAAP, THE DEFINITIONS CONTAINED HEREIN SHALL
CONTROL. ALL TERMS USED IN ARTICLE 9 OF THE UCC THAT ARE USED BUT NOT
SPECIFICALLY DEFINED HEREIN ARE USED HEREIN AS DEFINED THEREIN.
(C) 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 SECTION,
SUBSECTION, ANNEX, SCHEDULE AND EXHIBIT REFERENCES CONTAINED IN THIS AGREEMENT
ARE REFERENCES TO SECTIONS, SUBSECTIONS, ANNEX, SCHEDULES AND EXHIBITS IN OR TO
THIS AGREEMENT UNLESS OTHERWISE SPECIFIED.
(D) THE DEFINITIONS CONTAINED IN SECTION 1.01 OF THIS AGREEMENT ARE
APPLICABLE TO THE SINGULAR AS WELL AS THE PLURAL FORMS OF SUCH TERMS AND TO THE
MASCULINE, THE FEMININE AND THE NEUTER GENDERS OF SUCH TERMS.
(E) ANY REFERENCE HEREIN OR IN ANY OTHER TRANSACTION DOCUMENT TO A
PROVISION OF THE CODE OR ERISA SHALL BE DEEMED A REFERENCE TO ANY SUCCESSOR
PROVISION THERETO.
(F) ALL REFERENCES HEREIN TO ANY AGREEMENT OR INSTRUMENT SHALL BE
DEEMED REFERENCES TO SUCH AGREEMENT OR INSTRUMENT AS AMENDED, SUPPLEMENTED OR
OTHERWISE MODIFIED FROM TIME TO TIME, SUBJECT TO COMPLIANCE WITH ANY
RESTRICTIONS HEREIN ON THE AMENDMENT, SUPPLEMENTATION OR MODIFICATION OF SUCH
AGREEMENT OR INSTRUMENT.
7
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
SECTION 2.01. PURCHASE AND SALE OF RECEIVABLES. (A) UPON THE TERMS
SET FORTH HEREIN, EACH OF THE SELLERS HEREBY SELLS, ASSIGNS, TRANSFERS AND
CONVEYS TO THE COMPANY, WITHOUT RECOURSE (EXCEPT TO THE LIMITED EXTENT PROVIDED
HEREIN), ALL ITS RESPECTIVE PRESENT AND FUTURE RIGHT, TITLE AND INTEREST IN, TO
AND UNDER:
(I) ALL RECEIVABLES NOW EXISTING AND HEREAFTER ARISING FROM TIME TO
TIME (UNTIL AN EARLY TERMINATION WITH RESPECT TO SUCH SELLER OCCURS);
(II) ALL RELATED PROPERTY IN RESPECT OF SUCH RECEIVABLES;
(III) ALL COLLECTIONS;
(IV) ALL PAYMENT, ENFORCEMENT AND OTHER RIGHTS (INCLUDING
RESCISSION, REPLEVIN OR RECLAMATION), BUT NONE OF THE OBLIGATIONS, RELATING TO
ANY RECEIVABLE OR ARISING THEREFROM; AND
(V) ALL MONIES DUE OR TO BECOME DUE AND ALL AMOUNTS RECEIVED WITH
RESPECT TO THE ITEMS LISTED IN CLAUSES (I), (II), (III) AND (IV) AND ALL
PROCEEDS (INCLUDING, WITHOUT LIMITATION, WHATEVER IS RECEIVED UPON THE SALE,
EXCHANGE, COLLECTION OR OTHER DISPOSITION OF THE FOREGOING AND ALL "PROCEEDS" AS
DEFINED IN SECTION 9-306 OF THE UCC AS IN EFFECT IN THE COMMONWEALTH OF
PENNSYLVANIA) THEREOF, INCLUDING ALL RECOVERIES RELATING THERETO AND ALL AMOUNTS
ON DEPOSIT IN LOCKBOX ACCOUNTS OR ELIGIBLE SEGREGATED ACCOUNTS WHICH WERE NOT
AVAILABLE FUNDS ON THE DATE HEREOF (THE PROPERTY DESCRIBED IN THE FOREGOING
CLAUSES (II) THROUGH (V) ARE HEREINAFTER COLLECTIVELY REFERRED TO AS THE
"RECEIVABLES PROPERTY").
SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN, THE COMPANY
HEREBY AGREES TO PURCHASE THE RECEIVABLES AND RECEIVABLES PROPERTY OF EACH
SELLER.
(B) ON EACH APPLICABLE EFFECTIVE DATE AND ON THE DATE OF CREATION OF
EACH NEWLY CREATED RECEIVABLE, ALL OF THE APPLICABLE SELLER'S RIGHT, TITLE AND
INTEREST IN, TO AND UNDER (I) IN THE CASE OF EACH SUCH EFFECTIVE DATE, ALL THEN
EXISTING RECEIVABLES AND ALL RECEIVABLES PROPERTY IN RESPECT OF SUCH RECEIVABLES
AND (II) IN THE CASE OF EACH SUCH DATE OF CREATION (BUT ONLY SO LONG AS NO EARLY
TERMINATION WITH RESPECT TO SUCH SELLER HAS OCCURRED), ALL SUCH NEWLY CREATED
RECEIVABLES AND ALL RECEIVABLES PROPERTY IN RESPECT OF SUCH RECEIVABLES, SHALL
BE IMMEDIATELY AND AUTOMATICALLY SOLD, ASSIGNED, TRANSFERRED AND CONVEYED TO THE
COMPANY PURSUANT TO PARAGRAPH (A) ABOVE WITHOUT ANY FURTHER ACTION BY SUCH
SELLER OR ANY OTHER PERSON. IF ANY SELLER SHALL NOT HAVE RECEIVED PAYMENT
(INCLUDING AS A RESULT OF THE FAILURE TO SATISFY THE CONDITIONS SET FORTH IN
SECTION 3.03 OR THE APPLICATION OF THE FINAL PARAGRAPH OF SECTION 6.01) FROM THE
COMPANY OF THE PURCHASE PRICE FOR ANY NEWLY CREATED RECEIVABLE AND THE RELATED
RECEIVABLES PROPERTY ON THE PAYMENT DATE THEREFOR IN ACCORDANCE WITH THE TERMS
OF SUBSECTION 2.03(B), SUCH NEWLY CREATED RECEIVABLE AND THE RECEIVABLES
PROPERTY WITH RESPECT THERETO SHALL, UPON RECEIPT OF NOTICE BY THE COMPANY AND
THE TRUSTEE FROM THE APPLICABLE SELLER OF SUCH FAILURE TO RECEIVE PAYMENT,
IMMEDIATELY AND AUTOMATICALLY BE SOLD, ASSIGNED,
8
TRANSFERRED AND RECONVEYED BY THE COMPANY TO SUCH SELLER WITHOUT ANY FURTHER
ACTION BY THE COMPANY OR ANY OTHER PERSON.
(C) THE PARTIES TO THIS AGREEMENT INTEND THAT THE TRANSACTIONS
CONTEMPLATED BY SUBSECTIONS 2.01(A) AND (B) HEREBY SHALL BE, AND SHALL BE
TREATED AS, A PURCHASE AND RECEIPT BY THE COMPANY AND A SALE BY THE APPLICABLE
SELLER OF THE PURCHASED RECEIVABLES AND THE RECEIVABLES PROPERTY IN RESPECT
THEREOF AND NOT A LENDING TRANSACTION. ALL TRANSFERS OF RECEIVABLES AND
RECEIVABLES PROPERTY BY ANY SELLER HEREUNDER SHALL BE WITHOUT RECOURSE TO, OR
REPRESENTATION OR WARRANTY OF ANY KIND (EXPRESS OR IMPLIED) BY, ANY SELLER,
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN. THE FOREGOING SALE,
ASSIGNMENT, TRANSFER AND CONVEYANCE DOES NOT CONSTITUTE AND IS NOT INTENDED TO
RESULT IN A CREATION OR ASSUMPTION BY THE COMPANY OF ANY OBLIGATION OF ANY
SELLER OR ANY OTHER PERSON IN CONNECTION WITH THE RECEIVABLES, THE RECEIVABLES
PROPERTY OR ANY AGREEMENT OR INSTRUMENT RELATING THERETO, INCLUDING ANY
OBLIGATION TO ANY OBLIGOR. IF, AND TO THE EXTENT, THIS AGREEMENT DOES NOT
CONSTITUTE A VALID SALE, ASSIGNMENT, TRANSFER AND CONVEYANCE OF ALL RIGHT, TITLE
AND INTEREST OF EACH SELLER IN, TO AND UNDER THE PURCHASED RECEIVABLES AND THE
RECEIVABLES PROPERTY IN RESPECT THEREOF DESPITE THE INTENT OF THE PARTIES
HERETO, SUCH SELLER HEREBY GRANTS A "SECURITY INTEREST" (AS DEFINED IN THE UCC
AS IN EFFECT IN THE COMMONWEALTH OF PENNSYLVANIA) IN THE PURCHASED RECEIVABLES,
THE RECEIVABLES PROPERTY IN RESPECT THEREOF AND ALL PROCEEDS THEREOF TO THE
COMPANY, AND THE PARTIES AGREE THAT THIS AGREEMENT SHALL CONSTITUTE A SECURITY
AGREEMENT UNDER THE UCC IN EFFECT IN THE COMMONWEALTH OF PENNSYLVANIA.
(D) IN CONNECTION WITH THE FOREGOING CONVEYANCES, EACH SELLER AGREES
TO RECORD AND FILE, OR CAUSE TO BE RECORDED AND FILED, AT ITS OWN EXPENSE,
FINANCING STATEMENTS (AND CONTINUATION STATEMENTS WITH RESPECT TO SUCH FINANCING
STATEMENTS WHEN APPLICABLE), OR, WHERE APPLICABLE, REGISTRATIONS IN THE
APPROPRIATE RECORDS, (I) WITH RESPECT TO THE RECEIVABLES NOW EXISTING AND
HEREAFTER ACQUIRED PURSUANT TO THIS AGREEMENT BY THE COMPANY FROM THE SELLERS
AND (II) WITH RESPECT TO ANY OTHER RECEIVABLES PROPERTY FOR WHICH A SECURITY
INTEREST MAY BE PERFECTED UNDER THE RELEVANT UCC, LEGISLATION OR SIMILAR
STATUTES BY SUCH FILING, IN EACH CASE MEETING THE REQUIREMENTS OF APPLICABLE
STATE LAW IN SUCH MANNER AND IN SUCH JURISDICTIONS AS ARE NECESSARY TO PERFECT
AND MAINTAIN PERFECTION OF THE COMPANY'S PURCHASE OF OWNERSHIP INTERESTS IN
RECEIVABLES AND RECEIVABLES PROPERTY FROM THE SELLERS, AND TO DELIVER TO THE
COMPANY AND THE TRUSTEE NO LATER THAN 10 DAYS AFTER THE EFFECTIVE DATE (I) WHERE
APPLICABLE, A FILE-STAMPED COPY OR CERTIFIED STATEMENT OF SUCH FINANCING
STATEMENT OR OTHER EVIDENCE OF SUCH FILING OR REGISTRATION AND (II) OTHERWISE, A
PHOTOCOPY, CERTIFIED BY A RESPONSIBLE OFFICER TO BE A TRUE AND CORRECT COPY, OF
SUCH FINANCING STATEMENT OR OTHER FILING MADE NO LATER THAN 10 DAYS AFTER THE
EFFECTIVE DATE.
(E) IN CONNECTION WITH THE FOREGOING CONVEYANCES, EACH SELLER AGREES
AT ITS OWN EXPENSE, AS AGENT OF THE COMPANY (I) NO LATER THAN 30 DAYS AFTER THE
EFFECTIVE DATE, TO INDICATE OR CAUSE TO BE INDICATED ON THE COMPUTER FILES (BUT
NOT ON INDIVIDUAL INVOICES OR INDIVIDUAL COLLECTION FILES) RELATING TO SUCH
RECEIVABLES (BY MEANS OF A GENERAL LEGEND, SUBSTANTIALLY IN THE FORM DESCRIBED
ON SCHEDULE 9 HERETO, THAT WILL AUTOMATICALLY APPEAR EACH TIME A PERSON ENTERS
THE SELLERS' RECEIVABLES PROGRAM) THAT, UNLESS OTHERWISE SPECIFICALLY IDENTIFIED
AS A RECEIVABLE NOT SO SOLD, TRANSFERRED, ASSIGNED AND CONVEYED, ALL RECEIVABLES
(AND ANY SUCH OTHER RECEIVABLES) INCLUDED THEREIN AND ALL OTHER RECEIVABLES
PROPERTY (AND ANY OTHER SIMILAR RELATED PROPERTY) HAVE BEEN SOLD, TRANSFERRED,
ASSIGNED AND CONVEYED TO THE COMPANY
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IN ACCORDANCE WITH THIS AGREEMENT AND (II) ON OR PRIOR TO THE EFFECTIVE DATE TO
DELIVER, TO THE COMPANY COMPUTER FILES, MICROFICHE LISTS OR TYPED OR PRINTED
LISTS (THE "RECEIVABLES LISTS") CONTAINING TRUE AND COMPLETE LISTS OF ALL SUCH
RECEIVABLES, IDENTIFIED BY OBLIGOR AND SETTING FORTH THE RECEIVABLES BALANCE FOR
EACH RECEIVABLE AS OF THE CUT-OFF DATE.
(F) AS FURTHER CONFIRMATION OF THE SALE OF THE RECEIVABLES BUT
SUBJECT TO SUBSECTION 6.02(B), IT IS UNDERSTOOD AND AGREED THAT THE COMPANY
SHALL HAVE THE FOLLOWING RIGHTS:
(A) THE COMPANY (AND ITS ASSIGNEES) SHALL HAVE THE RIGHT AT
ANY TIME TO (I) NOTIFY, OR REQUIRE THAT SUCH SELLER AT ITS OWN
EXPENSE NOTIFY, THE RESPECTIVE OBLIGORS OF THE COMPANY'S OWNERSHIP
OF THE PURCHASED RECEIVABLES AND RECEIVABLES PROPERTY, (II) DIRECT
THAT PAYMENT OF ALL AMOUNTS DUE OR TO BECOME DUE UNDER THE PURCHASED
RECEIVABLES BE MADE DIRECTLY TO THE COMPANY OR ITS DESIGNEE, (III)
SUE FOR COLLECTION ON ANY PURCHASED RECEIVABLE OR (IV) SELL ANY
PURCHASED RECEIVABLES TO ANY PERSON FOR A PRICE THAT IS ACCEPTABLE
TO THE COMPANY (OR ITS ASSIGNEE);
(B) SUCH SELLER SHALL, UPON WRITTEN REQUEST OF THE COMPANY,
AND AT SUCH SELLER'S EXPENSE (I) DELIVER TO THE COMPANY OR A PARTY
DESIGNATED BY THE COMPANY ALL DOCUMENTS, INSTRUMENTS AND OTHER
RECORDS (INCLUDING CREDIT FILES) THAT EVIDENCE OR RECORD THE
RECEIVABLES SOLD BY SUCH SELLER AND ALL LICENSES, RIGHTS, COMPUTER
PROGRAMS, RELATED MATERIAL, COMPUTER TAPES, DISKS, CASSETTES AND
DATA NECESSARY TO THE IMMEDIATE COLLECTION OF THE PURCHASED
RECEIVABLES BY THE COMPANY, WITH OR WITHOUT THE PARTICIPATION OF
SUCH SELLER AND (II) MAKE SUCH ARRANGEMENTS WITH RESPECT TO THE
COLLECTION OF THE PURCHASED RECEIVABLES AS MAY BE REASONABLY
REQUIRED BY THE COMPANY. IN RECOGNITION OF SUCH SELLER'S NEED TO
HAVE ACCESS TO ANY DOCUMENTS WHICH MAY BE TRANSFERRED TO THE COMPANY
HEREUNDER, WHETHER AS A RESULT OF ITS CONTINUING BUSINESS
RELATIONSHIP WITH ANY OBLIGOR FOR RECEIVABLES PURCHASED HEREUNDER OR
AS A RESULT OF ITS RESPONSIBILITIES AS A SUB-SERVICER, THE COMPANY
HEREBY GRANTS TO SUCH SELLER AN IRREVOCABLE LICENSE TO ACCESS THE
DOCUMENTS TRANSFERRED BY SUCH SELLER TO THE COMPANY AND TO ACCESS
ANY SUCH TRANSFERRED COMPUTER SOFTWARE IN CONNECTION WITH ANY
ACTIVITY ARISING IN THE ORDINARY COURSE OF SUCH SELLER'S BUSINESS OR
IN PERFORMANCE OF SUCH SELLER'S DUTIES AS A SERVICING PARTY,
PROVIDED, HOWEVER, THAT SUCH SELLER SHALL NOT DISRUPT OR OTHERWISE
INTERFERE WITH THE COMPANY'S USE OF AND ACCESS TO THE DOCUMENTS AND
ITS COMPUTER SOFTWARE DURING SUCH LICENSE PERIOD; AND
(C) SUCH SELLER HEREBY GRANTS TO THE COMPANY AN IRREVOCABLE
POWER OF ATTORNEY (COUPLED WITH AN INTEREST) TO TAKE ANY AND ALL
STEPS IN SUCH SELLER'S NAME NECESSARY OR DESIRABLE, IN THE
REASONABLE OPINION OF THE COMPANY, TO COLLECT ALL AMOUNTS DUE UNDER
THE PURCHASED RECEIVABLES, INCLUDING, WITHOUT LIMITATION, ENFORCING
THE PURCHASED RECEIVABLES, EXERCISING ALL RIGHTS AND REMEDIES IN
RESPECT THEREOF AND, WITHOUT REGARD TO THE LIMITATION SET FORTH IN
SUBSECTION 6.02(B), ENDORSING SUCH SELLER'S NAME ON CHECKS AND OTHER
INSTRUMENTS REPRESENTING COLLECTIONS.
10
SECTION 2.02. PURCHASE PRICE. THE AMOUNT PAYABLE BY THE COMPANY TO A
SELLER (THE "PURCHASE PRICE") FOR RECEIVABLES AND RECEIVABLES PROPERTY ON ANY
PAYMENT DATE UNDER THIS AGREEMENT SHALL BE EQUAL TO THE PRODUCT OF (A) THE
AGGREGATE OUTSTANDING PRINCIPAL AMOUNT OF SUCH RECEIVABLES AS SET FORTH IN THE
APPLICABLE DAILY REPORT TIMES (B) THE DISCOUNTED PERCENTAGE WITH RESPECT TO SUCH
SELLER PLUS, ON THE EFFECTIVE DATE, THE AGGREGATE OF ALL AMOUNTS ON DEPOSIT IN
LOCKBOX ACCOUNTS OR ELIGIBLE SEGREGATED ACCOUNTS WHICH WERE NOT AVAILABLE FUNDS
ON SUCH DATE.
SECTION 2.03. PAYMENT OF PURCHASE PRICE. (A) UPON THE FULFILLMENT OF
THE CONDITIONS SET FORTH IN ARTICLE III, THE PURCHASE PRICE FOR RECEIVABLES AND
THE RECEIVABLES PROPERTY SHALL BE PAID OR PROVIDED FOR BY THE COMPANY IN THE
MANNER PROVIDED BELOW ON EACH DAY FOR WHICH A DAILY REPORT IS DELIVERED TO THE
COMPANY (EACH SUCH DAY, A "PAYMENT DATE") IN RESPECT OF A REPORTED DAY (WHICH
DAILY REPORT SHALL SPECIFY, BY SELLER, THE PRINCIPAL AMOUNT OF RECEIVABLES BEING
SOLD ON SUCH PAYMENT DATE, THE AGGREGATE PURCHASE PRICE FOR SUCH RECEIVABLES AND
THE COMPONENTS OF PAYMENT AS PROVIDED IN PARAGRAPH (B) BELOW).
(B) THE PURCHASE PRICE FOR RECEIVABLES AND RECEIVABLES PROPERTY
SHALL BE PAID BY THE COMPANY ON EACH PAYMENT DATE (INCLUDING THE INITIAL PAYMENT
DATE) AS FOLLOWS:
(I) BY NETTING THE AMOUNT OF ANY SELLER ADJUSTMENT PAYMENTS OR
SELLER REPURCHASE PAYMENTS PURSUANT TO SECTION 2.05 OR 2.06 AGAINST SUCH
PURCHASE PRICE;
(II) TO THE EXTENT AVAILABLE FOR SUCH PURPOSE, IN CASH FROM
COLLECTIONS RELEASED TO THE COMPANY PURSUANT TO THE POOLING AGREEMENT;
(III) TO THE EXTENT AVAILABLE FOR SUCH PURPOSE, IN CASH FROM
THE NET PROCEEDS OF A TRANSFER OF INTERESTS IN PURCHASED RECEIVABLES BY
THE COMPANY TO OTHER PERSONS;
(IV) TO THE EXTENT AVAILABLE FOR SUCH PURPOSE, IN CASH FROM
THE PROCEEDS OF CAPITAL CONTRIBUTED BY WESCO TO THE COMPANY, IF ANY, IN
RESPECT OF ITS EQUITY INTEREST IN THE COMPANY; AND
(V) AT THE OPTION OF THE COMPANY (SUBJECT TO THE PROVISIONS OF
SECTION 8.01), BY MEANS OF AN ADDITION TO THE PRINCIPAL AMOUNT OF THE
SELLER NOTE IN AN AGGREGATE AMOUNT UP TO THE REMAINING PORTION OF THE
PURCHASE PRICE. ANY SUCH ADDITION TO THE PRINCIPAL AMOUNT OF THE SELLER
NOTE SHALL BE ALLOCATED AMONG THE SELLERS (PRO RATA ACCORDING TO THE
PRINCIPAL AMOUNT OF RECEIVABLES SOLD BY EACH SELLER) BY THE SERVICER IN
ACCORDANCE WITH THE PROVISIONS OF THIS SUBSECTION 2.03(B)(V) AND SECTION
8.01. THE SERVICER MAY EVIDENCE SUCH ADDITIONAL PRINCIPAL AMOUNTS BY
RECORDING THE DATE AND AMOUNT THEREOF ON THE GRID ATTACHED TO SUCH SELLER
NOTE; PROVIDED, HOWEVER, THAT THE FAILURE TO MAKE ANY SUCH RECORDATION OR
ANY ERROR IN SUCH GRID SHALL NOT ADVERSELY AFFECT ANY SELLER'S RIGHTS.
(C) THE SERVICER SHALL BE RESPONSIBLE, IN ITS SOLE DISCRETION BUT IN
ACCORDANCE WITH SUBSECTION 2.03(A), FOR ALLOCATING AMONG THE SELLERS THE PAYMENT
OF THE PURCHASE PRICE FOR RECEIVABLES AND ANY AMOUNTS NETTED THEREFROM PURSUANT
TO SUBSECTION 2.03(B)(I), EITHER IN THE FORM OF CASH RECEIVED FROM THE COMPANY
OR AS AN ADDITION TO THE
11
PRINCIPAL AMOUNT OF A SELLER'S INTEREST IN THE SELLER NOTE. THE COMPANY SHALL BE
ENTITLED TO PAY ALL AMOUNTS IN RESPECT OF THE PURCHASE PRICE OF RECEIVABLES AND
RECEIVABLES PROPERTY TO AN ACCOUNT OF THE SERVICER FOR ALLOCATION BY THE
SERVICER TO THE SELLERS, AND EACH OF THE SELLERS HEREBY APPOINT THE SERVICER AS
THEIR AGENT FOR PURPOSES OF RECEIVING SUCH PAYMENTS AND MAKING SUCH ALLOCATIONS
AND HEREBY AUTHORIZES THE COMPANY TO MAKE ALL PAYMENTS DUE TO SUCH SELLER
DIRECTLY TO, OR AS DIRECTED BY, THE SERVICER. THE SERVICER HEREBY ACCEPTS AND
AGREES TO SUCH APPOINTMENT. ALL PAYMENTS UNDER THIS AGREEMENT SHALL BE MADE NOT
LATER THAN 3:00 P.M (NEW YORK CITY TIME) ON THE DATE SPECIFIED THEREFOR IN
DOLLARS IN SAME DAY FUNDS OR BY CHECK, AS THE SERVICER SHALL ELECT AND TO THE
BANK ACCOUNT DESIGNATED IN WRITING BY THE SERVICER TO THE COMPANY.
(D) WHENEVER ANY PAYMENT TO BE MADE UNDER THIS AGREEMENT SHALL BE
STATED TO BE DUE ON A DAY OTHER THAN A BUSINESS DAY, SUCH PAYMENT SHALL BE MADE
ON THE NEXT SUCCEEDING BUSINESS DAY. AMOUNTS NOT PAID WHEN DUE IN ACCORDANCE
WITH THE TERMS OF THIS AGREEMENT SHALL BEAR INTEREST AT A RATE EQUAL AT ALL
TIMES TO THE REFERENCE RATE, PAYABLE ON DEMAND.
SECTION 2.04. NO REPURCHASE. EXCEPT TO THE EXTENT EXPRESSLY SET
FORTH HEREIN, NO SELLER SHALL HAVE ANY RIGHT OR OBLIGATION UNDER THIS AGREEMENT,
BY IMPLICATION OR OTHERWISE, TO REPURCHASE FROM THE COMPANY ANY PURCHASED
RECEIVABLES OR RECEIVABLES PROPERTY OR TO RESCIND OR OTHERWISE RETROACTIVELY
AFFECT ANY PURCHASE OF ANY PURCHASED RECEIVABLES OR RECEIVABLES PROPERTY AFTER
THE PAYMENT DATE RELATING THERETO.
SECTION 2.05. REBATES, ADJUSTMENTS, RETURNS AND REDUCTIONS;
MODIFICATIONS. FROM TIME TO TIME, A SELLER MAY MAKE DILUTION ADJUSTMENTS TO
RECEIVABLES IN ACCORDANCE WITH THIS SUBSECTION 2.05 AND SUBSECTION 5.03(C). THE
SELLERS (OTHER THAN THOSE SELLERS FROM WHICH THE COMPANY HAS NO RECEIVABLES
OUTSTANDING AT SUCH TIME), JOINTLY AND SEVERALLY, AGREE TO PAY TO THE COMPANY
THE AMOUNT OF ANY SUCH DILUTION ADJUSTMENT (A "SELLER ADJUSTMENT PAYMENT");
PROVIDED, HOWEVER, THAT SUCH PAYMENT SHALL BE MADE NO LATER THAN THE SETTLEMENT
REPORT DATE OF THE MONTH FOLLOWING THE GRANT OF THE DILUTION ADJUSTMENT
(REGARDLESS OF WHICH SELLER SHALL HAVE GRANTED SUCH DILUTION ADJUSTMENT);
PROVIDED, FURTHER, THAT, PRIOR TO THE OCCURRENCE OF ANY EARLY TERMINATION WITH
RESPECT TO ALL SELLERS, ANY SUCH SELLER ADJUSTMENT PAYMENT KNOWN TO BE OWING TO
THE COMPANY ON ANY PAYMENT DATE SHALL, ON SUCH PAYMENT DATE, BE NETTED AGAINST
THE PURCHASE PRICE OF NEWLY CREATED RECEIVABLES IN ACCORDANCE WITH SUBSECTION
2.03(B)(I) TO THE EXTENT OF SUCH PRINCIPAL AMOUNT AND THE REMAINING AMOUNT OF
SUCH SELLER ADJUSTMENT PAYMENT KNOWN TO BE OWING TO THE COMPANY AFTER SUCH
NETTING, IF ANY, (OR FOLLOWING AN EARLY TERMINATION WITH RESPECT TO ALL SELLERS,
THE FULL AMOUNT) SHALL BE PAID TO THE COMPANY ON SUCH DATE IN CASH. THE AMOUNT
OF ANY DILUTION ADJUSTMENT POSTED ON ANY REPORTED DAY SHALL BE SET FORTH ON THE
DAILY REPORT PREPARED WITH RESPECT TO SUCH REPORTED DAY.
SECTION 2.06. LIMITED REPURCHASE OBLIGATION. IN THE EVENT THAT (I)
ANY REPRESENTATION OR WARRANTY CONTAINED IN SECTION 4.02 IN RESPECT OF ANY
RECEIVABLE TRANSFERRED TO THE COMPANY IS NOT TRUE AND CORRECT IN ANY MATERIAL
RESPECT ON THE APPLICABLE PAYMENT DATE, OR (II) THERE IS A BREACH OF ANY
COVENANT CONTAINED IN SUBSECTION 5.01(C), (F) OR (N) OR SECTION 5.03 WITH
RESPECT TO ANY RECEIVABLE IN ANY MATERIAL RESPECT OR (III) THE COMPANY'S
INTEREST IN ANY RECEIVABLE IS NOT A FIRST PRIORITY PERFECTED OWNERSHIP OR
SECURITY INTEREST AT ANY
12
TIME AS A RESULT OF ANY ACTION TAKEN BY, OR ANY FAILURE TO TAKE ACTION BY, ANY
SELLER, THEN THE SELLERS (OTHER THAN THOSE SELLERS FROM WHICH THE COMPANY HAS NO
RECEIVABLES OUTSTANDING AT SUCH TIME), JOINTLY AND SEVERALLY, AGREE TO PAY TO
THE COMPANY AN AMOUNT EQUAL TO THE PRINCIPAL AMOUNT (DETERMINED AS OF THE
PAYMENT DATE FOR SUCH RECEIVABLE) OF SUCH RECEIVABLE (WHETHER THE COMPANY PAID
SUCH PURCHASE PRICE IN CASH OR OTHERWISE) LESS COLLECTIONS RECEIVED BY THE
COMPANY IN RESPECT OF SUCH RECEIVABLE, REGARDLESS OF WHICH SELLER SHALL HAVE
BEEN RESPONSIBLE FOR SUCH INCORRECTNESS OR BREACH, SUCH PAYMENT TO OCCUR NO
LATER THAN THE PAYMENT DATE OCCURRING ON THE 30TH DAY (OR, IF SUCH 30TH DAY IS
NOT A PAYMENT DATE, ON THE PAYMENT DATE IMMEDIATELY SUCCEEDING SUCH 30TH DAY)
AFTER THE DAY SUCH BREACH OR INCORRECTNESS BECOMES KNOWN (OR SHOULD HAVE BECOME
KNOWN WITH DUE DILIGENCE) TO ANY SELLER (UNLESS SUCH BREACH OR INCORRECTNESS
SHALL HAVE BEEN CURED ON OR BEFORE SUCH DAY); PROVIDED, HOWEVER, THAT, PRIOR TO
ANY EARLY TERMINATION WITH RESPECT TO ALL SELLERS, ANY SUCH PAYMENT DUE AND
OWING TO THE COMPANY ON SUCH PAYMENT DATE SHALL BE NETTED AGAINST THE PURCHASE
PRICE OF NEWLY CREATED RECEIVABLES IN ACCORDANCE WITH SUBSECTION 2.03(B)(I) TO
THE EXTENT OF SUCH PRINCIPAL AMOUNT AND THE REMAINING AMOUNT OF SUCH PAYMENT DUE
TO THE COMPANY AFTER SUCH NETTING, IF ANY, (OR FOLLOWING AN EARLY TERMINATION
WITH RESPECT TO ALL SELLERS, THE FULL AMOUNT) SHALL BE PAID TO THE COMPANY IN
CASH TO THE EXTENT STILL UNPAID ON SUCH PAYMENT DATE. ANY PAYMENT BY ANY SELLER
PURSUANT TO THIS SECTION 2.06 IS REFERRED TO AS A "SELLER REPURCHASE PAYMENT".
THE OBLIGATION TO REACQUIRE ANY RECEIVABLE SHALL, UPON SATISFACTION THEREOF,
CONSTITUTE THE SOLE REMEDY RESPECTING THE EVENT GIVING RISE TO SUCH OBLIGATION
AVAILABLE TO THE COMPANY. SIMULTANEOUSLY WITH ANY SELLER REPURCHASE PAYMENT WITH
RESPECT TO ANY RECEIVABLE, SUCH RECEIVABLE AND THE RECEIVABLES PROPERTY WITH
RESPECT THERETO SHALL IMMEDIATELY AND AUTOMATICALLY BE SOLD, ASSIGNED,
TRANSFERRED AND CONVEYED BY THE COMPANY TO THE APPLICABLE SELLER WITHOUT ANY
FURTHER ACTION BY THE COMPANY OR ANY OTHER PERSON.
SECTION 2.07. OBLIGATIONS UNAFFECTED. THE OBLIGATIONS OF THE SELLERS
TO THE COMPANY UNDER THIS AGREEMENT SHALL NOT BE AFFECTED BY REASON OF ANY
INVALIDITY OR ILLEGALITY OF ANY RECEIVABLE OR ANY SALE OF A RECEIVABLE.
SECTION 2.08. CERTAIN CHARGES. EACH SELLER AND THE COMPANY AGREE
THAT LATE CHARGE REVENUE, REVERSALS OF DISCOUNTS, OTHER FEES AND CHARGES AND
OTHER SIMILAR ITEMS, WHENEVER CREATED, ACCRUED IN RESPECT OF PURCHASED
RECEIVABLES SHALL BE THE PROPERTY OF THE COMPANY NOTWITHSTANDING THE OCCURRENCE
OF AN EARLY TERMINATION AND ALL COLLECTIONS WITH RESPECT THERETO SHALL CONTINUE
TO BE ALLOCATED AND TREATED AS COLLECTIONS IN RESPECT OF PURCHASED RECEIVABLES.
SECTION 2.09. CERTAIN ALLOCATIONS. EACH SELLER HEREBY AGREES THAT,
FOLLOWING THE OCCURRENCE OF AN EARLY TERMINATION WITH RESPECT TO SUCH SELLER,
ALL COLLECTIONS AND OTHER PROCEEDS RECEIVED IN RESPECT OF RECEIVABLES GENERATED
BY SUCH SELLER SHALL BE APPLIED, FIRST, TO PAY THE OUTSTANDING PRINCIPAL AMOUNT
OF PURCHASED RECEIVABLES (AS OF THE DATE OF SUCH EARLY TERMINATION) OF THE
OBLIGOR TO WHOM SUCH COLLECTIONS ARE ATTRIBUTABLE UNTIL SUCH PURCHASED
RECEIVABLES ARE PAID IN FULL AND, SECOND, TO THE RELATED SELLER TO PAY
RECEIVABLES OF SUCH OBLIGOR NOT SOLD TO THE COMPANY; PROVIDED, HOWEVER, THAT
NOTWITHSTANDING THE FOREGOING, IF THE SELLER CAN ATTRIBUTE A COLLECTION TO A
SPECIFIC OBLIGOR AND A SPECIFIC RECEIVABLE, THEN SUCH COLLECTION SHALL BE
APPLIED TO PAY SUCH RECEIVABLE OF SUCH OBLIGOR. THE COMPANY AND THE SERVICER
SHALL TAKE SUCH ACTION AS THE SELLER MAY REASONABLY REQUEST, AT THE EXPENSE OF
THE
13
SELLER, TO ASSURE THAT ANY RECEIVABLE NOT SOLD TO THE COMPANY, THE RELATED
PROPERTY AND COLLECTIONS WITH RESPECT THERETO DO NOT REMAIN COMMINGLED WITH
OTHER COLLECTIONS HEREUNDER AND ARE IMMEDIATELY PAID TO THE SELLER.
SECTION 2.10. FURTHER ASSURANCES. FROM TIME TO TIME AT THE REQUEST
OF A SELLER, THE COMPANY SHALL DELIVER TO SUCH SELLER SUCH DOCUMENTS,
ASSIGNMENTS, RELEASES AND INSTRUMENTS OF TERMINATION AS SUCH SELLER MAY
REASONABLY REQUEST TO EVIDENCE THE RECONVEYANCE BY THE COMPANY TO SUCH SELLER OF
A RECEIVABLE PURSUANT TO THE TERMS OF SECTION 2.01(B), 2.06 OR 2.11(B),
PROVIDED, HOWEVER, THAT THE COMPANY SHALL HAVE BEEN PAID ALL AMOUNTS DUE
THEREUNDER; AND THE COMPANY AND THE SERVICER SHALL TAKE SUCH ACTION AS SUCH
SELLER MAY REASONABLY REQUEST, AT THE EXPENSE OF SUCH SELLER, TO ASSURE THAT ANY
SUCH RECEIVABLE, THE RELATED PROPERTY AND COLLECTIONS WITH RESPECT THERETO DO
NOT REMAIN COMMINGLED WITH OTHER COLLECTIONS HEREUNDER.
SECTION 2.11. PURCHASE OF SELLERS' INTEREST IN RECEIVABLES AND
RECEIVABLES PROPERTY. (A) IN THE EVENT OF ANY BREACH OF ANY OF THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN SUBSECTION 4.01 (A), (B), (C), (E),
(F) OR (G), AS OF THE DATE MADE, WHICH BREACH HAS A MATERIAL ADVERSE EFFECT ON
THE INTERESTS OF THE COMPANY IN THE RECEIVABLES OR THE RECEIVABLES PROPERTY,
THEN THE COMPANY, BY NOTICE THEN GIVEN IN WRITING TO THE SELLERS, MAY DIRECT THE
SELLERS TO PURCHASE ALL RECEIVABLES AND RECEIVABLES PROPERTY AND THE SELLERS
(OTHER THAN THOSE SELLERS FROM WHICH THE COMPANY HAS NO RECEIVABLES OUTSTANDING
AT SUCH TIME), JOINTLY AND SEVERALLY, SHALL BE OBLIGATED TO MAKE SUCH PURCHASE
30 DAYS AFTER RECEIPT OF SUCH NOTICE ON THE TERMS AND CONDITIONS SET FORTH IN
SUBSECTION 2.11(B) BELOW; PROVIDED, HOWEVER, THAT NO SUCH PURCHASE SHALL BE
REQUIRED TO MADE IF, BY SUCH DATE, THE REPRESENTATIONS AND WARRANTIES CONTAINED
IN SUBSECTIONS 4.01(A), (B), (C), (E), (F) OR (G) SHALL BE SATISFIED IN ALL
MATERIAL RESPECTS, OR ANY MATERIAL ADVERSE EFFECT ON THE COMPANY CAUSED THEREBY
HAS BEEN CURED.
(B) THE SELLERS (OTHER THAN THOSE SELLERS FROM WHICH THE COMPANY HAS
NO RECEIVABLES OUTSTANDING AT SUCH TIME), JOINTLY AND SEVERALLY, SHALL, AS THE
PURCHASE PRICE FOR THE RECEIVABLES AND RECEIVABLES PROPERTY TO BE PURCHASED
PURSUANT TO SUBSECTION 2.11(A) ABOVE, PAY TO THE COMPANY, ON THE BUSINESS DAY
PRECEDING SUCH DISTRIBUTION DATE, AN AMOUNT EQUAL TO THE PRINCIPAL AMOUNT OF THE
PURCHASED RECEIVABLES (DETERMINED AS OF THE PAYMENT DATE OR CONTRIBUTION DATE
FOR SUCH PURCHASED RECEIVABLES), LESS COLLECTIONS RECEIVED BY THE COMPANY IN
RESPECT OF SUCH PURCHASED RECEIVABLES, AS OF SUCH DISTRIBUTION DATE. UPON
PAYMENT OF SUCH AMOUNT, IN IMMEDIATELY AVAILABLE FUNDS, TO THE COMPANY, THE
COMPANY'S RIGHTS WITH RESPECT TO THE PURCHASED RECEIVABLES SHALL TERMINATE AND
SUCH INTEREST THEREIN SHALL IMMEDIATELY AND AUTOMATICALLY BE SOLD, ASSIGNED,
TRANSFERRED AND CONVEYED BY THE COMPANY TO THE SELLERS WITHOUT ANY FURTHER
ACTION BY THE COMPANY OR ANY OTHER PERSON AND THE COMPANY SHALL HAVE NO FURTHER
RIGHTS WITH RESPECT THERETO. IF THE COMPANY GIVES NOTICE DIRECTING THE SELLERS
TO PURCHASE THE PURCHASED RECEIVABLES AS PROVIDED ABOVE, THE OBLIGATION OF THE
SELLERS TO PURCHASE THE PURCHASED RECEIVABLES PURSUANT TO THIS SECTION 2.11
SHALL, UPON SATISFACTION THEREOF, CONSTITUTE THE SOLE REMEDY RESPECTING AN EVENT
OF THE TYPE SPECIFIED IN THE FIRST SENTENCE OF THIS SECTION 2.11 AVAILABLE TO
THE COMPANY.
ARTICLE III
CONDITIONS TO PURCHASES
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SECTION 3.01. CONDITIONS PRECEDENT TO COMPANY'S INITIAL PURCHASE.
THE OBLIGATION OF THE COMPANY TO PURCHASE RECEIVABLES AND RECEIVABLES PROPERTY
HEREUNDER ON THE EFFECTIVE DATE FROM THE SELLERS IS SUBJECT TO THE CONDITIONS
PRECEDENT THAT THE COMPANY SHALL HAVE RECEIVED ON OR BEFORE THE DATE OF SUCH
PURCHASE THE FOLLOWING, EACH (UNLESS OTHERWISE INDICATED) DATED THE DAY OF SUCH
SALE AND IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY:
(A) SECRETARY'S CERTIFICATE. A CERTIFICATE OF THE SECRETARY OR AN
ASSISTANT SECRETARY OF EACH SELLER, DATED THE CLOSING DATE, AND CERTIFYING
(I) THAT ATTACHED THERETO IS A TRUE AND COMPLETE COPY OF THE BY-LAWS OF
SUCH SELLER, AS IN EFFECT ON THE EFFECTIVE DATE AND AT ALL TIMES SINCE A
DATE PRIOR TO THE DATE OF THE RESOLUTIONS DESCRIBED IN CLAUSE (II) BELOW,
(II) THAT ATTACHED THERETO IS A TRUE AND COMPLETE COPY OF THE RESOLUTIONS,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, OF THE BOARD
OF DIRECTORS OF SUCH SELLER OR COMMITTEES THEREOF AUTHORIZING THE
EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY, AND THAT SUCH RESOLUTIONS HAVE NOT BEEN
AMENDED, MODIFIED, REVOKED OR RESCINDED AND ARE IN FULL FORCE AND EFFECT,
(III) THAT THE CERTIFICATE OF INCORPORATION OF SUCH PERSON HAS NOT BEEN
AMENDED SINCE THE DATE OF THE LAST AMENDMENT THERETO SHOWN ON THE
CERTIFICATE OF GOOD STANDING (OR ITS EQUIVALENT) FURNISHED PURSUANT TO
SUBSECTION (B) BELOW AND (IV) AS TO THE INCUMBENCY AND SPECIMEN SIGNATURE
OF EACH OFFICER EXECUTING THIS AGREEMENT AND ANY OTHER TRANSACTION
DOCUMENTS OR ANY OTHER DOCUMENT DELIVERED IN CONNECTION HEREWITH OR
THEREWITH ON BEHALF OF SUCH SELLER (ON WHICH CERTIFICATES THE COMPANY MAY
CONCLUSIVELY RELY UNTIL SUCH TIME AS THE COMPANY SHALL RECEIVE FROM SUCH
SELLER A REVISED CERTIFICATE WITH RESPECT TO SUCH SELLER MEETING THE
REQUIREMENTS OF THIS SUBSECTION (A));
(B) CORPORATE DOCUMENTS. THE CERTIFICATE OF INCORPORATION, INCLUDING
ALL AMENDMENTS THERETO, OF THE SELLER, CERTIFIED AS OF A RECENT DATE BY
THE SECRETARY OF STATE OR OTHER APPROPRIATE AUTHORITY OF THE STATE OF
INCORPORATION, AS THE CASE MAY BE;
(C) GOOD STANDING CERTIFICATES. CERTIFICATES OF COMPLIANCE, OF
STATUS OR OF GOOD STANDING, DATED AS OF A RECENT DATE, FROM THE SECRETARY
OF STATE OF DELAWARE AND PENNSYLVANIA;
(D) CONSENTS, LICENSES, APPROVALS, ETC. A CERTIFICATE DATED THE
CLOSING DATE OF A RESPONSIBLE OFFICER OF EACH SELLER EITHER (I) ATTACHING
COPIES OF ALL CONSENTS (INCLUDING, WITHOUT LIMITATION, CONSENTS UNDER LOAN
AGREEMENTS AND INDENTURES TO WHICH ANY SELLER OR ITS AFFILIATES ARE
PARTIES), LICENSES AND APPROVALS REQUIRED IN CONNECTION WITH THE
EXECUTION, DELIVERY AND PERFORMANCE BY SUCH SELLER OF THIS AGREEMENT AND
THE VALIDITY AND ENFORCEABILITY OF THIS AGREEMENT AGAINST SUCH SELLER, AND
SUCH CONSENTS, LICENSES AND APPROVALS SHALL BE IN FULL FORCE AND EFFECT OR
(II) STATING THAT NO SUCH CONSENTS, LICENSES OR APPROVALS ARE SO REQUIRED;
(E) NO LITIGATION. CONFIRMATION THAT THERE IS NO PENDING OR, TO ITS
KNOWLEDGE AFTER DUE INQUIRY, THREATENED ACTION OR PROCEEDING AFFECTING
SUCH SELLER OR
15
ANY OF ITS SUBSIDIARIES BEFORE ANY GOVERNMENTAL AUTHORITY THAT COULD
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT;
(F) UCC CERTIFICATE; UCC FINANCING STATEMENTS. (I) A UCC
CERTIFICATE, SUBSTANTIALLY IN THE FORM OF EXHIBIT C HERETO, DULY EXECUTED
BY A RESPONSIBLE OFFICER OF THE APPLICABLE SELLER AND DATED SUCH DATE OF
PURCHASE AND (II) EXECUTED COPIES OF SUCH PROPER FINANCING STATEMENTS,
FILED AND RECORDED AT SUCH SELLER'S EXPENSE PRIOR TO THE CLOSING DATE,
NAMING THE APPLICABLE SELLER AS THE SELLER AND THE COMPANY AS THE
PURCHASER OF THE RECEIVABLES AND THE RECEIVABLES PROPERTY, IN PROPER FORM
FOR FILING IN EACH JURISDICTION IN WHICH THE COMPANY (OR ANY OF ITS
ASSIGNEES) DEEMS IT NECESSARY OR DESIRABLE TO PERFECT THE COMPANY'S
OWNERSHIP INTEREST IN ALL RECEIVABLES AND RECEIVABLES PROPERTY UNDER THE
UCC OR ANY COMPARABLE LAW OF SUCH JURISDICTION;
(G) UCC SEARCHES. WRITTEN SEARCH REPORTS, LISTING ALL EFFECTIVE
FINANCING STATEMENTS THAT NAME THE APPLICABLE SELLER AS DEBTOR OR ASSIGNOR
AND THAT ARE FILED IN THE JURISDICTIONS IN WHICH FILINGS WERE MADE
PURSUANT TO SUBSECTION (F) ABOVE AND IN ANY OTHER JURISDICTIONS THAT THE
COMPANY DETERMINES ARE NECESSARY OR APPROPRIATE, TOGETHER WITH COPIES OF
SUCH FINANCING STATEMENTS (NONE OF WHICH, EXCEPT FOR THOSE DESCRIBED IN
SUBSECTION (F) ABOVE, SHALL COVER ANY RECEIVABLES OR RECEIVABLES
PROPERTY), AND TAX AND JUDGMENT LIEN SEARCHES SHOWING NO SUCH LIENS THAT
ARE NOT PERMITTED BY THE TRANSACTION DOCUMENTS;
(H) OTHER TRANSACTION DOCUMENTS. ORIGINAL COPIES, EXECUTED BY EACH
OF THE PARTIES THERETO, OF EACH OF THE OTHER TRANSACTION DOCUMENTS TO BE
EXECUTED AND DELIVERED IN CONNECTION HEREWITH;
(I) BACK-UP SERVICING ARRANGEMENTS. EVIDENCE THAT EACH SELLER
MAINTAINS DISASTER RECOVERY SYSTEMS AND BACK-UP COMPUTER AND OTHER
INFORMATION MANAGEMENT SYSTEMS THAT, IN THE COMPANY'S REASONABLE JUDGMENT
AS OF THE DATE HEREOF, ARE SUFFICIENT TO PROTECT SUCH SELLER'S BUSINESS
AGAINST MATERIAL INTERRUPTION OR LOSS OR DESTRUCTION OF ITS PRIMARY
COMPUTER AND INFORMATION MANAGEMENT SYSTEMS;
(J) LEGAL OPINIONS. (I) ONE OR MORE LEGAL OPINIONS FROM COUNSEL TO
THE SELLERS AND COUNSEL TO THE COMPANY TO THE EFFECT THAT:
(A) THE SALES OF RECEIVABLES BY EACH SELLER TO THE COMPANY
PURSUANT TO THIS AGREEMENT WOULD CONSTITUTE TRUE SALES AND THAT SUCH
RECEIVABLES WOULD NOT BE PROPERTY OF SUCH SELLER'S BANKRUPTCY
ESTATE; AND
(B) A COURT WOULD NOT ORDER THE SUBSTANTIVE CONSOLIDATION OF
THE ASSETS AND LIABILITIES OF THE COMPANY WITH THOSE OF ANY SELLER.
(II) ONE OR MORE LEGAL OPINIONS FROM COUNSEL TO THE SELLERS AND
COUNSEL TO THE COMPANY:
(A) TO THE EFFECT THAT EACH SELLER AND THE COMPANY, AS
APPLICABLE, HAS ALL APPROVALS, JUDICIAL, REGULATORY, LEGAL OR
OTHERWISE, NEEDED TO EXECUTE,
16
DELIVER AND PERFORM EACH TRANSACTION DOCUMENT TO WHICH IT IS A PARTY
AND THAT NO CONFLICT OR DEFAULT WILL OCCUR AS A RESULT OF THE
EXECUTION, DELIVERY AND PERFORMANCE THEREOF;
(B) TO THE EFFECT THAT THE COMPANY HAS A PERFECTED, FIRST
PRIORITY, SECURITY INTEREST IN THE RECEIVABLES; AND
(C) ADDRESSING OTHER CUSTOMARY MATTERS.
(III) EACH SUCH LEGAL OPINION SHALL ALSO BE ADDRESSED TO THE RATING
AGENCIES, THE INITIAL PURCHASER, AND THE TRUSTEE;
(K) LOCK-BOX AGREEMENT. LOCKBOX AGREEMENTS SIGNED BY THE SERVICER,
EACH SELLER (IF NECESSARY), THE COMPANY, EACH LOCKBOX PROCESSOR AND THE
TRUSTEE AND NO LATER THAN 30 DAYS AFTER THE EFFECTIVE DATE, ELIGIBLE
SEGREGATED ACCOUNT BANK ACKNOWLEDGEMENTS WITH RESPECT TO EACH ELIGIBLE
SEGREGATED ACCOUNTS;
(L) POLICIES. A COPY OF THE POLICIES, WHICH SHALL BE SATISFACTORY IN
FORM AND SUBSTANCE TO THE COMPANY;
(M) LIST OF OBLIGORS. THE RECEIVABLES LIST OF EACH SELLER SHOWING,
AS OF THE CUT-OFF DATE, THE OBLIGORS WHOSE RECEIVABLES EXIST ON THE
CUT-OFF DATE AND THE BALANCE OF THE RECEIVABLES WITH RESPECT TO EACH SUCH
OBLIGOR AS OF SUCH PRIOR DATE; AND
(N) SYSTEMS. EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THE
TRUSTEE AND THE AGENTS THAT SUCH SELLER'S SYSTEMS, PROCEDURES AND RECORD
KEEPING RELATING TO THE PURCHASED RECEIVABLES IS IN ALL MATERIAL RESPECTS
SUFFICIENT AND SATISFACTORY IN ORDER TO PERMIT THE PURCHASE AND
ADMINISTRATION OF THE PURCHASED RECEIVABLES IN ACCORDANCE WITH THE TERMS
AND INTENT OF THIS AGREEMENT.
SECTION 3.02. CONDITIONS PRECEDENT TO THE ADDITION OF A SELLER. THE
OBLIGATION OF THE COMPANY TO PURCHASE RECEIVABLES AND RECEIVABLES PROPERTY
HEREUNDER FROM A SUBSIDIARY OF WESCO REQUESTED TO BE AN ADDITIONAL SELLER
PURSUANT TO SECTION 9.12 IS SUBJECT TO THE CONDITIONS PRECEDENT THAT THE COMPANY
SHALL HAVE RECEIVED ON OR BEFORE THE DATE DESIGNATED FOR THE ADDITION OF SUCH
SELLER (THE "SELLER ADDITION DATE") AND IN FORM AND SUBSTANCE SATISFACTORY TO
THE COMPANY:
(A) ADDITIONAL SELLER SUPPLEMENT. AN ADDITIONAL SELLER SUPPLEMENT
(WITH A COPY FOR THE TRUSTEE AND EACH AGENT) DULY EXECUTED AND DELIVERED
BY SUCH SELLER.
(B) SECRETARY'S CERTIFICATE. A CERTIFICATE OF THE SECRETARY OR AN
ASSISTANT SECRETARY OF SUCH SELLER, DATED THE EFFECTIVE DATE, AND
CERTIFYING (I) THAT ATTACHED THERETO IS A TRUE AND COMPLETE COPY OF THE
BY-LAWS OF SUCH SELLER, AS IN EFFECT ON THE SELLER ADDITION DATE AND AT
ALL TIMES SINCE A DATE PRIOR TO THE DATE OF THE RESOLUTIONS DESCRIBED IN
CLAUSE (II) BELOW, (II) THAT ATTACHED THERETO IS A TRUE AND COMPLETE COPY
OF THE RESOLUTIONS, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE
COMPANY, OF THE
17
BOARD OF DIRECTORS OF SUCH SELLER OR COMMITTEES THEREOF AUTHORIZING THE
EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY, AND THAT SUCH RESOLUTIONS HAVE NOT BEEN
AMENDED, MODIFIED, REVOKED OR RESCINDED AND ARE IN FULL FORCE AND EFFECT,
(III) THAT THE CERTIFICATE OF INCORPORATION OF SUCH SELLER HAS NOT BEEN
AMENDED SINCE THE DATE OF THE LAST AMENDMENT THERETO SHOWN ON THE
CERTIFICATE OF GOOD STANDING (OR ITS EQUIVALENT) FURNISHED PURSUANT TO
SUBSECTION (E) BELOW AND (IV) AS TO THE INCUMBENCY AND SPECIMEN SIGNATURE
OF EACH OFFICER EXECUTING THE ADDITIONAL SELLER SUPPLEMENT AND ANY OTHER
TRANSACTION DOCUMENTS OR ANY OTHER DOCUMENT DELIVERED IN CONNECTION
THEREWITH ON BEHALF OF SUCH SELLER (ON WHICH CERTIFICATES THE COMPANY MAY
CONCLUSIVELY RELY UNTIL SUCH TIME AS THE COMPANY SHALL RECEIVE FROM SUCH
SELLER A REVISED CERTIFICATE WITH RESPECT TO SUCH SELLER MEETING THE
REQUIREMENTS OF THIS SUBSECTION (B));
(C) OFFICER'S CERTIFICATE. A CERTIFICATE OF A RESPONSIBLE OFFICER OF
WESCO, DATED THE EFFECTIVE DATE, AND CERTIFYING SUCH SELLER IS IN THE SAME
LINE OF BUSINESS AS THE EXISTING SELLERS AS OF THE RELATED SELLER ADDITION
DATE;
(D) CORPORATE DOCUMENTS. THE CERTIFICATE OF INCORPORATION, INCLUDING
ALL AMENDMENTS THERETO, OF SUCH SELLER, CERTIFIED AS OF A RECENT DATE BY
THE SECRETARY OF STATE OR OTHER APPROPRIATE AUTHORITY OF THE STATE OF
INCORPORATION, AS THE CASE MAY BE;
(E) GOOD STANDING CERTIFICATES. CERTIFICATES OF COMPLIANCE, OF
STATUS OR OF GOOD STANDING, DATED AS OF A RECENT DATE, FROM THE SECRETARY
OF STATE OR OTHER APPROPRIATE AUTHORITY OF SUCH JURISDICTION, WITH RESPECT
TO SUCH SELLER IN EACH STATE WHERE THE OWNERSHIP, LEASE OR OPERATION OF
PROPERTY OR THE CONDUCT OF BUSINESS REQUIRES IT TO QUALIFY AS A FOREIGN
CORPORATION, EXCEPT WHERE THE FAILURE TO SO QUALIFY WOULD NOT HAVE A
MATERIAL ADVERSE EFFECT;
(F) CONSENTS, LICENSES, APPROVALS, ETC. A CERTIFICATE DATED THE
RELATED SELLER ADDITION DATE OF A RESPONSIBLE OFFICER OF SUCH SELLER
EITHER (I) ATTACHING COPIES OF ALL CONSENTS (INCLUDING, WITHOUT
LIMITATION, CONSENTS UNDER LOAN AGREEMENTS AND INDENTURES TO WHICH ANY
SELLER OR ITS AFFILIATES ARE PARTIES), LICENSES AND APPROVALS REQUIRED IN
CONNECTION WITH THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH SELLER OF
THE ADDITIONAL SELLER SUPPLEMENT AND THE VALIDITY AND ENFORCEABILITY OF
THE ADDITIONAL SELLER SUPPLEMENT AGAINST SUCH SELLER, AND SUCH CONSENTS,
LICENSES AND APPROVALS SHALL BE IN FULL FORCE AND EFFECT OR (II) STATING
THAT NO SUCH CONSENTS, LICENSES OR APPROVALS ARE SO REQUIRED;
(G) NO LITIGATION. CONFIRMATION THAT THERE IS NO PENDING OR, TO ITS
KNOWLEDGE AFTER DUE INQUIRY, THREATENED ACTION OR PROCEEDING AFFECTING
SUCH SELLER OR ANY OF ITS SUBSIDIARIES BEFORE ANY GOVERNMENTAL AUTHORITY
THAT COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT;
(H) LOCKBOXES; ELIGIBLE SEGREGATED ACCOUNTS. A LOCKBOX ACCOUNT OR AN
ELIGIBLE SEGREGATED ACCOUNT WITH RESPECT TO RECEIVABLES TO BE SOLD BY SUCH
SELLER SHALL HAVE BEEN ESTABLISHED IN THE NAME OF THE COMPANY, EACH
INVOICE ISSUED TO AN
18
OBLIGOR ON AND AFTER THE EFFECTIVE DATE SHALL INDICATE THAT PAYMENTS IN
RESPECT OF ITS RECEIVABLE SHALL BE MADE BY SUCH OBLIGOR TO A LOCKBOX
ACCOUNT OR ELIGIBLE SEGREGATED ACCOUNT OR BY WIRE TRANSFER OR OTHER
ELECTRONIC PAYMENT TO A LOCKBOX ACCOUNT, AN ELIGIBLE SEGREGATED ACCOUNT OR
THE COLLECTION ACCOUNT OR OTHERWISE AS PROVIDED IN SECTION 2.03 OF THE
SERVICING AGREEMENT AND THE SERVICER SHALL HAVE DELIVERED (I) WITH RESPECT
TO EACH SUCH LOCKBOX ACCOUNT A LOCKBOX AGREEMENT SIGNED BY IT, THE
COMPANY, THE TRUSTEE AND APPLICABLE LOCKBOX PROCESSOR AND (II) WITH
RESPECT TO EACH SUCH ELIGIBLE SEGREGATED ACCOUNT, AN ELIGIBLE SEGREGATED
ACCOUNT BANK ACKNOWLEDGEMENT, AS THE CASE MAY BE, OR A COMMITMENT TO
TRANSFER THE SAME WITHIN 30 DAYS OF THE APPLICABLE SELLER ADDITION DATE.
(I) UCC CERTIFICATE; UCC FINANCING STATEMENTS. (I) A UCC CERTIFICATE
DULY EXECUTED BY A RESPONSIBLE OFFICER OF SUCH SELLER AND DATED THE
RELATED SELLER ADDITION DATE AND (II) EXECUTED COPIES OF SUCH PROPER
FINANCING STATEMENTS, FILED AND RECORDED AT SUCH SELLER'S EXPENSE PRIOR TO
THE RELATED SELLER ADDITION DATE, NAMING SUCH SELLER AS THE SELLER AND THE
COMPANY AS THE PURCHASER OF THE RECEIVABLES AND THE RECEIVABLES PROPERTY,
IN PROPER FORM FOR FILING IN EACH JURISDICTION IN WHICH THE COMPANY (OR
ANY OF ITS ASSIGNEES) DEEMS IT NECESSARY OR DESIRABLE TO PERFECT THE
COMPANY'S OWNERSHIP INTEREST IN ALL RECEIVABLES AND RECEIVABLES PROPERTY
UNDER THE UCC OR ANY COMPARABLE LAW OF SUCH JURISDICTION;
(J) UCC SEARCHES. WRITTEN SEARCH REPORTS, LISTING ALL EFFECTIVE
FINANCING STATEMENTS THAT NAME SUCH SELLER AS DEBTOR OR ASSIGNOR AND THAT
ARE FILED IN THE JURISDICTIONS IN WHICH FILINGS WERE MADE PURSUANT TO
SUBSECTION (I) ABOVE AND IN ANY OTHER JURISDICTIONS THAT THE COMPANY
DETERMINES ARE NECESSARY OR APPROPRIATE, TOGETHER WITH COPIES OF SUCH
FINANCING STATEMENTS (NONE OF WHICH, EXCEPT FOR THOSE DESCRIBED IN
SUBSECTION (I) ABOVE, SHALL COVER ANY RECEIVABLES OR RECEIVABLES
PROPERTY), AND TAX AND JUDGMENT LIEN SEARCHES SHOWING NO SUCH LIENS THAT
ARE NOT PERMITTED BY THE TRANSACTION DOCUMENTS;
(K) LIST OF OBLIGORS. A MICROFICHE, TYPED OR PRINTED LIST OR OTHER
TANGIBLE EVIDENCE REASONABLY ACCEPTABLE TO THE COMPANY SHOWING AS OF A
DATE ACCEPTABLE TO THE COMPANY PRIOR TO THE RELATED SELLER ADDITION DATE
THE OBLIGORS WHOSE RECEIVABLES ARE TO BE TRANSFERRED TO THE COMPANY AND
THE BALANCE OF THE RECEIVABLES WITH RESPECT TO EACH SUCH OBLIGOR AS OF
SUCH DATE;
(L) OPINIONS. LEGAL OPINIONS WITH RESPECT TO SUCH SELLER CONFORMING
TO THE REQUIREMENTS OF SECTION 3.01(J).
(M) BACK-UP SERVICING ARRANGEMENTS. EVIDENCE THAT SUCH SELLER
MAINTAINS DISASTER RECOVERY SYSTEMS AND BACK-UP COMPUTER AND OTHER
INFORMATION MANAGEMENT SYSTEMS THAT, IN THE COMPANY'S REASONABLE JUDGMENT,
ARE SUFFICIENT TO PROTECT SUCH SELLER'S BUSINESS AGAINST MATERIAL
INTERRUPTION OR LOSS OR DESTRUCTION OF ITS PRIMARY COMPUTER AND
INFORMATION MANAGEMENT SYSTEMS.
19
(N) PARTY TO SERVICING AGREEMENT. EVIDENCE THAT SUCH ADDITIONAL
SELLER SHALL HAVE BECOME A PARTY TO THE SERVICING AGREEMENT IN ITS
CAPACITY AS A SUB-SERVICER THEREUNDER.
(O) SYSTEMS. EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THE
TRUSTEE AND THE AGENTS, THAT SUCH ADDITIONAL SELLER'S SYSTEMS, PROCEDURES
AND RECORD KEEPING RELATING TO THE PURCHASED RECEIVABLES REMAIN IN ALL
MATERIAL RESPECTS SUFFICIENT AND SATISFACTORY IN ORDER TO PERMIT THE
PURCHASE AND ADMINISTRATION OF THE PURCHASED RECEIVABLES IN ACCORDANCE
WITH THE TERMS AND INTENT OF THIS AGREEMENT.
SECTION 3.03. CONDITIONS PRECEDENT TO ALL THE COMPANY'S PURCHASES OF
RECEIVABLES. THE OBLIGATION OF THE COMPANY TO PAY FOR ANY RECEIVABLE AND THE
RECEIVABLES PROPERTY WITH RESPECT THERETO ON EACH PAYMENT DATE (INCLUDING THE
EFFECTIVE DATE) SHALL BE SUBJECT TO THE FURTHER CONDITIONS PRECEDENT THAT, ON
AND AS OF SUCH PAYMENT DATE:
(A) THE FOLLOWING STATEMENTS SHALL BE TRUE (AND THE ACCEPTANCE BY
THE RELEVANT SELLER OF THE PURCHASE PRICE FOR SUCH RECEIVABLE ON SUCH
PAYMENT DATE SHALL CONSTITUTE A REPRESENTATION AND WARRANTY BY SUCH SELLER
THAT ON SUCH PAYMENT DATE SUCH STATEMENTS ARE TRUE):
(I) THE REPRESENTATION AND WARRANTIES OF SUCH SELLER
CONTAINED IN SECTIONS 4.01 AND 4.02 SHALL BE TRUE AND CORRECT IN ALL
MATERIAL RESPECTS ON AND AS OF SUCH PAYMENT DATE AS THOUGH MADE ON
AND AS OF SUCH DATE EXCEPT TO THE EXTENT ANY SUCH REPRESENTATION OR
WARRANTY IS EXPRESSLY MADE ONLY AS OF ANOTHER DATE (IN WHICH CASE IT
SHALL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS ON AND AS OF SUCH
OTHER DATE);
(II) AFTER GIVING EFFECT TO SUCH PURCHASE, NO (A) EARLY
TERMINATION WITH RESPECT TO SUCH SELLER OR (B) POTENTIAL PURCHASE
TERMINATION EVENT WITH RESPECT TO A PURCHASE TERMINATION EVENT SET
FORTH IN CLAUSE (G)(II) OF SECTION 6.01 SHALL HAVE OCCURRED AND BE
CONTINUING; AND
(III) THERE HAS BEEN NO MATERIAL ADVERSE CHANGE SINCE THE
DATE OF THIS AGREEMENT IN THE COLLECTIBILITY OF THE RECEIVABLES
TAKEN AS A WHOLE (OTHER THAN DUE TO A CHANGE IN THE CREDITWORTHINESS
OF THE OBLIGORS);
(B) THE COMPANY SHALL HAVE RECEIVED (AFTER GIVING EFFECT TO
SUBSECTION 2.03(B)(I)) PAYMENT IN FULL OF ALL AMOUNTS FOR WHICH PAYMENT IS
DUE FROM SUCH SELLER PURSUANT TO SECTIONS 2.05, 2.06 OR 7.01;
(C) THE COMPANY SHALL HAVE RECEIVED SUCH OTHER APPROVALS, OPINIONS
OR DOCUMENTS AS THE COMPANY MAY REASONABLY REQUEST; AND
(D) SUCH SELLER SHALL HAVE COMPLIED WITH ALL OF ITS COVENANTS IN ALL
MATERIAL RESPECTS AND SATISFIED ALL OF ITS OBLIGATIONS IN ALL MATERIAL
RESPECTS UNDER THIS AGREEMENT REQUIRED TO BE COMPLIED WITH OR SATISFIED AS
OF SUCH DATE;
20
PROVIDED, HOWEVER, THAT THE FAILURE OF SUCH SELLER TO SATISFY ANY OF THE
FOREGOING CONDITIONS SHALL NOT PREVENT SUCH SELLER FROM SUBSEQUENTLY SELLING
RECEIVABLES UPON SATISFACTION OF ALL SUCH CONDITIONS OR EXERCISING ITS RIGHTS
UNDER SUBSECTION 2.01(B).
SECTION 3.04. CONDITION PRECEDENT TO EACH SELLER'S OBLIGATIONS. THE
OBLIGATION OF A SELLER TO SELL ANY RECEIVABLE GENERATED BY IT ON ANY DATE
(INCLUDING ON THE EFFECTIVE DATE) SHALL BE SUBJECT TO THE CONDITION PRECEDENT
THAT, ON THE RELATED PAYMENT DATE, THE FOLLOWING STATEMENT SHALL BE TRUE (AND
THE PAYMENT BY THE COMPANY OF THE PURCHASE PRICE FOR SUCH RECEIVABLE ON SUCH
DATE SHALL CONSTITUTE A REPRESENTATION AND WARRANTY BY THE COMPANY THAT ON SUCH
PAYMENT DATE THE STATEMENTS IN CLAUSE (II) ARE TRUE): (I) NO PURCHASE
TERMINATION EVENT SET FORTH IN PARAGRAPH (G) (OTHER THAN CLAUSE (V) THEREOF) OF
SECTION 6.01 SHALL HAVE OCCURRED AND BE CONTINUING AND (II) NO EARLY
AMORTIZATION EVENT OR POTENTIAL EARLY AMORTIZATION EVENT IN EACH CASE OF A TYPE
SET FORTH IN PARAGRAPH (A) (OTHER THAN CLAUSE (V) THEREOF) OF SECTION 7.1 OF THE
POOLING AGREEMENT (AS IN EFFECT ON THE DATE HEREOF) SHALL HAVE OCCURRED AND BE
CONTINUING.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. EACH
SELLER HEREBY REPRESENTS AND WARRANTS, AS TO ITSELF ONLY, FOR THE BENEFIT OF THE
COMPANY AND ITS ASSIGNS (INCLUDING THE TRUSTEE) ON THE APPLICABLE EFFECTIVE DATE
AND ON EACH PAYMENT DATE AS FOLLOWS:
(A) CORPORATE EXISTENCE. SUCH SELLER (I) IS A CORPORATION DULY
INCORPORATED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE
JURISDICTION OF ITS ORGANIZATION, (II) HAS ALL REQUISITE CORPORATE POWER
AND AUTHORITY, AND ALL LEGAL RIGHT, TO OWN AND OPERATE ITS PROPERTIES, TO
LEASE THE PROPERTIES IT OPERATES AS LESSEE AND TO CONDUCT ITS BUSINESS AS
NOW CONDUCTED AND (III) IS DULY QUALIFIED AS A FOREIGN CORPORATION TO DO
BUSINESS AND IN GOOD STANDING (OR IS EXEMPT FROM SUCH REQUIREMENTS) UNDER
THE LAWS OF EACH JURISDICTION IN WHICH THE OWNERSHIP OR LEASE OF PROPERTY
OR THE CONDUCT OF ITS BUSINESS REQUIRES SUCH QUALIFICATION, EXCEPT, IN THE
CASE OF CLAUSES (II) AND (III), TO THE EXTENT THAT A FAILURE TO HAVE SUCH
POWER, AUTHORITY OR RIGHT OR TO QUALIFY AND BE IN GOOD STANDING, AS THE
CASE MAY BE, WOULD NOT BE REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE
EFFECT.
(B) CORPORATE POWER; AUTHORIZATION; CONSENTS. THE SELLER HAS THE
CORPORATE POWER AND AUTHORITY, AND THE LEGAL RIGHT, TO EXECUTE, DELIVER
AND PERFORM THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT
IS A PARTY AND HAS TAKEN ALL NECESSARY CORPORATE ACTION TO AUTHORIZE THE
EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY. NO CONSENT OR AUTHORIZATION
OF, FILING WITH, NOTICE TO OR OTHER ACT BY OR IN RESPECT OF, ANY
GOVERNMENTAL AUTHORITY OR ANY OTHER PERSON IS REQUIRED IN CONNECTION WITH
THE EXECUTION, DELIVERY, PERFORMANCE, VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY OR
AGAINST THE SELLER OTHER THAN (I) THOSE CONSENTS WHICH HAVE DULY BEEN
OBTAINED OR MADE AND ARE IN FULL FORCE AND
21
EFFECT ON THE EFFECTIVE DATE OR THE RELEVANT PAYMENT DATE, AS THE CASE MAY
BE, (II) THE FILING OF THE UCC FINANCING STATEMENTS REFERRED TO IN ARTICLE
III, ALL OF WHICH, AT THE TIME REQUIRED IN ARTICLE III, SHALL HAVE BEEN
DULY MADE AND SHALL BE IN FULL FORCE AND EFFECT, (III) THOSE THAT MAY BE
REQUIRED UNDER STATE SECURITIES OR "BLUE SKY" LAWS IN CONNECTION WITH THE
OFFERING OR SALE OF CERTIFICATES AND (IV) ANY SUCH CONSENT, AUTHORIZATION,
FILING, NOTICE OR OTHER ACT, THE ABSENCE OF WHICH WOULD NOT BE REASONABLY
LIKELY TO HAVE A MATERIAL ADVERSE EFFECT. THIS AGREEMENT AND EACH OTHER
TRANSACTION DOCUMENT TO WHICH IT IS A PARTY HAVE BEEN DULY EXECUTED AND
DELIVERED ON BEHALF OF THE SELLER.
(C) NO DEFAULT. (I) SUCH SELLER IS NOT IN DEFAULT UNDER OR WITH
RESPECT TO ANY OF ITS CONTRACTUAL OBLIGATIONS IN ANY RESPECT WHICH WOULD
BE REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT. (II) NO (A) EARLY
TERMINATION OR (B) POTENTIAL PURCHASE TERMINATION EVENT WITH RESPECT TO A
PURCHASE TERMINATION EVENT SET FORTH IN CLAUSE (G)(II) OF SECTION 6.01, IN
EACH CASE WITH RESPECT TO SUCH SELLER, HAS OCCURRED AND IS CONTINUING.
(D) VALID SALE; BINDING OBLIGATIONS. THIS AGREEMENT CONSTITUTES, AND
EACH OTHER TRANSACTION DOCUMENT TO BE SIGNED BY A RESPONSIBLE OFFICER OF
SUCH SELLER WHEN DULY EXECUTED AND DELIVERED WILL CONSTITUTE, AN
ENFORCEABLE OBLIGATION OF SUCH SELLER IN ACCORDANCE WITH ITS TERMS, EXCEPT
(A) AS SUCH ENFORCEABILITY MAY BE LIMITED BY APPLICABLE BANKRUPTCY,
INSOLVENCY, REORGANIZATION, MORATORIUM OR OTHER SIMILAR LAWS NOW OR
HEREAFTER IN EFFECT AFFECTING THE ENFORCEMENT OF CREDITORS' RIGHTS IN
GENERAL, AND (B) AS SUCH ENFORCEABILITY MAY BE LIMITED BY GENERAL
PRINCIPLES OF EQUITY (WHETHER CONSIDERED IN A SUIT AT LAW OR IN EQUITY).
(E) NO VIOLATION. THE EXECUTION, DELIVERY AND PERFORMANCE OF, AND
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY, THIS AGREEMENT AND
THE OTHER TRANSACTION DOCUMENTS AND THE FULFILLMENT OF THE TERMS HEREOF
AND THEREOF WILL NOT (I) CONFLICT WITH, RESULT IN ANY BREACH OF ANY OF THE
TERMS AND PROVISIONS OF, OR CONSTITUTE (WITH OR WITHOUT NOTICE OR LAPSE OF
TIME OR BOTH) A DEFAULT UNDER, (A) THE CERTIFICATE OR ARTICLES OF
INCORPORATION OR BY-LAWS OF SUCH SELLER OR (B) ANY INDENTURE, LOAN
AGREEMENT, MORTGAGE, DEED OF TRUST, OR OTHER MATERIAL CONTRACT, AGREEMENT
OR INSTRUMENT TO WHICH SUCH SELLER IS A PARTY OR BY WHICH SUCH SELLER OR
ANY OF ITS PROPERTIES IS BOUND, (II) RESULT IN THE CREATION OR IMPOSITION
OF ANY LIEN UPON ANY OF ITS PROPERTIES PURSUANT TO THE TERMS OF ANY SUCH
CONTRACT, INDENTURE, LOAN AGREEMENT, MORTGAGE, DEED OF TRUST, LEASE OR
OTHER AGREEMENT OR INSTRUMENT, OTHER THAN THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS OR (III) VIOLATE ANY OTHER REQUIREMENT OF LAW,
EXCEPT, IN THE CASE OF CLAUSES (I)(B), (II) AND (III) TO THE EXTENT THAT
SUCH CONFLICT, BREACH, DEFAULT, LIEN OR VIOLATION, AS THE CASE MAY BE,
WOULD NOT BE REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT.
(F) NO PROCEEDINGS. THERE ARE NO ACTIONS, SUITS OR PROCEEDINGS BY OR
BEFORE ANY ARBITRATOR OR GOVERNMENTAL AUTHORITY PENDING AGAINST OR, TO THE
KNOWLEDGE OF SUCH SELLER, THREATENED AGAINST OR AFFECTING SUCH SELLER (I)
ASSERTING THE INVALIDITY OR UNENFORCEABILITY OF THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT, (II) SEEKING TO PREVENT THE CONSUMMATION OF
ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
22
OR ANY OTHER TRANSACTION DOCUMENT, OR (III) SEEKING ANY DETERMINATION OR
RULING THAT COULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE
EFFECT (OTHER THAN THE DISCLOSED MATTERS).
(G) BULK SALES ACT. NO TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR
ANY OTHER TRANSACTION DOCUMENT WITH RESPECT TO SUCH SELLER REQUIRES
COMPLIANCE WITH, OR WILL BE SUBJECT TO AVOIDANCE UNDER, ANY BULK SALES ACT
OR SIMILAR LAW.
(H) LOCATION OF RECORDS; CHIEF EXECUTIVE OFFICE. THE CHIEF EXECUTIVE
OFFICE OF SUCH SELLER IS AS INDICATED ON SCHEDULE 2 HERETO AND IS THE
PLACE WHERE THE SELLER IS "LOCATED" FOR THE PURPOSES OF SECTION
9-103(3)(D) OF THE UCC AS IN EFFECT IN THE STATE OF NEW YORK. THE STATE
AND COUNTY WHERE THE CHIEF EXECUTIVE OFFICE OF SUCH SELLER IS "LOCATED"
FOR THE PURPOSES OF SECTION 9-103(3)(D) OF THE UCC AS IN EFFECT IN THE
STATE OF NEW YORK HAS NOT CHANGED IN THE PAST FOUR MONTHS. THE OFFICES
WHERE SUCH SELLER KEEPS ITS RECORDS CONCERNING THE RECEIVABLES AND RELATED
CONTRACTS AND ALL OTHER AGREEMENTS RELATED TO THE RECEIVABLES ARE AS
INDICATED FOR SUCH SELLER ON SCHEDULE 2 HERETO (OR AT SUCH OTHER
LOCATIONS, NOTIFIED TO THE COMPANY AND THE TRUSTEE IN ACCORDANCE WITH
SECTION 5.01(H), IN JURISDICTIONS WHERE ALL ACTION REQUIRED BY SECTION
9.02 HAS BEEN TAKEN AND COMPLETED).
(I) MARGIN REGULATIONS. NO USE OF ANY FUNDS OBTAINED BY SUCH SELLER
UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS WILL CONFLICT WITH
OR CONTRAVENE ANY OF REGULATIONS G, T, U AND X PROMULGATED BY THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM FROM TIME TO TIME.
(J) PROCEEDS BANKS; PAYMENT INSTRUCTIONS. THE NAMES AND ADDRESSES OF
ALL THE LOCKBOX BANKS, THE LOCKBOX PROCESSORS, AND ELIGIBLE SEGREGATED
ACCOUNT BANKS, TOGETHER WITH THE ACCOUNT NUMBERS OF THE LOCKBOX ACCOUNTS
AND THE ELIGIBLE SEGREGATED ACCOUNTS INTO WHICH COLLECTIONS ARE DEPOSITED
AT SUCH INSTITUTIONS, ARE SPECIFIED IN SCHEDULE 3. THE SELLERS HAVE
TRANSFERRED ALL OF THEIR RIGHT, TITLE AND INTEREST IN EACH LOCKBOX ACCOUNT
AND ELIGIBLE SEGREGATED ACCOUNT TO THE COMPANY. EACH LOCKBOX BANK OR
LOCKBOX PROCESSOR HAS EXECUTED AND DELIVERED TO THE COMPANY AND THE
TRUSTEE A LOCKBOX AGREEMENT. EACH ELIGIBLE SEGREGATED ACCOUNT BANK HAS
EXECUTED AND DELIVERED TO THE COMPANY AND THE TRUSTEE AN ELIGIBLE
SEGREGATED ACCOUNT BANK AGREEMENT. WITH RESPECT TO ANY PAYMENTS IN RESPECT
OF RECEIVABLES AND RELATED PROPERTY THAT ARE MADE DIRECTLY TO ANY SELLER
(INCLUDING, WITHOUT LIMITATION, ANY COLLECTORS, OTHER EMPLOYEES THEREOF OR
INDEPENDENT CONTRACTORS EMPLOYED THEREBY), SUCH SELLER AGREES TO DEPOSIT
PAYMENTS IN THE FORM RECEIVED WITHIN ONE BUSINESS DAY OF RECEIPT DIRECTLY
TO ONE OF THE LOCKBOX ACCOUNTS, OR ELIGIBLE SEGREGATED ACCOUNTS. EACH
INVOICE ISSUED TO AN OBLIGOR ON AND AFTER THE EFFECTIVE DATE SHALL
INDICATE THAT PAYMENTS IN RESPECT OF ITS RECEIVABLE SHALL BE MADE BY SUCH
OBLIGOR TO A LOCKBOX ACCOUNT OR ELIGIBLE SEGREGATED ACCOUNT OR BY WIRE
TRANSFER OR OTHER ELECTRONIC PAYMENT TO A LOCKBOX ACCOUNT, AN ELIGIBLE
SEGREGATED ACCOUNT OR THE COLLECTION ACCOUNT OR OTHERWISE AS PROVIDED IN
SECTION 2.03 OF THE SERVICING AGREEMENT.
23
(K) NO FRAUDULENT TRANSFERS. THE TRANSFERS OF RECEIVABLES AND
RECEIVABLES PROPERTY BY SUCH SELLER TO THE COMPANY PURSUANT TO THIS
AGREEMENT, AND ALL OTHER TRANSACTIONS BETWEEN SUCH SELLER AND THE COMPANY,
HAVE BEEN AND WILL BE MADE IN GOOD FAITH AND WITHOUT INTENT TO HINDER,
DELAY OR DEFRAUD CREDITORS OF SUCH SELLER, AND SUCH SELLER ACKNOWLEDGES
THAT IT HAS RECEIVED AND WILL RECEIVE FAIR CONSIDERATION AND REASONABLY
EQUIVALENT VALUE FOR THE PURCHASES BY THE COMPANY OF RECEIVABLES AND
RECEIVABLES PROPERTY HEREUNDER. THE PURCHASE OF RECEIVABLES AND
RECEIVABLES PROPERTY BY THE COMPANY FROM SUCH SELLER CONSTITUTES A TRUE
SALE OF SUCH RECEIVABLES AND RECEIVABLES PROPERTY UNDER APPLICABLE STATE
LAW.
(L) TRADE NAMES. SUCH SELLER USES NO TRADE NAME IN THE FURNISHING OF
ITS PRODUCTS OR SERVICES WHICH GENERATE RECEIVABLES OTHER THAN ITS ACTUAL
CORPORATE NAME AND THE TRADE NAMES SET FORTH FOR SUCH SELLER IN SCHEDULE
5. DURING THE FIVE YEARS PRECEDING THE DATE HEREOF, EXCEPT AS SET FORTH IN
SCHEDULE 5, (I) SUCH SELLER HAS NOT BEEN KNOWN BY ANY LEGAL NAME OR TRADE
NAME OTHER THAN ITS CORPORATE NAME, (II) NOR HAS SUCH SELLER BEEN THE
SUBJECT OF ANY MERGER OR OTHER CORPORATE REORGANIZATION WITHIN THE LAST
FIVE YEARS, OTHER THAN MERGERS OCCURRING MORE THAN ONE YEAR PRIOR TO THE
DATE HEREOF IN WHICH THE SELLER WAS THE SURVIVING COMPANY AND THE MERGED
ENTITY DID NOT INCLUDE IN ITS NAME THE NAME "WESCO".
(M) COMPLIANCE WITH APPLICABLE LAWS. SUCH SELLER IS IN COMPLIANCE
WITH THE REQUIREMENTS OF ALL APPLICABLE LAWS, RULES, REGULATIONS, AND
ORDERS OF ALL GOVERNMENTAL AUTHORITIES (FEDERAL, STATE, LOCAL OR FOREIGN,
AND INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LAWS), RELATING TO THE
RECEIVABLES A BREACH OF ANY OF WHICH, INDIVIDUALLY OR IN THE AGGREGATE,
WOULD BE REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT.
(N) TAXES. SUCH SELLER HAS FILED ALL TAX RETURNS (FEDERAL, STATE AND
LOCAL) REQUIRED BY LAW TO BE FILED AND HAS PAID OR MADE ADEQUATE PROVISION
FOR THE PAYMENT OF ALL TAXES, ASSESSMENTS AND OTHER GOVERNMENTAL CHARGES
DUE FROM SUCH SELLER OR IS CONTESTING ANY SUCH TAX, ASSESSMENT OR OTHER
GOVERNMENTAL CHARGE IN GOOD FAITH THROUGH APPROPRIATE PROCEEDINGS. NO TAX
LIEN HAS BEEN FILED WITH RESPECT TO TAXES WHICH COULD REASONABLY BE
EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT AND, TO THE BEST KNOWLEDGE
OF THE SELLER, NO CLAIM IS PRESENTLY BEING ASSERTED WITH RESPECT TO TAXES
WHICH COULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT.
FOR PURPOSES OF THIS PARAGRAPH, "TAXES" SHALL MEAN ANY PRESENT OR FUTURE
TAX, LEVY, IMPOST, DUTY, CHARGE, ASSESSMENT OR FEE OF ANY NATURE
(INCLUDING INTEREST, PENALTIES AND ADDITIONS THERETO) THAT IS IMPOSED BY
ANY GOVERNMENTAL AUTHORITY. SUCH SELLER KNOWS OF NO BASIS FOR ANY MATERIAL
ADDITIONAL TAX ASSESSMENT FOR ANY FISCAL YEAR FOR WHICH ADEQUATE RESERVES
HAVE NOT BEEN ESTABLISHED.
(O) EMPLOYEE BENEFIT PLANS. NO REPORTABLE EVENT HAS OCCURRED OR IS
REASONABLY EXPECTED TO OCCUR THAT, WHEN TAKEN TOGETHER WITH ALL OTHER SUCH
REPORTABLE EVENTS, COULD REASONABLY BE EXPECTED TO RESULT IN A MATERIAL
ADVERSE EFFECT. THE PRESENT VALUE OF ALL ACCUMULATED BENEFIT OBLIGATIONS
OF ALL UNDERFUNDED PLANS (BASED ON THE ASSUMPTIONS USED FOR PURPOSES OF
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 87) OF SUCH SELLER DID
NOT, AS OF THE DATE OF THE MOST RECENT FINANCIAL STATEMENTS
24
REFLECTING SUCH AMOUNTS, EXCEED BY MORE THAN $2,500,000 THE FAIR MARKET
VALUE OF THE ASSETS OF SUCH PLAN AND THE PRESENT VALUE OF ALL ACCUMULATED
BENEFIT OBLIGATIONS OF ALL UNDERFUNDED PLANS (BASED ON THE ASSUMPTIONS
USED FOR PURPOSES OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 87)
OF SUCH SELLER DID NOT, AS OF THE DATE OF THE MOST RECENT FINANCIAL
STATEMENTS REFLECTING SUCH AMOUNTS, EXCEED BY MORE THAN $5,000,000 THE
FAIR MARKET VALUE OF THE ASSETS OF ALL SUCH UNDERFUNDED PLANS.
(P) SOLVENCY. BOTH PRIOR TO AND AFTER GIVING EFFECT TO THE
TRANSACTIONS OCCURRING ON THE EFFECTIVE DATE, (I) THE FAIR VALUE OF THE
ASSETS OF SUCH SELLER AT A FAIR VALUATION WILL EXCEED THE DEBTS AND
LIABILITIES, SUBORDINATED, CONTINGENT OR OTHERWISE, OF SUCH SELLER; (II)
THE PRESENT FAIR SALABLE VALUE OF THE PROPERTY OF SUCH SELLER WILL BE
GREATER THAN THE AMOUNT THAT WILL BE REQUIRED TO PAY THE PROBABLE
LIABILITY OF SUCH SELLER ON ITS DEBTS AND OTHER LIABILITIES, SUBORDINATED,
CONTINGENT OR OTHERWISE, AS SUCH DEBTS AND LIABILITIES BECOME ABSOLUTE AND
MATURED; (III) SUCH SELLER WILL BE ABLE TO PAY ITS DEBTS AND LIABILITIES,
SUBORDINATED, CONTINGENT OR OTHERWISE, AS SUCH DEBTS AND LIABILITIES
BECOME ABSOLUTE AND MATURED; AND (IV) SUCH SELLER WILL NOT HAVE
UNREASONABLY SMALL CAPITAL WITH WHICH TO CONDUCT THE BUSINESS IN WHICH IT
IS ENGAGED AS SUCH BUSINESS IS NOW CONDUCTED AND IS PROPOSED TO BE
CONDUCTED. FOR ALL PURPOSES OF CLAUSES (I) THROUGH (IV) ABOVE, THE AMOUNT
OF CONTINGENT LIABILITIES AT ANY TIME SHALL BE COMPUTED AS THE AMOUNT
THAT, IN THE LIGHT OF ALL THE FACTS AND CIRCUMSTANCES EXISTING AT SUCH
TIME, REPRESENTS THE AMOUNT THAT CAN REASONABLY BE EXPECTED TO BECOME AN
ACTUAL OR MATURED LIABILITY. SUCH SELLER DOES NOT INTEND TO, NOR DOES IT
BELIEVE THAT IT WILL, INCUR DEBTS BEYOND ITS ABILITY TO PAY SUCH DEBTS AS
THEY MATURE, TAKING INTO ACCOUNT THE TIMING OF AND AMOUNTS OF CASH TO BE
RECEIVED BY IT AND THE TIMING OF AND AMOUNTS OF CASH TO BE PAYABLE IN
RESPECT OF ITS DEBT.
(Q) INVESTMENT COMPANY ACT. NEITHER SUCH SELLER NOR ANY OF SUCH
SELLER'S SUBSIDIARIES IS (I) AN "INVESTMENT COMPANY" REGISTERED OR
REQUIRED TO BE REGISTERED UNDER THE 1940 ACT, OR (II) A "HOLDING COMPANY",
OR A "SUBSIDIARY COMPANY" OR AN "AFFILIATE" OF A "HOLDING COMPANY" WITHIN
THE MEANING OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, AS AMENDED.
(R) OWNERSHIP. ALL OF THE ISSUED AND OUTSTANDING CAPITAL STOCK OF
SUCH SELLER (OTHER THAN WESCO) IS OWNED, DIRECTLY OR INDIRECTLY, BY WESCO.
(S) INDEBTEDNESS TO COMPANY. SUCH SELLER HAD NO OUTSTANDING
INDEBTEDNESS TO THE COMPANY OTHER THAN AMOUNTS PERMITTED BY THIS AGREEMENT
OR AMOUNTS OUTSTANDING UNDER THE SELLER NOTE.
(T) RECEIVABLES DOCUMENTS. UPON THE DELIVERY, IF ANY, BY SUCH SELLER
TO THE COMPANY OF LICENSES, RIGHTS, COMPUTER PROGRAMS, RELATED MATERIALS,
COMPUTER TAPES, DISKS, CASSETTES AND DATA RELATING TO THE ADMINISTRATION
OF THE PURCHASED RECEIVABLES PURSUANT TO SUBSECTION 5.01(O), THE COMPANY
SHALL HAVE BEEN FURNISHED WITH ALL MATERIALS AND DATA NECESSARY TO PERMIT
ORDERLY COLLECTION OF THE PURCHASED RECEIVABLES WITHOUT THE PARTICIPATION
OF SUCH SELLER IN SUCH COLLECTION.
25
(U) FILINGS. ON OR PRIOR TO THE DATE THAT IS 10 DAYS AFTER THE
EFFECTIVE DATE, ALL FILINGS AND OTHER ACTS (INCLUDING BUT NOT LIMITED TO
ALL FILINGS AND OTHER ACTS NECESSARY OR ADVISABLE UNDER THE UCC) SHALL
HAVE BEEN MADE OR PERFORMED SUCH THAT THE COMPANY HAS ON SUCH DATE A FIRST
PRIORITY PERFECTED OWNERSHIP OR SECURITY INTEREST IN RESPECT OF ALL
RECEIVABLES.
SECTION 4.02. REPRESENTATIONS AND WARRANTIES OF THE SELLERS RELATING
TO THE RECEIVABLES. EACH SELLER HEREBY REPRESENTS AND WARRANTS, AS TO ITSELF
ONLY, FOR THE BENEFIT OF THE COMPANY AND ITS ASSIGNS (INCLUDING THE TRUSTEE) ON
EACH PAYMENT DATE AS FOLLOWS:
(I) RECEIVABLES DESCRIPTION. AS OF THE EFFECTIVE DATE, THE
RECEIVABLES LIST DELIVERED PURSUANT TO SECTION 3.01(M) SETS FORTH IN ALL
MATERIAL RESPECTS AN ACCURATE AND COMPLETE LISTING OF ALL ITS RECEIVABLES
AS OF THE EFFECTIVE DATE AND THE INFORMATION CONTAINED THEREIN WITH
RESPECT TO THE IDENTITY OF SUCH RECEIVABLES IS TRUE AND CORRECT IN ALL
MATERIAL RESPECTS AS OF SUCH DATE. AS OF THE EFFECTIVE DATE, THE AGGREGATE
AMOUNT OF RECEIVABLES OWNED BY SUCH SELLER IS ACCURATELY SET FORTH ON THE
RECEIVABLES LIST.
(II) QUALITY OF TITLE. EACH RECEIVABLE EXISTING ON THE EFFECTIVE
DATE OR, IN THE CASE OF RECEIVABLES SOLD TO THE COMPANY AFTER THE
EFFECTIVE DATE, ON THE DATE THAT EACH SUCH RECEIVABLE SHALL HAVE BEEN SOLD
TO THE COMPANY, HAS BEEN CONVEYED TO THE COMPANY AND THE COMPANY HAS
ACQUIRED A VALID AND PERFECTED FIRST PRIORITY OWNERSHIP INTEREST IN EACH
SUCH RECEIVABLE, IN EACH CASE, FREE AND CLEAR OF ANY LIENS, EXCEPT FOR
PERMITTED LIENS SPECIFIED IN CLAUSES (I) OR (IV) OF THE DEFINITION
THEREOF.
(III) ELIGIBLE RECEIVABLE. ON THE EFFECTIVE DATE, EACH RECEIVABLE,
OTHER THAN RECEIVABLES DESIGNATED AS INELIGIBLE RECEIVABLES ON A DAILY
REPORT, SOLD TO THE COMPANY ON SUCH DATE IS AN ELIGIBLE RECEIVABLE ON THE
EFFECTIVE DATE AND, IN THE CASE OF RECEIVABLES SOLD TO THE COMPANY AFTER
THE EFFECTIVE DATE, EACH SUCH RECEIVABLE, OTHER THAN RECEIVABLES
DESIGNATED AS INELIGIBLE RECEIVABLES ON A DAILY REPORT, SOLD TO THE
COMPANY ON SUCH LATER DATE IS AN ELIGIBLE RECEIVABLE ON SUCH LATER DATE.
THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS SECTION 4.02
SHALL SURVIVE THE TRANSFER AND ASSIGNMENT OF THE RESPECTIVE RECEIVABLES TO THE
COMPANY PURSUANT TO THIS AGREEMENT. UPON DISCOVERY BY ANY SELLER OR THE COMPANY
OF A BREACH OF ANY OF THE FOREGOING REPRESENTATIONS AND WARRANTIES, THE PARTY
DISCOVERING SUCH BREACH SHALL GIVE PROMPT WRITTEN NOTICE TO THE OTHER.
SECTION 4.03. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. THE
COMPANY REPRESENTS AND WARRANTS AS TO ITSELF FOR THE BENEFIT OF THE SELLERS AS
FOLLOWS:
(A) CORPORATE EXISTENCE. IT (I) IS A CORPORATION DULY ORGANIZED,
VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE JURISDICTION
OF ITS INCORPORATION, AND IS DULY QUALIFIED AS A FOREIGN CORPORATION AND
IS IN GOOD STANDING IN EACH JURISDICTION IN WHICH THE FAILURE TO SO
QUALIFY WOULD HAVE A MATERIAL ADVERSE EFFECT, (II) HAS ALL REQUISITE
CORPORATE POWER AND AUTHORITY AND THE LEGAL RIGHT TO OWN, PLEDGE, MORTGAGE
AND OPERATE ITS PROPERTIES, AND TO CONDUCT ITS BUSINESS AS NOW OR
CURRENTLY PROPOSED TO BE CONDUCTED AND (III) IS IN COMPLIANCE WITH ALL
REQUIREMENTS OF LAW.
26
(B) CORPORATE POWER; AUTHORIZATION; CONSENTS. IT HAS THE CORPORATE
POWER AND AUTHORITY, AND THE LEGAL RIGHT, TO EXECUTE, DELIVER AND PERFORM
THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY
AND HAS TAKEN ALL NECESSARY CORPORATE ACTION TO AUTHORIZE THE EXECUTION,
DELIVERY AND PERFORMANCE OF THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY.
(C) NO VIOLATION. THE EXECUTION, DELIVERY AND PERFORMANCE BY IT OF
THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY
AND ALL INSTRUMENTS AND DOCUMENTS TO BE DELIVERED HEREUNDER BY IT, AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, (I) DO NOT (A) VIOLATE ITS
CERTIFICATE OR ARTICLES OF INCORPORATION AND BY-LAWS OR OTHER
ORGANIZATIONAL OR GOVERNING DOCUMENTS OR, IN ANY MATERIAL RESPECT, ANY
OTHER REQUIREMENT OF LAW, (B) CONFLICT WITH OR RESULT IN THE BREACH OF, OR
CONSTITUTE A DEFAULT UNDER, ANY INDENTURE, MORTGAGE OR DEED OF TRUST OR
ANY MATERIAL LEASE, AGREEMENT OR OTHER INSTRUMENT BINDING ON OR AFFECTING
IT OR ANY OF ITS RESPECTIVE SUBSIDIARIES OR ANY OF ITS PROPERTIES IN ANY
MATERIAL RESPECT OR (C) RESULT IN OR REQUIRE THE CREATION OR IMPOSITION OF
ANY LIEN EXCEPT AS CREATED OR IMPOSED HEREUNDER OR UNDER THE POOLING
AGREEMENT, AND NO TRANSACTION CONTEMPLATED HEREBY REQUIRES COMPLIANCE ON
ITS PART WITH ANY BULK SALES ACT OR SIMILAR LAW, AND (II) DO NOT REQUIRE
THE CONSENT OF, AUTHORIZATION BY OR APPROVAL OF OR NOTICE TO OR FILING OR
REGISTRATION WITH, ANY GOVERNMENTAL BODY, AGENCY, AUTHORITY, REGULATORY
BODY OR ANY OTHER PERSON OTHER THAN THOSE WHICH HAVE BEEN OBTAINED OR MADE
EXCEPT FOR THE FILING OF THE FINANCING STATEMENTS REFERRED TO IN ARTICLE
III HEREOF, WHICH FILINGS THE SELLERS HEREBY REPRESENT SHALL HAVE BEEN
DULY MADE PRIOR TO OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH ANY PURCHASES
OF RECEIVABLES AND OTHER RECEIVABLES PROPERTY AND SHALL AT ALL TIMES BE IN
FULL FORCE AND EFFECT (EXCEPT AS THEY MAY BE TERMINATED BY THE COMPANY).
(D) BINDING OBLIGATIONS. THIS AGREEMENT HAS BEEN DULY EXECUTED AND
DELIVERED BY THE COMPANY AND CONSTITUTES ITS LEGAL, VALID AND BINDING
OBLIGATION, ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS EXCEPT (A)
AS SUCH ENFORCEABILITY MAY BE LIMITED BY APPLICABLE BANKRUPTCY,
INSOLVENCY, REORGANIZATION, MORATORIUM OR OTHER SIMILAR LAWS NOW OR
HEREAFTER IN EFFECT AFFECTING THE ENFORCEMENT OF CREDITORS' RIGHTS IN
GENERAL, AND (B) AS SUCH ENFORCEABILITY MAY BE LIMITED BY GENERAL
PRINCIPLES OF EQUITY (WHETHER CONSIDERED IN A SUIT AT LAW OR IN EQUITY).
(E) ACCOUNTING TREATMENT. THE COMPANY WILL NOT PREPARE ANY FINANCIAL
STATEMENTS THAT SHALL ACCOUNT FOR THE TRANSACTIONS CONTEMPLATED HEREBY,
NOR WILL IT IN ANY OTHER RESPECT (OTHER THAN FOR TAX PURPOSES) ACCOUNT FOR
THE TRANSACTIONS CONTEMPLATED HEREBY, IN A MANNER THAT IS INCONSISTENT
WITH THE COMPANY'S OWNERSHIP INTEREST IN THE RECEIVABLES.
ARTICLE V
GENERAL COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE SELLERS. EACH SELLER
COVENANTS THAT, UNTIL THE PURCHASE TERMINATION DATE SHALL HAVE OCCURRED WITH
RESPECT TO SUCH SELLER AND
27
THERE ARE NO AMOUNTS OUTSTANDING WITH RESPECT TO THE PURCHASED RECEIVABLES
PREVIOUSLY SOLD BY SUCH SELLER TO THE COMPANY (OTHER THAN CHARGED-OFF
RECEIVABLES):
(A) PRESERVATION OF CORPORATE EXISTENCE AND NAME. SUCH SELLER WILL
PRESERVE AND MAINTAIN IN ALL MATERIAL RESPECTS ITS CORPORATE EXISTENCE,
RIGHTS, FRANCHISES AND PRIVILEGES IN THE JURISDICTION OF ITS
INCORPORATION, AND QUALIFY AND REMAIN QUALIFIED IN GOOD STANDING AS A
FOREIGN CORPORATION IN EACH JURISDICTION WHERE THE FAILURE TO PRESERVE AND
MAINTAIN SUCH EXISTENCE, RIGHTS, FRANCHISES, PRIVILEGES AND QUALIFICATION
COULD HAVE A MATERIAL ADVERSE EFFECT.
(B) MAINTENANCE OF PROPERTY. SUCH SELLER WILL KEEP ALL PROPERTY AND
ASSETS USEFUL AND NECESSARY TO PERMIT THE ORIGINATION, MONITORING AND
COLLECTION OF RECEIVABLES.
(C) COMPLIANCE WITH LAWS, ETC. SUCH SELLER SHALL COMPLY IN ALL
MATERIAL RESPECTS WITH ALL APPLICABLE LAWS, RULES, REGULATIONS AND ORDERS
APPLICABLE TO THE RECEIVABLES AND THE RECEIVABLES PROPERTY, INCLUDING,
WITHOUT LIMITATION, RULES AND REGULATIONS RELATING TO TRUTH IN LENDING,
FAIR CREDIT BILLING, FAIR CREDIT REPORTING, EQUAL CREDIT OPPORTUNITY, FAIR
DEBT COLLECTION PRACTICES AND PRIVACY, WHERE FAILURE TO SO COMPLY COULD
REASONABLY BE EXPECTED TO HAVE A MATERIALLY ADVERSE IMPACT ON THE AMOUNT
OF COLLECTIONS THEREUNDER.
(D) VISITATION RIGHTS. AT ANY REASONABLE TIME DURING NORMAL BUSINESS
HOURS AND FROM TIME TO TIME UPON REASONABLE NOTICE, ACCORDING TO THE
SELLER'S NORMAL SECURITY AND CONFIDENTIALITY PROVISIONS WITH RESPECT TO
CUSTOMER LISTS, SUCH SELLER SHALL PERMIT (I) THE COMPANY, THE TRUSTEE OR
ANY OF ITS AGENTS OR REPRESENTATIVES, (A) TO EXAMINE AND MAKE COPIES OF
AND ABSTRACTS FROM THE RECORDS, BOOKS OF ACCOUNT AND DOCUMENTS (INCLUDING,
WITHOUT LIMITATION, COMPUTER TAPES AND DISKS) OF SUCH SELLER RELATING TO
RECEIVABLES AND RELATED PROPERTY OWNED OR TO BE PURCHASED BY THE COMPANY
HEREUNDER, INCLUDING, WITHOUT LIMITATION, THE RELATED CONTRACTS AND
PURCHASE ORDERS AND OTHER AGREEMENTS AND (B) FOLLOWING THE TERMINATION OF
THE APPOINTMENT OF WESCO AS SERVICER OR OF SUCH SELLER AS A SERVICING
PARTY WITH RESPECT TO THE RECEIVABLES, TO BE PRESENT AT THE OFFICES AND
PROPERTIES OF SUCH SELLER TO ADMINISTER AND CONTROL THE COLLECTION OF
AMOUNTS OWING ON THE PURCHASED RECEIVABLES AND (II) THE COMPANY, THE
TRUSTEE OR ANY OF ITS AGENTS OR REPRESENTATIVES, OR THE TRUSTEE (UPON THE
GIVING OF APPROPRIATE NOTICE TO THE COMPANY) TO VISIT THE PROPERTIES OF
SUCH SELLER FOR THE PURPOSE OF EXAMINING SUCH RECORDS, BOOKS OF ACCOUNT
AND DOCUMENTS, AND TO DISCUSS THE AFFAIRS, FINANCES AND ACCOUNTS OF SUCH
SELLER RELATING TO THE RECEIVABLES OR SUCH SELLER'S PERFORMANCE HEREUNDER
WITH ANY OF ITS OFFICERS OR DIRECTORS AND WITH ITS INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS; PROVIDED, HOWEVER, THAT THE COMPANY, THE TRUSTEE OR
SUCH AGENTS OR REPRESENTATIVES, AS THE CASE MAY BE, SHALL NOTIFY SUCH
SELLER PRIOR TO ANY CONTACT WITH SUCH ACCOUNTANTS AND PERMIT
REPRESENTATIVES OF THE SELLER TO PARTICIPATE IN SUCH DISCUSSIONS.
(E) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. SUCH SELLER WILL
MAINTAIN AND IMPLEMENT ADMINISTRATIVE AND OPERATING PROCEDURES (INCLUDING,
WITHOUT LIMITATION, AN ABILITY TO RECREATE RECORDS EVIDENCING RECEIVABLES
AND THE RECEIVABLES PROPERTY IN
28
THE EVENT OF THE DESTRUCTION OF THE ORIGINALS THEREOF), AND KEEP AND
MAINTAIN ALL DOCUMENTS, BOOKS, RECORDS AND OTHER INFORMATION WHICH, IN
EACH CASE, IN THE REASONABLE DISCRETION OF THE COMPANY, ARE NECESSARY OR
ADVISABLE FOR THE COLLECTION OF ALL RECEIVABLES AND THE RECEIVABLES
PROPERTY (INCLUDING, WITHOUT LIMITATION, RECORDS ADEQUATE TO PERMIT THE
IDENTIFICATION OF EACH NEW RECEIVABLE AND ALL COLLECTIONS OF AND
ADJUSTMENTS TO EACH EXISTING RECEIVABLE). UPON THE REQUEST OF THE COMPANY,
SUCH SELLER WILL DELIVER COPIES OF ALL BOOKS AND RECORDS MAINTAINED
PURSUANT TO THIS SECTION 5.01(E) TO THE TRUSTEE.
(F) PERFORMANCE AND COMPLIANCE WITH POLICIES, RECEIVABLES AND
CONTRACTS. SUCH SELLER WILL (I) PERFORM ITS OBLIGATIONS IN ACCORDANCE WITH
AND COMPLY IN ALL MATERIAL RESPECTS WITH THE POLICIES, AS AMENDED FROM
TIME TO TIME IN ACCORDANCE WITH THE TRANSACTION DOCUMENTS AND (II) AT ITS
EXPENSE, TIMELY AND FULLY PERFORM AND COMPLY WITH ALL MATERIAL PROVISIONS,
COVENANTS AND OTHER PROMISES REQUIRED TO BE OBSERVED BY IT UNDER THE
RECEIVABLES AND THE CONTRACTS RELATED TO THE RECEIVABLES AND RELATED
PROPERTY AND ALL PURCHASE ORDERS AND OTHER AGREEMENTS RELATED TO SUCH
RECEIVABLES AND RELATED PROPERTY.
(G) OBLIGATIONS. SELLER SHALL PAY, DISCHARGE OR OTHERWISE SATISFY AT
OR BEFORE MATURITY OR BEFORE THEY BECOME DELINQUENT, AS THE CASE MAY BE,
ALL ITS OTHER OBLIGATIONS OF WHATEVER NATURE, EXCEPT WHERE (I) THE AMOUNT
OF VALIDITY THEREOF IS CURRENTLY BEING CONTESTED IN GOOD FAITH BY
APPROPRIATE PROCEEDINGS AND RESERVES IN CONFORMITY WITH GAAP WITH RESPECT
THERETO HAVE BEEN PROVIDED ON ITS BOOKS, OR (II) THE FAILURE TO SO PAY,
DISCHARGE OR SATISFY ALL SUCH OBLIGATIONS WOULD NOT, IN THE AGGREGATE, BE
REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT AND WOULD NOT SUBJECT
ANY OF ITS PROPERTIES TO ANY LIEN PROHIBITED BY SUBSECTION 5.03(B).
(H) LOCATION OF RECORDS. SUCH SELLER WILL KEEP ITS PRINCIPAL PLACE
OF BUSINESS AND CHIEF EXECUTIVE OFFICE, AND THE OFFICES WHERE IT KEEPS ITS
RECORDS CONCERNING THE RECEIVABLES, ALL RECEIVABLES PROPERTY, ALL
CONTRACTS AND PURCHASE ORDERS AND OTHER AGREEMENTS RELATED TO SUCH
RECEIVABLES (AND ALL ORIGINAL DOCUMENTS RELATING THERETO), AT THE
ADDRESS(ES) OF SUCH SELLER REFERRED TO IN SCHEDULE 2 OR, UPON 30 DAYS'
PRIOR WRITTEN NOTICE TO THE COMPANY AND THE AGENTS, AT SUCH OTHER
LOCATIONS IN JURISDICTIONS WHERE ALL ACTION REQUIRED BY SECTION 5.01(M)
SHALL HAVE BEEN TAKEN AND COMPLETED; PROVIDED, HOWEVER, THAT THE RATING
AGENCY CONDITION SHALL HAVE BEEN SATISFIED WITH RESPECT TO ANY CHANGES IN
LOCATION IF SUCH LOCATION IS NOT IN A STATE WHICH IS WITHIN THE TENTH
CIRCUIT UNLESS IT DELIVERS AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO
THE RATING AGENCIES TO THE EFFECT THAT OCTAGON GAS SYSTEMS, INC. V.
RIMMER, 995 F.2D 948 (10TH CIR. 1993), IS NO LONGER CONTROLLING PRECEDENT
IN THE TENTH CIRCUIT.
(I) OBLIGATION TO RECORD AND REPORT. SUCH SELLER SHALL TO THE
FULLEST EXTENT PERMITTED BY GAAP AND BY APPLICABLE LAW, RECORD EACH
PURCHASE OF THE PURCHASED RECEIVABLES AS A SALE ON ITS BOOKS AND RECORDS
AND REFLECT EACH PURCHASE OF PURCHASED RECEIVABLES IN ITS FINANCIAL
STATEMENTS AS A SALE.
29
(J) COLLECTIONS. SUCH SELLER SHALL CAUSE EACH INVOICE ISSUED TO AN
OBLIGOR ON AND AFTER THE EFFECTIVE DATE SHALL INDICATE THAT PAYMENTS IN
RESPECT OF ITS RECEIVABLE SHALL BE MADE BY SUCH OBLIGOR TO A LOCKBOX
ACCOUNT OR ELIGIBLE SEGREGATED ACCOUNT OR BY WIRE TRANSFER OR OTHER
ELECTRONIC PAYMENT TO A LOCKBOX ACCOUNT, AN ELIGIBLE SEGREGATED ACCOUNT OR
THE COLLECTION ACCOUNT OR OTHERWISE AS PROVIDED IN SECTION 2.03 OF THE
SERVICING AGREEMENT AND COMPLY IN ALL MATERIAL RESPECTS WITH PROCEDURES
WITH RESPECT TO COLLECTIONS REASONABLY SPECIFIED FROM TIME TO TIME BY THE
COMPANY, INCLUDING, WITHOUT LIMITATION, THE PROCEDURES SPECIFIED IN THE
SERVICING AGREEMENT. IN THE EVENT THAT ANY PAYMENTS IN RESPECT OF ANY SUCH
RECEIVABLES ARE MADE DIRECTLY TO THE SELLER (INCLUDING, WITHOUT
LIMITATION, ANY COLLECTOR, ANY OTHER EMPLOYEES THEREOF OR INDEPENDENT
CONTRACTORS EMPLOYED THEREBY), THE SELLER SHALL, WITHIN ONE BUSINESS DAY
(EXCEPT AS PROVIDED IN THE SERVICING AGREEMENT) OF RECEIPT THEREOF,
FORWARD SUCH AMOUNTS TO A LOCKBOX, A LOCKBOX ACCOUNT, AN ELIGIBLE
SEGREGATED ACCOUNT OR THE COLLECTION ACCOUNT AND, PRIOR TO FORWARDING SUCH
AMOUNTS, THE SELLER SHALL HOLD SUCH PAYMENTS IN TRUST AS CUSTODIAN FOR THE
COMPANY AND THE TRUSTEE.
(K) TAXES. SUCH SELLER WILL FILE ALL TAX RETURNS AND REPORTS
REQUIRED BY LAW TO BE FILED BY IT AND WILL PAY ALL TAXES AND GOVERNMENTAL
CHARGES THEREBY SHOWN TO BE OWING, EXCEPT ANY SUCH TAXES OR CHARGES WHICH
ARE BEING DILIGENTLY CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS
AND FOR WHICH ADEQUATE RESERVES IN ACCORDANCE WITH GAAP HAVE BEEN SET
ASIDE ON ITS BOOKS.
(L) SEPARATE CORPORATE EXISTENCE OF THE COMPANY. SUCH SELLER HEREBY
ACKNOWLEDGES THAT THE TRUSTEE AND THE INVESTOR CERTIFICATEHOLDERS ARE
ENTERING INTO THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS
IN RELIANCE UPON THE COMPANY'S IDENTITY AS A LEGAL ENTITY SEPARATE FROM
THE SELLERS AND ALL OTHER WESCO PERSONS. THEREFORE, FROM AND AFTER THE
DATE HEREOF, SUCH SELLER WILL TAKE (OR REFRAIN FROM TAKING, AS THE CASE
MAY BE) SUCH ACTIONS AND WILL CAUSE EACH OTHER WESCO PERSON TO TAKE (OR
REFRAIN FROM TAKING, AS THE CASE MAY BE) SUCH ACTIONS, AS SHALL BE
REQUIRED IN ORDER THAT:
(I) EACH WESCO PERSON MAINTAIN ITS DEPOSIT ACCOUNT OR ACCOUNTS
SEPARATE FROM THOSE OF THE COMPANY AND ENSURE THAT ITS FUNDS WILL
NOT BE DIVERTED TO THE COMPANY, NOR WILL SUCH FUNDS BE COMMINGLED
WITH THE FUNDS OF THE COMPANY;
(II) TO THE EXTENT THAT ANY WESCO PERSON SHARES ANY OFFICERS
OR OTHER EMPLOYEES WITH THE COMPANY, THE SALARIES OF AND THE
EXPENSES RELATED TO PROVIDING BENEFITS TO SUCH OFFICERS AND OTHER
EMPLOYEES SHALL BE FAIRLY ALLOCATED AMONG SUCH WESCO PERSON AND THE
COMPANY, AND SUCH WESCO PERSON AND THE COMPANY SHALL BEAR THEIR FAIR
SHARES OF THE SALARY AND BENEFIT COSTS ASSOCIATED WITH ALL SUCH
COMMON OFFICERS AND EMPLOYEES;
(III) TO THE EXTENT THAT ANY WESCO PERSON JOINTLY CONTRACTS
WITH THE COMPANY TO DO BUSINESS WITH VENDORS OR SERVICE PROVIDERS OR
TO SHARE OVERHEAD EXPENSES, THE COSTS INCURRED IN SO DOING SHALL BE
ALLOCATED FAIRLY BETWEEN SUCH
30
WESCO PERSON AND THE COMPANY, AND SUCH WESCO PERSON AND THE COMPANY
SHALL BEAR THEIR FAIR SHARES OF SUCH COSTS. TO THE EXTENT THAT ANY
WESCO PERSON CONTRACTS OR DOES BUSINESS WITH VENDORS OR SERVICE
PROVIDERS WHERE THE GOODS AND SERVICES PROVIDED ARE PARTIALLY FOR
THE BENEFIT OF THE COMPANY, THE COSTS INCURRED IN SO DOING SHALL BE
FAIRLY ALLOCATED BETWEEN SUCH WESCO PERSON AND THE COMPANY IN
PROPORTION TO THE BENEFIT OF THE GOODS OR SERVICES EACH IS PROVIDED,
AND SUCH WESCO PERSON AND THE COMPANY SHALL BEAR THEIR FAIR SHARES
OF SUCH COSTS. ALL MATERIAL TRANSACTIONS BETWEEN ANY WESCO PERSON
AND THE COMPANY, WHETHER CURRENTLY EXISTING OR HEREAFTER ENTERED
INTO, SHALL BE ONLY ON AN ARM'S LENGTH BASIS, IT BEING UNDERSTOOD
AND AGREED THAT THE TRANSACTIONS CONTEMPLATED IN THE TRANSACTION
DOCUMENTS MEET THE REQUIREMENTS OF THIS CLAUSE (III);
(IV) EACH WESCO PERSON WILL MAINTAIN OFFICE SPACE SEPARATE
FROM THE OFFICE SPACE OF THE COMPANY (BUT WHICH MAY BE LOCATED AT
THE SAME ADDRESS AS THE COMPANY). TO THE EXTENT THAT IT AND THE
COMPANY HAVE OFFICES IN THE SAME LOCATION, THERE SHALL BE A FAIR AND
APPROPRIATE ALLOCATION OF OVERHEAD COSTS BETWEEN THEM, AND EACH
SHALL BEAR ITS FAIR SHARE OF SUCH EXPENSES;
(V) NO WESCO PERSON WILL ASSUME OR GUARANTEE ANY OF THE
LIABILITIES OF THE COMPANY;
(VI) EACH WESCO PERSON WILL MAINTAIN CORPORATE RECORDS AND
BOOKS OF ACCOUNT SEPARATE FROM THOSE OF THE COMPANY AND TELEPHONE
NUMBERS, MAILING ADDRESSES, STATIONERY AND OTHER BUSINESS FORMS THAT
ARE SEPARATE AND DISTINCT FROM THOSE OF THE COMPANY.
(VII) ANY FINANCIAL STATEMENTS OF ANY WESCO PERSON WHICH ARE
CONSOLIDATED TO INCLUDE THE COMPANY WILL CONTAIN A DETAILED NOTE
SUBSTANTIALLY IN THE FORM, AND TO THE EFFECT, OF THE NOTE SET FORTH
ON SCHEDULE 8.
(VIII) NO WESCO PERSON WILL HOLD ITSELF OUT, OR PERMIT ITSELF
TO BE HELD OUT, AS HAVING AGREED TO PAY OR BE LIABLE FOR THE DEBTS
OF THE COMPANY.
(IX) EACH WESCO PERSON WILL TAKE, OR REFRAIN FROM TAKING, AS
THE CASE MAY BE, ALL OTHER ACTIONS THAT ARE NECESSARY TO BE TAKEN OR
NOT TO BE TAKEN IN ORDER (X) TO ENSURE THAT THE ASSUMPTIONS AND
FACTUAL RECITATIONS SET FORTH IN THE SPECIFIED BANKRUPTCY OPINION
PROVISIONS REMAIN TRUE AND CORRECT WITH RESPECT TO SUCH WESCO PERSON
(AND, TO THE EXTENT WITHIN ITS CONTROL, TO ENSURE THAT THE
ASSUMPTIONS AND FACTUAL RECITATIONS SET FORTH IN THE SPECIFIED
BANKRUPTCY OPINION PROVISIONS REMAIN TRUE AND CORRECT WITH RESPECT
TO THE COMPANY) AND (Y) TO COMPLY WITH THOSE PROCEDURES DESCRIBED IN
SUCH PROVISIONS THAT ARE APPLICABLE TO SUCH WESCO PERSON.
(M) FURTHER ACTION EVIDENCING PURCHASES.
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(I) SUCH SELLER AGREES THAT FROM TIME TO TIME, AT ITS
EXPENSE, IT WILL PROMPTLY EXECUTE AND DELIVER ALL FURTHER
INSTRUMENTS AND DOCUMENTS, AND TAKE ALL FURTHER ACTION, THAT MAY BE
NECESSARY OR DESIRABLE OR THAT THE COMPANY MAY REASONABLY REQUEST,
TO PROTECT OR MORE FULLY EVIDENCE THE COMPANY'S OWNERSHIP, RIGHT,
TITLE AND INTEREST IN THE RECEIVABLES AND RECEIVABLES PROPERTY SOLD
BY SUCH SELLER AND ITS RIGHTS UNDER THE CONTRACTS WITH RESPECT
THERETO, OR TO ENABLE THE COMPANY TO EXERCISE OR ENFORCE ANY OF ITS
RIGHTS HEREUNDER OR UNDER ANY OTHER TRANSACTION DOCUMENT. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, SUCH SELLER WILL UPON THE
REQUEST OF THE COMPANY (A) EXECUTE AND FILE SUCH FINANCING OR
CONTINUATION STATEMENTS, OR AMENDMENTS THERETO, AND SUCH OTHER
INSTRUMENTS OR NOTICES, AS MAY BE NECESSARY OR, IN THE REASONABLE
OPINION OF THE COMPANY OR THE AGENTS, DESIRABLE, (B) INDICATE ON ITS
BOOKS AND RECORDS (INCLUDING, WITHOUT LIMITATION, MASTER DATA
PROCESSING RECORDS) THAT THE RECEIVABLES AND RECEIVABLES PROPERTY
HAVE BEEN SOLD AND ASSIGNED TO THE COMPANY AND, IN TURN, THE COMPANY
HAS SOLD AND ASSIGNED ITS INTEREST THEREIN TO THE TRUSTEE, AND
PROVIDE TO THE COMPANY, UPON REQUEST, COPIES OF ANY SUCH RECORDS,
(C) AFTER THE OCCURRENCE OF A PURCHASE TERMINATION EVENT, CONTACT
CUSTOMERS TO CONFIRM AND VERIFY RECEIVABLES AND (D) OBTAIN THE
AGREEMENT OF ANY PERSON HAVING A LIEN ON ANY RECEIVABLES OWNED BY
SUCH SELLER (OTHER THAN ANY LIEN CREATED OR IMPOSED HEREUNDER OR
UNDER THE POOLING AGREEMENT OR ANY PERMITTED LIEN) TO RELEASE SUCH
LIEN UPON THE PURCHASE OF ANY SUCH RECEIVABLES BY THE COMPANY.
(II) SUCH SELLER HEREBY IRREVOCABLY AUTHORIZES THE COMPANY
AND THE TRUSTEE TO FILE ONE OR MORE FINANCING OR CONTINUATION
STATEMENTS SUBSTANTIALLY IN THE FORM OF THE ORIGINALLY AGREED UPON
FINANCING STATEMENTS, AND AMENDMENTS THERETO, RELATIVE TO ALL OR ANY
PART OF THE RECEIVABLES AND RECEIVABLES PROPERTY SOLD OR TO BE SOLD
BY SUCH SELLER, WITHOUT THE SIGNATURE OF SUCH SELLER WHERE PERMITTED
BY LAW.
(III) IF SUCH SELLER FAILS TO PERFORM ANY OF ITS AGREEMENTS
OR OBLIGATIONS UNDER THIS AGREEMENT, THE COMPANY OR ITS ASSIGNEES
MAY (BUT SHALL NOT BE REQUIRED TO) PERFORM, OR CAUSE PERFORMANCE OF,
SUCH AGREEMENTS OR OBLIGATIONS, AND THE EXPENSES OF THE COMPANY
INCURRED IN CONNECTION THEREWITH SHALL BE PAYABLE BY SUCH SELLER AS
PROVIDED IN SECTION 7.01.
(N) LEGEND REQUIREMENT FOR CHATTEL PAPER. SUCH SELLER AGREES (I) AT
ALL TIMES TO COMPLY WITH THE TERMS AND PROVISIONS SET FORTH IN SCHEDULE 3
TO THE POOLING AGREEMENT AND (II) THAT ANY RECEIVABLE THAT CONSTITUTES OR
IS EVIDENCED BY "CHATTEL PAPER" AS DEFINED IN ARTICLE 9 OF THE UCC AS IN
EFFECT IN THE RELEVANT UCC STATE SHALL BEAR A LEGEND STATING THAT SUCH
RECEIVABLE HAS BEEN CONVEYED TO THE TRUST.
(O) COMPUTER FILES. AT ITS OWN COST AND EXPENSE, EACH SELLER SHALL
RETAIN THE LEDGER USED BY SUCH SELLER AS A MASTER RECORD OF THE OBLIGORS
AND RETAIN COPIES OF ALL DOCUMENTS RELATING TO EACH OBLIGOR AS CUSTODIAN
AND AGENT FOR THE COMPANY AND OTHER PERSONS WITH INTERESTS IN THE
PURCHASED RECEIVABLES, AND EACH SELLER SHALL ASSURE CONTINUED COMPLIANCE
WITH SECTION 2.01(E).
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SECTION 5.02. REPORTING REQUIREMENTS. EACH SELLER SHALL FURNISH TO
THE COMPANY AND ITS ASSIGNS (INCLUDING THE TRUSTEE) FROM THE DATE HEREOF UNTIL
THE PURCHASE TERMINATION DATE SHALL HAVE OCCURRED WITH RESPECT TO SUCH SELLER
AND UNTIL THERE ARE NO AMOUNTS OUTSTANDING WITH RESPECT TO PURCHASED RECEIVABLES
PREVIOUSLY SOLD BY SUCH SELLER TO THE COMPANY:
(A) COMPLIANCE CERTIFICATE. NOT LATER THAN 120 DAYS AFTER THE END OF
EACH FISCAL YEAR AND NOT LATER THAN 60 DAYS AFTER THE END OF EACH OF THE
FIRST THREE FISCAL QUARTERS OF EACH FISCAL YEAR, A CERTIFICATE OF A
RESPONSIBLE OFFICER OF SUCH SELLER STATING THAT, TO THE BEST OF SUCH
RESPONSIBLE OFFICER'S KNOWLEDGE, SUCH SELLER DURING SUCH PERIOD, HAS
OBSERVED OR PERFORMED ALL OF ITS COVENANTS AND OTHER AGREEMENTS, AND
SATISFIED EVERY CONDITION, CONTAINED IN THE TRANSACTION DOCUMENTS TO WHICH
IT IS A PARTY TO BE OBSERVED, PERFORMED OR SATISFIED BY IT, AND THAT SUCH
RESPONSIBLE OFFICER HAS OBTAINED NO KNOWLEDGE OF ANY PURCHASE TERMINATION
EVENT OR POTENTIAL PURCHASE TERMINATION EVENT EXCEPT AS SPECIFIED IN SUCH
CERTIFICATE;
(B) ERISA. PROMPTLY AFTER THE FILING OR RECEIVING THEREOF, COPIES OF
ALL REPORTS AND NOTICES WITH RESPECT TO ANY REPORTABLE EVENT WHICH SUCH
SELLER FILES UNDER ERISA WITH THE INTERNAL REVENUE SERVICE, THE PENSION
BENEFIT GUARANTY CORPORATION OR THE U.S. DEPARTMENT OF LABOR OR WHICH SUCH
SELLER RECEIVES FROM THE PENSION BENEFIT GUARANTY CORPORATION IF, IN EACH
CASE, SUCH REPORT OR NOTICE RELATES TO AN EVENT OR CONDITION THAT COULD
REASONABLY BE EXPECTED TO GIVE RISE TO A PURCHASE TERMINATION EVENT,
AMORTIZATION EVENT OR A MATERIAL ADVERSE EFFECT;
(C) TERMINATION EVENTS: OTHER MATERIAL EVENTS. (I) UPON THE
COMPANY'S REQUEST, A CERTIFICATE OF A RESPONSIBLE OFFICER OF SUCH SELLER
CERTIFYING, AS OF THE DATE THEREOF, THAT NO PURCHASE TERMINATION EVENT HAS
OCCURRED AND IS CONTINUING AND SETTING FORTH THE COMPUTATIONS USED BY THE
CHIEF FINANCIAL OFFICER OF SUCH SELLER IN MAKING SUCH DETERMINATION; (II)
AS SOON AS POSSIBLE AND IN ANY EVENT WITHIN TWO BUSINESS DAYS AFTER A
RESPONSIBLE OFFICER OF SUCH SELLER OBTAINS KNOWLEDGE OF THE OCCURRENCE OF
ANY PURCHASE TERMINATION EVENT, POTENTIAL PURCHASE TERMINATION EVENT,
SERVICER DEFAULT OR POTENTIAL SERVICER DEFAULT, A WRITTEN STATEMENT OF A
RESPONSIBLE OFFICER OF SUCH SELLER SETTING FORTH DETAILS OF SUCH EVENT AND
THE ACTION THAT SUCH SELLER PROPOSES TO TAKE OR HAS TAKEN WITH RESPECT
THERETO; (III) PROMPTLY AFTER OBTAINING KNOWLEDGE OF ANY THREATENED ACTION
OR PROCEEDING AFFECTING SUCH SELLER OR ITS SUBSIDIARIES BEFORE ANY COURT,
GOVERNMENTAL AGENCY OR ARBITRATOR THAT MAY REASONABLY BE EXPECTED TO
MATERIALLY AND ADVERSELY AFFECT THE ENFORCEABILITY OF THIS AGREEMENT AND
THE OTHER TRANSACTION DOCUMENTS, NOTICE OF SUCH ACTION OR PROCEEDING; AND
(IV) BY JUNE 15, 1999, A CERTIFICATE OF A RESPONSIBLE OFFICER OF SUCH
SELLER (WITH A COPY TO EACH RATING AGENCY) CERTIFYING, AS OF THE DATE
THEREOF, THAT SUCH SELLER'S COMPUTER SYSTEMS SHALL BE "YEAR 2000
COMPLIANT" BY JUNE 30, 1999;
(D) INELIGIBLE RECEIVABLES. PROMPTLY UPON DETERMINING THAT ANY
PURCHASED RECEIVABLE ORIGINATED BY IT DESIGNATED AS AN ELIGIBLE RECEIVABLE
ON THE APPLICABLE DAILY REPORT WAS NOT AN ELIGIBLE RECEIVABLE AS OF THE
DATE PROVIDED THEREFOR, WRITTEN NOTICE OF SUCH DETERMINATION; AND
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(E) OTHER. PROMPTLY, FROM TIME TO TIME, SUCH OTHER INFORMATION,
DOCUMENTS, RECORDS OR REPORTS RESPECTING THE RECEIVABLES OF SUCH SELLER AS
THE COMPANY OR THE AGENTS MAY FROM TIME TO TIME REASONABLY REQUEST IN
ORDER TO PROTECT THE INTERESTS OF THE COMPANY AND THE AGENTS UNDER OR AS
CONTEMPLATED BY THE TRANSACTION DOCUMENTS.
SECTION 5.03. NEGATIVE COVENANTS. EACH SELLER COVENANTS THAT, UNTIL
THE PURCHASE TERMINATION DATE SHALL HAVE OCCURRED WITH RESPECT TO SUCH SELLER
AND THERE ARE NO AMOUNTS OUTSTANDING WITH RESPECT TO PURCHASED RECEIVABLES
PREVIOUSLY SOLD BY SUCH SELLER TO THE COMPANY,:
(A) RECEIVABLES TO BE ACCOUNTS, GENERAL INTANGIBLES OR CHATTEL
PAPER. SUCH SELLER WILL TAKE NO ACTION TO CAUSE ANY RECEIVABLE TO BE
EVIDENCED BY ANY "INSTRUMENT" OTHER THAN IN COMPLIANCE WITH SECTION 2.2(G)
OF THE SERVICING AGREEMENT OR, PROVIDED THAT THE PROCEDURES SET FORTH IN
SCHEDULE 3 TO THE POOLING AGREEMENT ARE FULLY IMPLEMENTED WITH RESPECT
THERETO, AN INSTRUMENT WHICH TOGETHER WITH A SECURITY AGREEMENT
CONSTITUTES "CHATTEL PAPER" (EACH AS DEFINED IN THE UCC AS IN EFFECT IN
THE RELEVANT UCC STATE). SUCH SELLER WILL TAKE NO ACTION TO CAUSE ANY
RECEIVABLE TO BE ANYTHING OTHER THAN AN "ACCOUNT", "GENERAL INTANGIBLE" OR
"CHATTEL PAPER" (EACH AS DEFINED IN THE UCC AS IN EFFECT IN THE RELEVANT
UCC STATE).
(B) SECURITY INTERESTS; SALE OF RECEIVABLES. EXCEPT FOR THE
CONVEYANCES HEREUNDER AND AS PROVIDED BELOW, SUCH SELLER WILL NOT SELL,
PLEDGE, ASSIGN OR TRANSFER TO ANY OTHER PERSON, OR GRANT, CREATE, INCUR,
ASSUME OR SUFFER TO EXIST ANY OTHER LIEN ON ANY RECEIVABLE OR RECEIVABLES
PROPERTY, WHETHER NOW EXISTING OR HEREAFTER CREATED, OR ANY INTEREST
THEREIN; SUCH SELLER WILL IMMEDIATELY NOTIFY THE COMPANY OF THE EXISTENCE
OF ANY OTHER LIEN ON ANY RECEIVABLE OR RECEIVABLES PROPERTY; AND SUCH
SELLER SHALL DEFEND THE RIGHT, TITLE AND INTEREST OF THE COMPANY IN, TO
AND UNDER THE RECEIVABLES OR RECEIVABLES PROPERTY, WHETHER NOW EXISTING OR
HEREAFTER CREATED, AGAINST ALL CLAIMS OF THIRD PARTIES CLAIMING THROUGH OR
UNDER SUCH SELLER; PROVIDED, HOWEVER, THAT NOTHING IN THIS SUBSECTION
5.03(B) SHALL PREVENT OR BE DEEMED TO PROHIBIT SUCH SELLER FROM SUFFERING
TO EXIST UPON ANY OF THE RECEIVABLES ANY PERMITTED LIEN.
(C) EXTENSION OR AMENDMENT OF RECEIVABLES. SUCH SELLER WILL NOT
EXTEND, RESCIND, CANCEL, MAKE ANY DILUTION ADJUSTMENT TO, AMEND OR
OTHERWISE MODIFY, OR ATTEMPT OR PURPORT TO EXTEND, RESCIND, CANCEL, MAKE
ANY DILUTION ADJUSTMENT TO, AMEND OR OTHERWISE MODIFY, THE TERMS OF ANY
PURCHASED RECEIVABLES, EXCEPT IN ANY SUCH CASE (I) IN ACCORDANCE WITH THE
TERMS OF THE POLICIES, (II) AS REQUIRED BY ANY REQUIREMENT OF LAW OR (III)
IN THE CASE OF DILUTION ADJUSTMENTS (WHETHER OR NOT PERMITTED BY ANY OTHER
CLAUSE OF THIS SENTENCE), UPON MAKING A SELLER ADJUSTMENT PAYMENT PURSUANT
TO SECTION 2.05.
(D) CHANGE IN BUSINESS. SUCH SELLER WILL NOT MAKE OR PERMIT TO BE
MADE ANY CHANGE IN THE CHARACTER OF ITS BUSINESS IN ANY MATERIAL RESPECT
IF SUCH CHANGE COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE
EFFECT.
(E) CHANGE IN POLICIES. SUCH SELLER SHALL NOT MAKE OR PERMIT TO BE
MADE ANY CHANGE IN THE POLICIES IN ANY MATERIAL RESPECT, EXCEPT (I) IF
SUCH CHANGES OR
34
MODIFICATIONS ARE REQUIRED UNDER ANY REQUIREMENT OF LAW, (II) IF SUCH
CHANGES OR MODIFICATIONS WOULD NOT REASONABLY BE EXPECTED TO HAVE A
MATERIAL ADVERSE EFFECT OR (III) IF THE RATING AGENCY CONDITION IS
SATISFIED WITH RESPECT THERETO.
(F) CHANGE IN NAME. SUCH SELLER WILL NOT CHANGE ITS NAME, IDENTITY
OR CORPORATE STRUCTURE IN ANY MANNER INCLUDING BY WAY OF ANY MERGER,
CONSOLIDATION, AMALGAMATION, LIQUIDATION, A WINDING UP OR DISSOLUTION
WHICH WOULD OR MIGHT MAKE ANY FINANCING STATEMENT OR CONTINUATION
STATEMENT (OR OTHER SIMILAR INSTRUMENT) RELATING TO THIS AGREEMENT
SERIOUSLY MISLEADING WITHIN THE MEANING OF SECTION 9-402(7) OF THE UCC, OR
IMPAIR THE PERFECTION OF THE COMPANY'S INTEREST IN ANY RECEIVABLE UNDER
ANY OTHER SIMILAR LAW, WITHOUT HAVING (I) DELIVERED 30 DAYS' PRIOR WRITTEN
NOTICE TO THE COMPANY, THE SERVICER AND THE TRUSTEE AND (II) TAKEN ALL
ACTION REQUIRED BY SUBSECTION 5.01(A).
(G) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. SUCH SELLER SHALL
NOT INSTRUCT ANY OBLIGOR OF ANY PURCHASED RECEIVABLES TO MAKE ANY PAYMENTS
WITH RESPECT TO ANY RECEIVABLES OTHER THAN TO A LOCKBOX, A LOCKBOX
ACCOUNT, AN ELIGIBLE SEGREGATED ACCOUNT OR THE COLLECTION ACCOUNT OR
OTHERWISE IN ACCORDANCE WITH THE SERVICING AGREEMENT.
(H) ACCOUNTING CHANGES. SUCH SELLER SHALL NOT PREPARE ANY FINANCIAL
STATEMENTS (OTHER THAN CONSOLIDATED FINANCIAL STATEMENTS) WHICH SHALL
ACCOUNT FOR THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY MANNER OTHER THAN
AS A SALE OF THE PURCHASED RECEIVABLES BY SUCH SELLER TO THE COMPANY NOR
IN ANY OTHER RESPECT (OTHER THAN FOR TAX PURPOSES) ACCOUNT FOR OR TREAT
THE TRANSACTIONS CONTEMPLATED HEREBY (INCLUDING FOR FINANCIAL ACCOUNTING
PURPOSES, EXCEPT AS REQUIRED BY LAW) IN ANY MANNER OTHER THAN AS SALES OF
THE PURCHASED RECEIVABLES ORIGINATED BY SUCH SELLER TO THE COMPANY.
(I) INELIGIBLE RECEIVABLES. SUCH SELLER SHALL NOT TAKE ANY ACTION TO
CAUSE AN ELIGIBLE RECEIVABLE TO CEASE TO BE AN ELIGIBLE RECEIVABLE, EXCEPT
IN ANY SUCH CASE UPON MAKING A SELLER REPURCHASE PAYMENT PURSUANT TO
SECTION 2.06; PROVIDED, HOWEVER, THAT IN NO EVENT SHALL AN ELIGIBLE
RECEIVABLE BECOMING AN AGED RECEIVABLE CONSTITUTE A BREACH OF THIS
PARAGRAPH (I).
ARTICLE VI
PURCHASE TERMINATION EVENTS
SECTION 6.01. PURCHASE TERMINATION EVENTS. IF, WITH RESPECT TO ANY
SELLER, ANY OF THE FOLLOWING EVENTS (EACH, A "PURCHASE TERMINATION EVENT" WITH
RESPECT TO SUCH SELLER) SHALL HAVE OCCURRED AND BE CONTINUING:
(A) THE SELLER SHALL FAIL TO MAKE ANY PAYMENT OR DEPOSIT TO BE MADE
BY IT HEREUNDER WHEN DUE AND SUCH FAILURE SHALL REMAIN UNREMEDIED FOR FIVE
BUSINESS DAYS; OR
35
(B) THERE SHALL HAVE OCCURRED (I) AN EARLY AMORTIZATION EVENT SET
FORTH IN SECTION 7.1 OF THE POOLING AGREEMENT OR (II) THE AMORTIZATION
PERIOD WITH RESPECT TO ALL OUTSTANDING SERIES SHALL HAVE OCCURRED AND BE
CONTINUING; OR
(C) ANY REPRESENTATION OR WARRANTY MADE OR DEEMED TO BE MADE BY SUCH
SELLER OR ANY OF ITS OFFICERS UNDER OR IN CONNECTION WITH ANY TRANSACTION
DOCUMENT, DAILY REPORT, MONTHLY SETTLEMENT STATEMENT OR OTHER INFORMATION,
STATEMENT, RECORD, CERTIFICATE, DOCUMENT OR REPORT DELIVERED PURSUANT TO A
TRANSACTION DOCUMENT SHALL PROVE TO HAVE BEEN FALSE OR INCORRECT IN ANY
MATERIAL RESPECT WHEN MADE OR DEEMED MADE (INCLUDING IN EACH CASE BY
OMISSION OF MATERIAL INFORMATION NECESSARY TO MAKE SUCH REPRESENTATION,
WARRANTY, CERTIFICATE OR STATEMENT NOT MISLEADING); PROVIDED, HOWEVER,
THAT NO SUCH EVENT SHALL CONSTITUTE A PURCHASE TERMINATION EVENT UNLESS
SUCH EVENT SHALL CONTINUE UNREMEDIED FOR A PERIOD OF 30 DAYS FROM THE
EARLIER OF (A) THE DATE ANY RESPONSIBLE OFFICER OF SUCH SELLER OBTAINS
KNOWLEDGE THEREOF AND (B) THE DATE SUCH SELLER RECEIVES NOTICE OF THE
INCORRECTNESS OF SUCH REPRESENTATION OR WARRANTY FROM THE COMPANY OR THE
TRUSTEE; PROVIDED, FURTHER,THAT A PURCHASE TERMINATION EVENT SHALL NOT BE
DEEMED TO HAVE OCCURRED UNDER THIS PARAGRAPH (C) BASED UPON A BREACH OF
ANY REPRESENTATION OR WARRANTY SET FORTH IN SECTION 4.02 WITH RESPECT TO
ANY RECEIVABLE IF THE SELLERS SHALL HAVE COMPLIED WITH THE PROVISIONS OF
SECTIONS 2.06 OR 2.11, AS THE CASE MAY BE; OR
(D) SUCH SELLER SHALL FAIL TO PERFORM OR OBSERVE ANY OTHER TERM,
COVENANT OR AGREEMENT CONTAINED HEREIN; PROVIDED, HOWEVER, THAT NO FAILURE
TO PERFORM OR OBSERVE ANY OTHER TERM, COVENANT OR AGREEMENT CONTAINED
HEREIN SHALL CONSTITUTE A PURCHASE TERMINATION EVENT UNLESS SUCH EVENT
SHALL CONTINUE UNREMEDIED FOR A PERIOD OF 30 DAYS FROM THE EARLIER OF (A)
THE DATE ANY RESPONSIBLE OFFICER OF SUCH SELLER OBTAINS KNOWLEDGE OF SUCH
FAILURE AND (B) THE DATE SUCH SELLER RECEIVES NOTICE OF SUCH FAILURE FROM
THE COMPANY OR THE TRUSTEE; PROVIDED, FURTHER, THAT A PURCHASE TERMINATION
EVENT SHALL NOT BE DEEMED TO HAVE OCCURRED UNDER THIS PARAGRAPH (D) BASED
UPON A BREACH OF ANY COVENANT SET FORTH IN SUBSECTION 5.01(C), (F) OR (G)
OR SECTION 5.03 WITH RESPECT TO ANY RECEIVABLE IF THE SELLERS SHALL HAVE
COMPLIED WITH THE PROVISIONS OF SECTIONS 2.06 OR 2.11, AS THE CASE MAY BE;
OR
(E) ANY TRANSACTION DOCUMENT TO WHICH SUCH SELLER IS A PARTY SHALL
CEASE, FOR ANY REASON, TO BE IN FULL FORCE AND EFFECT, OR WESCO OR SUCH
SELLER SHALL SO ASSERT IN WRITING, OR THE COMPANY SHALL FAIL TO HAVE A
VALID AND PERFECTED FIRST PRIORITY OWNERSHIP INTEREST IN SUBSTANTIALLY ALL
OF THE RECEIVABLES AND THE RECEIVABLES PROPERTY; OR
(F) (I) SUCH SELLER SHALL COMMENCE ANY CASE, PROCEEDING OR OTHER
ACTION (A) UNDER ANY EXISTING OR FUTURE LAW OF ANY JURISDICTION, DOMESTIC
OR FOREIGN, RELATING TO BANKRUPTCY, INSOLVENCY, REORGANIZATION OR RELIEF
OF DEBTORS, SEEKING TO HAVE AN ORDER FOR RELIEF ENTERED WITH RESPECT TO
IT, OR SEEKING TO ADJUDICATE IT A BANKRUPT OR INSOLVENT, OR SEEKING
REORGANIZATION, ARRANGEMENT, ADJUSTMENT, WINDING-UP, LIQUIDATION,
DISSOLUTION, COMPOSITION OR OTHER RELIEF WITH RESPECT TO IT OR ITS DEBTS,
OR (B) SEEKING APPOINTMENT OF A RECEIVER, TRUSTEE, CUSTODIAN OR OTHER
SIMILAR OFFICIAL FOR IT OR FOR ALL OR ANY SUBSTANTIAL PART OF ITS ASSETS,
OR SUCH SELLER SHALL MAKE A GENERAL ASSIGNMENT FOR
36
THE BENEFIT OF ITS CREDITORS; OR (II) THERE SHALL BE COMMENCED AGAINST
SUCH SELLER ANY CASE, PROCEEDING OR OTHER ACTION OF A NATURE REFERRED TO
IN CLAUSE (I) ABOVE WHICH (A) RESULTS IN THE ENTRY OF AN ORDER FOR RELIEF
OR ANY SUCH ADJUDICATION OR APPOINTMENT OR (B) REMAINS UNDISMISSED,
UNDISCHARGED OR UNBONDED FOR A PERIOD OF 60 DAYS; OR (III) THERE SHALL BE
COMMENCED AGAINST SUCH SELLER OR ANY OF ITS SUBSIDIARIES ANY CASE,
PROCEEDING OR OTHER ACTION SEEKING ISSUANCE OF A WARRANT OF ATTACHMENT,
EXECUTION, DISTRAINT OR SIMILAR PROCESS AGAINST ALL OR ANY SUBSTANTIAL
PART OF ITS ASSETS WHICH RESULTS IN THE ENTRY OF AN ORDER FOR ANY SUCH
RELIEF WHICH SHALL NOT HAVE BEEN VACATED, DISCHARGED, OR STAYED OR BONDED
PENDING APPEAL WITHIN 60 DAYS FROM THE ENTRY THEREOF; OR (IV) SUCH SELLER
OR ANY OF ITS RESPECTIVE SUBSIDIARIES SHALL TAKE ANY ACTION IN FURTHERANCE
OF ANY OF THE ACTS SET FORTH IN CLAUSE (I), (II), OR (III) ABOVE; OR (V)
SUCH SELLER SHALL GENERALLY NOT, OR SHALL BE UNABLE TO, OR SHALL ADMIT IN
WRITING ITS INABILITY TO, PAY ITS DEBTS AS THEY BECOME DUE; OR
(G) WESCO HAS BEEN TERMINATED AS SERVICER FOLLOWING A SERVICER
DEFAULT WITH RESPECT TO WESCO UNDER THE SERVICING AGREEMENT; OR
(H) 15 DAYS SHALL HAVE ELAPSED AFTER THERE SHALL BE FILED AGAINST
SUCH SELLER A (I) A NOTICE OF FEDERAL TAX LIEN FROM THE INTERNAL REVENUE
SERVICE (PROVIDED THAT IN THE CASE OF A FEDERAL TAX LIEN WITH RESPECT TO
PAYROLL TAXES SUCH LIEN SHALL RELATE TO TAXES IN EXCESS OF $750,000) OR
(II) A NOTICE OF LIEN FROM THE PBGC UNDER SECTION 412(N) OF THE CODE OR
SECTION 302(F) OF ERISA FOR A FAILURE TO MAKE A REQUIRED INSTALLMENT OR
OTHER PAYMENT TO A PLAN TO WHICH SECTION 412(N) OF THE CODE OR SECTION
302(F) OF ERISA APPLIES, UNLESS IN EACH CASE THERE SHALL HAVE BEEN
DELIVERED TO THE TRUSTEE AND EACH RATING AGENCY PROOF OF THE RELEASE OF,
OR PAYMENT OF AMOUNTS SECURED BY, SUCH LIEN; OR
(I) THERE SHALL BE FILED AGAINST SUCH SELLER A NOTICE OF ANY OTHER
LIEN, THE EXISTENCE OF WHICH COULD REASONABLY BE EXPECTED TO HAVE A
MATERIAL ADVERSE EFFECT UNLESS THERE HAS BEEN DELIVERED TO THE TRUSTEE
PROOF OF RELEASE OF, OR PAYMENT OF AMOUNTS SECURED BY, SUCH LIEN;
THEN, (X) IN THE CASE OF ANY PURCHASE TERMINATION EVENT DESCRIBED IN
PARAGRAPH (B)(I) OR (F) (OTHER THAN CLAUSE (V) THEREOF), THE OBLIGATION OF
THE COMPANY TO PURCHASE RECEIVABLES SHALL THEREUPON AUTOMATICALLY
TERMINATE WITHOUT FURTHER NOTICE OF ANY KIND, WHICH IS HEREBY WAIVED BY
SUCH SELLER, (Y) IN THE CASE OF ANY PURCHASE TERMINATION EVENT DESCRIBED
IN PARAGRAPH (B)(II) ABOVE, THE OBLIGATION OF THE COMPANY TO PURCHASE
RECEIVABLES SHALL THEREUPON TERMINATE WITHOUT NOTICE OF ANY KIND, WHICH IS
HEREBY WAIVED BY SUCH SELLER, UNLESS BOTH THE COMPANY AND SUCH SELLER
AGREE IN WRITING THAT SUCH EVENT SHALL NOT TRIGGER AN EARLY TERMINATION
HEREUNDER AND (Z) IN THE CASE OF ANY OTHER PURCHASE TERMINATION EVENT, SO
LONG AS SUCH PURCHASE TERMINATION EVENT SHALL BE CONTINUING, THE COMPANY
MAY TERMINATE ITS OBLIGATION TO PURCHASE RECEIVABLES FROM SUCH SELLER BY
WRITTEN NOTICE TO SUCH SELLER (ANY TERMINATION WITH RESPECT TO ANY SELLER
PURSUANT TO CLAUSE (X), (Y) OR (Z) OF THIS ARTICLE VI IS HEREIN CALLED AN
"EARLY TERMINATION" WITH RESPECT TO SUCH SELLER); PROVIDED, HOWEVER, THAT
IN THE EVENT OF (A) THE FILING OF ANY NOTICE OF LIEN DESCRIBED IN
PARAGRAPH (H) ABOVE OR (B) AN INVOLUNTARY PETITION OR PROCEEDING AS
DESCRIBED IN PARAGRAPHS (F)(II) AND (F)(III) ABOVE, THE
37
COMPANY SHALL NOT PURCHASE RECEIVABLES FROM SUCH SELLER UNTIL SUCH TIME,
IF ANY, AS SUCH LIEN IS RELEASED OR PAID (AND EVIDENCE OF SUCH RELEASE OR
PAYMENT IS RECEIVED AND VERIFIED BY S&P) AS DESCRIBED ABOVE OR SUCH
INVOLUNTARY PETITION OR PROCEEDING HAS BEEN DISMISSED; PROVIDED, FURTHER,
THAT IN THE CASE OF CLAUSE (B) SUCH DISMISSAL SHALL HAVE OCCURRED WITHIN
60 DAYS OF THE FILING OF SUCH PETITION OR THE COMMENCEMENT OF SUCH
PROCEEDING; PROVIDED, FURTHER, THAT UPON THE OCCURRENCE OF AN EARLY
TERMINATION OF A SELLER, SUCH SELLER SHALL HAVE NO FURTHER OBLIGATION TO
SELL ANY ADDITIONAL RECEIVABLES TO THE COMPANY. NOTWITHSTANDING ANYTHING
TO THE CONTRARY IN THIS SECTION 6.01, A DELAY IN OR FAILURE OF PERFORMANCE
REFERRED TO UNDER CLAUSE (A) ABOVE FOR A PERIOD OF 10 BUSINESS DAYS AFTER
THE APPLICABLE GRACE PERIOD SHALL NOT CONSTITUTE A PURCHASE TERMINATION
EVENT, IF SUCH DELAY OR FAILURE COULD NOT HAVE BEEN PREVENTED BY THE
EXERCISE OF REASONABLE DILIGENCE BY SUCH SELLER AND SUCH DELAY OR FAILURE
WAS CAUSED BY A FORCE MAJEURE DELAY.
SECTION 6.02. ADDITIONAL REMEDIES. (A) UPON THE OCCURRENCE OF ANY
PURCHASE TERMINATION EVENT, THE COMPANY SHALL HAVE, IN ADDITION TO ALL OTHER
RIGHTS AND REMEDIES UNDER THIS AGREEMENT OR OTHERWISE ALL OTHER RIGHTS AND
REMEDIES PROVIDED UNDER THE UCC OF EACH APPLICABLE JURISDICTION AND OTHER
APPLICABLE LAWS, WHICH RIGHTS SHALL BE CUMULATIVE. WITHOUT LIMITING THE
FOREGOING, THE OCCURRENCE OF A PURCHASE TERMINATION EVENT SHALL NOT DENY TO THE
COMPANY ANY REMEDY (IN ADDITION TO TERMINATION OF THE COMPANY'S OBLIGATION TO
PURCHASE RECEIVABLES FROM ANY RELEVANT SELLER OR SELLERS) TO WHICH THE COMPANY
MAY BE OTHERWISE APPROPRIATELY ENTITLED, WHETHER BY STATUTE OR OTHER APPLICABLE
LAW, AT LAW OR IN EQUITY.
(B) IN THE ABSENCE OF A PURCHASE TERMINATION EVENT UNDER SECTION
6.01(B)(I) OR (F), IT IS UNDERSTOOD AND AGREED THAT THE COMPANY WILL NOT
EXERCISE THE RIGHTS GRANTED TO IT PURSUANT TO SECTION 2.01(F).
ARTICLE VII
INDEMNIFICATION; EXPENSES; COSTS
SECTION 7.01. INDEMNITIES BY THE SELLERS. WESCO AND THE OTHER
SELLERS (OTHER THAN THOSE SELLERS FROM WHICH THE COMPANY HAS NO RECEIVABLES
OUTSTANDING AT SUCH TIME) AGREE (I) TO PAY OR REIMBURSE THE COMPANY FOR ALL ITS
COSTS AND EXPENSES INCURRED IN CONNECTION WITH THE ENFORCEMENT OR PRESERVATION
OF ANY RIGHTS AGAINST ANY SELLER UNDER THIS AGREEMENT, INCLUDING, WITHOUT
LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL TO THE COMPANY,
(II) TO PAY, INDEMNIFY AND HOLD THE COMPANY HARMLESS FROM, ANY AND ALL RECORDING
AND FILING FEES AND ANY AND ALL LIABILITIES WITH RESPECT TO, OR RESULTING FROM
ANY DELAY CAUSED BY THE SELLER IN PAYING, STAMP, EXCISE AND OTHER SIMILAR TAXES,
IF ANY, WHICH MAY BE PAYABLE OR DETERMINED TO BE PAYABLE IN CONNECTION WITH THE
EXECUTION AND DELIVERY OF, OR ANY AMENDMENT, SUPPLEMENT OR MODIFICATION OF, OR
ANY WAIVER OR CONSENT UNDER OR IN RESPECT OF, THIS AGREEMENT AND ANY SUCH OTHER
DOCUMENTS, AND (III) WITHOUT LIMITING ANY OTHER RIGHTS THAT THE COMPANY MAY HAVE
HEREUNDER OR UNDER APPLICABLE LAW, TO INDEMNIFY THE COMPANY FROM AND AGAINST ANY
AND ALL CLAIMS, LOSSES AND LIABILITIES (INCLUDING REASONABLE ATTORNEYS' FEES)
(ALL THE FOREGOING BEING COLLECTIVELY REFERRED TO AS "INDEMNIFIED AMOUNTS")
ARISING OUT OF OR RESULTING FROM ANY OF THE FOLLOWING, EXCLUDING, HOWEVER,
INDEMNIFIED AMOUNTS (A) TO THE EXTENT RESULTING FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE COMPANY,
38
(B) ARISING SOLELY FROM A DELAY IN PAYMENT, OR DEFAULT BY, AN OBLIGOR WITH
RESPECT TO ANY RECEIVABLE (OTHER THAN ANY DELAY OR DEFAULT ARISING OUT OF ANY
DISCHARGE, CLAIM, OFFSET OR DEFENSE (OTHER THAN DISCHARGE IN BANKRUPTCY OF THE
OBLIGOR OR OTHERWISE IN RESPECT OF A CHARGED-OFF RECEIVABLE) OF THE OBLIGOR TO
THE PAYMENT OF ANY TRANSFERRED RECEIVABLE ARISING FROM THE ACTIONS OF SUCH
SELLER (INCLUDING, WITHOUT LIMITATION, A DEFENSE BASED ON SUCH TRANSFERRED
RECEIVABLE'S NOT BEING A LEGAL, VALID AND BINDING OBLIGATION OF SUCH OBLIGOR
ENFORCEABLE AGAINST IT IN ACCORDANCE WITH ITS TERMS) OR (C) ATTRIBUTABLE TO ANY
INCOME OR FRANCHISE TAXES IMPOSED ON (OR MEASURED BY) THE COMPANY'S NET INCOME:
(A) THE TRANSFER BY SUCH SELLER OF ANY INTEREST IN ANY RECEIVABLE OR
RECEIVABLES PROPERTY OR PROCEEDS THEREOF TO A PERSON OTHER THAN THE COMPANY;
(B) RELIANCE ON ANY REPRESENTATION OR WARRANTY OR STATEMENT MADE OR
DEEMED MADE BY SUCH SELLER (OR ANY OF ITS OFFICERS) UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR IN ANY CERTIFICATE OR REPORT DELIVERED PURSUANT HERETO THAT,
IN EITHER CASE, SHALL HAVE BEEN FALSE OR INCORRECT IN ANY MATERIAL RESPECT WHEN
MADE OR DEEMED MADE;
(C) THE FAILURE BY SUCH SELLER TO COMPLY WITH ANY APPLICABLE LAW,
RULE OR REGULATION OF ANY GOVERNMENTAL AUTHORITY WITH RESPECT TO ANY RECEIVABLE
OR RECEIVABLES PROPERTY, OR THE NONCONFORMITY OF ANY RECEIVABLE OR RECEIVABLES
PROPERTY WITH ANY SUCH APPLICABLE LAW, RULE OR REGULATION;
(D) THE FAILURE TO VEST AND MAINTAIN VESTED IN THE COMPANY AN
OWNERSHIP INTEREST IN ANY RECEIVABLE OR RECEIVABLES PROPERTY, FREE AND CLEAR OF
ANY LIEN, OTHER THAN A LIEN ARISING UNDER THE TRANSACTION DOCUMENTS, WHETHER
EXISTING AT THE TIME OF THE PURCHASE OF SUCH RECEIVABLE OR RECEIVABLES PROPERTY
OR AT ANY TIME THEREAFTER;
(E) THE FAILURE TO FILE, OR ANY DELAY IN FILING, FINANCING
STATEMENTS OR OTHER SIMILAR INSTRUMENTS OR DOCUMENTS UNDER THE UCC OF ANY
APPLICABLE JURISDICTION OR OTHER APPLICABLE LAWS WITH RESPECT TO ANY RECEIVABLES
OR RECEIVABLES PROPERTY OF SUCH SELLER;
(F) ANY DISPUTE, CLAIM, OFFSET OR DEFENSE OF THE OBLIGOR TO THE
PAYMENT OF ANY RECEIVABLE (INCLUDING, WITHOUT LIMITATION, A DEFENSE BASED ON
SUCH RECEIVABLE OR THE RELATED CONTRACT NOT BEING FULLY ENFORCEABLE AGAINST THE
OBLIGOR IN ACCORDANCE WITH ITS TERMS), OR ANY OTHER CLAIM RESULTING FROM THE
SALE OF THE MERCHANDISE OR SERVICES RELATED TO ANY SUCH RECEIVABLE OR THE
FURNISHING OR FAILURE TO FURNISH SUCH MERCHANDISE OR SERVICES;
(G) ANY FAILURE OF SUCH SELLER TO PERFORM ITS DUTIES OR OBLIGATIONS
UNDER THIS AGREEMENT;
(H) ANY PRODUCTS LIABILITY CLAIM ARISING OUT OF OR IN CONNECTION
WITH MERCHANDISE, INSURANCE OR SERVICES THAT ARE THE SUBJECT OF ANY RECEIVABLE
OR RECEIVABLES PROPERTY;
(I) THE COMMINGLING OF COLLECTIONS AT ANY TIME WITH OTHER FUNDS OF
SUCH SELLER;
39
(J) ANY CLAIM INVOLVING ENVIRONMENTAL LIABILITY THAT RELATES TO ANY
PROPERTY THAT HAS BEEN, IS NOW OR HEREAFTER WILL BE OWNED, LEASED, OPERATED OR
OTHERWISE USED BY SUCH SELLER;
(K) ANY TAX OR GOVERNMENTAL FEE OR CHARGE (BUT NOT INCLUDING
FRANCHISE TAXES AND TAXES UPON OR MEASURED BY NET INCOME OF THE COMPANY), ALL
INTEREST AND PENALTIES THEREON OR WITH RESPECT THERETO, AND ALL OUT-OF-POCKET
COSTS AND EXPENSES, INCLUDING THE REASONABLE FEES AND EXPENSES OF COUNSEL IN
DEFENDING AGAINST THE SAME, WHICH MAY ARISE BY REASON OF THE PURCHASE OR
OWNERSHIP OF ANY RECEIVABLE OR RECEIVABLES PROPERTY, OR ANY INTEREST THEREIN OR
IN ANY MERCHANDISE WHICH SECURE ANY SUCH RECEIVABLES, ANY RECEIVABLES PROPERTY
OR ANY OTHER RIGHTS OR ASSETS TRANSFERRED HEREUNDER; OR
(L) ANY INVESTIGATION, LITIGATION OR PROCEEDING RELATED TO THIS
AGREEMENT OR IN RESPECT OF ANY RECEIVABLE OR RECEIVABLES PROPERTY OF SUCH
SELLER.
THE SELLERS SHALL PAY ON DEMAND TO THE COMPANY ANY AND ALL AMOUNTS
NECESSARY TO INDEMNIFY THE COMPANY FROM AND AGAINST ANY AND ALL INDEMNIFIED
AMOUNTS. NOTWITHSTANDING THE FOREGOING, SUCH SELLERS SHALL NOT UNDER ANY
CIRCUMSTANCES BE REQUIRED TO INDEMNIFY THE COMPANY FOR ANY INDEMNIFIED AMOUNTS
THAT RESULT FROM ANY DELAY IN THE COLLECTION OF ANY RECEIVABLES OR ANY DEFAULT
BY AN OBLIGOR WITH RESPECT TO ANY RECEIVABLES.
SECTION 7.02. INDEMNITIES BY THE COMPANY. WITHOUT LIMITING ANY OTHER
RIGHTS THAT THE SELLERS MAY HAVE HEREUNDER OR UNDER APPLICABLE LAW, THE COMPANY
HEREBY AGREES TO INDEMNIFY EACH SELLER FROM AND AGAINST ANY AND ALL CLAIMS,
LOSSES AND LIABILITIES (INCLUDING REASONABLE ATTORNEYS' FEES) ARISING OUT OF OR
RESULTING FROM SUCH SELLER'S RELIANCE ON ANY REPRESENTATION OR WARRANTY MADE BY
THE COMPANY IN THIS AGREEMENT OR IN ANY CERTIFICATE DELIVERED PURSUANT HERETO
THAT, IN EITHER CASE, SHALL HAVE BEEN FALSE OR INCORRECT IN ANY MATERIAL RESPECT
WHEN MADE OR DEEMED MADE; PROVIDED, HOWEVER, THAT ANY PAYMENTS MADE BY THE
COMPANY IN RESPECT OF ANY OF THE FOREGOING ITEMS SHALL BE MADE SOLELY FROM FUNDS
AVAILABLE TO THE COMPANY WHICH ARE NOT OTHERWISE REQUIRED TO BE APPLIED TO THE
PAYMENT OF ANY AMOUNTS PURSUANT TO ANY POOLING AND SERVICING AGREEMENTS (OTHER
THAN TO THE COMPANY), SHALL BE NON-RECOURSE OTHER THAN WITH RESPECT TO SUCH
FUNDS AND SHALL NOT CONSTITUTE A CLAIM AGAINST THE COMPANY TO THE EXTENT THAT
INSUFFICIENT FUNDS EXIST TO MAKE SUCH PAYMENT.
ARTICLE VIII
SELLER NOTE
SECTION 8.01. SELLER NOTE. (A) ON THE INITIAL EFFECTIVE DATE, THE
COMPANY SHALL ISSUE TO EACH SELLER A NOTE SUBSTANTIALLY IN THE FORM OF EXHIBIT A
(AS AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE "SELLER
NOTE"). THE AGGREGATE PRINCIPAL AMOUNT OF THE SELLER NOTE AT ANY TIME SHALL BE
EQUAL TO THE DIFFERENCE BETWEEN (A) THE AGGREGATE PRINCIPAL AMOUNT ON THE
ISSUANCE THEREOF AND EACH ADDITION TO THE PRINCIPAL AMOUNT OF SUCH SELLER NOTE
WITH RESPECT TO EACH SELLER PURSUANT TO THE TERMS OF SECTION 2.03 AS OF SUCH
TIME, MINUS (B) THE AGGREGATE AMOUNT OF ALL PAYMENTS MADE IN RESPECT OF THE
PRINCIPAL OF SUCH SELLER NOTE AS OF SUCH TIME. ALL PAYMENTS MADE IN RESPECT OF
THE SELLER NOTE SHALL BE ALLOCATED AMONG THE SELLERS BY THE SERVICER. EACH
SELLER'S INTEREST IN THE SELLER
40
NOTE SHALL EQUAL THE SUM OF EACH ADDITION THERETO ALLOCATED TO SUCH SELLER
PURSUANT TO SUBSECTION 2.03(C) LESS THE SUM OF EACH REPAYMENT THEREOF ALLOCATED
TO SUCH SELLER. ALL PAYMENTS MADE IN RESPECT OF THE SELLER NOTE SHALL BE
ALLOCATED, FIRST, TO PAY ACCRUED AND UNPAID INTEREST THEREON, AND SECOND, TO PAY
THE OUTSTANDING PRINCIPAL AMOUNT THEREOF. INTEREST ON THE OUTSTANDING PRINCIPAL
AMOUNT OF THE SELLER NOTE SHALL ACCRUE ON THE LAST DAY OF EACH SETTLEMENT PERIOD
AT A RATE PER ANNUM EQUAL TO THE REFERENCE RATE IN EFFECT FROM TIME TO TIME PLUS
2% FROM AND INCLUDING THE INITIAL EFFECTIVE DATE TO BUT EXCLUDING THE LAST DAY
OF EACH SETTLEMENT PERIOD AND SHALL BE PAID (X) ON EACH DISTRIBUTION DATE WITH
RESPECT TO THE PRINCIPAL AMOUNT OF THE SELLER NOTE OUTSTANDING FROM TIME TO TIME
DURING THE SETTLEMENT PERIOD IMMEDIATELY PRECEDING SUCH DISTRIBUTION DATE AND/OR
(Y) ON THE MATURITY DATE THEREOF; PROVIDED, HOWEVER, THAT, TO THE MAXIMUM EXTENT
PERMITTED BY LAW, ACCRUED INTEREST ON THE SELLER NOTE WHICH IS NOT SO PAID SHALL
BE ADDED, AT THE REQUEST OF SUCH SELLER, TO THE PRINCIPAL AMOUNT OF THE SELLER
NOTE. PRINCIPAL HEREUNDER NOT PAID OR PREPAID PURSUANT TO THE TERMS HEREOF SHALL
BE PAYABLE ON THE MATURITY DATE OF THE SELLER NOTE. DEFAULT IN THE PAYMENT OF
PRINCIPAL OR INTEREST UNDER THE SELLER NOTE SHALL NOT CONSTITUTE A PURCHASE
TERMINATION EVENT UNDER THIS AGREEMENT, A SERVICER DEFAULT UNDER ANY SERVICING
AGREEMENT OR AN EARLY AMORTIZATION EVENT UNDER THE POOLING AGREEMENT OR ANY
SUPPLEMENT THERETO.
SECTION 8.02. RESTRICTIONS ON TRANSFER OF SELLER NOTE. NEITHER THE
Seller Note, nor any right of any Seller to receive payments thereunder, shall
be assigned, transferred, exchanged, pledged, hypothecated, participated or
otherwise conveyed except as provided in the Credit Agreement and the security
documents related thereto.
Section 8.03. Aggregate Amount. Anything herein to the contrary
notwithstanding, the Company may not make any payment of any Purchase Price in
the form of Indebtedness of the Company under the Seller Note unless (i) at the
time of such payment and after giving effect thereto, the fair market value of
the Company's assets, including beneficial interests in, or indebtedness of, a
trust and all Receivables and Receivables Property the Company owns, is greater
than the amount of its liabilities, including its liabilities on the Seller Note
and all interest and other fees due and payable under any Pooling and Servicing
Agreements and the other Transaction Documents plus $45,000,000 and (ii) the
aggregate principal amount of Indebtedness evidenced by the Seller Note,
incurred on or before such Payment Date and outstanding on such Payment Date
(after giving effect to all repayments thereof on or before such Payment Date)
would not exceed 25% of the outstanding balance of the Receivables on such
Payment Date.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendment. Neither this Agreement nor any of the terms
hereof may be amended, supplemented or modified except in a writing signed by
the Company and the Sellers. Any amendment, supplement or modification shall not
be effective until the Rating Agency Condition, if applicable, has been
satisfied.
Section 9.02. Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile
41
communication) and shall be personally delivered or sent by certified mail,
postage-prepaid, by facsimile or by overnight courier, to the intended party at
the address or facsimile number of such party set forth under its name on the
signature pages hereof or at such other address or facsimile number as shall be
designated by such party in a written notice to the other parties hereto given
in accordance with this Section 9.02. Copies of all notices and other
communications provided for hereunder shall be delivered, if to the Trustee, at
its address at 450 West 33rd Street, New York, New York 10001, Attention:
Structured Finance Services, and if to the Servicer, at its address set forth on
Schedule 4. All notices and communications provided for hereunder shall be
effective, (a) if personally delivered by express mail or courier, when
received, (b) if sent by certified mail, three Business Days after having been
deposited in the mail, postage prepaid and (c) if transmitted by facsimile, when
sent, receipt confirmed by telephone or electronic means.
Section 9.03. No Waiver; Remedies. No failure on the part of the
Company, the Sellers or the Agents to exercise, and no delay in exercising, any
right under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 9.04. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Sellers and the Company and their
respective successors (whether by merger, consolidation or otherwise) and
assigns. Each Seller agrees that it will not assign or transfer all or any
portion of its rights or obligations hereunder without the prior written consent
of the Company and the Trustee. Each Seller hereby acknowledges and consents to
the assignment by the Company of the Receivables and Receivables Property and
the rights and remedies of the Company under this Agreement to the Trustee for
the benefit of the Certificateholders pursuant to the Pooling and Servicing
Agreements. Each Seller hereby acknowledges and consents that the Company will
grant a security interest in the Lockbox Accounts, the Collection Account and
the Eligible Segregated Accounts to the Trust and the Trustee for the benefit of
the Certificateholders. Each Seller agrees to take any action that the Company
or the Trust may reasonably request in connection with such assignment or
security interest. Each Seller agrees that the Trustee shall be entitled to
enforce the terms of this Agreement and the rights (including, without
limitation, the right to grant or withhold any consent or waiver or give any
notice) of the Company directly against such Seller, whether or not a Purchase
Termination Event or a Termination Event has occurred and that so long as any
Investor Certificates are outstanding that no consent, waiver or notice given
hereunder by the Company shall be effective unless the Trustee has given its
written consent thereto. Each Seller further agrees that, in respect of its
obligations hereunder, it will act at the direction of, and in accordance with,
all requests and instructions from the Trustee until all amounts due to the
Investor Certificateholders are paid in full. Each of the Trustee and the
Investor Certificateholders shall have the rights of third-party beneficiaries
under this Agreement.
Section 9.05. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES
42
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS, EXCEPT (I) THAT
ARTICLE II OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH
OF PENNSYLVANIA, (II) AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND (III) TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE COMPANY'S OWNERSHIP OF THE
RECEIVABLES AND RECEIVABLES PROPERTY, OR REMEDIES HEREUNDER IN RESPECT THEREOF,
MAY BE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 9.06. Waiver of Jury Trial. EACH PARTY HERETO WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN),
ACTIONS OF ANY OF THE PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
Section 9.07. Jurisdiction; Consent to Service of Process. (a) Each
party hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Transaction Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Company may otherwise have to bring any action or proceeding
relating to this Agreement or the other Transaction Documents against any Seller
or its properties in the courts of any jurisdiction.
(b) Each party hereto hereby irrevocably and unconditionally waives,
to the fullest extent they may legally and effectively do so, any objection
which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Transaction
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.02. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
43
Section 9.08. Integration. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
Section 9.09. Captions and Cross References. The various captions
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement.
Section 9.10. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
Section 9.11. No Petition in Bankruptcy. Each Seller covenants and
agrees that prior to the date which is one year and one day after the date of
termination of this Agreement pursuant to Section 9.14, it will not institute
against or join any other Person in instituting against the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any State of
the United States.
Section 9.12. Addition of Sellers. Subject to the terms and
conditions hereof, from time to time one or more wholly-owned Subsidiaries of
WESCO may become additional Sellers parties hereto. If any such Subsidiary
wishes to become an additional Seller, WESCO shall submit a request to such
effect in writing to the Company. Such wholly-owned Subsidiary shall become an
additional Seller party hereto on the related Seller Addition Date upon
satisfaction of the conditions set forth in Section 3.02 and the conditions, if
any, set forth in the Pooling and Servicing Agreements.
Section 9.13. Treatment of Sellers other than WESCO; Termination
Thereof. (a) WESCO hereby covenants and agrees with the Company that WESCO shall
not permit any Seller (other than WESCO) at any time to cease to be a
wholly-owned Subsidiary of WESCO, except as provided in the following paragraph
(b).
(b) If WESCO wishes to permit any Seller (other than WESCO) or
Seller Division (other than "core" WESCO) to cease to be a wholly-owned
Subsidiary of WESCO or terminate the sales of Receivables hereunder by any
Seller Division, then WESCO shall submit a request (a "Seller Termination
Request") to such effect in writing to the Company, which request shall be
accompanied by a certificate prepared by a Responsible Officer of the Servicer
indicating the Purchased Receivables Percentage applicable to such Seller (or
Seller Division) as of the date of submission of such request (the "Seller
Termination Request Date"). Subject to the terms and provisions hereof and of
the Pooling and Servicing Agreements, the relevant Seller (or Seller Division)
shall be terminated as a Seller (or Seller Division) hereunder immediately upon
the consummation of the transaction in connection with which such Seller ceases
to be a wholly-owned Subsidiary of WESCO or in the case of
44
a Seller Division upon the satisfaction of any applicable conditions in the
Pooling and Servicing Agreements. From and after the date any such Seller (or
Seller Division) is terminated as a Seller (or Seller Division) pursuant to this
subsection, the Seller (or Seller Division) shall cease selling, and the Company
shall cease buying, Receivables and Receivables Property from such Seller (or
Seller Division) and, in the case of the termination of a Seller, an "Early
Termination" shall deemed to have occurred with respect to such Seller.
(c) A terminated Seller shall have no further obligation under any
Transaction Document, other than pursuant to Sections 2.05, 2.06 and 2.11, with
respect to Receivables previously sold by it to the Company.
Section 9.14. Termination. This Agreement will terminate at such
time as (a) an Early Termination shall have occurred with respect to all Sellers
herewith and (b) all Receivables purchased hereunder have been collected, and
the proceeds thereof turned over to the Company and all other amounts owing to
the Company hereunder shall have been paid in full or, if Receivables sold
hereunder have not been collected, such Receivables have become Charged-Off
Receivables and the Company shall have completed its collection efforts with
respect thereto; provided, however, that the indemnities of the Sellers to the
Company set forth in Article 7 of this Agreement shall survive such termination
and provided, further, that the Company shall remain entitled to receive any
Collections on Receivables sold hereunder which have become Charged-Off
Receivables.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE SELLERS:
WESCO Distribution, Inc.
By: /s/ [ILLEGIBLE]
--------------------------
Name:
Title:
Address:
Commerce Court
4 Station Square, Suite 700
Pittsburgh, PA 15219
Telephone: (412) 454-2284
Facsimile: (412) 454-2555
WESCO Equity Corporation
By: /s/ [ILLEGIBLE]
--------------------------
Name:
Title:
Address:
3065 Sheridan Street
Las Vegas, NV 89102
Telephone: (702) 253-7660
Facsimile: (702) 253-7886
THE COMPANY:
WESCO RECEIVABLES CORP.
By: /s/ [ILLEGIBLE]
--------------------------
Name:
Title:
Address:
Commerce Court
4 Station Square, Suite 700
Pittsburgh, PA 15219
Telephone: (412) 454-2270
Facsimile: (412) 454-2555
THE SERVICER:
WESCO Distribution, Inc.
By: /s/ [ILLEGIBLE]
--------------------------
Name:
Title:
Address:
Commerce Court
4 Station Square, Suite 700
Pittsburgh, PA 15219
Telephone: (412) 454-2283
Facsimile: (412) 454-2555
================================================================================
WESCO RECEIVABLES CORP.
AND
WESCO DISTRIBUTION - CANADA, INC.
AND
WESCO DISTRIBUTION, INC.
----------------------------------------
CANADIAN RECEIVABLES SALE AGREEMENT
----------------------------------------
Dated as of June 5, 1998
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS.............................. 1
Section 1.01. Certain Defined Terms....................................... 1
Section 1.02. Other Definitional Provisions............................... 5
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES.................... 6
Section 2.01. Purchase and Sale of Receivables............................ 6
Section 2.02. Purchase Price.............................................. 9
Section 2.03. Payment of Purchase Price................................... 9
Section 2.04. No Repurchase............................................... 11
Section 2.05. Rebates, Adjustments, Returns and Reductions; Modifications. 11
Section 2.06. Limited Repurchase Obligation............................... 11
Section 2.07. Obligations Unaffected...................................... 12
Section 2.08. Certain Charges............................................. 12
Section 2.09. Certain Allocations......................................... 12
Section 2.10. Further Assurances.......................................... 12
Section 2.11. Purchase of Sellers' Interest in Receivables and
Receivables Property ....................................... 13
ARTICLE III
CONDITIONS TO PURCHASES........................ 13
Section 3.01. Conditions Precedent to Company's Initial Purchase.......... 13
Section 3.02. Conditions Precedent to the Addition of a Seller............ 16
Section 3.03. Conditions Precedent to All the Company's Purchases of
Receivables ................................................ 18
Section 3.04. Condition Precedent to Each Seller's Obligations............ 19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES..................... 19
Section 4.01. Representations and Warranties of the Sellers............... 19
Section 4.02. Representations and Warranties of the Sellers Relating
to the Receivables.......................................... 24
Section 4.03. Representations and Warranties of the Company............... 24
ARTICLE V
GENERAL COVENANTS........................... 26
Section 5.01. Affirmative Covenants of the Sellers........................ 26
Section 5.02. Reporting Requirements...................................... 31
-i-
Page
----
Section 5.03. Negative Covenants.......................................... 31
ARTICLE VI
PURCHASE TERMINATION EVENTS...................... 33
Section 6.01. Purchase Termination Events................................. 33
Section 6.02. Additional Remedies......................................... 36
ARTICLE VII
INDEMNIFICATION; EXPENSES; COSTS.................... 36
Section 7.01. Indemnities by the Sellers.................................. 36
Section 7.02. Indemnities by the Company.................................. 38
ARTICLE VIII
SELLER NOTE .............................. 38
Section 8.01. Seller Note................................................. 38
Section 8.02. Restrictions on Transfer of Seller Note..................... 39
Section 8.03. Aggregate Amount............................................ 39
ARTICLE IX
MISCELLANEOUS............................. 39
Section 9.01. Amendment................................................... 39
Section 9.02. Notices, Etc................................................ 39
Section 9.03. No Waiver; Remedies......................................... 40
Section 9.04. Successors and Assigns...................................... 40
Section 9.05. Governing Law............................................... 40
Section 9.06. Jurisdiction; Consent to Service of Process................. 41
Section 9.07. Integration................................................. 41
Section 9.08. Captions and Cross References............................... 41
Section 9.09. Execution in Counterparts................................... 41
Section 9.10. No Petition in Bankruptcy................................... 41
Section 9.11. Addition of Sellers......................................... 42
Section 9.12. Treatment of Sellers other than WESCO Canada; Termination
Thereof .................................................... 42
Section 9.13. Termination................................................. 42
EXHIBIT A Form of Seller Note
EXHIBIT B Form of Additional Seller Supplement
EXHIBIT C Form of PPSA Certificate
EXHIBIT D Form of Assignment
SCHEDULE 1 Sellers' Authorized Officers
-ii-
Page
----
SCHEDULE 2 Location of Each Seller's Chief Executive Office
SCHEDULE 3 Lockbox Banks, the Lockbox Processors, and Eligible
Segregated Account Banks
SCHEDULE 4 Address for Notice to Servicer
SCHEDULE 5 Seller Trade Names
SCHEDULE 6 Definition of Discounted Percentage
SCHEDULE 7 Form of Financial Statement Note
SCHEDULE 8 Form of General Legend
SCHEDULE 9 Form of True Sale Opinion
-iii-
CANADIAN RECEIVABLES SALE AGREEMENT
This CANADIAN RECEIVABLES SALE AGREEMENT dated as of June 5, 1998
(this "Agreement"), is among WESCO DISTRIBUTION, INC., a Delaware corporation
("WESCO") in its capacity as servicer (the "Servicer"), WESCO
Distribution-Canada, Inc., an Ontario corporation ("WESCO Canada") in its
capacity as a seller (a "Seller") and WESCO RECEIVABLES CORP., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, WESCO Canada intends to sell Receivables and Receivables
Property (both as hereinafter defined) to the Company on the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, the Company desires to purchase Receivables and Receivables
Property from the Sellers on the terms and subject to the conditions set forth
in this Agreement;
WHEREAS, the Sellers and the Company desire the transfer of
Receivables and Receivables Property from the Sellers to the Company to be a
true sale providing the Company with the full benefits of ownership of the
Receivables; and
WHEREAS, to obtain the necessary funds to purchase such Receivables
and Receivables Property, the Company has entered into the Pooling Agreement (as
hereinafter defined);
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. Unless otherwise defined
herein, capitalized terms which are used herein shall have the meanings assigned
to such terms in Section 1.1 of the Pooling Agreement, among the Company, the
Servicer and the Trustee. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Additional Seller Supplement" means an instrument substantially in
the form of Exhibit B hereto pursuant to which a Subsidiary of WESCO Canada
becomes a Seller party hereto.
2
"Articles" has the meaning set out in Section 3.1(a).
"Assignment" has the meaning specified in Section 2.1(c).
"Authorized Officers" means those officers of the Sellers designated
in Schedule 1 hereto (or in such other Schedule as may be delivered by the
Sellers to the other parties hereto from time to time) as duly authorized to
execute and deliver this Agreement and any instruments or documents in
connection herewith on behalf of the Sellers and to take, from time to time, all
other actions on behalf of the Sellers in connection herewith.
"Canadian Dollars" means the lawful currency of Canada.
"Closing Date" means the date of the initial issuance of the
Investor Certificates.
"Collections" shall mean all collections, including the Aggregate
Uncleared Funds Amount, and all amounts received in respect of the Receivables,
including Recoveries, Seller Repurchase Payments, Seller Adjustment Payments,
Servicer Indemnification Amounts paid by the Servicer and any other payments
received in respect of Dilution Adjustments, together with all collections
received in respect of the Related Property in the form of cash, checks, wire
transfers or any other form of cash payment, and all proceeds of Receivables and
collections thereof (including, without limitation, collections constituting an
account or general intangible or evidenced by a note, instrument, letter of
credit, security, contract, security agreement, chattel paper or other evidence
of indebtedness or security, whatever is received upon the sale, exchange,
collection or other disposition of, or any indemnity, warranty or guaranty
payable in respect of, the foregoing and all "proceeds", as defined in the PPSA
as in effect in the Province of Ontario, of the foregoing), but in any event,
not including any collections of Excluded Receivables.
"Contract" means a contract between any Seller and any Person
pursuant to or under which such Person shall be obligated to make payments to
such Seller.
"Discounted Percentage" has the meaning specified in Schedule 6
hereto.
"Early Termination" shall have the meaning specified in Section
6.01.
"Effective Date" means (i) with respect to WESCO Canada on the date
hereof and (ii) with respect to each Subsidiary of WESCO Canada added as a
Seller pursuant to Section 9.12, the Seller Addition Date with respect to each
such Subsidiary.
"Excluded Receivables" means Receivables (without giving effect to
the exclusion of Excluded Receivables from the definition thereof) (i) owed by
Obligors not resident in Canada, or which are denominated in a currency other
than Canadian Dollars, (ii) owed to a Seller by a vendor of merchandise to such
Seller, which relates to the merchandise sold by such vendor or promotional
programs of such vendor.
3
"Insolvency Event" with respect to the Seller, shall mean the
occurrence of any one or more of the Purchase Termination Events specified in
subsection 6.01(f).
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, deemed trust, pledge, hypothec, encumbrance, charge or security
interest in or on such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement relating
to such asset and (c) in the case of securities, any purchase option, call or
other similar right of a third party with respect to such securities.
"Material Adverse Effect" shall mean, with respect to any Seller,
(a) a material impairment of the ability of such Seller to perform its
obligations under the Transaction Documents, (b) a material impairment of the
validity or enforceability of any of the Transaction Documents against such
Seller, (c) a material impairment of the collectibility of the Receivables
originated by such Seller taken as a whole or (d) a material impairment of the
interests, rights or remedies of the Company under the Transaction Documents or
the Receivables taken as a whole.
"Ontario PPSA" means the PPSA as in effect from time to time in the
Province of Ontario.
"Payment Date" has the meaning specified in subsection 2.03(a).
"Pooling Agreement" means the Pooling Agreement dated as of the date
hereof, among the Company, the Servicer and the Trustee on behalf of the
Certificateholders, as such agreement may be amended, supplemented, waived, or
otherwise modified from time to time, including, without limitation, the Series
1998-1 Supplement dated as of the date hereof among the Company, the Servicer
and the Trustee.
"Potential Purchase Termination Event" means any condition or act
specified in Section 6.01 that, with the giving of notice or the lapse of time
or both, would become a Purchase Termination Event.
"PPSA" means, in respect of each province or territory in Canada
(other than Quebec), the Personal Property Security Act as from time to time in
effect in such province or territory, and in respect of Quebec, the Civil Code
of Quebec as from time to time in effect in such province; provided, however,
that in the case of the Province of Newfoundland and the Northwest Territories,
until such time as a personal property security act or similar legislation comes
into force in such province or territory, the term "PPSA" in respect of such
province or territory means the assignment of book debts act as from time to
time in effect in such province or territory; provided, further, that if any
terms which are used herein are expressed to be defined in the PPSA of a
particular jurisdiction, and such particular jurisdiction's PPSA does not define
such term, then such term shall have the meaning ascribed to it in the Ontario
PPSA.
"Purchased Receivable" means, at any time, any Receivable sold to
the Company by any Seller pursuant to, and in accordance with the terms of, this
Agreement and not theretofore resold to such Seller pursuant to subsection
2.01(b) or Sections 2.06 or 2.11.
4
"Purchased Receivables Percentage" means, with respect to any Seller
as to which WESCO Canada has submitted a Seller Termination Request, the
percentage equivalent of a fraction, the numerator of which is an amount equal
to the aggregate outstanding Principal Amount of Purchased Receivables sold by
such Seller as of the applicable Seller Termination Request Date, and the
denominator of which is an amount equal to the aggregate outstanding Principal
Amount of all Purchased Receivables as of such date.
"Purchase Price" has the meaning specified in Section 2.02.
"Purchase Termination Date" means, with respect to any Seller, the
date on which the Company's obligation to purchase Receivables from such Seller
shall terminate, which shall be the date on which an Early Termination occurs
with respect to such Seller.
"Purchase Termination Event" has the meaning specified in Section
6.01.
"Receivable" shall mean the indebtedness and payment obligations of
any Person to a Seller or acquired by a Seller (including, without limitation,
obligations constituting an account or general intangible or evidenced by a
note, instrument, contract, security agreement, chattel paper or other evidence
of indebtedness or security) arising from a sale of merchandise or the provision
of services by such Seller or the Person from whom such indebtedness and payment
obligation was acquired by a Seller, including, without limitation, any right to
payment for goods sold or for services rendered, and including the right to
payment of any transfer, sales or use taxes, goods and services taxes, returned
check charges and other obligations of such Person with respect thereto other
than Excluded Receivables; provided, however, that for purposes of Article II
hereof in the event that an Excluded Receivable is included on any Daily Report,
such Excluded Receivable shall be deemed to be a Receivable but not an Eligible
Receivable.
"Receivables Property" has the meaning specified in Section 2.01.
"Reference Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. If The Chase Manhattan Bank shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate for any reason,
including the failure of the Federal Reserve Bank of New York to publish rates
or the inability of The Chase Manhattan Bank to obtain quotations in accordance
with the terms of the definition thereof, the Reference Rate shall be determined
without regard to clause (b) of the immediately preceding sentence, as
appropriate, until the circumstances giving rise to such inability no longer
exist. Any change in the Reference Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective on the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively. The
term "Prime Rate" shall mean the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective on the date such change is publicly announced as being effective. The
term "Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members
5
of the Federal Reserve System arranged by Federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average of
the quotations for the day for such transactions received by The Chase Manhattan
Bank from three Federal funds brokers of recognized standing selected by it.
"Registrations" shall have the meaning specified in Section 2.1(d).
"Related Property" shall mean, with respect to each Receivable:
(a) all of the applicable Seller's interest in the goods, if
any, sold and delivered to an Obligor which gave rise to such Receivable;
(b) all other security interests or Liens purporting to secure
payment of such Receivable, together with all financing statements signed
by an Obligor describing any collateral securing such Receivable; and
(c) all guarantees, credit or similar types of insurance,
letters of credit and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such
Receivable;
in the case of clauses (b) and (c), whether pursuant to the contract related to
such Receivable or otherwise and including, without limitation, pursuant to any
obligations evidenced by a note, instrument, contract, security agreement,
chattel paper or other evidence of indebtedness or security and the proceeds
thereof.
"Seller Addition Date" has the meaning specified in Section 3.02.
"Seller Adjustment Payment" has the meaning specified in Section
2.05.
"Seller Note" has the meaning specified in Section 8.01.
"Seller Repurchase Payment" has the meaning specified in Section
2.06.
"Sellers" means WESCO Canada together with each Subsidiary of WESCO
Canada added as a Seller hereunder from time to time.
"Seller Termination Request" has the meaning specified in subsection
9.13(b).
"Seller Termination Request Date" has the meaning specified in
subsection 9.13(b).
"WESCO Persons" means each Seller and each of its Affiliates other
than the Company.
Section 1.02. Other Definitional Provisions. (a) All terms defined
herein or in the Pooling Agreement or any Supplement shall have their defined
meanings when used in
6
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1 of the Pooling Agreement or any Supplement, and accounting terms partly
defined in Section 1.1 of the Pooling Agreement or any Supplement to the extent
not defined, shall have the respective meanings given to them under GAAP. To the
extent that the definitions of accounting terms herein are inconsistent with the
meanings of such terms under GAAP, the definitions contained herein shall
control. All terms used in the Ontario PPSA that are used but not specifically
defined herein are used herein as defined therein.
(c) 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 Section,
subsection, Annex, Schedule and Exhibit references contained in this agreement
are references to Sections, subsections, Annex, Schedules and Exhibits in or to
this Agreement unless otherwise specified.
(d) The definitions contained in Section 1.01 of this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine, the feminine and the neuter genders of such terms.
(e) All references herein to any agreement or instrument shall be
deemed references to such agreement or instrument as amended, supplemented or
otherwise modified from time to time, subject to compliance with any
restrictions herein on the amendment, supplementation or modification of such
agreement or instrument.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
Section 2.01. Purchase and Sale of Receivables. (a) Upon the terms
set forth herein, each of the Sellers hereby sells, assigns, transfers and
conveys to the Company, without recourse (except to the limited extent provided
herein), all its respective present and future right, title and interest in, to
and under:
(i) all Receivables now existing and hereafter arising from time to
time (until an Early Termination with respect to such Seller occurs);
(ii) all Related Property in respect of such Receivables;
(iii) all Collections;
(iv) all payment, enforcement and other rights (including
rescission, replevin or reclamation), but none of the obligations, relating to
any Receivable or arising therefrom; and
7
(v) all monies due or to become due and all amounts received with
respect to the items listed in clauses (i), (ii), (iii) and (iv) and all
proceeds (including, without limitation, whatever is received upon the sale,
exchange, collection or other disposition of the foregoing and all "proceeds" as
defined in the Ontario PPSA, including all Recoveries relating thereto and all
amounts on deposit in the Lockbox Accounts or Eligible Segregated Accounts which
were not Available Funds on the date hereof) (the property described in the
foregoing clauses (ii) through (v) are hereinafter collectively referred to as
the "Receivables Property").
Subject to the terms and conditions set forth herein, the Company
hereby agrees to purchase the Receivables and Receivables Property of each
Seller.
(b) On each applicable Effective Date and on the date of creation of
each newly created Receivable, all of the applicable Seller's right, title and
interest in, to and under (i) in the case of each such Effective Date, all then
existing Receivables and all Receivables Property in respect of such Receivables
and (ii) in the case of each such date of creation (but only so long as no Early
Termination with respect to such Seller has occurred), all such newly created
Receivables and all Receivables Property in respect of such Receivables, shall
be immediately and automatically sold, assigned, transferred and conveyed to the
Company pursuant to paragraph (a) above without any further action by such
Seller or any other Person. If any Seller shall not have received payment
(including as a result of the failure to satisfy the conditions set forth in
Section 3.03 or the application of the final paragraph of Section 6.01) from the
Company of the Purchase Price for any newly created Receivable and the related
Receivables Property on the Payment Date therefor in accordance with the terms
of subsection 2.03(b), such newly created Receivable and the Receivables
Property with respect thereto shall, upon receipt of notice by the Company and
the Trustee from the applicable Seller of such failure to receive payment,
immediately and automatically be sold, assigned, transferred and reconveyed by
the Company to such Seller without any further action by the Company or any
other Person.
(c) To evidence and effect the sale, assignment, transfer and
conveyance of Purchased Receivables and the Receivables Property in respect
thereof, each Seller shall execute on the Effective Date with respect to such
Seller, a written assignment of the Purchased Receivables and the Receivables
Property in respect thereof in substantially the form of Exhibit D hereto (an
"Assignment"). The parties to this Agreement intend that the transactions
contemplated by subsections 2.01(a) and (b) hereby and each Assignment shall be,
and shall be treated as, a purchase and receipt by the Company and a sale by the
applicable Seller of the Purchased Receivables and the Receivables Property in
respect thereof and not a lending transaction. All transfers of Receivables and
Receivables Property by any Seller hereunder shall be without recourse to, or
representation or warranty of any kind (express or implied) by, any Seller,
except as otherwise specifically provided herein. The foregoing sale,
assignment, transfer and conveyance constituted hereby and under each Assignment
does not constitute and is not intended to result in a creation or assumption by
the Company of any obligation of any Seller or any other Person in connection
with the Receivables, the Receivables Property or any agreement or instrument
relating thereto, including any obligation to any Obligor. If, and to the
extent, this Agreement or any Assignment does not constitute a valid sale,
assignment, transfer and conveyance of all right, title and interest of each
Seller in, to and under the Purchased Receivables and the
8
Receivables Property in respect thereof despite the intent of the parties hereto
and the express terms hereof, such Seller hereby grants a "security interest"
(as defined in the Ontario PPSA) in the Purchased Receivables, the Receivables
Property in respect thereof and all proceeds thereof to the Company, and the
parties agree that this Agreement shall constitute a security agreement under
the Ontario PPSA.
(d) In connection with the foregoing conveyances, each Seller agrees
to record, file or register, or cause to be recorded, filed or registered, at
its own expense, each Assignment or notice or application with respect thereto,
as applicable, or financing statements (or continuation or financing change
statements, as applicable) (collectively, "Registrations") with respect to such
conveyances meeting the requirements of applicable law, in such manner and in
such jurisdictions as are necessary to protect, perfect and maintain the
protection and perfection of the Company's purchase of ownership interests in
the Receivables and Receivables Property from the Sellers, and shall deliver a
file stamped copy of each such Registration or other satisfactory evidence
thereof to the Company and the Trustee no later than 10 days after the Effective
Date.
(e) In connection with the foregoing conveyances, each Seller agrees
at its own expense, as agent of the Company (i) no later than 30 days after the
Effective Date, to indicate or cause to be indicated on the computer files (but
not on individual invoices or individual collection files) relating to such
Receivables (by means of a general legend, substantially in the form described
on Schedule 8 hereto, that will automatically appear each time a Person enters
the Seller's Receivables program) that, unless otherwise specifically identified
as a receivable not so sold, transferred, assigned and conveyed, all Receivables
(and any such other receivables) included therein and all other Receivables
Property (and any other similar related property (but for greater certainty, not
any Excluded Receivables)) have been sold, transferred, assigned and conveyed to
the Company in accordance with this Agreement and (ii) on or prior to the
Effective Date to deliver, to the Company computer files, microfiche lists or
typed or printed lists (the "Receivables Lists") containing true and complete
lists of all such Receivables, identified by Obligor and setting forth the
Receivables balance for each Receivable as of the Cut-Off Date.
(f) As further confirmation of the sale of the Receivables but
subject to subsection 6.02(b), it is understood and agreed that the Company
shall have the following rights:
(A) the Company (and its assignees) shall have the right at
any time to (I) notify, or require that such Seller at its own
expense notify, the respective Obligors of the Company's ownership
of the Purchased Receivables and Receivables Property, (II) direct
that payment of all amounts due or to become due under the Purchased
Receivables be made directly to the Company or its designee, (III)
sue for collection on any Purchased Receivable or (IV) sell any
Purchased Receivables to any Person for a price that is acceptable
to the Company (or its assignee);
(B) such Seller shall, upon written request of the Company,
and at such Seller's expense (I) deliver to the Company or a party
designated by the
9
Company all documents, instruments and other records (including
credit files) that evidence or record the Receivables sold by such
Seller and all licenses, rights, computer programs, related
material, computer tapes, disks, cassettes and data necessary to the
immediate collection of the Purchased Receivables by the Company,
with or without the participation of such Seller and (II) make such
arrangements with respect to the collection of the Purchased
Receivables as may be reasonably required by the Company. In
recognition of such Seller's need to have access to any Documents
which may be transferred to the Company hereunder, whether as a
result of its continuing business relationship with any Obligor for
Receivables purchased hereunder or as a result of its
responsibilities as a Sub-Servicer, the Company hereby grants to
such Seller an irrevocable license to access the Documents
transferred by such Seller to the Company and to access any such
transferred computer software in connection with any activity
arising in the ordinary course of such Seller's business or in
performance of such Seller's duties as a Servicing Party, provided,
however, that such Seller shall not disrupt or otherwise interfere
with the Company's use of and access to the Documents and its
computer software during such license period; and
(C) such Seller hereby grants to the Company an irrevocable
power of attorney with full power of substitution (including the
power to delegate to any Servicer or Sub-Servicer from time to time)
(coupled with an interest) to take any and all steps in such
Seller's name necessary or desirable, in the reasonable opinion of
the Company, to collect all amounts due under the Purchased
Receivables, including, without limitation, enforcing the Purchased
Receivables, exercising all rights and remedies in respect thereof
and, without regard to the limitation set forth in subsection
6.02(b), endorsing such Seller's name on checks and other
instruments representing Collections.
Section 2.02. Purchase Price. The amount payable by the Company to a
Seller (the "Purchase Price") for Receivables and Receivables Property on any
Payment Date under this Agreement shall be equal to the product of (a) the
aggregate outstanding Principal Amount of such Receivables as set forth in the
applicable Daily Report times (b) the Discounted Percentage with respect to such
Seller plus, on the Effective Date, the aggregate of all amounts on deposit in
Lockbox Accounts or Eligible Segregated Accounts which were not Available Funds
on such date. All interest rates and fees hereunder shall be computed on the
basis of the actual number of days elapsed divided 365. Any such applicable
interest rate, expressed as an annual rate of interest for the purpose of the
Interest Act (Canada) shall be equivalent to such applicable interest rate
multiplied by the actual number of days in the calendar year in which the same
is to be determined and divided by 365.
Section 2.03. Payment of Purchase Price. (a) Upon the fulfillment of
the conditions set forth in Article III, the Purchase Price for Receivables and
the Receivables Property shall be paid or provided for by the Company in the
manner provided below on each day for which a Daily Report is delivered to the
Company (each such day, a "Payment Date") in respect of a Reported Day (which
Daily Report shall specify, by Seller, the Principal
10
Amount of Receivables being sold on such Payment Date, the aggregate Purchase
Price for such Receivables and the components of payment as provided in
paragraph (b) below).
(b) The Purchase Price for Receivables and Receivables Property
shall be paid by the Company on each Payment Date (including the initial Payment
Date) as follows:
(i) by netting the amount of any Seller Adjustment Payments or
Seller Repurchase Payments pursuant to Section 2.05 or 2.06 against such
Purchase Price;
(ii) to the extent available for such purpose, in cash from
Collections released to the Company pursuant to the Pooling Agreement;
(iii) to the extent available for such purpose, in cash from
the net proceeds of a transfer of interests in Purchased Receivables by
the Company to other Persons;
(iv) to the extent available for such purpose, in cash from
the proceeds of capital contributed by WESCO to the Company, if any, in
respect of its equity interest in the Company; and
(v) at the option of the Company (subject to the provisions of
Section 8.01), by means of an addition to the principal amount of the
Seller Note in an aggregate amount up to the remaining portion of the
Purchase Price. Any such addition to the principal amount of the Seller
Note shall be allocated among the Sellers (pro rata according to the
Principal Amount of Receivables sold by each Seller) by the Servicer in
accordance with the provisions of this subsection 2.03(b)(v) and Section
8.01. The Servicer may evidence such additional principal amounts by
recording the date and amount thereof on the grid attached to such Seller
Note; provided, however, that the failure to make any such recordation or
any error in such grid shall not adversely affect any Seller's rights.
(c) The Servicer shall be responsible, in its sole discretion but in
accordance with subsection 2.03(a), for allocating among the Sellers the payment
of the Purchase Price for Receivables and any amounts netted therefrom pursuant
to subsection 2.03(b)(i), either in the form of cash received from the Company
or as an addition to the principal amount of a Seller's interest in the Seller
Note. The Company shall be entitled to pay all amounts in respect of the
Purchase Price of Receivables and Receivables Property to an account of the
Servicer for allocation by the Servicer to the Sellers, and each of the Sellers
hereby appoint the Servicer as their agent for purposes of receiving such
payments and making such allocations and hereby authorizes the Company to make
all payments due to such Seller directly to, or as directed by, the Servicer.
The Servicer hereby accepts and agrees to such appointment. All payments under
this Agreement shall be made not later than 3:00 p.m (Toronto time) on the date
specified therefor in Canadian Dollars (or U.S. Dollars calculated using the
Canadian Exchange Percentage) in same day funds or by check, as the Servicer
shall elect and to the bank account designated in writing by the Servicer to the
Company.
11
(d) Whenever any payment to be made under this Agreement shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day. Amounts not paid when due in accordance
with the terms of this Agreement shall bear interest at a rate equal at all
times to the Reference Rate, payable on demand.
Section 2.04. No Repurchase. Except to the extent expressly set
forth herein, no Seller shall have any right or obligation under this Agreement,
by implication or otherwise, to repurchase from the Company any Purchased
Receivables or Receivables Property or to rescind or otherwise retroactively
affect any purchase of any Purchased Receivables or Receivables Property after
the Payment Date relating thereto.
Section 2.05. Rebates, Adjustments, Returns and Reductions;
Modifications. From time to time, a Seller may make Dilution Adjustments to
Receivables in accordance with this subsection 2.05 and subsection 5.03(c). The
Sellers (other than those Sellers from which the Company has no Receivables
outstanding at such time), jointly and severally, agree to pay to the Company
the amount of any such Dilution Adjustment (a "Seller Adjustment Payment");
provided, however, that such payment shall be made no later than the Settlement
Report Date of the month following the grant of the Dilution Adjustment
(regardless of which Seller shall have granted such Dilution Adjustment);
provided, further, that, prior to the occurrence of any Early Termination with
respect to all Sellers, any such Seller Adjustment Payment known to be owing to
the Company on any Payment Date shall, on such Payment Date, be netted against
the Purchase Price of newly created Receivables in accordance with subsection
2.03(b)(i) to the extent of such Principal Amount and the remaining amount of
such Seller Adjustment Payment known to be owing to the Company after such
netting, if any, (or following an Early Termination with respect to all Sellers,
the full amount) shall be paid to the Company on such date in cash. The amount
of any Dilution Adjustment posted on any Reported Day shall be set forth on the
Daily Report prepared with respect to such Reported Day.
Section 2.06. Limited Repurchase Obligation. In the event that (i)
any representation or warranty contained in Section 4.02 in respect of any
Receivable transferred to the Company is not true and correct in any material
respect on the applicable Payment Date, or (ii) there is a breach of any
covenant contained in subsection 5.01(c), (f) or (n) or Section 5.03 with
respect to any Receivable in any material respect or (iii) the Company's
interest in any Receivable is not a first priority perfected ownership or
security interest at any time as a result of any action taken by, or any failure
to take action by, any Seller, then the Sellers (other than those Sellers from
which the Company has no Receivables outstanding at such time), jointly and
severally, agree to pay to the Company an amount equal to the Principal Amount
(determined as of the Payment Date for such Receivable) of such Receivable
(whether the Company paid such Purchase Price in cash or otherwise) less
Collections received by the Company in respect of such Receivable, regardless of
which Seller shall have been responsible for such incorrectness or breach, such
payment to occur no later than the Payment Date occurring on the 30th day (or,
if such 30th day is not a Payment Date, on the Payment Date immediately
succeeding such 30th day) after the day such breach or incorrectness becomes
known (or should have become known with due diligence) to any Seller (unless
such breach or incorrectness shall have been cured on or before such day);
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provided, however, that, prior to any Early Termination with respect to all
Sellers, any such payment due and owing to the Company on such Payment Date
shall be netted against the Purchase Price of newly created Receivables in
accordance with subsection 2.03(b)(i) to the extent of such Principal Amount and
the remaining amount of such payment due to the Company after such netting, if
any, (or following an Early Termination with respect to all Sellers, the full
amount) shall be paid to the Company in cash to the extent still unpaid on such
Payment Date. Any payment by any Seller pursuant to this Section 2.06 is
referred to as a "Seller Repurchase Payment". The obligation to reacquire any
Receivable shall, upon satisfaction thereof, constitute the sole remedy
respecting the event giving rise to such obligation available to the Company.
Simultaneously with any Seller Repurchase Payment with respect to any
Receivable, such Receivable and the Receivables Property with respect thereto
shall immediately and automatically be sold, assigned, transferred and conveyed
by the Company to the applicable Seller without any further action by the
Company or any other Person.
Section 2.07. Obligations Unaffected. The obligations of the Sellers
to the Company under this Agreement shall not be affected by reason of any
invalidity or illegality of any Receivable or any sale of a Receivable.
Section 2.08. Certain Charges. Each Seller and the Company agree
that late charge revenue, reversals of discounts, other fees and charges and
other similar items (not constituting Excluded Receivables), whenever created,
accrued in respect of Purchased Receivables shall be the property of the Company
notwithstanding the occurrence of an Early Termination and all Collections with
respect thereto shall continue to be allocated and treated as Collections in
respect of Purchased Receivables.
Section 2.09. Certain Allocations. Each Seller hereby agrees that,
following the occurrence of an Early Termination with respect to such Seller,
all Collections and other proceeds received in respect of Receivables generated
by such Seller shall be applied, first, to pay the outstanding Principal Amount
of Purchased Receivables (as of the date of such Early Termination) of the
Obligor to whom such Collections are attributable until such Purchased
Receivables are paid in full and, second, to the related Seller to pay
Receivables of such Obligor not sold to the Company; provided, however, that
notwithstanding the foregoing, if such Seller can attribute a Collection to a
specific Obligor and a specific Receivable, then such Collection shall be
applied to pay such Receivable of such Obligor. The Company and the Servicer
shall take such action as the Seller may reasonably request, at the expense of
such Seller, to assure that any Receivable not sold to the Company, the Related
Property and Collections with respect thereto and any Excluded Receivables do
not remain commingled with other Collections hereunder and are immediately paid
to the Seller.
Section 2.10. Further Assurances. From time to time at the request
of a Seller, the Company shall deliver to such Seller such documents,
assignments, releases and instruments of termination as such Seller may
reasonably request to evidence the reconveyance by the Company to such Seller of
a Receivable pursuant to the terms of Section 2.01(b), 2.06 or 2.11(b),
provided, however, that the Company shall have been paid all amounts due
thereunder; and the Company and the Servicer shall take such action as such
Seller may reasonably request, at the expense of such Seller, to assure that any
such
13
Receivable, the Related Property and Collections with respect thereto do not
remain commingled with other Collections hereunder.
Section 2.11. Purchase of Sellers' Interest in Receivables and
Receivables Property. (a) In the event of any breach of any of the
representations and warranties set forth in subsection 4.01(a), (b), (c), (e),
(f) or (g), as of the date made, which breach has a material adverse effect on
the interests of the Company in the Receivables or the Receivables Property,
then the Company, by notice then given in writing to the Sellers, may direct the
Sellers to purchase all Receivables and Receivables Property and the Sellers
(other than those Sellers from which the Company has no Receivables outstanding
at such time), jointly and severally, shall be obligated to make such purchase
30 days after receipt of such notice on the terms and conditions set forth in
subsection 2.11(b) below; provided, however, that no such purchase shall be
required to made if, by such date, the representations and warranties contained
in subsections 4.01(a), (b), (c), (e), (f) or (g) shall be satisfied in all
material respects, and any material adverse effect on the Company caused thereby
has been cured.
(b) The Sellers (other than those Sellers from which the Company has
no Receivables outstanding at such time), shall jointly and severally, shall, as
the purchase price for the Receivables and Receivables Property to be purchased
pursuant to subsection 2.11(a) above, pay to the Company, on the Business Day
preceding such Distribution Date, an amount equal to the Principal Amount of the
Purchased Receivables (determined as of the Payment Date or contribution date
for such Purchased Receivables), less Collections received by the Company in
respect of such Purchased Receivables, as of such Distribution Date. Upon
payment of such amount, in immediately available funds, to the Company, the
Company's rights with respect to the Purchased Receivables shall terminate and
such interest therein shall immediately and automatically be sold, assigned,
transferred and conveyed by the Company to the Sellers which originated such
Receivable without any further action by the Company or any other Person and the
Company shall have no further rights with respect thereto. If the Company gives
notice directing the Sellers to purchase the Purchased Receivables as provided
above, the obligation of the Sellers to purchase the Purchased Receivables
pursuant to this Section 2.11 shall, upon satisfaction thereof, constitute the
sole remedy respecting an event of the type specified in the first sentence of
this Section 2.11 available to the Company.
ARTICLE III
CONDITIONS TO PURCHASES
Section 3.01. Conditions Precedent to Company's Initial Purchase.
The obligation of the Company to purchase Receivables and Receivables Property
hereunder on the initial Effective Date from WESCO Canada is subject to the
conditions precedent that the Company shall have received on or before the date
of such purchase the following, each (unless otherwise indicated) dated the day
of such sale and in form and substance satisfactory to the Company:
(a) Secretary's Certificate. A certificate of the Secretary or an
Assistant Secretary of WESCO Canada, dated the Closing Date, and
certifying (i) that attached
14
thereto is a true and complete copy of the articles and certificates of
incorporation (including all amendments thereto) (the "Articles") and
by-laws of such Seller, as in effect on the Effective Date and at all
times since a date prior to the date of the resolutions described in
clause (ii) below, (ii) that attached thereto is a true and complete copy
of the resolutions, in form and substance reasonably satisfactory to the
Company, of the Board of Directors of such Seller or committees thereof
authorizing the execution, delivery and performance of this Agreement and
the other Transaction Documents to which it is a party and the
transactions contemplated hereby and thereby, and that such resolutions
have not been amended, modified, revoked or rescinded and are in full
force and effect, (iii) that the Articles of such Person have not been
amended since the date of the last amendment thereto shown on the
certificate of good standing (or its equivalent) furnished pursuant to
clause (i) above and (iv) as to the incumbency and specimen signature of
each officer executing this Agreement and any other Transaction Documents
or any other document delivered in connection herewith or therewith on
behalf of such Seller (on which certificates the Company may conclusively
rely until such time as the Company shall receive from such Seller a
revised certificate with respect to such Seller meeting the requirements
of this subsection (a));
(b) Good Standing Certificates. Certificates of compliance, of
status or of good standing, dated as of a recent date, issued by its
jurisdiction of incorporation and by each other jurisdiction where the
ownership, lease or operation of property or the conduct of business
requires it to qualify as a foreign or extra-provincial corporation,
except where the failure to so qualify would not have a Material Adverse
Effect;
(c) Consents, Licenses, Approvals, Etc. A certificate dated the
Closing Date of a Responsible Officer of each Seller either (i) attaching
copies of all consents (including, without limitation, consents under loan
agreements and indentures to which any Seller or its Affiliates are
parties), licenses and approvals required in connection with the
execution, delivery and performance by such Seller of this Agreement and
the validity and enforceability of this Agreement against such Seller, and
such consents, licenses and approvals shall be in full force and effect or
(ii) stating that no such consents, licenses or approvals are so required;
(d) No Litigation. Confirmation that there is no pending or, to its
knowledge after due inquiry, threatened action or proceeding affecting
such Seller or any of its Subsidiaries before any Governmental Authority
that could reasonably be expected to have a Material Adverse Effect;
(e) PPSA Certificate; Registrations. (i) A PPSA Certificate,
substantially in the form of Exhibit C hereto, duly executed by a
Responsible Officer of the applicable Seller and dated such date of
purchase and (ii) executed copies of all Registrations contemplated by
Section 2.1(d), filed, recorded or registered at such Seller's expense
prior to the Closing Date, naming the applicable Seller as the seller and
the Company as the purchaser of the Receivables and the Receivables
Property, in proper form for filing in each jurisdiction in which the
Company (or any of its assignees) deems it necessary or desirable to
perfect or protect the Company's ownership interest in all
15
Receivables and Receivables Property under the PPSA or any comparable law
of such jurisdiction;
(f) Searches. Written search reports, listing all effective
financing statements or other registrations or filings that name the
applicable Seller as debtor or assignor and that are filed, recorded or
registered in the jurisdictions in which filings, recordings or
registrations were made pursuant to subsection (e) above or Section
2.01(d) and in any other jurisdictions that the Company determines are
necessary or appropriate, together with copies of such financing
statements or other registrations or filings (none of which, except for
those described in subsection (f) above, shall cover any Receivables or
Receivables Property), and, where available, tax and judgment lien
searches showing no such liens that are not permitted by the Transaction
Documents;
(g) Other Transaction Documents. Original copies, executed by each
of the parties thereto, of each of the other Transaction Documents to be
executed and delivered in connection herewith;
(h) Back-up Servicing Arrangements. Evidence that each Seller
maintains disaster recovery systems and back-up computer and other
information management systems that, in the Company's reasonable judgment
as of the date hereof, are sufficient to protect such Seller's business
against material interruption or loss or destruction of its primary
computer and information management systems;
(i) Legal Opinions. (i) One or more legal opinions from counsel to
the Sellers and counsel to the Company substantially to the effect set out
in Schedule 9 hereto.
(ii) To the extent not dealt with in the opinions referred to in
clause (i) above, one or more legal opinions from counsel to the Sellers
and counsel to the Company:
(A) to the effect that each Seller and the Company, as
applicable, has all approvals, judicial, regulatory, legal or
otherwise, needed to execute, deliver and perform each Transaction
Document to which it is a party and that no conflict or default will
occur as a result of the execution, delivery and performance
thereof;
(B) to the effect that the Company has a perfected security
interest in the Receivables; and
(C) addressing other customary matters.
(iii) Each such legal opinion shall also be addressed to the Rating
Agencies, the Initial Purchaser, and the Trustee;
(j) Policies. A copy of the Policies, which shall be satisfactory in
form and substance to the Company;
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(k) List of Obligors. The Receivables List of each Seller showing,
as of the Cut-Off Date, the Obligors whose Receivables exist on the
Cut-Off Date and the balance of the Receivables with respect to each such
Obligor as of such prior date; and
(l) Systems. Evidence, reasonably satisfactory to the Company, the
Trustee and the Agents that such Seller's systems, procedures and record
keeping relating to the Purchased Receivables is in all material respects
sufficient and satisfactory in order to permit the purchase and
administration of the Purchased Receivables in accordance with the terms
and intent of this Agreement.
Section 3.02. Conditions Precedent to the Addition of a Seller. The
obligation of the Company to purchase Receivables and Receivables Property
hereunder from a Subsidiary of WESCO Canada requested to be an additional Seller
pursuant to Section 9.12 is subject to the conditions precedent that the Company
shall have received on or before the date designated for the addition of such
Seller (the "Seller Addition Date") and in form and substance satisfactory to
the Company:
(a) Additional Seller Supplement. An Additional Seller Supplement
(with a copy for the Trustee and each Agent) duly executed and delivered
by such Seller.
(b) Secretary's Certificate. A certificate of the Secretary or an
Assistant Secretary of such Seller, dated the Effective Date, and
certifying (i) that attached thereto is a true and complete copy of the
Articles and by-laws of such Seller, as in effect on the Seller Addition
Date and at all times since a date prior to the date of the resolutions
described in clause (ii) below, (ii) that attached thereto is a true and
complete copy of the resolutions, in form and substance reasonably
satisfactory to the Company, of the Board of Directors of such Seller or
committees thereof authorizing the execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party
and the transactions contemplated hereby and thereby, and that such
resolutions have not been amended, modified, revoked or rescinded and are
in full force and effect, (iii) that the Articles of such Seller have not
been amended since the date of the last amendment thereto shown on the
certificate of good standing (or its equivalent) furnished pursuant to
clause (i) above and (iv) as to the incumbency and specimen signature of
each officer executing the Additional Seller Supplement and any other
Transaction Documents or any other document delivered in connection
therewith on behalf of such Seller (on which certificates the Company may
conclusively rely until such time as the Company shall receive from such
Seller a revised certificate with respect to such Seller meeting the
requirements of this subsection (b));
(c) Officer's Certificate. A certificate of a Responsible Officer of
WESCO Canada, dated the Effective Date, and certifying such Seller is in
the same line of business as the existing Sellers as of the related Seller
Addition Date;
(d) Good Standing Certificates. Certificates of compliance, of
status or of good standing, dated as of a recent date with respect to such
Seller issued by its
17
jurisdiction of incorporation and by each other jurisdiction where the
ownership, lease or operation of property or the conduct of business
requires it to qualify as a foreign or extra-provincial corporation,
except where the failure to so qualify would not have a Material Adverse
Effect;
(e) Consents, Licenses, Approvals, Etc. A certificate dated the
related Seller Addition Date of a Responsible Officer of such Seller
either (i) attaching copies of all consents (including, without
limitation, consents under loan agreements and indentures to which any
Seller or its Affiliates are parties), licenses and approvals required in
connection with the execution, delivery and performance by such Seller of
the Additional Seller Supplement and the validity and enforceability of
the Additional Seller Supplement against such Seller, and such consents,
licenses and approvals shall be in full force and effect or (ii) stating
that no such consents, licenses or approvals are so required;
(f) No Litigation. Confirmation that there is no pending or, to its
knowledge after due inquiry, threatened action or proceeding affecting
such Seller or any of its Subsidiaries before any Governmental Authority
that could reasonably be expected to have a Material Adverse Effect;
(g) Lockboxes; Eligible Segregated Accounts. A Lockbox Account or an
Eligible Segregated Account with respect to Receivables to be sold by such
Seller shall have been established in the name of the Company, each
invoice issued to an Obligor on and after the Effective Date shall
indicate that payments in respect of its Receivable shall be made by such
Obligor to a Lockbox Account or Eligible Segregated Account or by wire
transfer or other electronic payment to a Lockbox Account, an Eligible
Segregated Account or the Collection Account or otherwise as provided in
Section 2.03 of the Servicing Agreement and the Servicer shall have
delivered (i) with respect to each such Lockbox Account a Lockbox
Agreement signed by it, the Company, the Trustee and applicable Lockbox
Processor and (ii) with respect to each such Eligible Segregated Account,
an Eligible Segregated Account Bank Acknowledgement, as the case may be,
or a commitment to transfer the same within 30 days of the applicable
Seller Addition Date.
(h) PPSA Certificate; Registrations. (i) A PPSA Certificate duly
executed by a Responsible Officer of such Seller and dated the related
Seller Addition Date and (ii) executed copies of all Registrations
contemplated by Section 2.01(d) filed, recorded or registered at such
Seller's expense prior to the related Seller Addition Date, naming such
Seller as the seller and the Company as the purchaser of the Receivables
and the Receivables Property, in proper form for filing in each
jurisdiction in which the Company (or any of its assignees) deems it
necessary or desirable to perfect or protect the Company's ownership
interest in all Receivables and Receivables Property under the PPSA or any
comparable law of such jurisdiction;
(i) Searches. Written search reports, listing all effective
financing statements or other registrations or filings that name such
Seller as debtor or assignor and that are filed, recorded or registered in
the jurisdictions in which filings,
18
recordings or registrations were made pursuant to subsection (h) above or
Section 2.1(d) and in any other jurisdictions that the Company determines
are necessary or appropriate, together with copies of such financing
statements or other registrations or filings (none of which, except for
those described in subsection (h) above, shall cover any Receivables or
Receivables Property), and, where available, tax and judgment lien
searches showing no such liens that are not permitted by the Transaction
Documents;
(j) List of Obligors. A microfiche, typed or printed list or other
tangible evidence reasonably acceptable to the Company showing as of a
date acceptable to the Company prior to the related Seller Addition Date
the Obligors whose Receivables are to be transferred to the Company and
the balance of the Receivables with respect to each such Obligor as of
such date;
(k) Opinions. Legal opinions with respect to such Seller conforming
to the requirements of Section 3.01(i).
(l) Back-up Servicing Arrangements. Evidence that such Seller
maintains disaster recovery systems and back-up computer and other
information management systems that, in the Company's reasonable judgment,
are sufficient to protect such Seller's business against material
interruption or loss or destruction of its primary computer and
information management systems.
(m) Party to Servicing Agreement. Evidence that such additional
Seller shall have become a party to the Servicing Agreement in its
capacity as a Sub-Servicer thereunder.
(n) Systems. Evidence, reasonably satisfactory to the Company, the
Trustee and the Agents, that such additional Seller's systems, procedures
and record keeping relating to the Purchased Receivables remain in all
material respects sufficient and satisfactory in order to permit the
purchase and administration of the Purchased Receivables in accordance
with the terms and intent of this Agreement.
Section 3.03. Conditions Precedent to All the Company's Purchases of
Receivables. The obligation of the Company to pay for any Receivable and the
Receivables Property with respect thereto on each Payment Date (including the
Effective Date) shall be subject to the further conditions precedent that, on
and as of such Payment Date:
(a) the following statements shall be true (and the acceptance by
the relevant Seller of the Purchase Price for such Receivable on such
Payment Date shall constitute a representation and warranty by such Seller
that on such Payment Date such statements are true):
(i) the representation and warranties of such Seller
contained in Sections 4.01 and 4.02 shall be true and correct in all
material respects on and as of such Payment Date as though made on
and as of such date except to the extent any such representation or
warranty is expressly made only as of another
19
date (in which case it shall be true and correct in all material
respects on and as of such other date);
(ii) after giving effect to such purchase, no (A) Early
Termination with respect to such Seller or (B) Potential Purchase
Termination Event with respect to a Purchase Termination Event set
forth in clause (f)(ii) of Section 6.01 shall have occurred and be
continuing; and
(iii) there has been no material adverse change since the
date of this Agreement in the collectibility of the Receivables
taken as a whole (other than due to a change in the creditworthiness
of the Obligors);
(b) the Company shall have received (after giving effect to
subsection 2.03(b)(i)) payment in full of all amounts for which payment is
due from such Seller pursuant to Sections 2.05, 2.06, 2.11 or 7.01;
(c) the Company shall have received such other approvals, opinions
or documents as the Company may reasonably request; and
(d) such Seller shall have complied with all of its covenants in all
material respects and satisfied all of its obligations in all material
respects under this Agreement required to be complied with or satisfied as
of such date;
provided, however, that the failure of such Seller to satisfy any of the
foregoing conditions shall not prevent such Seller from subsequently selling
Receivables upon satisfaction of all such conditions or exercising its rights
under subsection 2.01(b).
Section 3.04. Condition Precedent to Each Seller's Obligations. The
obligation of a Seller to sell any Receivable generated by it on any date
(including on the Effective Date) shall be subject to the condition precedent
that, on the related Payment Date, the following statement shall be true (and
the payment by the Company of the Purchase Price for such Receivable on such
date shall constitute a representation and warranty by the Company that on such
Payment Date the statements in clause (ii) are true): (i) no Purchase
Termination Event set forth in paragraph (f) (other than clause (v) thereof) of
Section 6.01 shall have occurred and be continuing and (ii) no Early
Amortization Event or Potential Early Amortization Event in each case of a type
set forth in paragraph (a) (other than clause (v) thereof) of Section 7.1 of the
Pooling Agreement (as in effect on the date hereof) shall have occurred and be
continuing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Sellers. WESCO
Canada hereby represents and warrants, as to itself only, for the benefit of the
Company and its assigns (including the Trustee) on the applicable Effective Date
and on each Payment Date as follows:
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(a) Corporate Existence. Such Seller (i) is a corporation duly
incorporated and validly existing under the laws of the jurisdiction of
its organization, (ii) has all requisite corporate power and authority,
and all legal right, to own and operate its properties, to lease the
properties it operates as lessee and to conduct its business as now
conducted and (iii) is duly qualified as a foreign or extra-provincial
corporation to do business (or is exempt from such requirements) under the
laws of each jurisdiction in which the ownership or lease of property or
the conduct of its business requires such qualification, except, in the
case of clauses (ii) and (iii), to the extent that a failure to have such
power, authority or right or to qualify, as the case may be, would not be
reasonably likely to have a Material Adverse Effect.
(b) Corporate Power; Authorization; Consents. Such Seller has the
corporate power and authority, and the legal right, to execute, deliver
and perform this Agreement and the other Transaction Documents to which it
is a party and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party. No consent or authorization
of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement and the other Transaction Documents to which it is a party by or
against such Seller other than (i) those consents which have duly been
obtained or made and are in full force and effect on the Effective Date or
the relevant Payment Date, as the case may be, (ii) the filing of the
Registrations referred to in Article III, all of which, at the time
required in Article III, shall have been duly made and shall be in full
force and effect and (iii) any such consent, authorization, filing, notice
or other act, the absence of which would not be reasonably likely to have
a Material Adverse Effect. This Agreement and each other Transaction
Document to which it is a party have been duly executed and delivered on
behalf of such Seller.
(c) No Default. (i) Such Seller is not in default under or with
respect to any of its Contractual Obligations in any respect which would
be reasonably likely to have a Material Adverse Effect. (ii) No (A) Early
Termination or (B) Potential Purchase Termination Event with respect to a
Purchase Termination Event set forth in clause (f)(ii) of Section 6.01, in
each case with respect to such Seller, has occurred and is continuing.
(d) Valid Sale; Binding Obligations. This Agreement constitutes, and
each other Transaction Document to be signed by a Responsible Officer of
such Seller when duly executed and delivered will constitute, an
enforceable obligation of such Seller in accordance with its terms, except
(A) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general, and (B) as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).
(e) No Violation. The execution, delivery and performance of, and
the consummation of the transactions contemplated by, this Agreement and
the other
21
Transaction Documents and the fulfillment of the terms hereof and thereof
will not (i) conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time or
both) a default under, (A) the certificate or articles of incorporation or
by-laws of such Seller or (B) any indenture, loan agreement, mortgage,
deed of trust, or other material contract, agreement or instrument to
which such Seller is a party or by which such Seller or any of its
properties is bound, (ii) result in the creation or imposition of any Lien
upon any of its properties pursuant to the terms of any such contract,
indenture, loan agreement, mortgage, deed of trust, lease or other
agreement or instrument, other than this Agreement and the other
Transaction Documents or (iii) violate any other Requirement of Law,
except, in the case of clauses (i)(B), (ii) and (iii) to the extent that
such conflict, breach, default, Lien or violation, as the case may be,
would not be reasonably likely to have a Material Adverse Effect.
(f) No Proceedings. There are no actions, suits or proceedings by or
before any arbitrator or Governmental Authority pending against or, to the
knowledge of such Seller, threatened against or affecting such Seller (i)
asserting the invalidity or unenforceability of this Agreement or any
other Transaction Document, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or any other
Transaction Document, or (iii) seeking any determination or ruling that
could reasonably be expected to result in a Material Adverse Effect (other
than the Disclosed Matters).
(g) Bulk Sales Act. No transaction contemplated by this Agreement or
any other Transaction Document with respect to such Seller requires
compliance with, or will be subject to avoidance under, any bulk sales act
or similar law, other than those consents or filings which have been
complied with or obtained.
(h) Location of Records; Chief Executive Office. The registered
office, chief place of business and chief executive office of such Seller
is as indicated on Schedule 2 hereto and is the place where such Seller is
"located" for the purposes of the PPSA in each of the provinces and
territories of Canada. The jurisdiction where the chief executive office
of such Seller is "located" for the purposes of each such PPSA has not
changed in the past four months. The offices where such Seller keeps its
records concerning the Receivables and related Contracts and all other
agreements related to the Receivables are as indicated for such Seller on
Schedule 2 hereto (or at such other) locations, notified to the Company
and the Trustee in accordance with Section 5.1(h), in jurisdictions where
all action required by Section 9.2 has been taken and completed).
(i) Proceeds Banks; Payment Instructions. The names and addresses of
all the Lockbox Banks, the Lockbox Processors, and Eligible Segregated
Account Banks, together with the account numbers of the Lockbox Accounts
and the Eligible Segregated Accounts into which Collections are deposited
at such institutions, are specified in Schedule 3. The Sellers will have
transferred all of their right, title and interest in each Lockbox Account
and Eligible Segregated Account to the Company. Each Lockbox Bank or
Lockbox Processor has executed and delivered to the Company
22
and the Trustee a Lockbox Agreement. Each Eligible Segregated Account Bank
has executed and delivered to the Company and the Trustee an Eligible
Segregated Account Bank Agreement. With respect to any payments in respect
of Receivables and Related Property that are made directly to any Seller
(including, without limitation, any Collectors, other employees thereof or
independent contractors employed thereby), such Seller agrees to deposit
payments in the form received within one Business Day of receipt directly
to one of the Lockbox Accounts, or Eligible Segregated Accounts. Each
invoice issued to an Obligor on and after the Effective Date shall
indicate that payments in respect of its Receivable shall be made by such
Obligor to a Lockbox Account or Eligible Segregated Account or by wire
transfer or other electronic payment to a Lockbox Account, an Eligible
Segregated Account or the Collection Account or otherwise as provided in
Section 2.03 of the Servicing Agreement.
(j) No Fraudulent Transfers. The transfers of Receivables and
Receivables Property by such Seller to the Company pursuant to this
Agreement, and all other transactions between such Seller and the Company,
have been and will be made in good faith and without intent to hinder,
delay or defraud creditors of such Seller, and such Seller acknowledges
that it has received and will receive fair consideration and reasonably
equivalent value for the purchases by the Company of Receivables and
Receivables Property hereunder. The purchase of Receivables and
Receivables Property by the Company from such Seller constitutes a true
sale of such Receivables and Receivables Property under applicable state
law.
(k) Trade Names. Such Seller uses no trade name in the furnishing of
its products or services which generate Receivables other than its actual
corporate name and the trade names set forth for such Seller in Schedule
5. During the five years preceding the date hereof, except as set forth in
Schedule 5, (i) such Seller has not been known by any legal name or trade
name (including any name in the French language) other than its corporate
name, (ii) nor has such Seller been the subject of any merger,
amalgamation or other corporate reorganization within the last five years.
(l) Compliance with Applicable Laws. Such Seller is in compliance
with the requirements of all applicable laws, rules, regulations, and
orders of all governmental authorities (federal, provincial, local or
foreign, and including, without limitation, environmental laws), relating
to the Receivables a breach of any of which, individually or in the
aggregate, would be reasonably likely to have a Material Adverse Effect.
(m) Taxes. Such Seller has filed all tax returns (federal,
provincial and local) required by law to be filed and has paid or made
adequate provision for the payment of all taxes, assessments and other
governmental charges due from such Seller or is contesting any such tax,
assessment or other governmental charge in good faith through appropriate
proceedings. No tax Lien has been filed with respect to taxes which could
reasonably be expected to result in a Material Adverse Effect and, to the
best knowledge of such Seller, no claim is presently being asserted with
respect to taxes which could reasonably be expected to result in a
Material Adverse Effect.
23
For purposes of this paragraph, "taxes" shall mean any present or future
tax, levy, impost, duty, charge, assessment or fee of any nature
(including interest, penalties and additions thereto) that is imposed by
any Governmental Authority. Such Seller knows of no basis for any material
additional tax assessment for any fiscal year for which adequate reserves
have not been established.
(n) Solvency. Both prior to and after giving effect to the
transactions occurring on the Effective Date, (i) the fair value of the
assets of such Seller at a fair valuation will exceed the debts and
liabilities, subordinated, contingent or otherwise, of such Seller; (ii)
the present fair salable value of the property of such Seller will be
greater than the amount that will be required to pay the probable
liability of such Seller on its debts and other liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured; (iii) such Seller will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities
become absolute and matured; and (iv) such Seller will not have
unreasonably small capital with which to conduct the business in which it
is engaged as such business is now conducted and is proposed to be
conducted. For all purposes of clauses (i) through (iv) above, the amount
of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an
actual or matured liability. Such Seller does not intend to, nor does it
believe that it will, incur debts beyond its ability to pay such debts as
they mature, taking into account the timing of and amounts of cash to be
received by it and the timing of and amounts of cash to be payable in
respect of its debt.
(o) Investment Company Act. Neither such Seller nor any of such
Seller's Subsidiaries is (i) an "investment company" registered or
required to be registered under the 1940 Act, or (ii) a "holding company",
or a "subsidiary company" or an "affiliate" of a "holding company" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
(p) Ownership. All of the issued and outstanding capital stock of
such Seller (other than WESCO Canada) is owned, directly or indirectly, by
WESCO Canada and all of the issued and outstanding capital stock of WESCO
Canada is owed, directly or indirectly, by WESCO.
(q) Indebtedness to Company. Such Seller had no outstanding
Indebtedness to the Company other than amounts permitted by this Agreement
or amounts outstanding under the Seller Note.
(r) Receivables Documents. Upon the delivery, if any, by such Seller
to the Company of licenses, rights, computer programs, related materials,
computer tapes, disks, cassettes and data relating to the administration
of the Purchased Receivables pursuant to subsection 5.01(o), the Company
shall have been furnished with all materials and data necessary to permit
orderly collection of the Purchased Receivables without the participation
of such Seller in such collection.
24
(s) Filings. On or prior to the date that is 10 days after the
Effective Date, all Registrations and other acts (including but not
limited to all filings and other acts necessary or advisable under the
PPSA) shall have been made or performed such that the Company has on such
date a first priority perfected ownership or security interest in respect
of all Receivables.
Section 4.02. Representations and Warranties of the Sellers Relating
to the Receivables. Each Seller hereby represents and warrants, as to itself
only, for the benefit of the Company and its assigns (including the Trustee) on
each Payment Date as follows:
(i) Receivables Description. As of the Effective Date, the
Receivables List delivered pursuant to Section 3.01(m) sets forth in all
material respects an accurate and complete listing of all its Receivables
as of the Effective Date and the information contained therein with
respect to the identity of such Receivables is true and correct in all
material respects as of such date. As of the Effective Date, the aggregate
amount of Receivables owned by such Seller is accurately set forth on the
Receivables List.
(ii) Quality of Title. Each Receivable existing on the Effective
Date or, in the case of Receivables sold to the Company after the
Effective Date, on the date that each such Receivable shall have been sold
to the Company, has been conveyed to the Company and the Company has
acquired a valid and perfected first priority ownership interest in each
such Receivable, in each case, free and clear of any Liens, except for
Permitted Liens specified in clauses (i) or (iv) of the definition
thereof.
(iii) Eligible Receivable. Each Receivable of such Seller is or will
be an account receivable arising out of such Seller's performance in
accordance with the terms of the Contract, if any, giving rise to such
Receivable. On the Effective Date, each Receivable other than Receivables
designated as Ineligible Receivables on a Daily Report, sold to the
Company on such date is an Eligible Receivable on the Effective Date and,
in the case of Receivables sold to the Company after the Effective Date,
each such Receivable, other than Receivables designated as Ineligible
Receivables on a Daily Report, sold to the Company on such later date is
an Eligible Receivable on such later date.
The representations and warranties set forth in this Section 4.02
shall survive the transfer and assignment of the respective Receivables to the
Company pursuant to this Agreement. Upon discovery by any Seller or the Company
of a breach of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the other.
Section 4.03. Representations and Warranties of the Company. The
Company represents and warrants as to itself for the benefit of the Sellers as
follows:
(a) Corporate Existence. It (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation, and is duly qualified as a foreign corporation and
is in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect,
25
(ii) has all requisite corporate power and authority and the legal right
to own, pledge, mortgage and operate its properties, and to conduct its
business as now or currently proposed to be conducted and (iii) is in
compliance with all Requirements of Law.
(b) Corporate Power; Authorization; Consents. It has the corporate
power and authority, and the legal right, to execute, deliver and perform
this Agreement and the other Transaction Documents to which it is a party
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement and the other Transaction
Documents to which it is a party.
(c) No Violation. The execution, delivery and performance by it of
this Agreement and the other Transaction Documents to which it is a party
and all instruments and documents to be delivered hereunder by it, and the
transactions contemplated hereby and thereby, (i) do not (A) violate its
certificate or articles of incorporation and by-laws or other
organizational or governing documents or, in any material respect, any
other Requirement of Law, (B) conflict with or result in the breach of, or
constitute a default under, any indenture, mortgage or deed of trust or
any material lease, agreement or other instrument binding on or affecting
it or any of its respective subsidiaries or any of its properties in any
material respect or (C) result in or require the creation or imposition of
any Lien except as created or imposed hereunder or under the Pooling
Agreement, and no transaction contemplated hereby requires compliance on
its part with any bulk sales act or similar law, and (ii) do not require
the consent of, authorization by or approval of or notice to or filing or
registration with, any governmental body, agency, authority, regulatory
body or any other Person other than those which have been obtained or made
except for the filing of the Financing Statements referred to in Article
III hereof, which filings the Sellers hereby represent shall have been
duly made prior to or substantially contemporaneously with any purchases
of Receivables and other Receivables Property and shall at all times be in
full force and effect (except as they may be terminated by the Company).
(d) Binding Obligations. This Agreement has been duly executed and
delivered by the Company and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms except (A)
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general, and (B) as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).
(e) Accounting Treatment. The Company will not prepare any financial
statements that shall account for the transactions contemplated hereby,
nor will it in any other respect (other than for tax purposes) account for
the transactions contemplated hereby, in a manner that is inconsistent
with the Company's ownership interest in the Receivables.
26
ARTICLE V
GENERAL COVENANTS
Section 5.01. Affirmative Covenants of the Sellers. Each Seller
covenants that, until the Purchase Termination Date shall have occurred with
respect to such Seller and there are no amounts outstanding with respect to the
Purchased Receivables previously sold by such Seller to the Company (other than
Charged-off Receivables):
(a) Preservation of Corporate Existence and Name. Such Seller will
preserve and maintain in all material respects its corporate existence,
rights, franchises and privileges in the jurisdiction of its
incorporation, and qualify and remain qualified as a foreign or
extraprovincial corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualification could have a Material Adverse Effect.
(b) Maintenance of Property. Such Seller will keep all property and
assets useful and necessary to permit the origination, monitoring and
collection of Receivables.
(c) Compliance with Laws, Etc. Such Seller shall comply in all
material respects with all applicable laws, rules, regulations and orders
applicable to the Receivables and the Receivables Property, including,
without limitation, rules and regulations relating to truth in lending,
fair credit billing, fair credit reporting, equal credit opportunity, fair
debt collection practices and privacy, where failure to so comply could
reasonably be expected to have a materially adverse impact on the amount
of Collections thereunder.
(d) Visitation Rights. At any reasonable time during normal business
hours and from time to time upon reasonable notice, according to such
Seller's normal security and confidentiality provisions with respect to
customer lists, such Seller shall permit (i) the Company, the Trustee or
any of its agents or representatives, (A) to examine and make copies of
and abstracts from the records, books of account and documents (including,
without limitation, computer tapes and disks) of such Seller relating to
Receivables and Related Property owned or to be purchased by the Company
hereunder, including, without limitation, the related Contracts and
purchase orders and other agreements and (B) following the termination of
the appointment of WESCO as Servicer or of such Seller as a Servicing
Party with respect to the Receivables, to be present at the offices and
properties of such Seller to administer and control the collection of
amounts owing on the Purchased Receivables and (ii) the Company, the
Trustee or any of its agents or representatives, or the Trustee (upon the
giving of appropriate notice to the Company) to visit the properties of
such Seller for the purpose of examining such records, books of account
and documents, and to discuss the affairs, finances and accounts of such
Seller relating to the Receivables or such Seller's performance hereunder
with any of its officers or directors and with its independent chartered
accountants; provided, however, that the Company, the Trustee or such
agents or representatives, as the case may be, shall notify such Seller
prior to
27
any contact with such accountants and permit representatives of such
Seller to participate in such discussions.
(e) Keeping of Records and Books of Account. Such Seller will
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing Receivables
and the Receivables Property in the event of the destruction of the
originals thereof), and keep and maintain all documents, books, records
and other information which, in each case, in the reasonable discretion of
the Company, are necessary or advisable for the collection of all
Receivables and the Receivables Property (including, without limitation,
records adequate to permit the identification of each new Receivable and
all Collections of and adjustments to each existing Receivable). Upon the
request of the Company, such Seller will deliver copies of all books and
records maintained pursuant to this Section 5.01(e) to the Trustee.
(f) Performance and Compliance with Policies, Receivables and
Contracts. Such Seller will (i) perform its obligations in accordance with
and comply in all material respects with the Policies, as amended from
time to time in accordance with the Transaction Documents and (ii) at its
expense, timely and fully perform and comply with all material provisions,
covenants and other promises required to be observed by it under the
Receivables and the Contracts related to the Receivables and Related
Property and all purchase orders and other agreements related to such
Receivables and Related Property.
(g) Obligations. Such Seller shall pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the
case may be, all its other obligations of whatever nature, except where
(i) the amount of validity thereof is currently being contested in good
faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on its books, or (ii) the failure to so
pay, discharge or satisfy all such obligations would not, in the
aggregate, be reasonably likely to have a Material Adverse Effect and
would not subject any of its properties to any Lien prohibited by
subsection 5.03(b).
(h) Location of Records. Such Seller will keep its principal and
chief place of business, registered office and chief executive office, and
the offices where it keeps its records concerning the Receivables, all
Receivables Property, all Contracts and purchase orders and other
agreements related to such Receivables (and all original documents
relating thereto), at the address(es) of such Seller referred to in
Schedule 2 or, upon 30 days' prior written notice to the Company and the
Agents, at such other locations in jurisdictions where all action required
by Section 5.01(m) shall have been taken and completed.
(i) Obligation to Record and Report. Such Seller shall to the
fullest extent permitted by GAAP and by applicable law, record each
purchase of the Purchased Receivables as a sale on its books and records
and reflect each purchase of Purchased Receivables in its financial
statements as a sale.
28
(j) Collections. Such Seller shall cause each invoice issued to an
Obligor on and after the Effective Date shall indicate that payments in
respect of its Receivable shall be made by such Obligor to a Lockbox
Account or Eligible Segregated Account or by wire transfer or other
electronic payment to a Lockbox Account, an Eligible Segregated Account or
the Collection Account or otherwise as provided in Section 2.03 of the
Servicing Agreement and comply in all material respects with procedures
with respect to Collections reasonably specified from time to time by the
Company; including, without limitation, the procedures specified in the
Servicing Agreement. In the event that any payments in respect of any such
Receivables are made directly to such Seller (including, without
limitation, any Collector, any other employees thereof or independent
contractors employed thereby), such Seller shall, within one Business Day
(except as provided in the Servicing Agreement) of receipt thereof,
forward such amounts to a Lockbox, a Lockbox Account, an Eligible
Segregated Account or the Collection Account and, prior to forwarding such
amounts, the Seller shall hold such payments in trust as custodian for the
Company and the Trustee.
(k) Taxes. Such Seller will file all tax returns and reports
required by law to be filed by it and will pay all taxes and governmental
charges thereby shown to be owing, except any such taxes or charges which
are being diligently contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP have been set
aside on its books.
(l) Separate Corporate Existence of the Company. Such Seller hereby
acknowledges that the Trustee and the Investor Certificateholders are
entering into the transactions contemplated by the Transaction Documents
in reliance upon the Company's identity as a legal entity separate from
the Sellers and all other WESCO Persons. Therefore, from and after the
date hereof, such Seller will take (or refrain from taking, as the case
may be) such actions and will cause each other WESCO Person to take (or
refrain from taking, as the case may be) such actions, as shall be
required in order that:
(i) Each WESCO Person maintain its deposit account or accounts
separate from those of the Company and ensure that its funds will
not be diverted to the Company, nor will such funds be commingled
with the funds of the Company;
(ii) To the extent that any WESCO Person shares any officers
or other employees with the Company, the salaries of and the
expenses related to providing benefits to such officers and other
employees shall be fairly allocated among such WESCO Person and the
Company, and such WESCO Person and the Company shall bear their fair
shares of the salary and benefit costs associated with all such
common officers and employees;
(iii) To the extent that any WESCO Person jointly contracts
with the Company to do business with vendors or service providers or
to share overhead expenses, the costs incurred in so doing shall be
allocated fairly between such
29
WESCO Person and the Company, and such WESCO Person and the Company
shall bear their fair shares of such costs. To the extent that any
WESCO Person contracts or does business with vendors or service
providers where the goods and services provided are partially for
the benefit of the Company, the costs incurred in so doing shall be
fairly allocated between such WESCO Person and the Company in
proportion to the benefit of the goods or services each is provided,
and such WESCO Person and the Company shall bear their fair shares
of such costs. All material transactions between any WESCO Person
and the Company, whether currently existing or hereafter entered
into, shall be only on an arm's length basis, it being understood
and agreed that the transactions contemplated in the Transaction
Documents meet the requirements of this clause (iii);
(iv) Each WESCO Person will maintain office space separate
from the office space of the Company (but which may be located at
the same address as the Company). To the extent that it and the
Company have offices in the same location, there shall be a fair and
appropriate allocation of overhead costs between them, and each
shall bear its fair share of such expenses;
(v) No WESCO Person will assume or guarantee any of the
liabilities of the Company;
(vi) Each WESCO Person will maintain corporate records and
books of account separate from those of the Company and telephone
numbers, mailing addresses, stationery and other business forms that
are separate and distinct from those of the Company.
(vii) Any financial statements of any WESCO Person which are
consolidated to include the Company will contain a detailed note
substantially in the form, and to the effect, of the note set forth
on Schedule 7.
(viii) No WESCO Person will hold itself out, or permit itself
to be held out, as having agreed to pay or be liable for the debts
of the Company.
(ix) Each WESCO Person will take, or refrain from taking, as
the case may be, all other actions that are necessary to be taken or
not to be taken in order (x) to ensure that the assumptions and
factual recitations set forth in the Specified Bankruptcy Opinion
Provisions remain true and correct with respect to such WESCO Person
(and, to the extent within its control, to ensure that the
assumptions and factual recitations set forth in the Specified
Bankruptcy Opinion Provisions remain true and correct with respect
to the Company) and (y) to comply with those procedures described in
such provisions that are applicable to such WESCO Person.
(m) Further Action Evidencing Purchases.
30
(i) Such Seller agrees that from time to time, at its
expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be
necessary or desirable or that the Company may reasonably request,
to protect or more fully evidence the Company's ownership, right,
title and interest in the Receivables and Receivables Property sold
by such Seller and its rights under the Contracts with respect
thereto, or to enable the Company to exercise or enforce any of its
rights hereunder or under any other Transaction Document. Without
limiting the generality of the foregoing, such Seller will upon the
request of the Company (A) execute and file such Registrations, as
may be necessary or, in the reasonable opinion of the Company or the
Agents, desirable, (B) indicate on its books and records (including,
without limitation, master data processing records) that the
Receivables and Receivables Property have been sold and assigned to
the Company and, in turn, the Company has sold and assigned its
interest therein to the Trustee, and provide to the Company, upon
request, copies of any such records, (C) after the occurrence of a
Purchase Termination Event, contact customers to confirm and verify
Receivables and (D) obtain the agreement of any Person having a Lien
on any Receivables owned by such Seller (other than any Lien created
or imposed hereunder or under the Pooling Agreement or any Permitted
Lien) to release such Lien upon the purchase of any such Receivables
by the Company.
(ii) Such Seller hereby irrevocably authorizes the Company
and the Trustee to register, file or record one or more
Registrations substantially in the form of the originally agreed
upon Registrations, relative to all or any part of the Receivables
and Receivables Property sold or to be sold by such Seller, without
the signature of such Seller where permitted by law.
(iii) If such Seller fails to perform any of its agreements
or obligations under this Agreement, the Company or its assignees
may (but shall not be required to) perform, or cause performance of,
such agreements or obligations, and the expenses of the Company
incurred in connection therewith shall be payable by such Seller as
provided in Section 7.01.
(n) Legend Requirement For Chattel Paper. Such Seller agrees (i) at
all times to comply with the terms and provisions set forth in Schedule 3
to the Pooling Agreement and (ii) that any Receivable that constitutes or
is evidenced by "chattel paper" as defined in the Ontario PPSA shall bear
a legend stating that such Receivable has been conveyed to the Trust.
(o) Computer Files. At its own cost and expense, each Seller shall
retain the ledger used by such Seller as a master record of the Obligors
and retain copies of all documents relating to each Obligor as custodian
and agent for the Company and other Persons with interests in the
Purchased Receivables, and each Seller shall assure continued compliance
with Section 2.01(e).
31
Section 5.02. Reporting Requirements. Each Seller shall furnish to
the Company and its assigns (including the Trustee) from the date hereof until
the Purchase Termination Date shall have occurred with respect to such Seller
and until there are no amounts outstanding with respect to Purchased Receivables
previously sold by such Seller to the Company:
(a) Compliance Certificate. Not later than 120 days after the end of
each fiscal year and not later than 60 days after the end of each of the
first three fiscal quarters of each fiscal year, a certificate of a
Responsible Officer of such Seller stating that, to the best of such
Responsible Officer's knowledge, such Seller during such period, has
observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in the Transaction Documents to which
it is a party to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Purchase Termination
Event or Potential Purchase Termination Event except as specified in such
certificate;
(b) Termination Events: Other Material Events. (i) Upon the
Company's request, a certificate of a Responsible Officer of such Seller
certifying, as of the date thereof, that no Purchase Termination Event has
occurred and is continuing and setting forth the computations used by the
chief financial officer of such Seller in making such determination; (ii)
as soon as possible and in any event within two Business Days after a
Responsible Officer of such Seller obtains knowledge of the occurrence of
any Purchase Termination Event, Potential Purchase Termination Event,
Servicer Default or Potential Servicer Default, a written statement of a
Responsible Officer of such Seller setting forth details of such event and
the action that such Seller proposes to take or has taken with respect
thereto; (iii) promptly after obtaining knowledge of any threatened action
or proceeding affecting such Seller or its Subsidiaries before any court,
governmental agency or arbitrator that may reasonably be expected to
materially and adversely affect the enforceability of this Agreement and
the other Transaction Documents, notice of such action or proceeding; and
(iv) by June 15, 1999, a certificate of a Responsible Officer of such
Seller (with a copy to each Rating Agency) certifying, as of the date
thereof, that such Seller's computer systems shall be "year 2000
compliant" by June 30, 1999;
(c) Ineligible Receivables. Promptly upon determining that any
Purchased Receivable originated by it designated as an Eligible Receivable
on the applicable Daily Report was not an Eligible Receivable as of the
date provided therefor, written notice of such determination; and
(d) Other. Promptly, from time to time, such other information,
documents, records or reports respecting the Receivables of such Seller as
the Company or the Agents may from time to time reasonably request in
order to protect the interests of the Company and the Agents under or as
contemplated by the Transaction Documents.
Section 5.03. Negative Covenants. Each Seller covenants that, until
the Purchase Termination Date shall have occurred with respect to such Seller
and there are no
32
amounts outstanding with respect to Purchased Receivables previously sold by
such Seller to the Company.
(a) Receivables to be Accounts, General Intangibles or Chattel
Paper. Such Seller will take no action to cause any Receivable to be
evidenced by any "instrument" other than in compliance with Section 2.2(g)
of the Servicing Agreement or, provided that the procedures set forth in
Schedule 3 to the Pooling Agreement are fully implemented with respect
thereto, an instrument which together with a security agreement
constitutes "chattel paper" (each as defined in the Ontario PPSA). Such
Seller will take no action to cause any Receivable to be anything other
than an "account", "general intangible" or "chattel paper" (each as
defined in the Ontario PPSA).
(b) Security Interests; Sale of Receivables. Except for the
conveyances hereunder and as provided below, such Seller will not sell,
pledge, assign or transfer to any other Person, or grant, create, incur,
assume or suffer to exist any other Lien on any Receivable or Receivables
Property, whether now existing or hereafter created, or any interest
therein; such Seller will immediately notify the Company of the existence
of any other Lien on any Receivable or Receivables Property; and such
Seller shall defend the right, title and interest of the Company in, to
and under the Receivables or Receivables Property, whether now existing or
hereafter created, against all claims of third parties claiming through or
under such Seller; provided, however, that nothing in this subsection
5.03(b) shall prevent or be deemed to prohibit such Seller from suffering
to exist upon any of the Receivables any Permitted Lien.
(c) Extension or Amendment of Receivables. Such Seller will not
extend, rescind, cancel, make any Dilution Adjustment to, amend or
otherwise modify, or attempt or purport to extend, rescind, cancel, make
any Dilution Adjustment to, amend or otherwise modify, the terms of any
Purchased Receivables, except in any such case (i) in accordance with the
terms of the Policies, (ii) as required by any Requirement of Law or (iii)
in the case of Dilution Adjustments (whether or not permitted by any other
clause of this sentence), upon making a Seller Adjustment Payment pursuant
to Section 2.05.
(d) Change in Business. Such Seller will not make or permit to be
made any change in the character of its business in any material respect
if such change could reasonably be expected to have a Material Adverse
Effect.
(e) Change in Policies. Such Seller shall not make or permit to be
made any change in the Policies in any material respect, except (i) if
such changes or modifications are required under any Requirement of Law,
(ii) if such changes or modifications would not reasonably be expected to
have a Material Adverse Effect or (iii) if the Rating Agency Condition is
satisfied with respect thereto.
(f) Change in Name. Such Seller will not change its name, identity
or corporate structure in any manner including by way of any merger,
consolidation, amalgamation, liquidation, a winding up or dissolution
which would or might make
33
any Registration relating to this Agreement incorrect or require any
amendment or additional Registration with respect thereto, or otherwise
impair the perfection or protection of the Company's interest in any
Receivable under any other similar law, without having (i) delivered 30
days' prior written notice to the Company, the Servicer and the Trustee
and (ii) taken all action required by subsection 5.01(a).
(g) Change in Payment Instructions to Obligors. Such Seller shall
not instruct any Obligor of any Purchased Receivables to make any payments
with respect to any Receivables other than to a Lockbox, a Lockbox
Account, an Eligible Segregated Account or the Collection Account or
otherwise in accordance with the Servicing Agreement.
(h) Accounting Changes. Such Seller shall not prepare any financial
statements (other than consolidated financial statements) which shall
account for the transactions contemplated hereby in any manner other than
as a sale of the Purchased Receivables by such Seller to the Company nor,
except as required by law, in any other respect (other than for tax
purposes) account for or treat the transactions contemplated hereby
(including for financial accounting purposes) in any manner other than as
sales of the Purchased Receivables originated by such Seller to the
Company.
(i) Ineligible Receivables. Such Seller shall not take any action to
cause an Eligible Receivable to cease to be an Eligible Receivable, except
in any such case upon making a Seller Repurchase Payment pursuant to
Section 2.06; provided, however, that in no event shall an Eligible
Receivable becoming an Aged Receivable constitute a breach of this
paragraph (i).
ARTICLE VI
PURCHASE TERMINATION EVENTS
Section 6.01. Purchase Termination Events. If, with respect to any
Seller, any of the following events (each, a "Purchase Termination Event" with
respect to such Seller) shall have occurred and be continuing:
(a) Such Seller shall fail to make any payment or deposit to be made
by it hereunder when due and such failure shall remain unremedied for five
Business Days; or
(b) There shall have occurred (i) an Early Amortization Event set
forth in Section 7.01 of the Pooling Agreement or (ii) the Amortization
Period with respect to all Outstanding Series shall have occurred and be
continuing; or
(c) Any representation or warranty made or deemed to be made by such
Seller or any of its officers under or in connection with any Transaction
Document, Daily Report, Monthly Settlement Statement or other information,
statement, record, certificate, document or report delivered pursuant to a
Transaction Document shall prove to have been false or incorrect in any
material respect when made or deemed
34
made (including in each case by omission of material information necessary
to make such representation, warranty, certificate or statement not
misleading); provided, however, that no such event shall constitute a
Purchase Termination Event unless such event shall continue unremedied for
a period of 30 days from the earlier of (A) the date any Responsible
Officer of such Seller obtains knowledge thereof and (B) the date such
Seller receives notice of the incorrectness of such representation or
warranty from the Company or the Trustee; provided, further,that a
Purchase Termination Event shall not be deemed to have occurred under this
paragraph (c) based upon a breach of any representation or warranty set
forth in Section 4.02 with respect to any Receivable if the Sellers shall
have complied with the provisions of Sections 2.06 or 2.11, as the case
may be; or
(d) Such Seller shall fail to perform or observe any other term,
covenant or agreement contained herein; provided, however, that no failure
to perform or observe any other term, covenant or agreement contained
herein shall constitute a Purchase Termination Event unless such event
shall continue unremedied for a period of 30 days from the earlier of (A)
the date any Responsible Officer of such Seller obtains knowledge of such
failure and (B) the date such Seller receives notice of such failure from
the Company or the Trustee; provided, further, that a Purchase Termination
Event shall not be deemed to have occurred under this paragraph (d) based
upon a breach of any covenant set forth in subsection 5.01(c), (f) or (g)
or Section 5.03 with respect to any Receivable if the Sellers shall have
complied with the provisions of Sections 2.06 or 2.11, as the case may be;
or
(e) Any Transaction Document to which such Seller is a party shall
cease, for any reason, to be in full force and effect, or WESCO Canada or
such Seller shall so assert in writing, or the Company shall fail to have
a valid and perfected first priority ownership interest in substantially
all of the Receivables and the Receivables Property; or
(f) (i) such Seller shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief
of debtors (including, without limitation, the Companies Creditor's
Arrangement Act (Canada)), seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it
or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, receiver manager, administrator, inspector, liquidator or other
similar official for it or for all or any substantial part of its assets
or any such person shall be privately appointed in respect of such Seller
or all or any substantial part of its assets and such appointment is not
set aside or stayed within 30 days after the date that such appointment
was made, provided that such 30 day period shall only apply if such
appointment was not consented to or acquiesced and is being actively and
diligently contested in good faith by appropriate proceedings, or such
Seller shall make a general assignment for the benefit of its creditors;
or (ii) there shall be commenced against such Seller any case, proceeding
or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for
35
relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against such Seller or any of its Subsidiaries any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial
part of its assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof, or all or any
substantial part of the property of such Seller shall be seized or
repossessed by any creditor pursuant to applicable law, and such seizure
or repossession shall not be set aside or otherwise reversed within 60
days; or (iv) such Seller or any of its respective Subsidiaries shall take
any action in furtherance of any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) such Seller shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
(g) WESCO has been terminated as Servicer following a Servicer
Default with respect to WESCO under the Servicing Agreement; or
(h) there shall be filed against such Seller a notice of any other
Lien, the existence of which could reasonably be expected to have a
Material Adverse Effect unless there has been delivered to the Trustee
proof of release of, or payment of amounts secured by, such Lien;
then, (x) in the case of any Purchase Termination Event described in
paragraph (b)(i) or (f) (other than clause (v) thereof), the obligation of
the Company to purchase Receivables shall thereupon automatically
terminate without further notice of any kind, which is hereby waived by
such Seller, (y) in the case of any Purchase Termination Event described
in paragraph (b)(ii) above, the obligation of the Company to purchase
Receivables shall thereupon terminate without notice of any kind, which is
hereby waived by such Seller, unless both the Company and such Seller
agree in writing that such event shall not trigger an Early Termination
hereunder and (z) in the case of any other Purchase Termination Event, so
long as such Purchase Termination Event shall be continuing, the Company
may terminate its obligation to purchase Receivables from such Seller by
written notice to such Seller (any termination with respect to any Seller
pursuant to clause (x), (y) or (z) of this Article VI is herein called an
"Early Termination" with respect to such Seller); provided, however, that
in the event of (A) the filing of any notice of Lien described in
paragraph (h) above or (B) an involuntary petition or proceeding as
described in paragraphs (f)(ii) and (f)(iii) above, the Company shall not
purchase Receivables from such Seller until such time, if any, as such
Lien is released or paid (and evidence of such release is received and
verified by S&P) as described above or such involuntary petition or
proceeding has been dismissed; provided, further, that in the case of
clause (B) such dismissal shall have occurred within 60 days of the filing
of such petition or the commencement of such proceeding; provided,
further, that upon the occurrence of an Early Termination of a Seller,
such Seller shall have no further obligation to sell any additional
Receivables to the Company. Notwithstanding anything to the contrary in
this Section 6.01, a delay in or failure of performance referred to under
clause (a) above for a period of 10 Business Days after the applicable
grace period shall not constitute a Purchase
36
Termination Event, if such delay or failure could not have been prevented
by the exercise of reasonable diligence by such Seller and such delay or
failure was caused by a Force Majeure Delay.
Section 6.02. Additional Remedies. (a) Upon the occurrence of any
Purchase Termination Event, the Company shall have, in addition to all other
rights and remedies under this Agreement or otherwise all other rights and
remedies provided under the PPSA of each applicable jurisdiction and other
applicable laws, which rights shall be cumulative. Without limiting the
foregoing, the occurrence of a Purchase Termination Event shall not deny to the
Company any remedy (in addition to termination of the Company's obligation to
purchase Receivables from any relevant Seller or Sellers) to which the Company
may be otherwise appropriately entitled, whether by statute or other applicable
law, at law or in equity.
(b) In the absence of a Purchase Termination Event under Section
6.01(b)(i) or (f), it is understood and agreed that the Company will not
exercise the rights granted to it pursuant to Section 2.01(f).
ARTICLE VII
INDEMNIFICATION; EXPENSES; COSTS
Section 7.01. Indemnities by the Sellers. WESCO Canada and the other
Sellers (other than those Sellers from which the Company has no Receivables
outstanding at such time) agree (i) to pay or reimburse the Company for all its
costs and expenses incurred in connection with the enforcement or preservation
of any rights against any Seller under this Agreement, including, without
limitation, the reasonable fees and disbursements of counsel to the Company on a
solicitor-client basis, (ii) to pay, indemnify and hold the Company harmless
from, any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay caused by the Seller in paying, stamp,
excise and other similar taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement and any such other documents, and (iii) without limiting any
other rights that the Company may have hereunder or under applicable law, to
indemnify the Company from and against any and all claims, losses and
liabilities (including reasonable attorneys' fees) (all the foregoing being
collectively referred to as "Indemnified Amounts") arising out of or resulting
from any of the following, excluding, however, Indemnified Amounts (a) to the
extent resulting from the gross negligence or willful misconduct of the Company,
(b) arising solely from a delay in payment, or default by, an Obligor with
respect to any Receivable (other than any delay of default arising out of any
discharge, claim, offset or defense (other than discharge in bankruptcy of the
Obligor or otherwise in respect of a Charged-Off Receivable) of the Obligor to
the payment of any Transferred Receivable arising from the actions of such
Seller (including, without limitation, a defense based on such Transferred
Receivable's not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms) or (c) attributable to any
income or franchise taxes imposed on (or measured by) the Company's net income:
37
(a) the transfer by such Seller of any interest in any Receivable or
Receivables Property or proceeds thereof to a Person other than the Company;
(b) reliance on any representation or warranty or statement made or
deemed made by such Seller (or any of its officers) under or in connection with
this Agreement or in any certificate or report delivered pursuant hereto that,
in either case, shall have been false or incorrect in any material respect when
made or deemed made;
(c) the failure by such Seller to comply with any applicable law,
rule or regulation of any governmental authority with respect to any Receivable
or Receivables Property, or the nonconformity of any Receivable or Receivables
Property with any such applicable law, rule or regulation;
(d) the failure to vest and maintain vested in the Company an
ownership interest in any Receivable or Receivables Property, free and clear of
any Lien, other than a Lien arising under the Transaction Documents, whether
existing at the time of the purchase of such Receivable or Receivables Property
or at any time thereafter;
(e) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the PPSA of any
applicable jurisdiction or other applicable laws with respect to any Receivables
or Receivables Property of such Seller;
(f) any dispute, claim, offset or defense of the Obligor to the
payment of any Receivable (including, without limitation, a defense based on
such Receivable or the related Contract not being fully enforceable against the
Obligor in accordance with its terms), or any other claim resulting from the
sale of the merchandise or services related to any such Receivable or the
furnishing or failure to furnish such merchandise or services;
(g) any failure of such Seller to perform its duties or obligations
under this Agreement;
(h) any products liability claim arising out of or in connection
with merchandise, insurance or services that are the subject of any Receivable
or Receivables Property;
(i) the commingling of Collections at any time with other funds of
such Seller;
(j) any claim involving environmental liability that relates to any
property that has been, is now or hereafter will be owned, leased, operated or
otherwise used by such Seller;
(k) any tax or governmental fee or charge (but not including
franchise taxes and taxes upon or measured by net income of the Company), all
interest and penalties thereon or with respect thereto, and all out-of-pocket
costs and expenses, including the reasonable fees and expenses of counsel in
defending against the same, which may arise by reason of the purchase or
ownership of any Receivable or Receivables Property, or any interest therein or
in
38
any merchandise which secure any such Receivables, any Receivables Property or
any other rights or assets transferred hereunder; or
(l) any investigation, litigation or proceeding related to this
Agreement or in respect of any Receivable or Receivables Property of such
Seller.
The Sellers shall pay on demand to the Company any and all amounts
necessary to indemnify the Company from and against any and all Indemnified
Amounts. Notwithstanding the foregoing, such Sellers shall not under any
circumstances be required to indemnify the Company for any Indemnified Amounts
that result from any delay in the collection of any Receivables or any default
by an Obligor with respect to any Receivables.
Section 7.02. Indemnities by the Company. Without limiting any other
rights that the Sellers may have hereunder or under applicable law, the Company
hereby agrees to indemnify each Seller from and against any and all claims,
losses and liabilities (including reasonable legal fees and disbursements on a
solicitor-client basis) arising out of or resulting from such Seller's reliance
on any representation or warranty made by the Company in this Agreement or in
any certificate delivered pursuant hereto that, in either case, shall have been
false or incorrect in any material respect when made or deemed made; provided,
however, that any payments made by the Company in respect of any of the
foregoing items shall be made solely from funds available to the Company which
are not otherwise required to be applied to the payment of any amounts pursuant
to any Pooling and Servicing Agreements (other than to the Company), shall be
non-recourse other than with respect to such funds and shall not constitute a
claim against the Company to the extent that insufficient funds exist to make
such payment.
ARTICLE VIII
SELLER NOTE
Section 8.01. Seller Note. (a) On the initial Effective Date, the
Company shall issue to each Seller, or to such other personal affiliated with
the Seller as the Seller may direct in writing, a note substantially in the form
of Exhibit A (as amended, supplemented or otherwise modified from time to time,
the "Seller Note"). The aggregate principal amount of the Seller Note at any
time shall be equal to the difference between (a) the aggregate principal amount
on the issuance thereof and each addition to the principal amount of such Seller
Note with respect to each Seller pursuant to the terms of Section 2.03 as of
such time, minus (b) the aggregate amount of all payments made in respect of the
principal of such Seller Note as of such time. All payments made in respect of
the Seller Note shall be allocated among the Sellers by the Servicer. Each
Seller's interest in the Seller Note (or, if a Seller has directed issuance of
the note to another person, such person's interest in the Seller Note) shall
equal the sum of each addition thereto allocated to such Seller pursuant to
subsection 2.03(c) less the sum of each repayment thereof allocated to such
Seller. All payments made in respect of the Seller Note shall be allocated,
first, to pay accrued and unpaid interest thereon, and second, to pay the
outstanding principal amount thereof. Interest on the outstanding principal
amount of the Seller Note shall accrue on the last day of each
39
Settlement Period at a rate per annum equal to the Reference Rate in effect from
time to time plus 2% from and including the initial Effective Date to but
excluding the last day of each Settlement Period and shall be paid (x) on each
Distribution Date with respect to the principal amount of the Seller Note
outstanding from time to time during the Settlement Period immediately preceding
such Distribution Date and/or (y) on the maturity date thereof; provided,
however, that, to the maximum extent permitted by law, accrued interest on the
Seller Note which is not so paid shall be added, at the request of such Seller,
to the principal amount of the Seller Note. Principal hereunder not paid or
prepaid pursuant to the terms hereof shall be payable on the maturity date of
the Seller Note. Default in the payment of principal or interest under the
Seller Note shall not constitute a Purchase Termination Event under this
Agreement, a Servicer Default under any Servicing Agreement or an Early
Amortization Event under the Pooling Agreement or any Supplement thereto.
Section 8.02. Restrictions on Transfer of Seller Note. Neither the
Seller Note, nor any right of any Seller or other person to receive payments
thereunder, shall be assigned, transferred, exchanged, pledged, hypothecated,
participated or otherwise conveyed to Wesco Deistribution, Inc. and except as
provided in the Credit Agreement and the security documents related thereto.
Section 8.03. Aggregate Amount. Anything herein to the contrary
notwithstanding, the Company may not make any payment of any Purchase Price in
the form of Indebtedness of the Company under the Seller Note unless (i) at the
time of such payment and after giving effect thereto, the fair market value of
the Company's assets, including beneficial interests in, or indebtedness of, a
trust and all Receivables and Receivables Property the Company owns, is greater
than the amount of its liabilities, including its liabilities on the Seller Note
and all interest and other fees due and payable under any Pooling and Servicing
Agreements and the other Transaction Documents plus $45,000,000 and (ii) the
aggregate principal amount of Indebtedness evidenced by the Seller Note,
incurred on or before such Payment Date and outstanding on such Payment Date
(after giving effect to all repayments thereof on or before such Payment Date)
would not exceed 25% of the outstanding balance of the Receivables on such
Payment Date.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendment. Neither this Agreement nor any of the terms
hereof may be amended, supplemented or modified except in a writing signed by
the Company and the Sellers. Any amendment, supplement or modification shall not
be effective until the Rating Agency Condition, if applicable, has been
satisfied.
Section 9.02. Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
certified or registered mail, postage-prepaid, by facsimile or by overnight
courier, to the intended party at the address or facsimile number of such party
set forth under its name on the signature pages hereof or at such other address
or facsimile number as shall be designated by such party in a written
40
notice to the other parties hereto given in accordance with this Section 9.02;
provided, however, that no notices or other communications may be sent by mail
during any actual or apprehended disruption of postal services in the
jurisdiction of the intended recipient of such notice or other communication.
Copies of all notices and other communications provided for hereunder shall be
delivered, if to the Trustee, at its address at 450 West 33rd Street, New York,
New York 10001, Attention: Structured Finance Services, and if to the Servicer,
at its address set forth on Schedule 4. All notices and communications provided
for hereunder shall be effective, (a) if personally delivered by express mail or
courier, when received, (b) if sent by certified or registered mail, five
Business Days after having been deposited in the mail, postage prepaid and (c)
if transmitted by facsimile, when sent, receipt confirmed by telephone or
electronic means.
Section 9.03. No Waiver; Remedies. No failure on the part of the
Company, the Sellers or the Agents to exercise, and no delay in exercising, any
right under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 9.04. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Sellers and the Company and their
respective successors (whether by merger, consolidation or otherwise) and
assigns. Each Seller agrees that it will not assign or transfer all or any
portion of its rights or obligations hereunder other than as permitted in
section 8.01 and section 8.02 hereof, without the prior written consent of the
Company and the Trustee. Each Seller hereby acknowledges and consents to the
assignment by the Company of the Receivables and Receivables Property and the
rights and remedies of the Company under this Agreement to the Trustee for the
benefit of the Certificateholders pursuant to the Pooling and Servicing
Agreements. Each Seller hereby acknowledges and consents that the Company will
grant a security interest in the Lockbox Accounts, the Collection Account and
the Eligible Segregated Accounts to the Trust and the Trustee for the benefit of
the Certificateholders. Each Seller agrees to take any action that the Company
or the Trust may reasonably request in connection with such assignment or
security interest. Each Seller agrees that the Trustee shall be entitled to
enforce the terms of this Agreement and the rights (including, without
limitation, the right to grant or withhold any consent or waiver or give any
notice) of the Company directly against such Seller, whether or not a Purchase
Termination Event or a Termination Event has occurred and that so long as any
Investor Certificates are outstanding no consent, waiver or notice given
hereunder by the Company shall be effective unless the Trustee has given its
written consent thereto. Each Seller further agrees that, in respect of its
obligations hereunder, it will act at the direction of, and in accordance with,
all requests and instructions from the Trustee until all amounts due to the
Investor Certificateholders are paid in full. The Parties acknowledge that the
Company holds all rights of the Trustee and the Investor Certificateholders
hereunder, in trust for the benefit thereof and accordingly, each of the Trustee
and the Investor Certificateholders shall have the rights of third-party
beneficiaries under this Agreement.
Section 9.05. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
41
PROVINCE OF ONTARIO, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS, EXCEPT AS REQUIRED BY MANDATORY
PROVISIONS OF LAW.
Section 9.06. Jurisdiction; Consent to Service of Process. (a) Each
party hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Transaction Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Company may otherwise have to bring any action or proceeding
relating to this Agreement or the other Transaction Documents against any Seller
or its properties in the courts of any jurisdiction.
(b) Each party hereto hereby irrevocably and unconditionally waives,
to the fullest extent they may legally and effectively do so, any objection
which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Transaction
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.02. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
Section 9.07. Integration. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
Section 9.08. Captions and Cross References. The various captions
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement.
Section 9.09. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
42
Section 9.10. No Petition in Bankruptcy. Each Seller covenants and
agrees that prior to the date which is one year and one day after the date of
termination of this Agreement pursuant to Section 9.13, it will not institute
against or join any other Person in instituting against the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any State of
the United States.
Section 9.11. Addition of Sellers. Subject to the terms and
conditions hereof, from time to time one or more wholly-owned Subsidiaries of
WESCO Canada may become additional Sellers parties hereto. If any such
Subsidiary wishes to become an additional Seller, WESCO Canada shall submit a
request to such effect in writing to the Company. Such wholly-owned Subsidiary
shall become an additional Seller party hereto on the related Seller Addition
Date upon satisfaction of the conditions set forth in Section 3.02 and the
conditions, if any, set forth in the Pooling and Servicing Agreements.
Section 9.12. Treatment of Sellers other than WESCO Canada;
Termination Thereof. (a) WESCO Canada hereby covenants and agrees with the
Company that WESCO Canada shall not permit any Seller (other than WESCO Canada)
at any time to cease to be a wholly-owned Subsidiary of WESCO, except as
provided in the following paragraph (b).
(b) If WESCO Canada wishes to permit any Seller to cease to be a
wholly-owned Subsidiary of WESCO Canada, then WESCO Canada shall submit a
request (a "Seller Termination Request") to such effect in writing to the
Company, which request shall be accompanied by a certificate prepared by a
Responsible Officer of the Servicer indicating the Purchased Receivables
Percentage applicable to such Seller as of the date of submission of such
request (the "Seller Termination Request Date"). Subject to the terms and
provisions hereof and of the Pooling and Servicing Agreements, the relevant
Seller shall be terminated as a Seller hereunder immediately upon the
consummation of the transaction in connection with which such Seller ceases to
be a wholly-owned Subsidiary of WESCO Canada. From and after the date any such
Seller is terminated as a Seller pursuant to this subsection, the Seller shall
cease selling, and the Company shall cease buying, Receivables and Receivables
Property from such Seller and in the case of the termination of a Seller, an
"Early Termination" shall deemed to have occurred with respect to such Seller.
(c) A terminated Seller shall have no further obligation under any
Transaction Document, other than pursuant to Sections 2.05, 2.06 and 2.11, with
respect to Receivables previously sold by it to the Company.
Section 9.13. Termination. This Agreement will terminate at such
time as (a) an Early Termination shall have occurred with respect to all Sellers
herewith and (b) all Receivables purchased hereunder have been collected, and
the proceeds thereof turned over to the Company and all other amounts owing to
the Company hereunder shall have been paid in full or, if Receivables sold
hereunder have not been collected, such Receivables have become Charged-Off
Receivables and the Company shall have completed its collection efforts with
respect thereto; provided, however, that the indemnities of the Sellers to the
Company set forth in Article 7 of this Agreement shall survive such termination
and provided, further, that the Company shall remain entitled to receive any
Collections on Receivables sold hereunder which have become Charged-Off
Receivables.
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE SELLERS:
WESCO Distribution-Canada, Inc.
By:/s/ [ILLEGIBLE]
-------------------------------
Name:
Title:
Address:
Commerce Court
4 Station Square, Suite 700
Pittsburgh, PA 15219
Telephone: (412) 454-2254
Facsimile: (412) 454-2555
THE COMPANY:
WESCO RECEIVABLES CORP.
By:/s/ [ILLEGIBLE]
-------------------------------
Name:
Title:
Address:
Commerce Court
4 Station Square
Pittsburgh, PA 15219
Telephone: (412) 454-2270
Facsimile: (412) 454-2555
44
THE SERVICER:
WESCO Distribution, Inc.
By:/s/ [ILLEGIBLE]
-------------------------------
Name:
Title:
Address:
Commerce Court
4 Station Square, Suite 700
Pittsburgh, PA 15219
Telephone: (412) 454-2283
Facsimile: (412) 454-2555
Exhibit 10.17
================================================================================
WESCO RECEIVABLES CORP.,
as Company,
WESCO DISTRIBUTION, INC.,
as Servicer,
and
THE CHASE MANHATTAN BANK,
as Trustee
on behalf of the Holders
WESCO RECEIVABLES MASTER TRUST
POOLING AGREEMENT
Dated as of June 5, 1998
================================================================================
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
1.1. Definitions.................................................... 1
1.2. Other Definitional and Calculation Provisions.................. 31
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
2.1. Conveyance of Receivables...................................... 33
2.2. Acceptance by Trustee.......................................... 37
2.3. Representations and Warranties of the Company
Relating to the Company.................................... 37
2.4. Representations and Warranties of the Company
Relating to the Receivables................................ 41
2.5. Repurchase of Ineligible Receivables Cash Dilution Payments.... 42
2.6. Purchase of Investor Certificateholders' Interest
in Trust Portfolio......................................... 44
2.7. Affirmative Covenants of the Company........................... 45
2.8. Negative Covenants of the Company.............................. 50
ARTICLE III
RIGHTS OF HOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
3.1. Rights of Holders.............................................. 54
ARTICLE IV
ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO THE SERIES RELATING THERETO
ARTICLE V
THE CERTIFICATES AND INTERESTS
5.1. The Certificates............................................... 63
5.2. Authentication of Certificates................................. 64
5.3. Registration of Transfer and Exchange
of Certificates............................................ 64
5.4. Mutilated, Destroyed, Lost or Stolen
Certificates............................................... 68
5.5. Persons Deemed Owners.......................................... 68
Page
----
5.6. Appointment of Paying Agent.................................... 69
5.7. Access to List of Investor Certificateholders'
Names and Addresses........................................ 70
5.8. Authenticating Agent........................................... 70
5.9. Tax Treatment.................................................. 72
5.10. Company Exchanges.............................................. 72
5.11. Book-Entry Certificates........................................ 75
5.12. Notices to Clearing Agency..................................... 76
5.13. Definitive Certificates........................................ 76
ARTICLE VI
OTHER MATTERS RELATING
TO THE COMPANY
6.1. Limitation on Liability........................................ 76
6.2. Liabilities.................................................... 77
ARTICLE VII
EARLY AMORTIZATION EVENTS
7.1. Early Amortization Events...................................... 77
7.2. Additional Rights Upon the Occurrence of
Certain Events............................................. 79
ARTICLE VIII
THE TRUSTEE
8.1. Duties of Trustee.............................................. 80
8.2. Rights of the Trustee.......................................... 83
8.3. Trustee Not Liable for Recitals in Certificates................ 85
8.4. Trustee May Own Certificates................................... 85
8.5. Trustee's Fees and Expenses.................................... 86
8.6. Eligibility Requirements for Trustee........................... 87
8.7. Resignation or Removal of Trustee.............................. 87
8.8. Successor Trustee.............................................. 88
8.9. Merger or Consolidation of Trustee............................. 88
8.10. Appointment of Co-Trustee or Separate Trustee.................. 89
8.11. Tax Returns.................................................... 90
8.12. Trustee May Enforce Claims Without Possession
of Certificates............................................ 91
8.13. Suits for Enforcement.......................................... 91
8.14. Rights of Investor Certificateholders to
Direct Trustee............................................. 91
8.15. Representations and Warranties of Trustee...................... 92
8.16. Maintenance of Office or Agency................................ 92
Page
----
8.17. Limitation of Liability....................................... 92
ARTICLE IX
TERMINATION
9.1. Termination of Trust; Liquidation of Receivables.............. 93
9.2. Clean-Up Call and Final Termination Date of
Investor Certificates of any Series....................... 93
9.3. Final Payment with Respect to Any Series...................... 95
9.4. Company's Termination Rights.................................. 96
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1. Amendment..................................................... 96
10.2. Protection of Right, Title and Interest to Trust.............. 98
10.3. Limitation on Rights of Holders............................... 99
10.4. Governing Law................................................ 100
10.5. Notices...................................................... 100
10.6. Severability of Provisions................................... 101
10.7. Assignment................................................... 101
10.8. Certificates Nonassessable and Fully Paid.....................101
10.9. Further Assurances........................................... 101
10.10. No Waiver; Cumulative Remedies................................102
10.11. Counterparts................................................. 102
10.12. Third-Party Beneficiaries.................................... 102
10.13. Actions by Holders........................................... 102
10.14. Merger and Integration....................................... 102
10.15. Headings..................................................... 102
10.16. Construction of Agreement.................................... 103
10.17. No Set-Off................................................... 103
10.18. No Bankruptcy Petition....................................... 103
10.19. Limitation of Liability...................................... 103
10.20. Canadian Taxes ............................................. 104
10.21. Certain Information.......................................... 105
Page
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EXHIBITS
Exhibit A Form of Lockbox Agreement
Exhibit B Form of Eligible Segregated Account Bank Acknowledgment
Exhibit C Form of Annual Opinion of Counsel
Exhibit D Internal Operating Procedures Memorandum
Exhibit E Form of Required Currency Hedge Assignment
SCHEDULES
Schedule 1 Receivables
Schedule 1A Construction Receivables
Schedule 1B BEAR Receivables
Schedule 2 Identification of the Trust Accounts
Schedule 3 Actions with respect to Chattel Paper
Schedule 4 Location of Chief Executive Office
Schedule 5 [Reserved]
Schedule 6 Form of Legend for Receivables Computer Files
Schedule 7 Conditions Precedent to becoming Eligible Receivable
POOLING AGREEMENT, dated as of June 5, 1998, among WESCO Receivables
Corp., a Delaware corporation (the "Company"); WESCO Distribution, Inc., a
Delaware corporation ("WESCO"), in its capacity as servicer (the "Servicer");
and The Chase Manhattan Bank, a New York banking corporation, not in its
individual capacity, but solely as trustee (in such capacity, the "Trustee").
W I T N E S S E T H :
WHEREAS, as of the date hereof, (i) the Company, the Servicer and
the Sellers (as hereinafter defined) are entering into a U.S. Receivables Sale
Agreement (as amended, supplemented or otherwise modified from time to time, the
"U.S. Receivables Sale Agreement") and a Canadian Receivables Sale Agreement (as
amended, supplemented or otherwise modified from time to time, the "Canadian
Receivables Sales Agreement", collectively with the U.S. Receivables Sale
Agreement, the "Receivables Sale Agreements") and (ii) the Company, the
Servicer, the Sellers, in their capacities as servicers of the Receivables (in
such capacities, the "Sub-Servicers"), and the Trustee are entering into a
Servicing Agreement (as amended, supplemented or otherwise modified from time to
time, the "Servicing Agreement"); and
WHEREAS, the parties hereto wish to enter into this Agreement in
order to create a master trust to which the Company will transfer all of its
right, title and interest in, to and under the Receivables and other Trust
Assets now or hereafter owned by the Company, or in which the Company has an
interest, and such master trust shall, from time to time at the direction of the
Company, issue one or more Series of Investor Certificates which shall represent
interests in the Receivables and such other Trust Assets as specified herein and
in the Supplement related to such Series.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"Accounts" shall have the meaning specified in subsection 2.1(a)(v)
of this Agreement.
"Adjusted Invested Amount" shall have, with respect to any
Outstanding Series, the meaning assigned to such term in the related
Supplement for such Series.
"Affiliate" shall mean, with respect to any specified Person, any
other Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person; provided that
a Person shall not be deemed an Affiliate of another Person solely by
reason of an individual serving as an officer or director of
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such other Person. For purposes of this definition, "control" of a Person
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Aged Receivable" shall mean, as of any date of determination, any
Receivable (a) which is unpaid in whole or in part, (i) in the case of a
Receivable other than a Construction Receivable or a BEAR Receivable, for
more than 121 days after its original invoice date, (ii) in the case of a
Construction Receivable, for more than 151 days after its original invoice
date or (iii) in the case of a BEAR Receivable, for more than 91 days
after its original invoice date or (b) which is, as of such date of
determination, a Charged-Off Receivable.
"Agent" shall mean, with respect to any Series, the Person or
Persons, if any, so designated in the related Supplement.
"Aggregate Adjusted Invested Amount" shall mean, with respect to any
date of determination, the sum of the Adjusted Invested Amounts with
respect to all Outstanding Series on such date of determination.
"Aggregate Allocated Receivables Amount" shall mean, with respect to
any date of determination, the sum of the Allocated Receivables Amounts
with respect to all Outstanding Series on such date of determination.
"Aggregate Daily Collections" shall mean, with respect to any
Business Day, the aggregate amount of all Collections deposited into the
Collection Accounts which first became Available Funds after 1:00 p.m.,
New York City time, on the prior Business Day and prior to 1:00 p.m., New
York City time, on such Business Day; provided, that during the first
three Business Days following the Issuance Date for Series 1998-1
Certificates, Aggregate Daily Collections will not include Collections
which have become Available Funds from deposits made prior to such
Issuance Date.
"Aggregate Invested Amount" shall mean, at any date of
determination, the sum of the Invested Amounts with respect to all
Outstanding Series on such date of determination.
"Aggregate Overconcentration Amount" shall mean, with respect to any
date of determination, the sum of the Overconcentration Amounts of all
Eligible Obligors at the end of the preceding Business Day.
"Aggregate Receivables Amount" shall mean, with respect to any date
of determination, (i) the aggregate Principal Amount of all Eligible
Receivables in the Trust at the end of the Business Day immediately
preceding such date minus (ii) the Aggregate Overconcentration Amount for
such date plus (iii) the Aggregate Uncleared Funds Amount; provided that
for purposes of calculating the amounts in (i), (ii) and (iii) above,
Canadian Dollar amounts will be converted into U.S. Dollars using the
Valuation Price in lieu of the Canadian Exchange Percentage.
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"Aggregate Target Receivables Amount" shall mean, with respect to
any date of determination, the sum of the Target Receivables Amounts with
respect to all Outstanding Series on such date of determination.
"Aggregate Uncleared Funds Amount" shall mean on any date, any
amounts on deposit in any Eligible Segregated Account or Lockbox Account
which were not Available Funds as of the last time that funds were
transferred from such accounts to the Collection Accounts.
"Agreement" shall mean this Pooling Agreement and all amendments and
modifications hereof and supplements hereto, and including, unless
expressly stated otherwise, each Supplement.
"Allocable Charged-Off Amount" shall have, with respect to any
Series, the meaning specified in subsection 3.1(e).
"Allocable Recoveries Amount" shall have, with respect to any
Series, the meaning specified in subsection 3.1(e).
"Allocated Receivables Amount" shall mean, with respect to any
Outstanding Series, the meaning assigned to such term in the related
Supplement for such Series.
"Amortization Period" shall mean, with respect to any Outstanding
Series, the meaning assigned to such term in the related Supplement for
such Series.
"Authorized Foreign Exchange Dealer" shall mean any foreign exchange
dealer authorized by applicable law to deal and engage in foreign exchange
transactions relating to Canadian Dollars selected by the Servicer and
reasonably acceptable to the Trustee.
"Available Funds" shall mean any funds which are immediately
available funds on the applicable date of determination.
"BEAR Receivables" shall mean the Receivables described on Schedule
1B, the composition of which may change over time as provided in such
Schedule.
"Book-Entry Certificates" shall mean the Certificates issued to a
Clearing Agency to facilitate the use of book entries by such Clearing
Agency to evidence ownership of beneficial interests in the Certificates,
transfers of which beneficial interests shall be made through book entries
by such Clearing Agency, all as described in Section 5.11; provided,
however, that after the occurrence of a condition whereupon book-entry
registration and transfer are no longer permitted and Definitive
Certificates are issued to the Certificate Book-Entry Holders, such
Certificates shall no longer be "Book-Entry Certificates".
"Business Day" shall mean any day other than (i) a Saturday or a
Sunday or (ii) another day on which commercial banking institutions or
trust companies in the State of New York or in the city where the
Corporate Trust Office is located, are authorized or
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obligated by law, executive order or governmental decree to be closed;
provided that, when used in connection with the calculation of Certificate
Rates which are determined by reference to the Eurodollar Rate, "Business
Day" shall mean any Business Day on which dealings in Dollars between
banks may be carried on in both London, England and New York, New York.
The term "Business Day", as applied in Canada, shall not include any day
on which commercial banking institutions or trust companies in Canada are
authorized or obligated by law, executive order or governmental decree to
be closed.
"Business Day Received" shall have the meaning specified in
subsection 2.3(e) of the Servicing Agreement.
"Canada/Canadian Dollar Collection Account" shall have the meaning
specified in subsection 3.1(b)(i).
"Canada/Canadian Dollar Collection Concentration Account" shall have
the meaning specified in subsection 3.1(b)(i).
"Canada/U.S. Dollar Collection Account" shall have the meaning
specified in subsection 3.1(b)(i).
"Canada/U.S. Dollar Collection Concentration Account" shall have the
meaning specified in subsection 3.1(b)(i).
"Canadian Dollars" shall mean dollars in lawful currency of Canada.
"Canadian Dollar Receivables" shall mean Receivables payable in
Canadian Dollars sold to the Company pursuant to the Canadian Receivables
Sale Agreement and then transferred to the Trustee pursuant to this
Agreement.
"Canadian Exchange Percentage" shall mean, at any date of
determination, the rate at which Canadian Dollars may be exchanged into
U.S. Dollars (expressed as the percentage of Canadian Dollars per U.S.
Dollars), as reported in The Wall Street Journal on the immediately
preceding Business Day. In the event that such rate does not appear in The
Wall Street Journal on such immediately preceding Business Day, the
Canadian Exchange Percentage shall be determined by reference to the
relevant Bloomberg currency page (or, if such rate does not appear on any
Bloomberg currency page, on the relevant page of the Reuters Monitor Money
Rates Service) as of the close of business of the immediately preceding
Business Day. In the event that such rate does not appear on any Bloomberg
page or the relevant page of the Reuters Monitor Money Rates Service, the
Canadian Exchange Percentage shall be determined by reference to such
other publicly available service for displaying exchange rates with
respect to Canadian Dollars as may be selected by the Trustee.
"Canadian Governmental Obligor" shall mean the government of Canada
or the government of any province or other political subdivision thereof,
and any agency,
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authority, bureau, commission or instrumentality of, or any Person owned
or controlled by, any thereof.
"Cash Dilution Payment" shall have the meaning specified in
subsection 4.6(a) of the Servicing Agreement.
"Certificate" shall mean any Series of Investor Certificates.
"CBRS" shall mean CBRS Inc. or its successor.
"Certificate Book-Entry Holder" shall mean, with respect to a
Book-Entry Certificate, the Person who is listed on the books of the
Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency, as the beneficial owner of such Book-Entry
Certificate (directly or as an indirect participant, in accordance with
the rules of such Clearing Agency).
"Certificate Rate" shall mean, with respect to any Series and Class
of Certificates, the percentage interest rate (or formula on the basis of
which such interest rate shall be determined) stated in the applicable
Supplement.
"Certificate Register" shall mean the register maintained pursuant
to Section 5.3, providing for the registration of the Certificates and
transfers and exchanges thereof.
"Certificateholders' Interest" shall have the meaning specified in
subsection 3.1(b).
"Charged-Off Receivables" shall mean all Receivables (or portions
thereof) which, in accordance with the Policies of the applicable Seller,
have or should have been written off as uncollectible, including without
limitation the Receivables of any Obligor which becomes the subject of any
voluntary or involuntary bankruptcy proceeding.
"Class" shall mean, with respect to any Series, any one of the
classes of Certificates of that Series as specified in the related
Supplement.
"Clean-Up Call Percentage" shall have, with respect to any Series,
the meaning specified in the related Supplement for such Series.
"Clean-Up Call Repurchase Price" shall have the meaning specified in
Section 9.2.
"Clearing Agency" shall mean each organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act
of 1934, as amended.
"Clearing Agency Participant" shall mean a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency
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effects book-entry transfers and pledges of securities deposited with such
Clearing Agency.
"Collection Accounts" shall mean the collective reference to the
U.S. Dollar Collection Account, the Canada/U.S. Dollar Collection Account
and the Canada/Canadian Dollar Collection Account and shall include,
without limitation, all subaccounts thereof.
"Collection Concentration Accounts" shall have the meaning specified
in subsection 3.1(b)(i).
"Collections" shall mean all collections, including the Aggregate
Uncleared Funds Amount, and all amounts received in respect of the
Receivables, including Recoveries, Seller Repurchase Payments, Seller
Adjustment Payments, Servicer Indemnification Amounts paid by the Servicer
and any other payments received in respect of Dilution Adjustments,
together with all collections received in respect of the Related Property
in the form of cash, checks, wire transfers or any other form of cash
payment, and all proceeds of Receivables and collections thereof
(including, without limitation, collections constituting an account or
general intangible or evidenced by a note, instrument, letter of credit,
security, contract, security agreement, chattel paper or other evidence of
indebtedness or security, whatever is received upon the sale, exchange,
collection or other disposition of, or any indemnity, warranty or guaranty
payable in respect of, the foregoing and all "proceeds", as defined in
Section 9-306 of the UCC as in effect in the State of New York, of the
foregoing or, if applicable, as defined under the PPSA as in effect in the
Province of Ontario).
"Collector" shall mean any branch or employee of the Servicer or any
Sub-Servicer authorized to collect payments in respect of Receivables in
accordance with the Policies of the Seller which generated such
Receivables.
"Company" shall mean WESCO Receivables Corp., a Delaware
corporation.
"Company Collection Subaccount" shall have the meaning specified in
subsection 3.1(a).
"Company Exchange" shall have the meaning specified in subsection
5.10(a).
"Company Interest" shall have the meaning specified in subsection
3.1(b).
"Construction Receivables" shall mean the Receivables described on
Schedule 1A.
"Contractual Obligation" shall mean, as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any of
its property is bound.
"Corporate Trust Office" shall mean the principal office of the
Trustee at which at any particular time its corporate trust business shall
be administered, which office at
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the date of the execution of this Agreement is located at 450 West 33rd
St., New York, New York 10001 (Attention: Structured Finance Services).
"Counterparty" shall mean a Person who is a party to a Required
Currency Hedge with the Company.
"Credit Enhancer" shall mean, with respect to any Outstanding
Series, that Person, if any, designated as such in the applicable
Supplement.
"Cut-Off Date" shall mean the close of business on [May 28] [June
1], 1998.
"Daily Report" shall have the meaning specified in subsection 4.1 of
the Servicing Agreement.
"DBRS" shall mean Dominion Bond Rating Service Limited, or its
successor.
"Definitive Certificates" shall have the meaning specified in
Section 5.11.
"Deposit Date" shall have the meaning specified in subsection
3.1(d).
"Depository" shall mean, with respect to any Series, the Clearing
Agency designated as the "Depository" in the related Supplement.
"Depository Agreement" shall mean, with respect to any Series, an
agreement among the Company, the Trustee and a Clearing Agency, or a
letter of undertaking to a Clearing Agency by the Company and the Trustee,
in each case in a form reasonably satisfactory to the Trustee and the
Company.
"Dilution Adjustments" shall mean any rebates, administrative fees,
discounts, credit memos, refunds, non-cash payments or other adjustments
(including, without limitation, as a result of the application of any
special or other discounts or any reconciliations) in respect of any
Receivable, the amount owing for any returns (including, without
limitation, as a result of the return of any defective goods) or
cancellations and the amount of any other reduction in the amount owing
under any Receivable (including, without limitation, any elimination of
service charges), in each case granted, permitted or made by the
applicable Seller or the Servicer to the related Obligor, provided that a
"Dilution Adjustment" does not include any Charged-Off Receivable.
"Distribution Date" shall mean, except as otherwise set forth in the
applicable Supplement, the 20th day of each calendar month, beginning on
July 20th, 1998, or if such 20th day is not a Business Day, the next
succeeding Business Day.
"Dollars," "U.S. Dollars", "U.S. $" and "$" shall mean dollars in
lawful currency of the United States of America.
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"Early Amortization Event" shall have, with respect to any Series,
the meaning specified in Section 7.1 of this Agreement (without taking
into account any Supplements) and in any Supplement for such Series.
"Early Amortization Period" shall have, with respect to any Series,
the definition assigned to such term in Section 7.1 of this Agreement
(without taking into account any Supplements) and in any Supplement for
such Series.
"Early Termination" shall have the meaning assigned to such term in
the Receivables Sale Agreement.
"Eligible Counterparty" shall mean a Counterparty with commercial
paper or short-term deposit ratings of A-1 or P-1, or such other rating as
shall be required in the Supplement setting forth the terms of the
applicable Series of Investor Certificates. The initial Eligible
Counterparty shall be The Chase Manhattan Bank.
"Eligible Institution" shall mean (a) with respect to accounts in
the United States a depository institution or trust company (which may
include the Trustee and its affiliates) organized under the laws of the
United States of America or any one of the states thereof or the District
of Columbia; provided, however, that at all times (i) such depository
institution or trust company is a member of the Federal Deposit Insurance
Corporation, (ii) the certificates of deposit or unsecured and
uncollateralized debt obligations of such depository institution or trust
company are rated in one of the two highest long-term rating categories or
in the highest short-term rating category by each Rating Agency and (iii)
such depository institution or trust company has a combined capital and
surplus of at least $50,000,000, and (b) with respect to accounts in
Canada a bank within the meaning of the Bank Act (Canada) or a trust
company licensed under the laws of Canada or any province thereof;
provided, however, that at all times (i) the certificates of deposit or
unsecured and uncollateralized debt obligations of such depository
institution or trust company are rated in one of the two highest long-term
rating categories or in the highest short-term rating category by each
Rating Agency and (ii) such depository institution or trust company has a
combined capital and surplus of at least $50,000,000.
"Eligible Investments" shall mean any deposit accounts, book-entry
securities, negotiable instruments or securities represented by
instruments in bearer or registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) federal funds, demand deposits, time deposits or certificates of
deposit of an Eligible Institution;
(c) commercial paper rated, at the time of the investment or
contractual commitment to invest therein, in the highest rating category
by each Rating Agency rating such commercial paper;
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(d) investments in money market funds (including funds for which the
Trustee or any of its Affiliates is investment manager or adviser) rated
in one of the two highest rating category by each Rating Agency rating
such money market fund (provided, that if such Rating Agency is S&P, such
rating shall be AAAm-G);
(e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) described in clause (b) above; or
(g) any other investment upon satisfaction of the Rating Agency
Condition with respect thereto.
"Eligible Obligor" shall mean, as of any date of determination, each
Obligor in respect of a Receivable that satisfies the following
eligibility criteria:
(a) (i) it is a resident of the United States, its territories or
possessions, or of Canada; provided, however, that if an Obligor is
located in the Canadian Provinces of Newfoundland or the Northwest
Territories, it shall not be deemed to be an Eligible Obligor until, as
evidenced by an Opinion of Counsel, all actions are taken that are
required to perfect the Company's and the Trust's ownership/security
interest in the Receivables of such Obligor;
(b) if it is a Federal Government Obligor or a State/Local
Government Obligor, then such Obligor shall be subject to the first
proviso contained in the definition of "Overconcentration Amount";
(c) it is not a Seller or an Affiliate of a Seller;
(d) it is not a Canadian Governmental Obligor; and
(e) it is not the subject of any voluntary or involuntary bankruptcy
proceeding;
provided, however, that (i) if 40% or more of the Principal Amount of
Receivables, other than Construction Receivables or BEAR Receivables, of
an Obligor (measured by the Principal Amount of Receivables of such
Obligor in the Trust) is reported as being aged 151 days or more after the
respective original invoice dates of such Receivables as at the end of the
Settlement Period immediately preceding the most recent Settlement Report
Date (commencing with the Settlement Report Date occurring on June 15,
1998), such Obligor shall not be deemed an Eligible Obligor until such
time as the Servicer furnishes the Trustee with a report (which may be
part of a Daily Report or a Monthly Settlement Statement) demonstrating
that less than 40% of the Principal Amount of Receivables of such Obligor
then in the Trust are aged 151 days or more after the respective original
invoice dates of such Receivables, (ii) if 40% or more of
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the Principal Amount of Receivables that are BEAR Receivables of an
Obligor (measured by the Principal Amount of Receivables of such Obligor
in the Trust) is reported as being aged 121 days or more after the
respective original invoice dates of such Receivables as at the end of the
Settlement Period immediately preceding the most recent Settlement Report
Date (commencing with the Settlement Report Date occurring on June 15,
1998), such Obligor shall not be deemed an Eligible Obligor until such
time as the Servicer furnishes the Trustee with a report (which may be
part of a Daily Report or a Monthly Settlement Statement) demonstrating
that less than 40% of the Principal Amount of Receivables of such Obligor
then in the Trust are aged 121 days or more after the respective original
invoice dates of such Receivables and (iii) if 40% or more of the
Principal Amount of Receivables that are Construction Receivables of an
Obligor (measured by the Principal Amount of Receivables of such Obligor
in the Trust) is reported as being aged 181 days or more after the
respective original invoice dates of such Receivables as at the end of the
Settlement Period immediately preceding the most recent Settlement Report
Date (commencing with the Settlement Report Date occurring on June 15,
1998), such Obligor shall not be deemed an Eligible Obligor until such
time as the Servicer furnishes the Trustee with a report (which may be
part of a Daily Report or a Monthly Settlement Statement) demonstrating
that less than 40% of the Principal Amount of Receivables of such Obligor
then in the Trust are aged 181 days or more after the respective original
invoice dates of such Receivables.
"Eligible Receivable" shall mean, as of any date of determination,
each Receivable owing by an Eligible Obligor that as of such date
satisfies the following eligibility criteria:
(a) it constitutes either (i) an account within the meaning of
Section 9-106 of the UCC of the State the law of which governs the
perfection of the interest granted in it, (ii) chattel paper within the
meaning of Section 9-105 of such UCC, subject, in the case of chattel
paper, to compliance with the procedures set forth in Schedule 3 hereto;
or (iii) a general intangible (to the extent that such Receivable includes
interest, finance charges, returned check or late charges or sales or
similar taxes) within the meaning of Section 9-106 of such UCC or, if
applicable, one of either (i), (ii) or (iii), each under the PPSA of the
pertinent province of Canada;
(b) it is not evidenced by an "instrument" (other than an instrument
which constitutes or together with a security agreement constitutes
"chattel paper" (each as defined in the UCC as in effect in any state, or
as defined in similar Canadian provincial legislation, in which the
Company's or the applicable Seller's chief executive office or books and
records relating to such Receivable are located)) or any title in bearer
form;
(c) it is not an Aged Receivable;
(d) the goods related to it shall have been shipped or the services
related to it shall have been performed and such Receivable shall have
been billed to the related Obligor;
(e) it is denominated and payable in U.S. Dollars or Canadian
Dollars in the United States or Canada; provided that if (i) on any
Distribution Date, the Required
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Currency Hedge is not in place for the full Required Hedge Period or (ii)
a Counterparty ceases to be an Eligible Counterparty and is not replaced
with an Eligible Counterparty within 30 days, then Canadian Dollar
Receivables will not be included for purposes of this subsection (e); and
provided further that if on any Distribution Date, the Required Currency
Hedge is for a notional amount less than the Required Hedge Notional
Amount, then the Principal Amount of Canadian Dollar Receivables included
for purposes of this subsection (e) will be limited to the actual notional
amount of the Required Currency Hedge calculated using the Valuation
Price.
(f) it arose in the ordinary course of business from the sale of
goods, products or services of the relevant Seller and in accordance with
the Policies of such Seller and, at such date of determination, no Early
Termination has occurred with respect to such Seller;
(g) (i) it does not contravene any applicable law, rule or
regulation and the applicable Seller is not in violation of any law, rule
or regulation in connection with it, in each case which in any way renders
such Receivable unenforceable or would otherwise impair in any material
respect the collectibility of such Receivable and (ii) it is not subject
to any investigation or proceeding known by such Seller that would
reasonably be expected to adversely affect the payment or enforceability
thereof;
(h) it is an account receivable representing all or part of the
sales price of merchandise, insurance or services within the meaning of
Section 3(c)(5) of the 1940 Act;
(i) (i) it is not a Receivable of a Seller Division which has not
become a New Division or (ii) it is not a Receivable purchased by a Seller
from any Person other than a Receivable purchased in connection with the
acquisition by a Seller of the business unit or operating assets of
another Person, so long as the Seller Division consisting of such business
unit or operating assets has become a New Division and the conditions set
forth on Schedule 7 hereto have been satisfied;
(j) it is not a Receivable for which the applicable Seller has
established an offsetting specific reserve; provided that a Receivable
subject only in part to the foregoing shall be an Eligible Receivable to
the extent not so subject;
(k) it is not a Receivable, other than a Construction Receivable,
with original payment terms in excess of 60 days from its original invoice
date or a Construction Receivable with original payment terms in excess of
90 days, or in respect of which the applicable Seller has (i) altered the
basis of the aging from the initial due date for payment such that the
final due date extends to a date more than 60 days, in the case of a
Receivable other than a Construction Receivable, or to a date more than 90
days, in the case of a Construction Receivable, from its original invoice
date or (ii) otherwise made any modification except in the ordinary course
of business and consistent with the Policies of such Seller;
(l) all required consents, approvals or authorizations necessary for
the creation and enforceability of such Receivable and the effective
assignment and sale thereof by
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the applicable Seller to the Company and by the Company to the Trust shall
have been obtained with respect to such Receivable;
(m) the applicable Seller is not in default in any material respect
under the terms of the contract, if any, from which such Receivable arose;
provided that if a series of Receivables arise under a single contract
Receivables not subject to such default shall be an Eligible Receivable to
the extent not so subject;
(n) all right, title and interest in it has been validly sold to the
Company by the applicable Seller pursuant to the Receivables Sales
Agreements;
(o) the Company or the Trust will have legal and beneficial
ownership therein free and clear of all Liens other than such Liens
described in clause (i) of the definition of Permitted Liens and such
Receivable has been the subject of either a valid transfer from the
Company to the Trust or, alternatively, the grant of a first priority
perfected security interest therein to the Trust free and clear of all
Liens other than such Liens described in clause (i) of the definition of
Permitted Liens;
(p) it is not subject to any dispute in whole or in part or to any
offset, counterclaim, defense, rescission, recoupment or subordination;
provided that a Receivable subject only in part to any of the foregoing
shall be an Eligible Receivable to the extent not so subject;
(q) it is at all times the legal, valid and binding obligation of
the Obligor thereon, enforceable against such Obligor to pay the full
Principal Amount thereof in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or law);
(r) each of the representations and warranties with respect thereto
made in the Receivables Sale Agreements by the applicable Seller with
respect to such Receivable is true and correct in all material respects;
and
(s) at the time such Receivable was sold by the applicable Seller to
the Company (i) under the U.S. Receivables Sale Agreement, no event
described in subsection 6.01(f) (other than clause (v) thereof) of the
U.S. Receivables Sale Agreement (without giving effect to any requirement
as to the passage of time) had occurred with respect to such Seller or
(ii) under the Canadian Receivables Sale Agreement, no event described in
subsection 6.1(f) (other than clause (v) thereof) of the Canadian
Receivables Sale Agreement (without giving effect to any requirement as to
passage of time) had occurred with respect to such Seller.
"Eligible Segregated Account" shall mean (a) a segregated account or
accounts maintained with a depository institution or trust company whose
long-term unsecured debt obligations are rated in one of the three highest
long-term or short-term rating categories by each Rating Agency rating
such depository institution or trust company at the time of any deposit
therein, provided, however, that if such obligations are only
13
rated by one of S&P or Moody's, such rating shall suffice, or (b) a
segregated account or accounts maintained with a federal of state
chartered depository institution subject to regulations regarding
fiduciary funds on deposit substantially similar to 12 C.F.R. Section
9.10(b).
"Eligible Segregated Account Bank" shall mean any bank or depository
institution with which an Eligible Segregated Account has been
established.
"Eligible Segregated Account Bank Acknowledgment" shall have the
meaning specified in subsection 2.3(b)(ii) of the Servicing Agreement.
"Eligible Successor Servicer" shall mean a Person which, at the time
of its appointment as Servicer, (i) is legally qualified and has the
corporate power and authority to service the Receivables transferred to
the Trust, (ii) has demonstrated the ability to service a portfolio of
similar receivables in accordance with the standards set forth in
subsection 6.2(c) of the Servicing Agreement and (iii) has a combined
capital and surplus of at least $5,000,000.
"Enhancement" shall mean, with respect to any Series, (i) the funds
on deposit in or credited to any bank account (or subaccount thereof) of
the Trust for the benefit of any Holders of such Series, (ii) any surety
arrangement, any letter of credit, guaranteed rate agreement, maturity
guaranty facility, tax protection agreement, interest rate swap, currency
swap or other contract, agreement or arrangement, in each case for the
benefit of any Holders of such Series, as designated in the applicable
Supplement and (iii) the subordination of one Class of Certificates in a
Series to another class in such Series or the subordination of any
Certificate held or interest owned by the Company to the Investor
Certificates of such Series.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchangeable Company Interest" shall have the meaning specified in
subsection 3.1(a) and shall be exchangeable as provided in Section 5.10.
"Exchange Date" shall have the meaning, with respect to any Series
issued pursuant to a Company Exchange, specified in Section 5.10.
"Exchange Notice" shall have the meaning, with respect to any Series
issued pursuant to a Company Exchange, specified in Section 5.10.
"Federal Government Obligor" shall mean the United States federal
government or any subdivision thereof or any agency, department or
instrumentality thereof.
"Filing Trust Assets" shall have the meaning specified in subsection
2.1(e).
"Force Majeure Delay" shall mean, with respect to any Servicing
Party, any cause or event which is beyond the control and not due to the
negligence of such
14
Servicing Party which delays, prevents or prohibits the Servicer's
delivery of Daily Reports and/or Monthly Settlement Statements, including,
without limitation, acts of God or the elements and fire, but excluding
strikes by any Servicing Party's employees; provided that no such cause or
event shall be deemed to be a Force Majeure Delay unless the Servicer
shall have given the Company and the Trustee written notice promptly after
the beginning of such delay.
"Fractional Undivided Interest" shall mean the fractional undivided
interest in the Certificateholders' Interest evidenced by an Investor
Certificate.
"GAAP" shall mean generally accepted accounting principles in the
United States of America and, where pertinent, in Canada as in effect from
time to time.
"General Opinion" shall mean, with respect to any action, an Opinion
of Counsel to the effect that (A) such action has been duly authorized by
all necessary corporate action on the part of the Servicer, the applicable
Seller or Sellers or the Company, as the case may be, (B) any agreement
executed in connection with such action constitutes a legal, valid and
binding obligation of the Servicer, the applicable Seller or Sellers or
the Company, as the case may be, enforceable in accordance with the terms
thereof, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect, affecting the enforcement of creditors' rights and
except as such enforceability may be limited by general principles of
equity (whether considered in a proceeding at law or in equity), (C) such
action does not violate any Requirement of Law or require any consent or
filing thereunder, (D) such action does not result in a breach of, or
default under any contractual obligation, or creation of any Lien,
pursuant thereto and (E) any condition precedent to any such action
specified in the applicable agreement, if any, has been complied with,
which opinion in the case of clauses (D) or (E) may, to the extent that
such opinion concerns questions of fact, rely on an Officer's Certificate
with respect to such questions of fact.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government.
"Holders" shall mean the collective reference to (i) the Investor
Certificateholders, (ii) the owner of the Exchangeable Company Interest
and (iii) if applicable, the owner of each Series Subordinated Interest.
"Indebtedness" shall mean, with respect to any Person at any date,
(a) all indebtedness of such Person for borrowed money, (b) any obligation
owed for the deferred purchase price of property or services which
purchase price is evidenced by a note or similar written instrument, (c)
notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (d) that
portion of obligations of such Person under capital leases which is
properly classified as a liability on a balance sheet in conformity with
GAAP and (e) all Indebtedness referred to in clauses (a) through (d) above
of another Person secured by
15
any Lien on any property owned by such Person even though such Person has
not assumed or otherwise become liable for the payment thereof.
"Independent Public Accountants" means any independent certified
public accountants of nationally recognized standing which constitute one
of the accounting firms commonly referred to as the "big six" accounting
firms (or any successor thereto); provided that such firm is independent
with respect to the Servicer within the meaning of Rule 2-01(b) of
Regulation S-X under the Securities Act.
"Ineligible Receivable" shall have the meaning specified in Section
2.5.
"Initial Closing Date" shall mean June 5, 1998.
"Initial Invested Amount" shall mean, with respect to any
Outstanding Series, the meaning assigned to such term in the related
Supplement for such Series.
"Insolvency Event" shall mean the occurrence of any one or more of
the Early Amortization Events specified in paragraph (a) of Section 7.1.
"Internal Operating Procedures Memorandum" shall mean the internal
operating procedures memorandum prepared by the Trustee as set forth in
Exhibit D hereto.
"Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
"Invested Amount" shall mean, with respect to any Outstanding
Series, the meaning assigned to such term in the related Supplement for
such Series.
"Invested Percentage" shall mean, with respect to any Outstanding
Series, the meaning assigned to such term in the related Supplement for
such Series.
"Investment Earnings" shall have the meaning specified in subsection
3.1(c).
"Investor Certificateholder" shall mean the registered holder of, or
the bearer of, an Investor Certificate.
"Investor Certificates" shall mean the Certificates executed by the
Company and authenticated by or on behalf of the Trustee, substantially in
the form attached to the applicable Supplement, but shall not include any
Certificate held by the Company.
"Issuance Date" shall mean, with respect to any Series, the date of
issuance of such Series, or the date of any issuance of additional
certificates representing any increase to the Invested Amount of such
Series, as specified in the related Supplement.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, deemed trust, hypothecation, encumbrance, charge
or security interest in or on such asset, (b) the interest of a vendor or
a lessor under any conditional sale agreement, capital lease or title
retention agreement relating to such asset and (c) in the
16
case of securities, any purchase option, call or other similar right of a
third party with respect to such securities; provided, however, that if a
lien is imposed under Section 412(n) of the Internal Revenue Code or
Section 302(f) of ERISA for a failure to make a required installment or
other payment to a plan to which Section 412(n) of the Internal Revenue
Code or Section 302(f) of ERISA applies, then such lien shall not be
treated as a "Lien" from and after the time any Person who is obligated to
make such payment pays to such plan the amount of such lien determined
under Section 412(n)(3) of the Internal Revenue Code or Section 302(f)(3)
of ERISA, as the case may be, and provides to the Trustee, any Agent and
each Rating Agency written evidence reasonably satisfactory to the Rating
Agencies of the release of such lien, or such lien expires pursuant to
Section 412(n)(4)(B) of the Internal Revenue Code or Section 302(f)(4)(B)
of ERISA.
"Lockbox" shall mean the post office boxes listed on the applicable
schedule to the Receivables Sale Agreements to which the Obligors are
instructed to remit payments on the Receivables and/or such other post
office boxes as may be established pursuant to Section 2.3 of the
Servicing Agreement.
"Lockbox Account" shall mean each intervening bank account of the
Company used by a Lockbox Processor for deposit of funds received in a
Lockbox prior to their transfer to the Collection Accounts, which account
may also be used by Collectors and other employees of the Servicing
Parties for deposit of Collections received by such persons or direct
payment by Obligors.
"Lockbox Agreement" shall mean, with respect to each Lockbox
Processor, a lockbox agreement in substantially the form set forth as
Exhibit A hereto, or such other form of lockbox agreement with a Lockbox
Processor acceptable to each Agent, or if there are no Agents, which upon
execution thereof the Rating Agency Condition is satisfied.
"Lockbox Bank" shall mean the depository institution that holds a
Lockbox Account.
"Lockbox Processor" shall mean the depository institution or
processing company (which may be the Trustee) which processes payments on
the Receivables sent by the Obligors thereon forwarded to a Lockbox.
"Material Adverse Effect" shall mean (a) a material impairment of
the ability of a Seller, a Servicing Party or the Company, as the case may
be, to perform its obligations under the Transaction Documents, (b) a
materially adverse effect on the business, operations, property or
condition (financial or otherwise) of the Company, (c) a material
impairment of the validity or enforceability of any of the Transaction
Documents against a Seller, a Servicing Party or the Company, (d) a
material impairment of the collectibility of the Receivables taken as a
whole or (e) a material impairment of the interests, rights or remedies of
the Trustee or the Investor Certificateholders under or with respect to
the Transaction Documents or the Receivables taken as a whole.
17
"Monthly Servicing Fee" shall have the meaning specified in
subsection 2.5(a) of the Servicing Agreement.
"Monthly Settlement Statement" shall have the meaning specified in
Section 4.2 of the Servicing Agreement.
"New Division" shall mean any Seller Division which has satisfied
the criteria for the addition of a Seller Division specified in any
Pooling and Servicing Agreement.
"1940 Act" shall mean the Investment Company Act of 1940, as
amended.
"Obligor" shall mean, with respect to any Receivable, the party
obligated to make payments with respect to such Receivable, including any
guarantor thereof.
"Officer's Certificate" shall mean, unless otherwise specified in
this Agreement, a certificate signed by the President, Chief Financial
Officer, Treasurer, Controller, or any Vice President of the Servicer or
the Company, as the case may be, or, in the case of a Successor Servicer,
a certificate signed by a Vice President and the financial controller (or
an officer holding an office with equivalent or more senior
responsibilities) of such Successor Servicer.
"Opinion of Counsel" shall mean a written opinion or opinions of one
or more counsel (who, unless otherwise specified in this Agreement, may be
internal counsel) to the Company or the Servicer, designated by the
Company or the Servicer, as the case may be, which is reasonably
acceptable to the Trustee.
"Optional Termination Notice" shall have, with respect to any
Series, the meaning specified in the related Supplement for such Series.
"Outstanding Series" shall mean, at any time, a Series issued
pursuant to an effective Supplement for which the Series Termination Date
for such Series has not occurred.
"Overconcentration Amount" shall mean, at any date with respect to
an Eligible Obligor, the Principal Amount of Eligible Receivables due from
such Obligor at such date which, expressed as a percentage of the
Principal Amount of all Eligible Receivables in the Trust at such date,
exceeds the percentage set forth below for the applicable category of that
Obligor at such date (or such higher percentage after giving effect to
which the Rating Agency Condition is satisfied).
18
Minimum Rating
--------------
S&P Moody's Percentage
--- ------- ----------
A-1+ or AA P-1 or Aa2 15%
A-1 or A+ P-1 or A1 10%
A-2 or BBB+ P-2 or Baa1 7.5%
A-3 or BBB- P-3 or Baa3 2.5%
Not rated/other Not rated/other 2%
/Not rated
; provided, however, (i) that all Eligible Obligors that are Affiliates of
each other shall be deemed to be a single Eligible Obligor to the extent
the Servicer knows or has reason to know of the affiliation and in that
case, the applicable debt rating for such group of Obligors shall be the
debt rating of the ultimate parent of the group, (ii) that with respect to
all Eligible Obligors that are Federal Government Obligors or State/Local
Government Obligors, such Obligors shall, notwithstanding the foregoing,
be deemed to be a single Eligible Obligor for which the applicable
percentage set forth under the column headed "Percentage" above shall be
2%.
The percentage applicable to any Obligor (or the ultimate parent of
the affiliated group of which such Obligor is a member, as the case may
be) will be the percentage associated with the lowest of such Obligor's
(or such ultimate parent's, as the case may be) short-term and long-term
senior debt rating issued by S&P and Moody's; provided that, if S&P or
Moody's issues no rating with respect to the debt of such Obligor (or such
ultimate parent, as the case may be), then the percentage applicable to
such Obligor (or such ultimate parent, as the case may be) shall be the
percentage associated with the category "Not rated/other." The ratings
specified in the table are minimums for each percentage category, so that
a rating not shown in the table falls in the category associated with the
highest rating shown in the table that is lower than that rating.
"Paying Agent" shall mean any paying agent and co-paying agent
appointed pursuant to Section 5.6 and, unless otherwise specified in the
related Supplement of any Outstanding Series and with respect to such
Series, shall initially be the Trustee.
"Permitted Liens" shall mean, at any time, for any Person:
(i) Liens created pursuant to this Agreement or the
Receivables Sale Agreements;
(ii) Liens for taxes, assessments or other governmental
charges or levies not yet due and payable or if such Person shall
currently be contesting the validity thereof in good faith by
appropriate proceedings and with respect to
19
which reserves in conformity with GAAP have been provided on the
books of such Person; and
(iii) Liens on a Receivable arising as a result of offsetting
specific reserves and rights of set-off, counterclaim or other
defenses with respect to such Receivable.
"Person" shall mean any individual, partnership, limited liability
company, corporation, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity of whatever nature.
"Policies" shall mean, with respect to each Seller, the credit and
collection policies and the returned goods policies of such Seller, copies
of which have been delivered to the Trustee, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
the Transaction Documents.
"Pooling and Servicing Agreements" shall mean, collectively, this
Agreement, the Servicing Agreement and each Supplement for an Outstanding
Series.
"Potential Early Amortization Event" shall mean an event which, with
the giving of notice and/or the lapse of time, would constitute an Early
Amortization Event hereunder or under any Supplement for an Outstanding
Series.
"Potential Servicer Default" shall mean an event which, with the
giving of notice and/or the lapse of time, would constitute a Servicer
Default.
"PPSA" shall have the meaning specified in the Canadian Receivables
Sale Agreement.
"Prepayment Request" shall have, with respect to any Series, the
meaning specified in the related Supplement.
"Principal Amount" shall mean, with respect to any Receivable
payable in U.S. Dollars, the amount due thereunder and in the case of any
Receivables payable in Canadian Dollars the amount of Canadian Dollars
multiplied by the applicable Canadian Exchange Percentage.
"Principal Terms" shall have, with respect to any Series issued
pursuant to a Company Exchange, the meaning specified in subsection
5.10(c).
"Rating Agency" shall mean, with respect to each Outstanding Series,
any rating agency or agencies designated as such in the related
Supplement; provided that in the event that no Outstanding Series has been
rated, then for purposes of the definitions of "Eligible Institution",
"Eligible Investments" and Section 2.3(b) of the Servicing Agreement,
"Rating Agency" shall mean S&P and references to "each Rating Agency"
shall refer solely to S&P.
20
"Rating Agency Condition" shall mean, subject to the applicable
Supplement, with respect to any action, that each Rating Agency shall have
notified the Company, the Servicer, any Agent and the Trustee in writing
that such action will not result in a reduction or withdrawal of the
rating of any Outstanding Series or any Class of any such Outstanding
Series with respect to which it is a Rating Agency.
"Receivable" shall mean the indebtedness and payment obligations of
any Person to a Seller or acquired by a Seller (including, without
limitation, obligations constituting an account or general intangible or
evidenced by a note, instrument, contract, security agreement, chattel
paper or other evidence of indebtedness or security) arising from a sale
of merchandise or the provision of services by such Seller or the Person
from whom such indebtedness and payment obligation was acquired by a
Seller, including, without limitation, any right to payment for goods sold
or for services rendered, and including the right to payment of any
interest, sales taxes, finance or service charges, returned check or late
charges and other obligations of such Person with respect thereto.
"Receivables Purchase Date" shall mean, with respect to any
Receivable, the Business Day on which the Company purchases such
Receivable from the applicable Seller and transfers such Receivable to the
Trust.
"Receivables Sale Agreements" shall have the meaning specified in
the recitals hereto.
"Record Date" shall mean, with respect to any Series, the dates
specified as such in the applicable Supplement.
"Recoveries" shall mean all amounts collected (net of out-of-pocket
costs of collection) in respect of Charged-Off Receivables.
"Related Property" shall mean, with respect to each Receivable:
(a) all of the applicable Seller's interest in the goods
(other than returned goods), if any, sold and delivered to an
Obligor relating to the sale which gave rise to such Receivable;
(b) all other security interests or Liens, and the applicable
Seller's interest in the property subject thereto, from time to time
purporting to secure payment of such Receivable, together with all
financing statements signed by an Obligor describing any collateral
securing such Receivable; and
(c) all guarantees, insurance, letters of credit and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable;
in the case of clauses (b) and (c), without limitation, whether pursuant
to the contract related to such Receivable or otherwise or pursuant to any
obligations evidenced by a
21
note, instrument, contract, security agreement, chattel paper or other
evidence of indebtedness or security and the proceeds thereof.
"Reported Day" shall have the meaning specified in Section 4.1 of
the Servicing Agreement.
"Repurchase Obligation Date" shall have the meaning specified in
subsection 2.5(a).
"Required Currency Hedge" shall mean one or more currency options,
exercisable at any time, with an Eligible Counterparty providing for the
delivery by such Eligible Counterparty of U.S. Dollars in exchange for the
receipt of Canadian Dollars.
"Required Hedge Period" shall mean six months from the Initial
Closing Date or from the Distribution Date on which such period is being
determined.
"Required Hedge Notional Amount" shall mean an amount denominated in
U.S. Dollars, which represents the portion of the Target Receivables
Amount allocable to the Canadian Dollar Receivables, as calculated in the
most recent Monthly Settlement Statement.
"Requirement of Law" for any Person shall mean the certificate or
articles 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.
"Responsible Officer" shall mean (i) when used with respect to the
Trustee, any officer within the Corporate Trust Office of the Trustee
including any Vice President, any Assistant Vice President, Trust Officer
or Assistant Trust Officer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the
administration of this Agreement and (ii) when used with respect to any
other Person, the Chairman or Vice Chairman of the Board, President, Chief
Financial Officer, any Vice President, Treasurer, Controller, Assistant
Treasurer or Secretary of such Person.
"Revolving Period" shall mean, with respect to any Outstanding
Series, the meaning assigned to such term in the related Supplement for
such Series.
"S&P" shall mean Standard & Poor's Ratings Services, or any
successor thereto.
"Securities Act" shall mean the United States Securities Act of
1933, as amended.
"Seller Adjustment Payments" shall have the meaning specified in
Section 2.05 of the Receivables Sale Agreements.
22
"Seller Division" shall mean any business unit or operating assets
acquired by a Seller which is made part of an existing division of a
Seller or made a new division (but not a subsidiary) of a Seller.
"Seller Notes" shall mean the notes, collectively as specified in
Section 8.01 of the U.S. Receivables Sale Agreement and in Section 8.01 of
the Canadian Receivables Sale Agreement.
"Seller Repurchase Payments" shall have the meaning specified in
Section 2.06 of the Receivables Sale Agreements.
"Sellers" shall mean the collective reference to (i) WESCO, in its
capacity as a Seller under the U.S. Receivables Sale Agreement, (ii) WESCO
Equity Corporation, a Delaware corporation, in its capacity as a Seller
under the U.S. Receivables Sale Agreement, (iii) WESCO
Distribution-Canada, Inc., an Ontario corporation, in its capacity as a
Seller under the Canadian Receivables Sale Agreement, and (iv) any wholly
owned Subsidiaries of WESCO which have been added as Sellers in accordance
with the provisions of the Receivables Sale Agreements and the other
Transaction Documents (but, in each case, excluding any such Subsidiaries
which have been terminated as Sellers in accordance with the provisions
thereof and of the other Transaction Documents), all of the foregoing in
their capacities as Sellers under the Receivables Sale Agreements; each,
individually, a "Seller".
"Series" shall mean any series of Investor Certificates, the terms
of which are set forth in a Supplement.
"Series Account" shall mean any deposit, trust, escrow, reserve or
similar account maintained by the Trustee for the benefit of the Investor
Certificateholders of any Series or Class, as specified in any Supplement.
"Series Canada/Canadian Dollar Collection Subaccount" shall have the
meaning specified in subsection 3.1(b)(i).
"Series Canada/U.S. Dollar Collection Subaccount" shall have the
meaning specified in subsection 3.1(b)(i).
"Series Collection Subaccount" shall have the meaning specified in
subsection 3.1(b)(i).
"Series Collection Sub-subaccounts" shall have the meaning specified
in subsection 3.1(b)(i).
"Series Non-Principal Collection Sub-subaccount" shall have the
meaning specified in subsection 3.1(b)(i).
"Series Principal Collection Sub-subaccount" shall have the meaning
specified in subsection 3.1(b)(i).
23
"Series Subordinated Interest" shall mean, with respect to any
Series, the interest of the Company in the Trust Assets, if any, which is
subordinated to the Certificateholders' Interest of such Series, as set
forth in the Supplement for such Series.
"Series Termination Date" shall mean, with respect to any
Outstanding Series, the meaning assigned to such term in the related
Supplement for such Series.
"Service Transfer" shall have the meaning specified in Section 6.1
of the Servicing Agreement.
"Servicer" shall initially mean WESCO in its capacity as Servicer
under the Transaction Documents and, after any Service Transfer, the
Successor Servicer.
"Servicer Default" shall have, with respect to any Series, the
meaning specified in Section 6.1 of the Servicing Agreement and, if
applicable, as supplemented by the related Supplement for such Series.
"Servicer Indemnification Amounts" shall have the meaning specified
in Section 5.2(c) of the Servicing Agreement.
"Servicer Site Review" shall mean a review performed by the Trustee
of the servicing operations of the Servicer at its offices.
"Servicing Agreement" shall have the meaning specified in the
recitals hereto.
"Servicing Fee" shall have the meaning specified in subsection
2.5(a) of the Servicing Agreement.
"Servicing Fee Percentage" shall mean 1% per annum.
"Servicing Party" shall mean the collective reference to the
Servicer and each Sub-Servicer.
"Settlement Period" shall mean (i) initially, the period commencing
May 1, 1998 and ending on the last day of the May 1998 fiscal month of the
Servicer, and (ii) thereafter, each fiscal month of the Servicer.
"Settlement Report Date" shall mean, except as otherwise set forth
in the applicable Supplement, the 15th day of each calendar month (or if
such 15th day is not a Business Day, the next succeeding Business Day),
"Special Allocation Settlement Report Date" shall have the meaning
specified in subsection 3.1(e).
"Specified Bankruptcy Opinion Provisions" shall mean the factual
assumptions and the actions to be taken by any Seller or the Company, in
each case as specified in
24
the legal opinion of Simpson Thacher & Bartlett relating to
non-substantive consolidation and delivered on the Initial Closing Date.
"Standby Liquidation System" shall mean a system satisfactory to the
Trustee by which the Trustee will receive and store electronic information
regarding Receivables from the Servicer and each Sub-Servicer which may be
utilized in the event of a liquidation of the Receivables to be carried
out by the Trustee.
"State/Local Government Obligor" shall mean any state or local
government in the United States or any subdivision thereof or any agency,
department or instrumentality thereof.
"Sub-Servicer" shall have the meaning specified in the recitals
hereto.
"Subsidiary" shall mean, as to any Person, a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"Successor Servicer" shall have the meaning specified in Section 6.2
of the Servicing Agreement.
"Supplement" shall mean, with respect to any Series, a supplement to
this Agreement complying with the terms of Section 5.10(c), executed in
conjunction with the issuance of any Series.
"Target Receivables Amount" shall mean, with respect to any
Outstanding Series, the meaning assigned to such term in the related
Supplement for such Series.
"Tax Opinion" shall mean, with respect to any action, an Opinion of
Counsel of one or more outside law firms (a) to the effect that, for
federal income tax purposes, (i) such action will not adversely affect the
characterization as debt or as an interest in a partnership (other than a
partnership taxable as a corporation), as the case may be, of any Investor
Certificates of any Outstanding Series or Class not retained by the
Company, (ii) following such action, the Trust will not be classified as
an association or a publicly traded partnership taxable as a corporation,
(iii) such action will not cause or constitute a taxable event in which
gain or loss would be recognized by any Investor Certificateholder or the
Trust and (iv) in the case of Section 5.9, the Investor Certificates of
the new Series which are not retained by the Company will be characterized
as debt or as an interest in a partnership (other than a partnership
taxable as a corporation) and (b) with respect to state taxation issues,
in substantially the form delivered on the Initial Closing Date.
"Termination Notice" shall have the meaning specified in Section 6.1
of the Servicing Agreement.
25
"Transaction Documents" shall mean the collective reference to this
Agreement, the Servicing Agreement, each Supplement with respect to any
Outstanding Series, the Receivables Sale Agreements, the Lockbox
Agreements, the Eligible Segregated Account Bank Acknowledgments, the
Certificates and any other documents delivered pursuant to or in
connection therewith.
"Transfer Agent and Registrar" shall have the meaning specified in
Section 5.3 and shall initially be the Trustee.
"Transfer Deposit Amount" shall have the meaning specified in
subsection 2.5(b).
"Transferred Agreements" shall have the meaning specified in
subsection 2.1(b).
"Trust" shall mean the WESCO Receivables Master Trust created by
this Agreement.
"Trust Account" shall have the meaning, with respect to any Series,
specified in the applicable Supplement for such Series.
"Trust Assets" shall have the meaning specified in Section 2.1.
"Trust Termination Date" shall have the meaning specified in
subsection 9.1(a).
"Trustee" shall mean the institution executing this Agreement as
trustee, or its successor in interest, or any successor trustee appointed
as herein provided.
"UCC" shall mean the Uniform Commercial Code, as amended from time
to time, as in effect in any specified jurisdiction or if no jurisdiction
is specified, as in effect in the State of New York and, with respect to
the Receivables sold pursuant to the Canadian Receivables Sale Agreement,
the PPSA, as amended from time to time, as in effect in any specified
jurisdiction of Canada or if no jurisdiction is specified, as in effect in
the Province of Ontario.
"U.S. Dollar Collection Account" shall have the meaning specified in
subsection 3.1(b)(i).
"U.S. Dollar Collection Concentration Account" shall have the
meaning specified in subsection 3.1(b)(i).
"Valuation Price" shall mean, as of any date of determination, the
strike price of any outstanding Required Currency Hedge that would require
the highest amount of Canadian Dollars to purchase one (1) U.S. Dollar.
"WESCO" shall mean WESCO Distribution, Inc., a Delaware corporation.
26
Section 1.2. Other Definitional and Calculation Provisions. (a) All
terms defined in this Agreement, the Servicing Agreement or in any Supplement
shall have such defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1, and accounting terms partly defined in Section 1.1 to the extent not
defined, shall have the respective meanings given to them under GAAP. To the
extent that the definitions of accounting terms herein are inconsistent with the
meanings of such terms under GAAP, the definitions contained herein shall
control.
(c) 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 Section,
subsection, Schedule and Exhibit references contained in this Agreement are
references to Sections, subsections, Schedules and Exhibits in or to this
Agreement unless otherwise specified.
(d) All references herein to any agreement or instrument shall be
deemed references to such agreement or instrument as amended, supplemented or
otherwise modified from time to time in which case such reference shall be to
the agreement or instrument.
(e) The definitions contained in Section 1.1 are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Where a definition contained in Section 1.1 specifies that such
term shall have the meaning set forth in the related Supplement, the definition
of such term set forth in the related Supplement may be preceded by a prefix
indicating (or include in its definition) the specific Series or Class to which
such definition shall apply.
(g) Where reference is made in this Agreement or any related
Supplement to the amount of Receivables, such reference shall, unless explicitly
stated otherwise, be deemed a reference to the Principal Amount (as such term is
defined in Section 1.1) of such Receivables.
(h) Any reference herein or in any other Transaction Document to a
provision of the Internal Revenue Code or ERISA shall be deemed a reference to
any successor provision thereto.
(i) To the extent that any provision of this Agreement or any other
Transaction Document requires that a calculation be performed with respect to a
date occurring prior to the effective date of such Transaction Document, such
calculation shall be performed as provided therein as though such Transaction
Document had been effective on and as of such prior date.
(j) In calculating the Principal Amount of Receivables on any day,
the Principal Amount of Receivables shall be reduced by the amount of
collections received on such day (whether or not such Collections have resulted
in Available Funds); provided, that to the
27
extent that a Collection is subsequently dishonored by the bank on which such
Collection is drawn, the Principal Amount of Receivables shall be reinstated by
the amount of such dishonored Collection. In addition, for purposes of making
the allocations required by Article III of this Agreement, as supplemented by
the Supplements, on any day, the Servicer shall only direct, and the Trustee
shall only be required to transfer, Available Funds.
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
Section 2.1. Conveyance of Receivables.
(a) By execution and delivery of this Agreement, the Company does
hereby transfer, assign, set over and otherwise convey to the Trustee for the
benefit of the Holders, without recourse (except as specifically provided
herein), all of its present and future right, title and interest in, to and
under:
(i) all Receivables, including those existing at the close of
business on the Initial Closing Date and all Receivables thereafter
arising from time to time until but not including the Trust Termination
Date;
(ii) the Related Property;
(iii) all Collections;
(iv) the Required Currency Hedge;
(v) all payment, enforcement and other rights (including rescission,
replevin or reclamation), but none of the obligations, relating to any
Receivable or arising therefrom;
(vi) the Collection Accounts, the Collection Concentration Accounts,
each Eligible Segregated Account, each Lockbox and each Lockbox Account
(collectively, the "Accounts"), including (A) all funds and other
evidences of payment held therein and all certificates and instruments, if
any, from time to time representing or evidencing any of such Accounts or
any funds and other evidences of payment held therein, (B) all investments
of such funds held in such Accounts and all certificates and instruments
from time to time representing or evidencing such investments, (C) all
notes, certificates of deposit and other instruments from time to time
hereafter delivered or transferred to, or otherwise possessed by, the
Trustee for and on behalf of the Company in substitution for any of the
then existing Accounts and (D) all interest, dividends, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any and all of the then
existing Accounts;
(vii) all monies due or to become due and all amounts received with
respect to the items listed in clauses (i) through (vi) and all proceeds
(including, without
28
limitation, whatever is received upon the sale, exchange, collection or
other disposition of the foregoing and all "proceeds" as defined in
Section 9-306 of the UCC as in effect in the State of New York or, if
applicable, as defined under the PPSA as in effect in the Province of
Ontario) thereof, including all Recoveries relating thereto;
(b) The Company, to secure its obligations hereunder, hereby
transfers, assigns, sets over and otherwise conveys to the Trustee for the
benefit of the Holders, and grants to the Trustee, for the benefit of the
Holders, a first priority perfected security interest in, all its right, title
and interest in, to and under the following: each of the Receivables Sale
Agreements and the Servicing Agreement, including in respect of each agreement,
(A) all property assigned thereunder and all rights of the Company to receive
monies due and to become due under or pursuant to such agreement, whether
payable as fees, expenses, costs or otherwise, (B) all rights of the Company to
receive proceeds of any credit or similar types of insurance, indemnity,
warranty or guaranty with respect to such agreement, (C) claims of the Company
for damages arising out of or for breach of or default under such agreement, (D)
the right of the Company to amend, waive or terminate such agreement, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder, (E) all other rights, remedies, powers, privileges and claims of the
Company under or in connection with such agreement (whether arising pursuant to
such agreement or otherwise available to the Company at law or in equity),
including the rights of the Company to enforce such agreement and to give or
withhold any and all consents, requests, notices, directions, approvals,
extensions or waivers under or in connection therewith and (F) all monies due or
to become due and all amounts received with respect to the items listed in
clauses (A) through (F) and all proceeds (including, without limitation,
whatever is received upon the sale, exchange, collection or other disposition of
the foregoing and all "proceeds" as defined in Section 9-306 of the UCC as in
effect in the State of New York or, if applicable, as defined under the PPSA as
in effect in the Province of Ontario) thereof, including all Recoveries relating
thereto (all of the foregoing set forth in subclauses (A)-(F), inclusive, the
"Transferred Agreements");
Such property described in the foregoing paragraphs (a) and (b),
together with all investments and all monies on deposit in any other bank
account or accounts maintained for the benefit of any Holders and all monies
available under any Enhancement to be provided by any Enhancement Provider for
any Series for payment to Holders shall constitute the assets of the Trust (the
"Trust Assets").
Subject to Section 5.9, although it is the intent of the parties to
this Agreement that the conveyance of the Company's right, title and interest
in, to and under the Receivables and the other Trust Assets described in
paragraph (a) pursuant to this Agreement shall constitute a purchase and sale
and not a loan, in the event that such conveyance is deemed to create a loan,
the Company hereby grants to the Trustee, for the benefit of the Investor
Certificateholders, a perfected first priority security interest in all of the
Company's present and future right, title and interest in, to and under the
Receivables and such other Trust Assets to secure the payment of the applicable
Invested Amounts, interest thereon and the other fees and expenses payable to
the Investor Certificateholders, and that this Agreement shall constitute a
security agreement under applicable law in favor of the Trustee, for the benefit
of the Investor Certificateholders.
29
(c) The assignment, set over and conveyance to the Trust pursuant to
Section 2.1(a) shall be made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such assignment, set over and conveyance shall be
construed accordingly. In connection with the foregoing assignment, except as
expressly provided otherwise in the Transaction Documents, the Company, the
Servicer and each Sub-Servicer agree to deliver to the Trustee each Trust Asset
(including any original documents or instruments included in the Trust Assets as
are necessary to effect such assignment) in which the transfer of an interest is
perfected under the UCC or otherwise solely by possession and not by filing a
financing statement or similar document.
Notwithstanding the assignment of the Transferred Agreements set
forth in Section 2.1(b), the Company does not hereby assign or delegate any of
its duties or obligations under the Transferred Agreements to the Trust or the
Trustee and neither the Trust nor the Trustee accepts such duties or
obligations, and the Company shall continue to have the right and the obligation
to purchase Receivables from the Sellers thereunder from time to time. The
foregoing assignment, set-over and conveyance does not constitute and is not
intended to result in a creation or an assumption by the Trust, the Trustee, any
Investor Certificateholder or the Company, in its capacity as a Holder, of any
obligation of the Servicer, the Company, any Seller or any other Person in
connection with the Receivables or under any agreement or instrument relating
thereto, including, without limitation, any obligation to any Obligor.
In connection with such assignment, the Company agrees to record,
file and register, or cause to be recorded, filed or registered, at its own
expense, any assignment, notice, application thereof, financing statements (and
continuation statements with respect to such financing statements when
applicable) or registrations in the appropriate records, each where applicable,
(i) with respect to the Receivables now existing and hereafter created and (ii)
with respect to any other Trust Assets a security interest in which may be
perfected, obtained or protected under the relevant UCC, PPSA, legislation or
similar statute by such filing or registration, as the case may be, in each case
meeting the requirements of applicable law in such manner and in such
jurisdictions as are necessary to perfect and protect and maintain perfection
and protection of the assignment of the Receivables and such other Trust Assets
to the Trust, and to deliver a file-stamped copy or certified statement of such
financing statement or registration or other evidence of such filing or
registration to the Trustee on or prior to the date of issuance of any
Certificates (the items described in clauses (i) and (ii), the "Filing Trust
Assets"). The Trustee shall be under no obligation whatsoever to file such
financing statement, or a continuation statement to such financing statement, or
to make any other filing or other registration under the UCC, other relevant
legislation or similar statute in connection with such transfer. The Trustee
shall be entitled to conclusively rely on the filings or registrations made by
or on behalf of the Company without any independent investigation and the
Company's obligation to make such filings as evidence that such filings have
been made.
In connection with such assignment, the Company further agrees, at
its own expense, on or prior to the Initial Closing Date (a) to indicate, or to
cause to be indicated, in its computer files (but not on individual invoices or
individual collection files) relating to such Receivables (by means of a general
legend, substantially in the form described on Schedule 6 hereto, that will
automatically appear each time a Person enters the Sellers' Receivables program
that unless otherwise specifically identified as a receivable not so sold,
transferred,
30
assigned and conveyed, all Receivables (and any such other receivables) included
therein and all other Receivables Property (and any other similar related
property) have been sold, transferred, assigned and conveyed pursuant to the
Receivables Sale Agreements or this Agreement, respectively, to the Company or
the Trust for the benefit of the Holders, as the case may be, and (b) to
deliver, or cause to be delivered, to the Trustee computer files, microfiche
lists or typed or printed lists (the "Receivables Lists") containing true and
complete lists of all such Receivables transferred to the Trust, identified by
Obligor and setting forth the Receivables balance for each such Receivable, as
of the Cut-Off Date. Such tapes or disks shall be marked as Schedule 1 to this
Agreement and are hereby incorporated into and made a part of this Agreement.
Section 2.2. Acceptance by Trustee. (a) The Trustee hereby
acknowledges its acceptance on behalf of the Trust of all right, title and
interest to the property, now existing and hereafter created, assigned to the
Trust pursuant to Section 2.1 and declares that it shall maintain such right,
title and interest, upon the trust herein set forth, for the benefit of all
Holders. The Trustee further acknowledges that prior to, or simultaneously with,
the execution and delivery of this Agreement, the Company delivered or caused to
be delivered to the Trustee the computer file printout or microfiche list
described in the last paragraph of Section 2.1.
(b) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
Section 2.3. Representations and Warranties of the Company Relating
to the Company. The Company hereby represents and warrants to the Trustee and
the Trust, for the benefit of the holders of Certificates of each Outstanding
Series, as of the Issuance Date of such Series, that:
(a) Corporate Existence; Compliance with Law. The Company (i) is a
corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its organization, (ii) has all requisite
corporate power and authority and all legal right to own and operate its
properties, to lease the properties it operates as lessee and to conduct
its business as now conducted, (iii) is duly qualified as a foreign
corporation to do business and is in good standing under the laws of each
jurisdiction where such qualification is necessary and (iv) is in
compliance with its certificate or articles of incorporation and by-laws
or other organizational or governing documents and, in all material
respects, any other Requirements of Law. The Company does not engage in
activities prohibited by the Transaction Documents or its certificate or
articles of incorporation.
(b) Corporate Power; Authorization; Consents. The Company has the
corporate power and authority, and the legal right, to execute, deliver
and perform this Agreement and the other Transaction Documents to which it
is a party and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party. No consent or authorization
of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement and the
31
other Transaction Documents to which it is a party by or against the
Company other than (i) those which have duly been obtained or made and are
in full force and effect on the Initial Closing Date, (ii) any filings of
UCC-1 financing statements or similar documents necessary to perfect the
Company's or the Trust's interest in the Trust Assets and (iii) those that
may be required under the state securities or "blue sky" laws in
connection with the offering or sale of certificates. This Agreement and
each other Transaction Document to which the Company is a party have been
duly executed and delivered on behalf of the Company.
(c) Enforceability. This Agreement and each of the other Transaction
Documents to which the Company is a party (i) constitute the legal, valid
and binding obligations of the Company enforceable against it in
accordance with their terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights generally and except as such enforceability may be
limited by general principles of equity (whether considered in a
proceeding at law or in equity) and (ii) are effective to, and all action
has been taken to, cause compliance with paragraph (n) of the definition
of Eligible Receivables.
(d) No Legal Bar. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which the Company is a
party will not violate its certificate or articles of incorporation and
by-laws or other organizational or governing documents and, any other
Requirement of Law in any material respect, and will not result in, or
require, the creation or imposition of any Lien (other than Liens
contemplated or permitted hereby) on any of its properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation.
(e) No Conflict. The execution and delivery of this Agreement and
the other Transaction Documents to which the Company is a party, the
performance of the transactions contemplated hereby and thereby and the
fulfillment of the terms hereof and thereof will not conflict with, result
in any breach of any of the material terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default
under, any indenture, contract, agreement, mortgage, deed of trust, or
other instrument to which the Company is a party or by which it or any of
its property is bound.
(f) No Material Litigation. There are no actions, suits,
investigations or proceedings at law or in equity (including, without
limitation, injunctions, writs or restraining orders) by or before any
arbitrator, court or Governmental Authority now pending or, to the
knowledge of the Company, threatened against or affecting the Company or
any properties, revenues or rights of the Company which (i) involve this
Agreement or any of the other Transaction Documents or any of the
transactions contemplated hereby or thereby, (ii) which could reasonably
be expected to affect adversely the income tax or franchise tax attributes
of the Trust under the United States federal or any state or franchise tax
systems or (iii) would be reasonably likely to have a Material Adverse
Effect. The transactions contemplated hereunder and the use of the
proceeds thereof will not violate any Requirement of Law.
32
(g) No Default. The Company is not in default, in any material
respect, under or with respect to any of its Contractual Obligations. No
Early Amortization Event or Potential Early Amortization Event has
occurred and is continuing.
(h) Compliance with Law. The Company has complied with all
applicable provisions of its certificate or articles of incorporation and
by-laws or other organizational or governing documents and has complied in
all material respects with any other Requirements of Law with respect to
the Company, its business and properties and the Trust Assets.
(i) Tax Returns. The Company has filed or caused to be filed all tax
returns which are required to have been filed by it and has paid or caused
to be paid all taxes shown thereon to be due and payable, and any
assessments made against it or any of its property. No tax Lien has been
filed, and, to the best knowledge of the Company, no claim is being
asserted, with respect to any taxes. For purposes of this paragraph,
"taxes" shall mean any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and
additions thereto) that is imposed by any Governmental Authority.
(j) Location of Records; Chief Executive Office. The offices at
which the Company keeps its records concerning the Receivables either (x)
are located at the addresses set forth for the Sellers on the relevant
schedule of the Receivables Sale Agreements or (y) have been reported to
the Trustee in accordance with the provisions of subsection 2.8(l) of this
Agreement. The chief executive office of the Company is located at the
address set forth on Schedule 4 (as such location may be changed from time
to time in accordance with Section 2.8(1) of the Agreement) and is the
place where the Company is "located" for the purposes of Section
9-103(3)(d) of the UCC as in effect in the State of New York, or, if
applicable, for purposes of the relevant provincial laws of Canada. The
state and county where the chief executive office of the Company is
"located" for the purposes of Section 9-103(3)(d) of the UCC as in effect
in the State of New York has not changed in the past four months.
(k) Solvency. Both prior to and after giving effect to the
transactions occurring on each Issuance Date, (i) the fair value of the
assets of the Company at a fair valuation will exceed the debts and
liabilities, subordinated, contingent or otherwise, of the Company; (ii)
the present fair salable value of the property of the Company will be
greater than the amount that will be required to pay the probable
liability of the Company on its debts and other liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured; (iii) the Company will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities
become absolute and matured; and (iv) the Company will not have
unreasonably small capital with which to conduct the business in which it
is engaged as such business is now conducted and is proposed to be
conducted. For all purposes of clauses (i) through (iv) above, the amount
of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such
time, represents the amount that can reasonably be expected to become an
actual or matured liability. Both prior to and after giving effect to the
transactions occurring on each Issuance Date, the Company does not intend
to, nor does it believe that it will,
33
incur debts beyond its ability to pay such debts as they mature, taking
into account the timing of and amounts of cash to be received by it and
the timing of and amounts of cash to be payable in respect of its debt.
(l) Investment Company. Neither the Company nor the Trust (before
and after giving effect to the issuance of Certificates on such Issuance
Date) is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or is exempt from all provisions of such
act.
(m) Ownership; Subsidiaries. All of the issued and outstanding
capital stock of the Company is owned, legally and beneficially, by WESCO.
The Company has no Subsidiaries.
(n) Names. The legal name of the Company is as set forth in this
Agreement. The Company has not had, nor has, any trade names, fictitious
names, assumed names or "doing business as" names.
(o) Liabilities. Other than, (i) the liabilities, commitments or
obligations (whether absolute, accrued, contingent or otherwise) arising
under or in respect of the Transaction Documents and (ii) immaterial
amounts due and payable in the ordinary course of business of a
special-purpose company, the Company does not have any liabilities,
commitments or obligations (whether absolute, accrued, contingent or
otherwise), whether due or to become due.
(p) Use of Proceeds; Federal Reserve Board Regulation. No proceeds
of the issuance of any Investor Certificates will be used by the Company
to purchase or carry any margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve System, as in effect from time
to time). The Company is in compliance with all applicable regulations of
the Board of Governors of the Federal Reserve System (including, without
limitation, Regulations U and G with respect to "margin stock").
(q) Collection Procedures. The Company and each Seller have in place
procedures pursuant to the Policies which are either necessary or
advisable to ensure the timely collection of Receivables in accordance
with the Transaction Documents.
(r) Lockbox Accounts; Eligible Segregated Accounts. The Lockbox
Banks and Eligible Segregated Account Banks are the only institutions
holding any Lockbox Accounts or Eligible Segregated Accounts for the
receipt of payments from Obligors in respect of Receivables and no Persons
other than Obligors have been instructed to make payments to Lockbox
Accounts or Eligible Segregated Accounts. (i) Each Lockbox Agreement to
which the Company is party is in full force and effect, (ii) each Lockbox
Account is free and clear of any Lien (other than any right of set-off
expressly provided for in the applicable Lockbox Agreement), (iii) each
Eligible Segregated Account Agreement to which the Company is party is in
full force and effect and (iv) each Eligible Segregated Account
established pursuant to subsection 2.3(b) of the Servicing Agreement is
free and clear of any Lien.
34
(s) Bulk Sales. The execution, delivery and performance of this
Agreement do not require compliance with any "bulk sales" law by the
Company.
The representations and warranties set forth in this Section 2.3
shall survive after the date made and the transfer and assignment of the Trust
Assets to the Trust. Upon discovery by a Responsible Officer of the Company or
the Servicer or by a Responsible Officer of the Trustee of a breach of any of
the foregoing representations and warranties, the party discovering such breach
shall give prompt written notice to the other parties and to each Agent with
respect to all Outstanding Series. The Trustee's obligations in respect of any
breach are limited as provided in subsection 8.2(g).
Section 2.4. Representations and Warranties of the Company Relating
to the Receivables. The Company hereby represents and warrants to the Trustee
and the Trust, for the benefit of the holders of Certificates of each
Outstanding Series, (x) as of the Issuance Date of such Series, and (y) with
respect to each Receivable transferred to the Trust after such Issuance Date, as
of the related Receivables Purchase Date, unless, in either case, otherwise
stated in the applicable Supplement or unless such representation or warranty
expressly relates only to a prior date, that:
(a) Schedule 1 to this Agreement sets forth an accurate and complete
listing as of the Cut-Off Date of all Receivables to be transferred to the
Trust as of the Initial Closing Date and the information contained therein
with respect to the identity of the Obligor of, and Principal Amount of,
each such Receivable is true and correct in all material respects as of
the Cut-Off Date. As of the Cut-Off Date, the aggregate amount of
Receivables owned by the Company is accurately set forth in all material
respects in Schedule 1 hereto.
(b) Each Receivable existing on the Initial Closing Date or, in the
case of Receivables transferred to the Trust after the Initial Closing
Date, on the date that each such Receivable shall have been transferred to
the Trust, has been conveyed to the Trust free and clear of any Lien,
except for Permitted Liens specified in clauses (i) and (iv) of the
definition thereof.
(c) On the Initial Closing Date, each Receivable transferred to the
Trust that is included in the calculation of the initial Aggregate
Receivables Amount is an Eligible Receivable and, in the case of
Receivables transferred to the Trust after the Initial Closing Date, on
the date such Receivable shall have been transferred to the Trust, each
such Receivable that is included in the calculation of the Aggregate
Receivables Amount on such date is an Eligible Receivable.
The representations and warranties set forth in this Section 2.4
shall survive after the date made and the transfer and assignment of the Trust
Assets to the Trust. Upon discovery by a Responsible Officer of the Company or
the Servicer or a Responsible Officer of the Trustee of a breach of any of the
representations and warranties, the party discovering such breach shall give
prompt written notice to the other parties and to each Agent with respect to all
Outstanding Series. The Trustee's obligations in respect of any breach are
limited as provided in Section 8.2(g).
35
Section 2.5. Repurchase of Ineligible Receivables and Cash Dilution
Payments. (a) Repurchase Obligation. If (i) any representation or warranty under
subsections 2.4(a), (b) or (c) is not true and correct in any material respect
as of the date specified therein with respect to any Receivable transferred to
the Trust, (ii) there is a breach of any covenant under subsection 2.8(c) with
respect to any Receivable in any material respect or (iii) the Trust's interest
in any Receivable is not a first priority perfected ownership or security
interest at any time as a result of any action taken by, or any failure to take
action by, the Company (any Receivable as to which the conditions specified in
any of clauses (i), (ii) or (iii) of this subsection 2.5(a) exists is referred
to herein as an "Ineligible Receivable") then, upon the earlier (the date on
which such earlier event occurs, the "Repurchase Obligation Date") of the
discovery by the Company of any such event which continues unremedied or receipt
by the Company of written notice given by the Trustee or the Servicer of any
such event which continues unremedied, the Company shall become obligated to
repurchase or cause to be repurchased such Ineligible Receivable on the terms
and conditions set forth in subsection 2.5(b).
(b) Repurchase of Receivables. Subject to the last sentence of this
subsection 2.5(b), the Company shall repurchase, or cause to be repurchased,
each Ineligible Receivable required to be repurchased pursuant to subsection
2.5(a) by depositing in the Collection Accounts in immediately available funds
no later than the Business Day following the related Repurchase Obligation Date
an amount equal to the lesser of (x) the amount by which the Aggregate Target
Receivables Amount exceeds the Aggregate Receivables Amount (after giving effect
to the reduction thereof by the Principal Amount of such Ineligible Receivable)
and (y) the aggregate outstanding Principal Amount of each such Ineligible
Receivable (the "Transfer Deposit Amount"). Upon transfer or deposit of the
Transfer Deposit Amount, the Trust shall automatically and without further
action be deemed to sell, transfer, assign, set over and otherwise convey to the
Company, without recourse, representation or warranty, all the right, title and
interest of the Trust in and to such Ineligible Receivable, all monies due or to
become due with respect thereto and all proceeds thereof; and such repurchased
Ineligible Receivable shall be treated by the Trust as collected in full as of
the date on which it was transferred. The Trustee shall execute such documents
and instruments of transfer or assignment and take such other actions as shall
reasonably be requested by the Company to effect the conveyance of such
Receivables pursuant to this subsection. Except as otherwise specified in any
Supplement, the obligation of the Company to repurchase any Ineligible
Receivable shall constitute the sole remedy respecting the event giving rise to
such obligation available to Investor Certificateholders (or the Trustee on
behalf of Investor Certificateholders) unless such obligation is not satisfied
in full in accordance with the terms of this Agreement.
(c) Dilution Adjustments. If, as a result of a Dilution Adjustment
pursuant to Section 4.6 of the Servicing Agreement, the Aggregate Receivables
Amount is less than the Aggregate Target Receivables Amount, the Company (in
addition to but without duplication of the obligation of the applicable Seller
under the Receivables Sale Agreements in respect of such Dilution Adjustment)
shall be required to pay into the Series Principal Collection Sub-subaccount
with respect to each Outstanding Series in immediately available funds within
one Business Day of such determination such Series' pro rata share of the lesser
of the amount of such Dilution Adjustment and the amount (the "Cash Dilution
Payment") by which the Aggregate Target Receivables Amount exceeds the Aggregate
Receivables Amount.
36
Section 2.6. Purchase of Investor Certificateholders' Interest in
Trust Portfolio. (a) In the event of any breach of any of the representations
and warranties set forth in Section 2.3, which breach has a material adverse
effect on the interests of the holders of an Outstanding Series (without giving
effect to any Enhancement) under or with respect to the Transaction Documents,
then the Trustee, at the written direction of holders of Certificates evidencing
more than 50% of the Invested Amount of such Outstanding Series shall notify the
Company to purchase such Outstanding Series and the Company shall be obligated
to make such purchase on the next Distribution Date occurring at least five
Business Days after receipt of such notice on the terms and conditions set forth
in subsection 2.6(b) below; provided, however, that no such purchase shall be
required to be made if, by such Distribution Date, the representations and
warranties contained in Section 2.3 shall be satisfied in all material respects
and any material adverse effect on the holders of such Outstanding Series caused
thereby shall have been cured.
(b) As required under subsection 2.6(a) above, the Company shall
deposit into the U.S. Dollar Collection Account for credit to the applicable
subaccount of the U.S. Dollar Collection Account on the Business Day preceding
such Distribution Date an amount equal to the purchase price (as described in
the next succeeding sentence) for the Certificateholders' Interest for such
Outstanding Series on such day. The purchase price for any such purchase will be
equal to (i) the Adjusted Invested Amount of such Outstanding Series on the date
on which the purchase is made plus (ii) an amount equal to all interest accrued
but unpaid on such Series up to the Distribution Date on which the distribution
of such deposit is scheduled to be made pursuant to Section 9.2 plus (iii) any
other amount required to be paid in connection therewith pursuant to any
Supplement. Notwithstanding anything to the contrary in this Agreement, the
entire amount of the purchase price deposited in the U.S. Dollar Collection
Account (together with amounts on deposit in the applicable Series Principal
Collection Sub-subaccount) shall be distributed to the related Investor
Certificateholders on such Distribution Date pursuant to Section 9.2. If the
Trustee gives notice directing the Company to purchase the Certificates of an
Outstanding Series as provided above, except as otherwise specified in any
Supplement, the obligation of the Company to purchase such Certificates pursuant
to this Section 2.6 shall constitute the sole remedy respecting an event of the
type specified in the first sentence of this Section 2.6 available to the
applicable Investor Certificateholders (or the Trustee on behalf of such
Investor Certificateholders) unless such obligation is not satisfied in full in
accordance with the terms of this Agreement.
Section 2.7. Affirmative Covenants of the Company. The Company
hereby covenants that, until the Trust Termination Date occurs, the Company
shall:
(a) Financial Statements. (i) Furnish to the Trustee, each Agent and
the Rating Agencies, within 120 days after the end of each fiscal year,
the balance sheet and related statements of income, stockholders' equity
and cash flows showing the financial condition of the Company as of the
close of such fiscal year and the results of its operations during such
year, certified by an appropriate Responsible Officer of the Company to
the effect that such financial statements fairly present the financial
condition and results of operations of the Company in accordance with GAAP
consistently applied;
37
(ii) Furnish to the Trustee, each Agent and the Rating
Agencies, within 60 days after the end of each of the first three
fiscal quarters of each fiscal year, the Company's balance sheet and
related income statement showing the financial condition of the
Company as of the close of such fiscal quarter and the results of
its operations during such fiscal year (and, beginning with the
second fiscal year, showing, on a comparative basis, such
information as of and for the corresponding dates and periods of the
preceding fiscal year), all certified by a Responsible Officer of
such Person as fairly presenting the financial condition and results
of operations of the Company in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments; and
(iii) Furnish to the Trustee and each Agent, promptly, from
time to time, such other information regarding the operations,
business affairs and financial condition of the Company, or
compliance with the terms of any Transaction Document, in each case
as any Agent or the Trustee may reasonably request.
(b) Annual Opinion. Deliver to the Trustee an Opinion of Counsel,
substantially in the form of Exhibit C, by January 31 of each year, the
first such delivery hereunder to occur in January 1999.
(c) Payment of Obligations; Compliance with Obligations. Pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of whatever nature
(including, without limitation, all taxes, assessments, levies and other
governmental charges imposed on it), except where the amount or validity
thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have
been provided on the books of the Company. The Company shall defend the
right, title and interest of the Trustee and the Holders in, to and under
the Receivables and the other Trust Assets, whether now existing or
hereafter created, against all claims of third parties claiming through or
under the Company, any Seller, any Sub-Servicer or the Servicer.
(d) Inspection of Property; Books and Records; Discussions. Keep
proper books of records and accounts in which full, true and correct
entries in conformity in all material respects with GAAP and all
Requirements of Law shall be made of all dealings and transactions in
relation to its business and activities; and permit representatives of the
Trustee or any Agent for any Outstanding Series upon reasonable advance
notice to visit and inspect any of its properties and examine and make
abstracts from any of its books and records during normal business hours
on any Business Day and as often as may reasonably be desired and to
discuss the business, operations, properties and financial and other
condition of the Company with officers and employees of the Company and
with its Independent Public Accountants; provided, that the Trustee shall
notify the Company prior to any contact with such accountants and, prior
to the occurrence of an Early Amortization Event, shall permit
representatives of the Company to be present during such discussions.
38
(e) Compliance with Law and Policies. (i) Comply in all material
respects with all Requirements of Law applicable to the Company.
(ii) Cause each Seller to perform its obligations in
accordance with, and comply in all material respects with, the
Policies, as amended from time to time in accordance with the
Transaction Documents, in regard to the Receivables and the Related
Property.
(f) Purchase of Receivables. Purchase Receivables solely pursuant to
(i) the Receivables Sale Agreements or (ii) this Agreement.
(g) Delivery of Collections. In the event that the Company receives
Collections directly from Obligors, deposit such Collections into the
applicable Lockbox Account, Eligible Segregated Account or a Collection
Account within one Business Day after receipt thereof by the Company.
(h) Notices. (a) Promptly (and, in any event, within five Business
Days after a Responsible Officer of the Company becomes aware of such
event) give written notice to the Trustee, each Rating Agency and each
Agent for any Outstanding Series of:
(i) the occurrence of any Early Amortization Event; and
(ii) any Lien not permitted by subsection 2.8(c) on any
Receivable or any other Trust Assets.
(b) Promptly (and, in any event, within five Business Days
after a Responsible Officer of the Company becomes aware of such
event) give written notice to the Trustee and each Agent for any
Outstanding Series of the occurrence of any Potential Early
Amortization Event
(i) Lockboxes; Eligible Segregated Accounts. (i) Maintain, and keep
in full force and effect, each Lockbox Agreement and Eligible Segregated
Account Agreement to which the Company is a party, and not amend or
otherwise modify each such agreement, except in each case to the extent
otherwise permitted under the terms of this Agreement and the other
Transaction Documents; provided, however, that the Company may enter into
any amendments or modifications of a Lockbox Agreement or Eligible
Segregated Account Agreement that the Company reasonably deems necessary
to conform such Lockbox Agreement or Eligible Segregated Account Agreement
to the cash management system of the Servicer and that are reasonably
acceptable to the Trustee and each Agent, (ii) ensure that each related
Lockbox Account and each related Eligible Segregated Account shall be free
and clear of, and defend each such Lockbox Account and Eligible Segregated
Account against any writ, order, stay, judgment, warrant of attachment or
execution or similar process.
(j) Separate Corporate Existence.
(i) Maintain its own deposit account or accounts, separate
from those of any Affiliate, with commercial banking institutions
and ensure that the funds
39
of the Company will not be diverted to any other Person or for other
than corporate uses of the Company, nor will such funds be
commingled with the funds of any Seller or any other Subsidiary or
Affiliate of any Seller;
(ii) To the extent that it shares the same officers or other
employees as any of its stockholders or Affiliates, the salaries of
and the expenses related to providing benefits to such officers and
other employees shall be fairly allocated among such entities, and
each such entity shall bear its fair share of the salary and benefit
costs associated with all such common officers and employees;
(iii) To the extent that it jointly contracts with any of its
stockholders or Affiliates to do business with vendors or service
providers or to share overhead expenses, the costs incurred in so
doing shall be allocated fairly among such entities, and each such
entity shall bear its fair share of such costs. To the extent that
the Company contracts or does business with vendors or service
providers where the goods and services provided are partially for
the benefit of any other Person, the costs incurred in so doing
shall be fairly allocated to or among such entities for whose
benefit the goods or services are provided, and each such entity
shall bear its fair share of such costs. All material transactions
between the Company and any of its Affiliates, whether currently
existing or hereafter entered into, shall be only on an arm's-length
basis, it being understood and agreed that the transactions
contemplated in the Transaction Documents meet the requirements of
this clause (iii);
(iv) Maintain an office space separate from offices of WESCO
and its Affiliates (but which may be located at the same address as
WESCO). To the extent that the Company and any of its stockholders
or Affiliates have offices in the same location, there shall be a
fair and appropriate allocation of overhead costs among them, and
each such entity shall bear its fair share of such expenses;
(v) Issue separate financial statements prepared not less
frequently than quarterly and prepared in accordance with GAAP;
(vi) Conduct its affairs in its own name and strictly in
accordance with its articles of incorporation and observe all
necessary, appropriate and customary corporate formalities,
including, but not limited to, holding all regular and special
stockholders' and directors' meetings appropriate to authorize all
corporate action, keeping separate and accurate minutes of its
meetings, passing all resolutions or consents necessary to authorize
actions taken or to be taken, and maintaining accurate and separate
books, records and accounts, including, but not limited to, payroll
and intercompany transaction accounts;
(vii) Not assume or guarantee any of the liabilities of any
Seller, any Servicing Party or any Affiliate of any thereof; and
40
(viii) Take, or refrain from taking, as the case may be, all
other actions that are necessary to be taken or not to be taken in
order to (x) ensure that the assumptions and factual recitations set
forth in the Specified Bankruptcy Opinion Provisions remain true and
correct in all material respects with respect to the Company and (y)
comply in all material respects with those procedures described in
such provisions which are applicable to the Company.
(k) Preservation of Corporate Existence. (i) Preserve and maintain
its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation and (ii) qualify and remain qualified in
good standing as a foreign corporation in each jurisdiction where the
failure to preserve and maintain such existence, rights, franchises,
privileges and qualification would, if not remedied within 30 days, be
reasonably likely to have a Material Adverse Effect.
(l) Net Worth. Maintain at all times a consolidated net worth, as
determined in accordance with GAAP, of at least $50,000,000.
(m) Maintenance of Property. Keep all property and assets useful and
necessary to permit the monitoring and collection of Receivables.
(n) Further Assurances. File, or cause to be filed, at the
applicable Seller's expense and in accordance with the provisions of the
UCC or PPSA of the applicable jurisdiction, duly completed and executed
continuation statements with respect to all financing statements filed in
connection with the transactions contemplated by the Receivables Sale
Agreements.
(o) Required Currency Hedges. (i) On the Initial Closing Date and on
each Distribution Date thereafter, the Company shall have the Required
Currency Hedge in place for the Required Hedge Period and the Required
Hedge Notional Amount. The Company agrees that at any time that it enters
into any Required Currency Hedge, it shall have funds available to make
payment of fees or other amounts due in connection with the purchase of
such Required Currency Hedge at the time that such payments are due and
payable thereunder.
(ii) The Company agrees that at any time that it enters into
any Required Currency Hedge, it shall execute and deliver to the
Trustee an assignment of all amounts payable to the Company under
such Required Currency Hedge substantially in the form of Exhibit E
(each, a "Required Currency Hedge Assignment").
(iii) If any time the commercial paper or short term deposit
ratings from any Rating Agency assigned to a Counterparty is such
that the Counterparty is no longer an Eligible Counterparty, the
Company shall (x) to the extent permitted under the Required
Currency Hedge to which such Counterparty is a party, require such
Counterparty to secure its obligations under such Required Currency
Hedge or take such other actions as shall satisfy the Rating Agency
Condition or (y) replace the Counterparty with an Eligible
Counterparty within 30 days.
41
Section 2.8. Negative Covenants of the Company. The Company hereby
covenants that, until the Trust Termination Date occurs, it shall not directly
or indirectly:
(a) Accounting of Transfers. Prepare any consolidating financial
statements which shall account for the transactions contemplated by the
Receivables Sale Agreement in any manner other than as a sale of
Receivables by the Sellers to the Company or in any other respect account
for or treat the transactions under the Receivables Sale Agreements
(including for financial accounting purposes, except as required by law)
in any manner other than as transfers of Receivables by the Sellers to the
Company; provided, however, that this subsection shall not apply for any
tax or tax accounting purposes.
(b) Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except: (i) Indebtedness evidenced by the Seller
Note; (ii) Indebtedness representing fees, expenses and indemnities
payable pursuant to and in accordance with the Transaction Documents; and
(iii) Indebtedness for services supplied or furnished to the Company in an
amount not to exceed $100,000 at any one time outstanding; provided that
any payments made by the Company pursuant to this subsection shall be made
solely from funds available to the Company which are not otherwise
required to be applied to the payment of any amounts (other than amounts
payable to the Company) pursuant to any Pooling and Servicing Agreements,
shall be non-recourse other than with respect to such funds, and shall not
constitute a claim against the Company to the extent that insufficient
funds exist to make such payment.
(c) Limitation on Liens and Sales. Except for the conveyance
hereunder or as otherwise contemplated hereby, the Company will not sell,
pledge, assign or transfer to any Person, or create, incur, assume or
suffer to exist any Lien upon any Receivables or any of its property,
assets or revenues, whether now owned or hereafter acquired, except for
Permitted Liens, it being understood that no Permitted Lien under clause
(ii) of the definition thereof shall cover any of the Trust Assets.
(d) Limitation on Guarantee Obligations. Become or remain liable,
directly or contingently, in connection with any Indebtedness or other
liability of any other Person, whether by guarantee, endorsement (other
than endorsements of negotiable instruments for deposit or collection in
the ordinary course of business), agreement to purchase or repurchase,
agreement to supply or advance funds, or otherwise, except in connection
with indemnification obligations of the Company to the limited extent
provided in the Company's articles of incorporation and by-laws; provided
that any payments made by the Company pursuant to this subsection shall be
made solely from funds available to the Company which are not otherwise
required to be applied to the payment of any amounts (other than amounts
payable to the Company) pursuant to any Pooling and Servicing Agreements,
shall be non-recourse other than with respect to such funds, and shall not
constitute a claim against the Company to the extent that insufficient
funds exist to make such payment.
(e) Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or
42
dissolution), or make any material change in its present method of
conducting business (other than as contemplated by the Transaction
Documents), or convey, sell, lease, assign, transfer or otherwise dispose
of, all or substantially all of its property, business or assets other
than the assignments and transfers contemplated hereby.
(f) Limitation on Dividends and Other Payments. Declare or pay any
dividend on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of capital
stock of the Company, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Company (any of the
foregoing, a "restricted payment"), or make, directly or indirectly,
payments in any form in respect of the Seller Notes unless (i) at the date
such restricted payment or payment in respect of the Seller Notes is made,
the Company shall have made all payments in respect of its repurchase
obligations pursuant to this Agreement outstanding at such date, (ii) at
the date any restricted payment is made, the outstanding principal amount
of the Seller Notes shall be zero, and (iii) any such restricted payment
is made in accordance with all corporate and legal formalities applicable
to the Company; provided, however, that (A) no restricted payment shall be
made on any date if (x) a Potential Early Amortization Event of a type
referred to in clause (a)(ii) or (iii) of Section 7.1 or (y) an Early
Amortization Event has occurred and is continuing (or would occur as a
result of such payment) on such date, (B) no payment in respect of the
Seller Notes shall be made in contravention of the subordination
provisions contained therein and (C) all restricted payments, and payments
in respect of the Seller Notes, made on any date shall be payable by the
Company solely from funds available to the Company in accordance with the
terms of any Pooling and Servicing Agreement.
(g) Business of the Company. Engage at any time in any business or
business activity other than the acquisition of Receivables pursuant to
the Receivables Sale Agreements, the assignments and transfers hereunder
and the other transactions contemplated by the Transaction Documents, and
any activity incidental to the foregoing and necessary or convenient to
accomplish the foregoing, or enter into or be a party to any agreement or
instrument other than in connection with the foregoing, except those
agreements or instruments permitted under subsection 2.8(i).
(h) Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any
Person, except for any Exchangeable Company Interest, any Series
Subordinated Interest, the Receivables and the other Trust Assets or as
otherwise permitted by the Transaction Documents.
(i) Agreements. (A) Become a party to, or permit any of its
properties to be bound by, any indenture, mortgage, instrument, contract,
agreement, lease or other undertaking, except the Transaction Documents,
leases of office space, equipment or other facilities for use by the
Company in its ordinary course of business, employment agreements, service
agreements, agreements relating to shared employees and the other
Transaction Documents and agreements necessary to perform its obligations
under the
43
Transaction Documents, (B) issue any power of attorney (except to the
Trustee or the Servicer or except for the purpose of permitting any Person
to perform any ministerial functions on behalf of the Company that are not
prohibited by or inconsistent with the terms of the Transaction
Documents), or (C) amend, supplement, modify or waive any of the
provisions of the Receivables Sale Agreements or any Lockbox Agreement or
Eligible Segregated Account Agreement or request, consent or agree to or
suffer to exist or permit any such amendment, supplement, modification or
waiver or exercise any consent rights granted to it thereunder unless such
amendment, supplement, modification or waiver or such exercise of consent
rights would not be reasonably likely to have a Material Adverse Effect
and, in the case of the Receivables Sale Agreements, the Rating Agency
Condition shall have been satisfied with respect to any such amendments,
supplements, modifications or waivers.
(j) Policies; Amendments to Receivables. (i) Make any change or
modification (or permit any change or modification to be made) in any
material respect to the Policies, except (x) if such changes or
modifications are necessary under any Requirement of Law, (y) if such
changes or modifications would not reasonably be likely to have a Material
Adverse Effect or (z) if the Rating Agency Condition is satisfied with
respect thereto; provided, however, that if any change or modification,
other than a change or modification permitted pursuant to clause (x) or
(y) above, would be reasonably likely to have a material adverse effect on
the interests of the Investor Certificateholders of a Series which is not
rated by a Rating Agency, the consent of the applicable Agent (or as
specified in the related Supplement) shall be required to effect such
change or modification.
(ii) Take any action with respect to the Receivables of the
type which if taken by the Servicer would violate the provisions of
Section 4.6 of the Servicing Agreement.
(k) Receivables Not To Be Evidenced by Promissory Notes. Subject to
the delivery requirement set forth in subsection 2.1(c), take any action
to cause any Receivable to be evidenced by any "instrument" other than,
provided that the procedures set forth in Schedule 3 are fully implemented
with respect thereto, an instrument which alone or together with a
security agreement constitutes "chattel paper" (each as defined in the UCC
as in effect in any state in which the Company's or the applicable
Seller's chief executive office or books and records relating to such
Receivable are located, or as defined under the relevant provincial laws
of Canada), except in connection with its enforcement or collection of an
Aged Receivable.
(l) Offices. Move outside or within the state where such office is
now located the location of its chief executive office or of any of the
offices where it keeps its records with respect to the Receivables without
(i) in the case of moves outside such state, giving 30 days' prior written
notice to the Trustee and each Rating Agency, (ii) in the case of moves
within such state, giving the Trustee prompt notice of a change within the
state where such office is now located of the location of its chief
executive office or any office where it keeps its records with respect to
the Receivables and (iii) taking all actions reasonably requested by the
Trustee (including but not limited to all filings and other acts necessary
or advisable under the UCC or similar statute of
44
each relevant jurisdiction) in order to continue the Trust's first
priority perfected ownership or security interest in all Receivables now
owned or hereafter created; provided, however, that the Company shall not
change the location of its chief executive office to outside of the United
States, or to a state which is within the Tenth Circuit unless it delivers
an Opinion of Counsel reasonably acceptable to the Rating Agencies to the
effect that Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993), is no longer controlling precedent in the Tenth Circuit.
(m) Change in Name. Change its name, identity or corporate structure
in any manner which would or might make any financing statement or
continuation statement (or other similar instrument) filed in accordance
herewith seriously misleading within the meaning of Section 9-402(7) of
the UCC as in effect in any applicable jurisdiction in which UCC filings
have been made in respect of the Trust Assets without 30 days' prior
written notice to the Trustee and each Rating Agency.
(n) Charter. Amend or make any change or modification to its
certificate of incorporation or by-laws without first satisfying the
Rating Agency Condition (other than an amendment, change or modification
made pursuant to changes in law of the state of its incorporation or
amendments to change the Company's name (subject to compliance with clause
(m) above), resident agent or address of resident agent).
(o) Addition of Sellers. Agree to the addition of any Subsidiary of
WESCO as an additional Seller pursuant to Section 9.12 of the Receivables
Sale Agreements without (i) such Subsidiary complying with all conditions
precedent set forth in the Receivables Sale Agreements, or such
Subsidiary's being simultaneously added as a Sub-Servicer (or without
another Subsidiary's simultaneously agreeing to act as a Sub-Servicer in
respect of such additional Seller) under the Transaction Documents
pursuant to Section 2.6 of the Servicing Agreement.
ARTICLE III
RIGHTS OF HOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
THE FOLLOWING PORTION OF THIS ARTICLE III
IS APPLICABLE TO ALL SERIES.
Section 3.1. Rights of Holders. (a) Each Series of Investor
Certificates shall represent Fractional Undivided Interests in the Trust
(including any Enhancement applicable to such Series as specified in the related
Supplement) relating to such Series and the right to receive Collections and
other amounts at the times and in the amounts specified in this Article III (as
supplemented by the Supplement related to such Series) to be deposited in the
Collection Accounts and any other accounts maintained for the benefit of the
Investor Certificateholders or paid to the Investor Certificateholders (with
respect to each outstanding Series, the "Certificateholders' Interest"). The
"Exchangeable Company Interest" shall be the interest in the Trust not
represented by any Series of Investor Certificates then outstanding or Series
Subordinated Interests then in existence, including the right to receive
Collections and
45
other amounts at the times and in the amounts specified in this Article III to
be paid to the Company (the "Company Interest"), and each Series Subordinated
Interest, if any, shall be the interest specified as such pursuant to the
related Supplement; provided, however, that no such Exchangeable Company
Interest or Series Subordinated Interest shall include any interest in any Trust
Account or any other accounts maintained for the benefit of the Investor
Certificateholders or the benefit of any Enhancement Provider, except as
specifically provided in this Article III.
(b) Establishment of Collection Accounts and the Collection
Concentration Accounts; Authority of the Trustee in Respect of the Collection
Accounts and the Collection Concentration Accounts and Holders' Interests
Therein. (i) The Trustee, for the benefit of the Investor Certificateholders,
shall cause to be established and maintained in the name of the Trust with an
Eligible Institution or with the corporate trust department of the Trustee or an
affiliate of the Trustee, the following three segregated trust accounts
(collectively, the "Collection Accounts"), each bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Investor Certificateholders: (i) an account in the United States to hold all
Collections received in the United States (the "U.S. Dollar Collection
Account"), (ii) an account in Canada to hold all Collections received in Canada
that are paid in U.S. Dollars (the "Canada/U.S. Dollar Collection Account") and
(iii) an account in Canada to hold all Collections received in Canada that are
paid in Canadian Dollars (the "Canada/Canadian Dollar Collection Account").
Schedule 2, which is hereby incorporated into and made a part of this Agreement,
identifies the Collection Accounts by setting forth the account number of each
such account, the account designation of such account and the name of the
institution with which such account has been established. The U.S. Dollar
Collection Account shall be divided into individual subaccounts for each
Outstanding Series (each, respectively, a "Series Collection Subaccount" and,
collectively, the "Series Collection Subaccounts") and for the Company (the
"Company Collection Subaccount"). For administrative purposes only, the Trustee
shall establish or cause to be established for each Series, so long as such
Series is an Outstanding Series, sub-subaccounts of the Series Collection
Subaccounts with respect to such Series (respectively, the "Series Principal
Collection Sub-subaccount" and "Series Non-Principal Collection Sub-subaccount"
and, collectively, the "Series Collection Sub-subaccounts"). For administrative
purposes only, the Trustee shall also establish or cause to be established for
each Series, so long as such Series is an Outstanding Series, subaccounts of the
Canada/U.S. Dollar Collection Account and subaccounts of the Canada/Canadian
Dollar Collection Account (each, respectively, a "Series Canada/U.S. Dollar
Collection Subaccount" and a "Series Canada/Canadian Dollar Collection
Subaccount"). The Company shall also establish intervening deposit accounts
(each as defined below, collectively, the "Collection Concentration Accounts"),
in the name of the Company, which accounts shall be used for the receipt of
Collections transferred from the Lockbox Accounts and the Eligible Segregated
Accounts (to the extent so provided in the Servicing Agreement) prior to the
deposit of such Collections, as appropriate, (A) into the U.S. Dollar Collection
Account (the "U.S. Dollar Collection Concentration Account"), (B) into the
Canada/Canadian Dollar Collection Account (the "Canada/Canadian Dollar
Collection Concentration Account") or (C) into the Canada/U.S. Dollar Collection
Account (the "Canada/U.S. Dollar Collection Concentration Account").
(ii) The Trustee, on behalf of the Investor
Certificateholders, shall possess all right, title and interest in all funds on
deposit from time to time in the Collection
46
Accounts and in all proceeds thereof. The Collection Accounts shall be under the
sole dominion and control of the Trustee for the benefit of the Investor
Certificateholders and, to the extent set forth in any Supplement, any
Enhancement Provider set forth therein. If, at any time, the Servicer has actual
notice or knowledge that any institution holding any of the Collection Accounts
is other than the corporate trust department of the Trustee or an affiliate of
the Trustee, or that any other institution holding any of the Collection
Accounts has ceased to be an Eligible Institution, the Servicer shall direct the
Trustee in writing to establish within 30 days a substitute account therefor
with an Eligible Institution, transfer any cash and/or any Eligible Investments
to such new account and from the date any such substitute accounts are
established, such account shall be the Collection Account. Neither the Company
nor the Servicer, nor any person or entity claiming by, through or under the
Company or Servicer, shall have any right, title or interest in, except to the
extent expressly provided under the Transaction Documents, or any right to
withdraw any amount from, the Collection Accounts. Pursuant to the authority
granted to the Servicer in subsection 2.2(a) of the Servicing Agreement, the
Servicer shall have the power, revocable by the Trustee, to instruct the Trustee
in writing to make withdrawals from and payments to the Collection Accounts for
the purposes of carrying out the Servicer's or the Trustee's duties hereunder.
(c) Administration of the Collection Accounts. At the written
direction of the Servicer, funds on deposit in the Collection Accounts available
for investment shall be invested by the Trustee in Eligible Investments selected
by the Servicer. All such Eligible Investments shall be held by the Trustee for
the benefit of the Investor Certificateholders. Amounts on deposit in each
Series Non-Principal Collection Sub-subaccount shall, if applicable, be invested
in Eligible Investments that will mature, or that are payable or redeemable upon
demand of the holder thereof, so that such funds will be available on or before
the Business Day immediately preceding the next Distribution Date. None of such
Eligible Investments shall be disposed of prior to the maturity date with
respect thereto unless the Trustee is directed in writing by the Servicer (such
direction shall specify the investments to be disposed) and such disposition is
reasonably necessary to prevent a loss. All interest and investment earnings
(net of losses and investment expenses) (the "Investment Earnings") on funds
deposited in a Series Non-Principal Collection Sub-subaccount shall be deposited
in such sub-subaccount. Amounts on deposit in the Series Principal Collection
Sub-subaccounts and any other sub-subaccounts as specified in the related
Supplement shall be invested in Eligible Investments that mature, or that are
payable or redeemable upon demand of the holder thereof, so that such funds will
be available not later than the date which is specified in any Supplement. The
Trustee, or its nominee or custodian, shall maintain possession of the
instruments or securities, if any, evidencing any Eligible Investments from the
time of purchase thereof until the time of sale or maturity. Any Investment
Earnings on such invested funds in a Series Principal Collection Sub-subaccount
and any other sub-subaccounts as specified in the related Supplement will be
deposited in the related Series Non-Principal Collection Sub-subaccount. If the
Servicer fails to give such written instruction, the amounts in the Collection
Accounts available for investment shall remain uninvested.
(d) Daily Collections. (i) Promptly following its receipt of
Collections in the form of available funds in the Lockbox Accounts or Eligible
Segregated Accounts, but in no event later than the Business Day following such
receipt, the Servicer shall transfer, or cause to be transferred, all
Collections on deposit (less the aggregate amount of set-offs permitted to be
retained pursuant to any applicable Lockbox Agreement or Eligible Segregated
Accounts
47
Agreement) in the form of available funds in the Lockbox Accounts, or Eligible
Segregated Accounts directly to the applicable Collection Concentration Account
as follows:
(A) all funds which are deposited in the United States, to the U.S.
Dollar Collection Concentration Account;
(B) all funds which are deposited in Canada in U.S. Dollars, to the
Canada/U.S. Dollar Collection Concentration Account; and
(C) all funds which are deposited in Canada in Canadian Dollars, to
the Canada/Canadian Dollar Collection Concentration Account.
All such transfers to the U.S. Dollar Collection Concentration
Account and the Canada/U.S. Dollar Collection Concentration Account shall be
made in U.S. Dollars. All such transfers to the Canada/Canadian Dollar
Collection Concentration Account shall be made in Canadian Dollars.
(ii) Promptly, but in no event later than the date of deposit
(unless received after 3:00 p.m. New York City time, on such date, then on the
next Business Day), the Trustee shall transfer amounts on deposit (a) in the
U.S. Dollar Collection Concentration Account into the U.S. Dollar Collection
Account, (b) in the Canada/U.S. Dollar Collection Concentration Account into the
Canada/U.S. Dollar Collection Account and (c) in the Canada/Canadian Dollar
Collection Concentration Account into the Canada/Canadian Dollar Collection
Account.
(iii) On the date funds become available in the U.S. Dollar
Collection Account (unless received after 1:00 p.m., New York City time, on such
date, then on the next Business Day) (the "Deposit Date"), the Trustee shall (in
accordance with the written directions received from the Servicer pursuant to
subsection (h) below, upon which the Trustee may conclusively rely) transfer
from Aggregate Daily Collections for such Deposit Date, to the respective Series
Collection Subaccount for each Outstanding Series, an amount equal to the
product of (x) the applicable Invested Percentage for such Outstanding Series
and (y) such Aggregate Daily Collections.
(iv) On each Deposit Date, the Trustee shall (in accordance
with the written directions received from the Servicer pursuant to subsection
(h) below, upon which the Trustee may conclusively rely) allocate funds
transferred to the Series Collection Subaccount for each Outstanding Series
pursuant to subsection (d)(ii) above to the Series Non-Principal Collection
Sub-subaccount, the Series Principal Collection Sub-subaccount and such other
Sub-subaccounts of each such Series in accordance with the related Supplement
for such Series.
(v) On each Deposit Date, except as otherwise provided in a
Supplement, the Trustee shall (in accordance with the written directions
received from the Servicer pursuant to subsection (h) below, upon which the
Trustee may conclusively rely) transfer to the Company Collection Subaccount
from Aggregate Daily Collections deposited into the Collection Accounts pursuant
to subsection (d)(i) above on such Deposit Date, the remaining funds (less an
amount equal to the costs and expenses, if any, incurred by the Trustee with
respect to the sale of the Receivables pursuant to subsection 7.2(a) or 9.1(b)
and
48
reimbursable to the Trustee as provided in Section 8.5), if any, on deposit in
the Collection Account on such date after giving effect to transfers to be made
pursuant to subsection (d)(iii) above.
(vi) No later than the Business Day following each Deposit
Date, the Servicer shall direct the Trustee in writing to transfer with respect
to the Aggregate Daily Collections deposited into the Canada/U.S. Dollar
Collection Account and the Canada/Canadian Dollar Collection Account to the
respective Series Canada/U.S. Dollar Collection Subaccount and the respective
Series Canada/Canadian Dollar Collection Subaccount, as the case may be, for
each Outstanding Series, an amount equal to the product of (x) the applicable
Invested Percentage for such Outstanding Series and (y) such Aggregate Daily
Collections.
(vii) No later than the Business Day following each Deposit
Date, except as otherwise provided in a Supplement, (A) if in the amounts
deposited in a Series Collection Subaccount or Sub-subaccount, as the case may
be, of an Outstanding Series in accordance with this Section 3.1 and the related
Supplement are less than the amounts required to be on deposit therein on such
Business Day or (B) if a Supplement requires or permits funds on deposit in the
respective Series Canada/U.S. Dollar Collection Subaccount or the respective
Series Canada/Canadian Dollar Collection Subaccount to be transferred to another
Collection Subaccount or Sub-subaccount of such Series, as the case may be, the
Servicer shall direct the Trustee in writing to transfer to the applicable
Series Collection Subaccount or Sub-subaccounts, as the case may be, first,
from amounts on deposit in the Series Canada/U.S. Dollar Collection Subaccount
for such Series and second, from amounts on deposit in the Series
Canada/Canadian Dollar Collection Subaccount for such Series, an amount up to
the amount of any such shortfall or required or permitted transfer.
(e) Certain Allocations Following an Amortization Period. (i) If, on
any Settlement Report Date, an Amortization Period has occurred and is
continuing with respect to any Outstanding Series and at such Settlement Report
Date, a Revolving Period is still in effect with respect to any other
Outstanding Series (a "Special Allocation Settlement Report Date"), then the
Servicer shall make the following calculations:
(A) the amount (the "Allocable Charged-Off Amount") equal to the
excess, if any, of (I) the aggregate Principal Amount of Charged-Off
Receivables for the related Settlement Period over (II) the aggregate
amount of Recoveries received during the related Settlement Period;
(B) the amount (the "Allocable Recoveries Amount") equal to the
excess, if any, of (I) the aggregate amount of Recoveries received during
the related Settlement Period over (II) the aggregate Principal Amount of
Charged-Off Receivables for the related Settlement Period; and
(ii) If, on any Special Allocation Settlement Report Date, any
of the Allocable Charged-Off Amount or the Allocable Recoveries Amount is
greater than zero for the related Settlement Period, the Trustee shall (in
accordance with written directions received pursuant to subsection (h) below,
upon which the Trustee may conclusively rely) make (A) a pro rata allocation to
each Outstanding Series (based on the Invested Percentage for such
49
Series) of a portion of each such positive amount and (B) an allocation to the
Exchangeable Company Interest of the remaining portion of each such positive
amount; provided, that the aggregate Allocable Recoveries Amount allocated
pursuant to this subsection 3.1(e)(ii) shall never exceed the Allocable
Charged-Off Amount previously allocated pursuant to this subsection 3.1(e)(ii).
(iii) With respect to each portion of the Allocable
Charged-Off Amount and the Allocable Recoveries Amount which is allocated to an
Outstanding Series pursuant to subsection 3.1(e)(ii), the Trustee shall apply
each such amount to such Series in accordance with the related Supplement for
such Series.
(f) Allocations for the Exchangeable Company Interest. Until the
occurrence and continuance of a Potential Early Amortization Event or an Early
Amortization Event, in each case set forth in Section 7.1 of the Agreement, or
an Early Amortization Period with respect to all Outstanding Series, on each
Business Day and, after the occurrence and continuance of a Potential Early
Amortization Event or an Early Amortization Event, in each case set forth in
Section 7.1 of the Agreement, or an Early Amortization Period with respect to
all Outstanding Series, and until the Trust Termination Date, on each
Distribution Date, after making all allocations required pursuant to subsection
3.1(d), the Trustee shall (in accordance with the written direction of the
Servicer, upon which the Trustee may conclusively rely) transfer to the owner of
the Exchangeable Company Interest the remaining amount on deposit in the Company
Collection Subaccount as well as all amounts on deposit in the Canada/U.S.
Dollar Collection Account and the Canada/Canadian Dollar Collection Account (and
any subaccounts thereof) not otherwise required to be retained therein or
otherwise distributed pursuant to the terms of a Supplement.
(g) Set-Off. (i) In addition to the provisions of Section 8.5, if
the Company shall fail to make a payment as provided in this Agreement or any
Supplement, the Servicer or the Trustee may set off and apply any amounts
otherwise payable to the Company under any Pooling and Servicing Agreement,
including without limitation any amounts allocable to the Exchangeable Company
Interest or any Series Subordinated Interest. The Company hereby waives demand,
notice or declaration of such set-off and application; provided, however, that
notice will promptly be given to the Company of such set-off; provided, further,
that failure to give such notice shall not affect the validity of such set-off.
(ii) In addition to the provisions of Section 8.5, in the
event the Servicer shall fail to make a payment as provided in any Pooling and
Servicing Agreement, the Trustee may set off and apply any amounts otherwise
payable to the Servicer in its capacity as Servicer under the Transaction
Documents on account of such obligation. The Servicer hereby waives demand,
notice or declaration of such set-off and application; provided that notice will
promptly be given to the Servicer of such set-off; provided, further, that
failure to give such notice shall not affect the validity of such set-off.
(h) Allocation and Application of Funds. The Servicer shall in a
timely manner direct the Trustee in writing (which shall be given in the form of
the Daily Report and Monthly Settlement Statement) to apply all Collections with
respect to the Receivables in accordance with this Article III and in the
Supplement with respect to each Outstanding Series. The Servicer shall direct
the Trustee in writing to pay Collections to the owner of the
50
Exchangeable Company Interest to the extent such Collections are allocated to
the Exchangeable Company Interest under subsection 3.1(f) and as otherwise
provided in Article III. Notwithstanding anything in this Agreement, any
Supplement or any other Transaction Document to the contrary, to the extent that
the Trustee receives any Daily Report prior to 2:00 p.m., New York City time, on
any Business Day, the Trustee shall make any applications of funds required
thereby on the same Business Day and otherwise on the next succeeding Business
Day.
(i) Exchange of Canadian Dollars into U.S. Dollars. All amounts
transferred from a Series Canada/Canadian Dollar Collection Subaccount to the
U.S. Dollar Collection Account (or any Subaccount or Sub-subaccount thereof)
shall be exchanged by the Trustee into U.S. Dollars at the written direction of
the Servicer. Subject to the last paragraph in this Section 3.1(i), the Servicer
shall solicit offer quotations from at least two Authorized Foreign Exchange
Dealers for effecting such exchange and shall compare such offer quotations to
the Required Currency Hedge and select the execution which will require the
least amount of Canadian Dollars to purchase one (1) U.S. Dollar. The Servicer
shall then direct the Trustee in writing to effect such exchange with the
Authorized Foreign Exchange Dealer or the Eligible Counterparty as soon
thereafter as is reasonably practicable.
The Servicer shall notify the Trustee in writing of the name and
payment instructions of the Authorized Foreign Exchange Dealer or Eligible
Counterparty, and shall direct the Trustee in writing to execute the trade. The
Trustee shall withdraw the portion of the Canadian Dollars from the appropriate
Series Canada/Canadian Dollar Collection Subaccount required to be paid pursuant
to such agreement or agreements and make the payments described in the payment
instructions provided pursuant to the preceding sentence, all in accordance with
the written instructions of the Servicer.
The Servicer shall maintain written records of any quotations
received in response to any solicitations made pursuant to this Section 3.1(i)
and shall make the same available to the Trustee promptly upon request.
If, as a result of changes in customary market practice in, or other
changes relating to, the currency exchange markets in Canada, the Servicer is
unable to comply with the terms thereof in respect of the purchase of U.S.
Dollars with Canadian Dollars, then the parties hereto will use all reasonable
efforts to agree on the terms of an amendment hereto and to amend the terms
hereof in order to permit such compliance with the terms hereof or to reflect
such customary market practice.
The foregoing shall be the exclusive method by which amounts may be
transferred from a Series Canada/Canadian Dollar Collection Subaccount to the
U.S. Dollar Collection Account (or any Subaccount or Sub-subaccount thereof);
provided, however, as an alternate transfer method, the Servicer may transfer
the required amount of U.S. Dollars, calculated in accordance with the Canadian
Exchange Percentage, to the U.S. Dollar Collection Account (or any Subaccount or
Sub-subaccount thereof) and upon completion of such transfer, the Trustee shall
distribute from such Series Canada/Canadian Dollar Collection Subaccount the
corresponding amount of Canadian Dollars to or upon the order of the Servicer;
and provided further that the amount of U.S. Dollars transferred is not less
than the amount of U.S. Dollars that would have been transferred using the
Valuation Price. The
51
Trustee shall, in no event whatsoever, be responsible for any loss or damages
arising out of or with respect to any currency exchange pursuant to this Article
III except to the extent provided in Article VIII.
THE REMAINDER OF ARTICLE III SHALL BE SPECIFIED
IN THE SUPPLEMENT WITH RESPECT TO EACH SERIES.
SUCH REMAINDER SHALL BE APPLICABLE ONLY TO THE
SERIES RELATING TO THE SUPPLEMENT IN WHICH
SUCH REMAINDER APPEARS.
ARTICLE IV
ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO THE SERIES RELATING THERETO
ARTICLE V
THE CERTIFICATES AND INTERESTS
Section 5.1. The Certificates. The Investor Certificates of each
Series and any Class thereof shall be in fully registered form and shall be
substantially in the form of the exhibits with respect thereto attached to the
applicable Supplement. The Certificates shall, upon issue, be executed and
delivered by the Company to the Trustee for authentication and redelivery as
provided in Section 5.2. The Investor Certificates shall be issued in minimum
denominations of $1,000,000 and in integral multiples of $100,000 in excess
thereof unless otherwise specified in any Supplement for any Series and Class.
Unless otherwise specified in any Supplement for any Series, the Investor
Certificates of any Series or Class shall be issued upon initial issuance as one
or more global certificates in an aggregate original principal amount equal to
the Initial Invested Amount with respect to such Series or Class. The Company is
hereby authorized to execute and deliver each Certificate on behalf of the
Trust. Each Certificate shall be executed by manual or facsimile signature on
behalf of the Company by a Responsible Officer. Certificates bearing the manual
or facsimile signature of the individual who was, at the time when such
signature was affixed, authorized to sign on behalf of the Company or the
Trustee shall not be rendered invalid, notwithstanding that such individual has
ceased to be so authorized prior to or on the date of the authentication and
delivery of such Certificates or does not hold such office at the date of such
Certificates. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless there appears on such Certificate
a certificate of authentication substantially in the form provided for herein
executed by or on behalf of the Trustee by the manual signature of a duly
authorized signatory, and such certificate of authentication upon any
Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication but failure to do
so shall not render them invalid.
52
Section 5.2. Authentication of Certificates. Contemporaneously with
the execution and delivery of this Agreement, the Trustee shall authenticate and
deliver the initial Series of the Investor Certificates that is issued upon
original issuance, upon the written order of the Company in a form reasonably
satisfactory to the Trustee, to the holders of the initial Series of Investor
Certificates, against payment to the Company of the Initial Invested Amount. The
Investor Certificates shall be duly authenticated by or on behalf of the Trustee
in authorized denominations equal to (in the aggregate) the Initial Invested
Amount and the interests evidenced thereby, and together with any Series
Subordinated Interest and the Exchangeable Company Interest, shall constitute
the entire ownership of the Trust. Upon a Company Exchange as provided in
Section 5.10 and the satisfaction of certain other conditions specified therein,
the Trustee shall authenticate and deliver the Certificates of additional Series
(with the designation provided in the applicable Supplement) (or, if provided in
any Supplement, the additional Investor Certificates of an existing Series),
upon the written order of the Company, to the Persons designated in such
Supplement or order (if no additional Supplement is required). Upon the order of
the Company, the Investor Certificates of any Series shall be duly authenticated
by or on behalf of the Trustee, in authorized denominations equal to (in the
aggregate) the Initial Invested Amount of such Series (or, if provided in any
Supplement, the additional Investor Certificates of an existing Series), of
Investor Certificates.
Section 5.3. Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at the office or agency to be maintained
by a transfer agent and registrar (which may be the Trustee) (the "Transfer
Agent and Registrar") in accordance with the provisions of Section 8.16 a
register (the "Certificate Register") in which, subject to such reasonable
regulations as the Trustee may prescribe, the Transfer Agent and Registrar shall
provide for the registration of the Investor Certificates and of transfers and
exchanges of the Investor Certificates as herein provided. The Company hereby
appoints the Trustee as Transfer Agent and Registrar for the purpose of
registering the Investor Certificates and transfers and exchanges of the
Investor Certificates as herein provided. The Trustee shall be permitted to
resign as Transfer Agent and Registrar upon 30 days' written notice to the
Company and the Servicer; provided, however, that such resignation shall not be
effective and the Trustee shall continue to perform its duties as Transfer Agent
and Registrar until the Trustee has appointed a successor Transfer Agent and
Registrar reasonably acceptable to the Company and such successor Transfer Agent
and Registrar has accepted such appointment. The provisions of Sections 8.1,
8.2, 8.3, 8.5 and 10.19 shall apply to the Trustee also in its role as Transfer
Agent or Registrar, as the case may be, for so long as the Trustee shall act as
Transfer Agent or Registrar, as the case may be.
The Company hereby agrees to provide the Trustee from time to time
sufficient funds, on a timely basis and in accordance with and subject to
Section 8.5, for the payment of any reasonable compensation payable to the
Transfer Agent and Registrar for their services under this Section 5.3. The
Trustee hereby agrees that, upon the receipt of such funds from the Company, it
shall pay the Transfer Agent and Registrar such amounts.
Upon surrender for registration of transfer of any Investor
Certificate at any office or agency of the Transfer Agent and Registrar
maintained for such purpose, the Company shall execute, and, upon the written
request of the Company, the Trustee shall authenticate and deliver, in the name
of the designated transferee or transferees, one or more new Investor
Certificates in authorized denominations of the same Series (and Class)
53
representing like aggregate Fractional Undivided Interests and which bear
numbers that are not contemporaneously outstanding.
At the option of an Investor Certificateholder, Investor
Certificates may be exchanged for other Investor Certificates of the same Series
(and Class) in authorized denominations of like aggregate Fractional Undivided
Interests, bearing numbers that are not contemporaneously outstanding, upon
surrender of the Investor Certificates to be exchanged at any such office or
agency of the Transfer Agent and Registrar maintained for such purpose.
Whenever any Investor Certificates of any Series are so surrendered
for exchange, the Company shall execute, and, upon the written request of the
Company, the Trustee shall authenticate and (unless the Transfer Agent and
Registrar is different from the Trustee, in which case the Transfer Agent and
Registrar shall) deliver, the Investor Certificates of such Series which the
Investor Certificateholder making the exchange is entitled to receive. Every
Investor Certificate presented or surrendered for registration of transfer or
exchange shall be accompanied by a written instrument of transfer substantially
in the form attached to the form of such Investor Certificate and duly executed
by the holder thereof or his attorney-in-fact duly authorized in writing
delivered to the Trustee (unless the Transfer Agent and Registrar is different
from the Trustee, in which case to the Transfer Agent and Registrar) and
complying with any requirements set forth in the applicable Supplement.
No service charge shall be made for any registration of transfer or
exchange of Investor Certificates, but the Transfer Agent and Registrar may
require any Investor Certificateholder that is transferring or exchanging one or
more Certificates to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer or exchange of
Investor Certificates.
All Investor Certificates surrendered for registration of transfer
and exchange shall be canceled and disposed of in a customary manner
satisfactory to the Trustee.
The Company shall execute and deliver Certificates to the Trustee or
the Transfer Agent and Registrar in such amounts and at such times as are
necessary to enable the Trustee and the Transfer Agent and Registrar to fulfill
their respective responsibilities under this Agreement and the Certificates.
(b) The Transfer Agent and Registrar will maintain at its expense in
the Borough of Manhattan, The City of New York and, subject to subsection
5.3(a), if specified in the related Supplement for any Series, any other city
designated in such Supplement, an office or offices or agency or agencies where
Investor Certificates may be surrendered for registration or transfer or
exchange.
(c) Unless otherwise stated in any related Supplements, registration
of transfer of Certificates containing a legend relating to restrictions on
transfer of such Certificates (which legend shall be set forth in the Supplement
relating to such Investor Certificates) shall be effected only if the conditions
set forth in the related Supplement are complied with.
Certificates issued upon registration or transfer of, or in exchange
for, Certificates bearing the legend referred to above shall also bear such
legend unless the
54
Company, the Servicer, the Trustee and the Transfer Agent and Registrar receive
an Opinion of Counsel satisfactory to each of them, to the effect that such
legend may be removed.
(d) (i) The Company may not transfer, assign, exchange or otherwise
pledge or convey the Series Subordinated Interest of any Series (or any interest
therein) or the Exchangeable Company Interest (or any interest therein) except,
with respect to the Exchangeable Company Interest, pursuant to Section 5.10.
(ii) Neither the Company nor the Servicer shall at any time
participate in the listing of any Targeted Investor Certificate (as
defined below) on an "established securities market" within the meaning of
Section 7704(b)(1) of the Internal Revenue Code and any proposed,
temporary or final treasury regulation thereunder as of the date hereof,
including, without limitation, an over-the-counter or interdealer
quotation system that regularly disseminates firm buy or sell quotations.
"Targeted Investor Certificate" shall mean any Certificate representing a
right to receive interest or principal with respect to any Class or Series
of Investor Certificates with respect to which an Opinion of Counsel has
not been rendered that such Certificates will be treated as debt for
federal income tax purposes (it being understood that any Certificate with
respect to which an Opinion of Counsel has been rendered that such
Certificate will be treated either as debt or as an interest in a
partnership for federal income tax purposes shall be a Targeted Investor
Certificate).
(e)(i) No transfer of a Targeted Investor Certificate or grant of a
participation therein shall be permitted if (A) such transfer or grant would
cause the number of Targeted Holders (as defined below) to exceed 90 or (B) the
transferee or grantee, as the case may be, is a trust, partnership or "S
corporation" (within the meaning of Section 1361(a) of the Code) (a
"flow-through entity"), unless such flow-through entity represents that less
than 50% of the aggregate value of such flow-through entity's assets consist of
Targeted Investor Certificates. "Targeted Holder" shall mean each holder of a
Targeted Investor Certificate; provided, however, that any Person holding more
than one interest with respect to the Investor Certificates or the Trust, each
of which separately would cause such Person to be a Targeted Holder, shall be
treated as a single Targeted Holder.
(ii) Any determination by the Transfer Agent and Registrar (in
accordance with the information contained in the Certificate Register and the
certifications made by each transferee and participant pursuant to the
applicable Supplement, upon which information the Transfer Agent and Registrar
may conclusively rely) that the event described in either clause (i)(A) or
(i)(B) of this subsection 5.3(e) would occur as the result of a transfer of a
Targeted Investor Certificate or the grant of a participation therein shall be
(X) communicated in writing to the transferring or granting Investor
Certificateholder prior to the effective date set out in the notice of transfer
or participation required by, or otherwise provided for under, the related
Supplement and (Y) binding upon the parties absent manifest error.
(iii) Except as specified in any Supplement for a related
Series, all Investor Certificates of any Series shall be equally and ratably
entitled as provided herein to the benefits hereof without preference, priority
or distinction on account of the actual time or times of
55
authentication and delivery, all in accordance with the terms and provisions of
this Agreement and the applicable Supplement.
Section 5.4. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate is surrendered to the Transfer Agent and
Registrar, or the Transfer Agent and Registrar receives evidence in the form of
a certification by the holder thereof of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Transfer Agent and Registrar and
the Trustee such security or indemnity as may be required by them to save the
Trust and each of them harmless, then, in the absence of actual notice to the
Trustee or Transfer Agent and Registrar that such Certificate has been acquired
by a bona fide purchaser, the Company shall execute and, upon the written
request of the Company, the Trustee shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like tenor and aggregate Fractional Undivided Interest and
bearing a number that is not contemporaneously outstanding. In connection with
the issuance of any new Certificate under this Section 5.4, the Trustee or the
Transfer Agent and Registrar may require the payment by the Holder of a sum
sufficient to cover any tax or other governmental expenses (including the fees
and expenses of the Trustee and Transfer Agent and Registrar) connected
therewith. Any duplicate Certificate issued pursuant to this Section 5.4 shall
constitute complete and indefeasible evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section 5.5. Persons Deemed Owners. At all times prior to due
presentation of a Certificate for registration of transfer, the Company, the
Trustee, the Paying Agent, the Transfer Agent and Registrar, any Agent and any
agent of any of them may treat the Person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Article IV of the related Supplement and for all other
purposes whatsoever, and neither the Trustee, the Paying Agent, the Transfer
Agent and Registrar, any Agent nor any agent of any of them shall be affected by
any notice to the contrary. Notwithstanding the foregoing provisions of this
Section 5.5, in determining whether the holders of the requisite Fractional
Undivided Interests have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Certificates (or interests therein) owned
by the Company, the Servicer or any Affiliate thereof shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Certificates which a Responsible
Officer of the Trustee actually knows to be so owned shall be so disregarded.
Certificates (or interests therein) so owned by the Company, the Servicer or any
Affiliate thereof which have been pledged in good faith shall not be disregarded
and may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Certificates (or interests therein) and that the pledgee is not the Company, the
Servicer or an Affiliate thereof.
Section 5.6. Appointment of Paying Agent. The Paying Agent shall
make distributions to Investor Certificateholders from the Collection Account to
the extent of available funds (and/or any other account or accounts maintained
for the benefit of the Investor Certificateholders as specified in the related
Supplement for any Series) pursuant to Articles III and IV. The Trustee may
revoke such power and remove the Paying Agent if the Trustee determines in its
sole discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement in any material respect. Unless otherwise
specified in the
56
related Supplement for any Series and with respect to such Series, the Paying
Agent shall initially be the Trustee and, if the Trustee so chooses, any
co-paying agent chosen by the Trustee. Each Paying Agent shall have a combined
capital and surplus of at least $50,000,000. The Paying Agent shall be permitted
to resign upon 30 days' written notice to the Trustee. In the event that the
Paying Agent shall so resign, the Trustee shall appoint a successor to act as
Paying Agent (which shall be a depository institution or trust company)
reasonably acceptable to the Company which appointment shall be effective on the
date on which the Person so appointed gives the Trustee written notice that it
accepts the appointment. Any resignation or removal of the Paying Agent and
appointment of successor Paying Agent pursuant to this Section 5.6 shall not
become effective until acceptance of appointment by the successor Paying Agent,
as provided in this Section 5.6. The Trustee shall cause such successor Paying
Agent or any additional Paying Agent appointed by the Trustee to execute and
deliver to the Trustee an instrument in which such successor Paying Agent or
additional Paying Agent shall agree with the Trustee that as Paying Agent, such
successor Paying Agent or additional Paying Agent will hold all sums, if any,
held by it for payment to the Investor Certificateholders in trust for the
benefit of the Investor Certificateholders entitled thereto until such sums
shall be paid to such Holders. The Paying Agent shall return all unclaimed funds
to the Trustee and upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Trustee. The provisions of Sections
8.1, 8.2, 8.3, 8.5 and 10.19 shall apply to the Trustee also in its role as
Paying Agent, for so long as the Trustee shall act as Paying Agent. Any
reference in this Agreement to the Paying Agent shall include any co-paying
agent, if any, unless the context requires otherwise.
The Company hereby agrees to provide the Trustee from time to time
sufficient funds, on a timely basis and in accordance with and subject to
Section 8.5, for the payment of any reasonable compensation payable to the
Paying Agent for its services under this Section 5.6. The Trustee hereby agrees
that, upon the receipt of such funds from the Company, it shall pay the Paying
Agent such amounts.
Section 5.7. Access to List of Investor Certificateholders' Names
and Addresses. The Trustee will furnish or cause to be furnished by the Transfer
Agent and Registrar to the Company, the Servicer or the Paying Agent, within ten
Business Days after receipt by the Trustee of a written request therefor from
the Company, the Servicer or the Paying Agent, respectively, in writing, a list
of the names and addresses of the Investor Certificateholders as then recorded
by or on behalf of the Trustee. If three or more Investor Certificateholders of
record or any Investor Certificateholder of any Series or a group of Investor
Certificateholders of record representing Fractional Undivided Interests
aggregating not less than 10% of the Invested Amount of the related Outstanding
Series (the "Applicants") apply in writing to the Trustee, and such application
states that the Applicants desire to communicate with other Investor
Certificateholders of any Series with respect to their rights under this
Agreement or under the Investor Certificates and is accompanied by a copy of the
communication which such Applicants propose to transmit, then the Trustee, after
having been adequately indemnified by such Applicants for its costs and
expenses, shall transmit or shall cause the Transfer Agent and Registrar to
transmit, such communication to the Investor Certificateholders reasonably
promptly after the receipt of such application.
Every Investor Certificateholder, by receiving and holding an
Investor Certificate, agrees with the Trustee that neither the Trustee, the
Transfer Agent and Registrar,
57
nor any of their respective agents, officers, directors or employees shall be
held accountable by reason of the disclosure or mailing of any such information
as to the names and addresses of the Investor Certificateholders hereunder,
regardless of the sources from which such information was derived.
As soon as practicable following each Record Date, the Trustee shall
provide to the Paying Agent or its designee, a list of Investor
Certificateholders in such form as the Paying Agent may reasonably request.
Section 5.8. Authenticating Agent. (a) The Trustee may appoint one
or more authenticating agents with respect to the Certificates which shall be
authorized to act on behalf of the Trustee in authenticating the Certificates in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates. Whenever reference is made in this Agreement to
the authentication of Certificates by the Trustee or the Trustee's certificate
of authentication, such reference shall be deemed to include authentication on
behalf of the Trustee by an authenticating agent and a certificate of
authentication executed on behalf of the Trustee by an authenticating agent.
Each authenticating agent must be acceptable to the Company.
(b) Any institution succeeding to the corporate trust business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such authenticating agent.
(c) An authenticating agent may at any time resign by giving written
notice of resignation to the Trustee. Upon the receipt by the Trustee of any
such notice of resignation and upon the giving of any such notice of termination
by the Trustee, the Trustee shall immediately give notice of such resignation or
termination to the Company. Any resignation of an authenticating agent shall not
become effective until acceptance of appointment by the successor authenticating
agent as provided in this Section 5.8. The Trustee may at any time terminate the
agency of an authenticating agent by giving notice of termination to such
authenticating agent. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time an authenticating agent shall cease to be
acceptable to the Trustee, the Trustee promptly may appoint a successor
authenticating agent. Any successor authenticating agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and duties
of its predecessor hereunder, with like effect as if originally named as an
authenticating agent. No successor authenticating agent (other than an Affiliate
of the Trustee) shall be appointed unless reasonably acceptable to the Trustee
and the Company.
(d) The Company hereby agrees to provide the Trustee from time to
time sufficient funds, on a timely basis and in accordance with and subject to
Section 8.5, for the payment of any reasonable compensation payable to each
authenticating agent for its services under this Section 5.8. The Trustee hereby
agrees that, upon the receipt of such funds from the Company it shall pay each
authenticating agent such amounts.
(e) The provisions of Sections 8.1, 8.2, 8.3 and 8.5 shall be
applicable to any authenticating agent.
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(f) Pursuant to an appointment made under this Section 5.8, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
"This is one of the Certificates described in the Pooling Agreement
dated as of June 5, 1998, among WESCO Receivables Corp., WESCO
Distribution, Inc., as Servicer, and The Chase Manhattan Bank, as Trustee.
------------------------
as Authenticating Agent
for the Trustee
By
---------------------------
Authorized Signatory"
Section 5.9. Tax Treatment. It is the intent of the Servicer, the
Company, the Investor Certificateholders and the Trustee that, for federal,
state and local income and franchise tax purposes, the Investor Certificates be
treated as evidence of indebtedness secured by the Trust Assets and the Trust
not be characterized as an association taxable as a corporation. The Company,
the Servicer and the Trustee, by entering into this Agreement, and each Investor
Certificateholder, by its acceptance of its Investor Certificate, agree to treat
the Investor Certificates for federal, state and local income and franchise tax
purposes as indebtedness. The provisions of this Agreement and all related
Transaction Documents shall be construed to further these intentions of the
parties. This Section 5.9 shall survive the termination of this Agreement and
shall be binding on all transferees of any of the foregoing persons.
Section 5.10. Company Exchanges. (a) The Company may, in accordance
with the procedures set forth below, call for an adjustment of the Exchangeable
Company Interest in exchange for (i) an increase in the Invested Amount of
Investor Certificates of an Outstanding Series (or a Class thereof) and an
increase in the related Series Subordinated Interest or (ii) one or more newly
issued Series of Investor Certificates and the related newly created Series
Subordinated Interest (a "New Series") (any such exchange, a "Company
Exchange"). The Company may perform a Company Exchange by notifying the Trustee,
in writing at least five days in advance (an "Exchange Notice") of the date upon
which the Company Exchange is to occur (an "Exchange Date"). Any Exchange Notice
shall state the designation of any Series (and/or Class, if applicable) to be
issued (or increased) on the Exchange Date and, with respect to each such Series
(and/or Class, if applicable): (a) its additional or Initial Invested Amount, as
the case may be, if any, which in the aggregate at any time may not be greater
than the current value of the Exchangeable Company Interest, if any, at such
time, (b) its Certificate Rate (or the method for allocating interest payments
or other cash flow to such Series), if any, and (c) whether such New Series will
be a companion series to an Outstanding Series as described in paragraph (d)
below (an "Existing Companion Series"; and together with the New Series, a
"Companion Series"). On the Exchange Date, the Trustee shall, upon the written
order of the Company, authenticate and deliver any
59
Certificates evidencing an increase in the Invested Amount of Investor
Certificates of an Outstanding Series (or a Class thereof) or a newly issued
Series only upon delivery by the Company to the Trustee of the following
(together with the delivery by the Company to the Trustee of any additional
agreements, instruments or other documents as are specified in the related
Supplement): (a) a Supplement executed by the Company and specifying the
Principal Terms of such Series (provided that no such Supplement shall be
required for any increase in the Invested Amount of an Outstanding Series (or
Class thereof) of Investor Certificates unless it is so required by the related
Supplement; provided that if the Certificate Rate for the new Certificates is
different from the Certificate Rate applicable to the outstanding Certificates
of such Series (or Class thereof) the new Certificate Rate shall be set forth in
an Officer's Certificate of the Company delivered to the Trustee), (b) a Tax
Opinion addressed to the Trustee and the Trust, (c) a General Opinion addressed
to the Trustee and the Trust, (d) an agreement pursuant to which the Enhancement
Provider, if any, agrees to provide Enhancement, (e) an Officer's Certificate
that the Exchange will not result in the occurrence of a Potential Early
Amortization Event or Early Amortization Event with respect to any Outstanding
Series and that all conditions precedent to the Exchange contained in the
Pooling and Servicing Agreements have been complied with, and (f) written
confirmation from each Rating Agency that the Company Exchange will not result
in the Rating Agency's reducing or withdrawing its rating on any then
Outstanding Series rated by it. Upon the delivery of the items listed in clauses
(a) through (f) above, the existing Exchangeable Company Interest and the
applicable Series Subordinated Interests, as the case may be, shall be deemed
adjusted as of the Exchange Date, and the new Series Subordinated Interests, if
any, shall be deemed duly created as of the Exchange Date, in each case as
provided above. There is no limit to the number of Company Exchanges that the
Company may perform under this Agreement. If the Company shall, on any Exchange
Date, retain any Investor Certificates issued on such Exchange Date, it shall,
prior to transferring any such Certificates to another Person, obtain a Tax
Opinion. Additional restrictions relating to a Company Exchange may be set forth
in any Supplement.
(b) Upon any Company Exchange, the Trustee, in accordance with the
written directions of the Company, shall issue to the Company under Section 5.1,
for execution and redelivery to the Trustee for authentication under Section
5.2, (i) one or more Certificates representing an increase in the Invested
Amount of an Outstanding Series (or Class thereof) or (ii) one or more new
Series of Investor Certificates. Any such Certificates shall be substantially in
the form specified in the applicable Supplement and each shall bear, upon its
face, the designation for such Series (and Class thereof) to which each such
certificate belongs so selected by the Company.
(c) In conjunction with a Company Exchange, the parties hereto
shall, except as otherwise provided in subsection (a) above, execute a
Supplement to this Agreement, which shall define, with respect to any additional
Investor Certificates or newly issued Series, as the case may be: (i) its name
or designation, (ii) its additional or initial principal amount, as the case may
be (or method for calculating such amount), (iii) its coupon rate (or formula
for the determination thereof), (iv) the interest payment date or dates and the
date or dates from which interest shall accrue, (v) the method for allocating
Collections to Holders, including the applicable Investor Percentage, (vi) the
names of any accounts to be used by such Series and the terms governing the
operation of any such accounts, (vii) the issue and terms of a letter of credit
or other form of Enhancement, if any, with respect thereto, (viii) the terms, if
any, on
60
which the Certificates of such Series may be repurchased by the Company or may
be remarketed to other investors, (ix) the Series Termination Date, (x) any
deposit account maintained for the benefit of Holders, (xi) the number of
Classes of such Series, and if more than one Class, the rights and priorities of
each such Class, (xii) the rights of the owner of the Exchangeable Company
Interest that have been transferred to the holders of such Series, (xiii) the
designation of any Series Accounts and the terms governing the operation of any
such Series Accounts, (xiv) provisions reasonably acceptable to the Trustee
concerning the payment of the Trustee's fees and expenses and (xv) other
relevant terms (all such terms, the "Principal Terms" of such Series). The
Supplement executed in connection with the Company Exchange shall contain
administrative provisions which are reasonably acceptable to the Trustee.
(d) In order for a New Series to be part of a Companion Series, the
Supplement for the related Existing Companion Series must provide for or permit
the Amortization Period to commence on the Issuance Date for such New Series,
and on or prior to the Issuance Date for the New Series the Servicer and the
Company shall take all actions, if any, necessary to cause the Amortization
Period for such Existing Companion Series to commence on such Issuance Date. The
proceeds from the issuance of the New Series shall be deposited in the
applicable Series Principal Collection Sub-subaccount and the Company shall, on
the Issuance Date for such New Series, deposit into the applicable Series
Non-Principal Collection Sub-subaccount the amount of interest that will accrue
on the New Series over a period specified in the related Supplement for such New
Series. On each day on which principal is paid to the holders of the Existing
Companion Series, the Trustee shall distribute to the Company from the
applicable Series Principal Collection Sub-subaccount of the New Series an
amount (up to the amount of available funds in such account) equal to the amount
distributed on such day to the Investor Certificateholders of any Existing
Companion Series; provided that, after giving effect to such distributions, the
Aggregate Receivables Amount shall equal or exceed the sum of (i) the Target
Receivables Amount with respect to such Existing Companion Series on such day,
plus (ii) the Target Receivables Amount with respect to the New Series on such
day, plus (iii) the Target Receivables Amount with respect to any other
Outstanding Series on such day; provided further that the Trustee may
conclusively rely on the calculations of the Servicer of such amounts.
Section 5.11. Book-Entry Certificates. If specified in any related
Supplement, the Investor Certificates, or any portion thereof, upon original
issuance, shall be issued in the form of one or more typewritten Certificates
representing the Book-Entry Certificates, to be delivered to the depository
specified in such Supplement (the "Depository") which shall be the Clearing
Agency, specified by, or on behalf of, the Company for such Series. The Investor
Certificates shall initially be registered on the Certificate Register in the
name of the nominee of such Clearing Agency, and no Certificate Book-Entry
Holder will receive a definitive certificate representing such Certificate
Book-Entry Holder's interest in the Investor Certificates, except as provided in
Section 5.13. Unless and until definitive, fully registered Investor
Certificates ("Definitive Certificates") have been issued to Holders pursuant to
Section 5.13 or the related Supplement:
(a) the provisions of this Section 5.11 shall be in full force and
effect;
(b) the Company, the Servicer and the Trustee may deal with each
Clearing Agency for all purposes (including the making of distributions on
the Investor
61
Certificates) as the Holder without respect to whether there has been any
actual authorization of such actions by the Certificate Book-Entry Holders
with respect to such actions;
(c) to the extent that the provisions of this Section 5.11 conflict
with any other provisions of this Agreement, the provisions of this
Section 5.11 shall control; and
(d) the rights of Certificate Book-Entry Holders shall be exercised
only through the Clearing Agency and the related Clearing Agency
Participants and shall be limited to those established by law and
agreements between such related Certificate Book-Entry Holders and the
Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Depository Agreement, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Investor Certificates to
such Clearing Agency Participants.
Notwithstanding the foregoing, no Class or Series of Investor Certificates may
be issued as Book Entry Certificates (but, instead, shall be issued as
Definitive Certificates) unless at the time of issuance of such Class or Series
the Company and the Trustee receive an opinion of independent counsel that the
Certificates of such Class or Series will be treated as indebtedness for federal
income tax purposes.
Section 5.12. Notices to Clearing Agency. Whenever notice or other
communication to the Holders is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificate Book-Entry Holders
pursuant to Section 5.13, the Trustee shall, give all such notices and
communications specified herein to be given to the Investor Certificateholders
to the Clearing Agencies.
Section 5.13. Definitive Certificates. If (a)(i) the Company advises
the Trustee in writing that any Clearing Agency is no longer willing or able to
properly discharge its responsibilities under the applicable Depository
Agreement, and (ii) the Company is unable to locate a qualified successor, (b)
the Company, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (c) after the
occurrence of a Servicer Default or an Early Amortization Event, Certificate
Book-Entry Holders representing Fractional Undivided Interests aggregating more
than 50% of the Invested Amount held by such Certificate Book-Entry Holders of
each affected Series then issued and outstanding advise the Clearing Agency
through the Clearing Agency Participants in writing, and the Clearing Agency
shall so notify the Trustee, that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interests of the
Certificate Book-Entry Holders, the Trustee shall notify the Clearing Agency,
which shall be responsible to notify the Certificate Book-Entry Holders, of the
occurrence of any such event and of the availability of Definitive Certificates
to Certificate Book-Entry Holders requesting the same. Upon surrender to the
Trustee of the Book-Entry Certificates by the Clearing Agency, accompanied by
registration instructions from the Clearing Agency for registration, the Company
shall execute and the Trustee shall authenticate the Definitive Certificates.
Neither the Company nor the Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions.
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ARTICLE VI
OTHER MATTERS RELATING
TO THE COMPANY
Section 6.1. Limitation on Liability. None of the Company's
directors or officers or employees or agents, shall be under any liability to
the Trust, the Trustee, the Holders or any other Person for any action taken or
for refraining from the taking of any action pursuant to this Agreement, whether
or not such action or inaction arises from express or implied duties under this
Agreement; provided, that this provision shall not protect any such director,
officer, employee or agent against any liability which would otherwise be
imposed on such Person by reason of wilful misconduct, bad faith or gross
negligence in the performance of such Person's duties or by reason of reckless
disregard of such Person's obligations and duties hereunder.
Section 6.2. Liabilities. By entering into this Agreement, the
Company agrees to be liable, directly to the injured party, for the entire
amount of any losses, claims, damages or liabilities, arising out of or based on
the arrangement created by any Pooling and Servicing Agreement or the actions of
the Servicer taken pursuant hereto or thereto (except those losses, claims,
damages or liabilities incurred by an Investor Certificateholder in the capacity
of an investor in the Investor Certificates as a result of the performance of
the Receivables, market fluctuations or other similar market or investment
risks) as though the Pooling and Servicing Agreements created a partnership
under the New York Uniform Limited Partnership Act with the Company as a general
partner thereof. The Company agrees to pay, indemnify and hold harmless each
Investor Certificateholder against and from any and all such losses, claims,
damages and liabilities, except to the extent they arise from any action or
omission by such Investor Certificateholder; provided that any payments made by
the Company in respect of any of the foregoing items shall be made solely from
funds available to the Company which are not otherwise required to be applied to
the payment of any amounts pursuant to any Pooling and Servicing Agreements
(other than to the Company), shall be non-recourse other than with respect to
such funds and shall not constitute a claim against the Company to the extent
that insufficient funds exist to make such payment. In the event of a Service
Transfer, the Successor Servicer (except for the Trustee in its capacity as
Successor Servicer) will indemnify and hold harmless the Company for any losses,
claims, damages and liabilities of the Company arising under this Section 6.2
from the actions or omissions of such Successor Servicer.
ARTICLE VII
EARLY AMORTIZATION EVENTS
Section 7.1. Early Amortization Events. Unless modified with respect
to any Series of Investor Certificates by any related Supplement, if any one of
the following events (each, an "Early Amortization Event") shall occur:
(a)(i) the Company shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief
of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent,
63
or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it
or its debts, or (B) seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
assets, or the Company shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against the Company any
case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced
against the Company any case, proceeding or other action seeking issuance
of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 such days from
the entry thereof; or (iv) the Company shall take any action in
furtherance of any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Company shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become due;
(b) the Trust or the Company shall become an "investment company"
within the meaning of the Investment Company Act of 1940, as amended;
(c) the Trust is characterized for federal income tax purposes as a
"publicly traded partnership" or as an association taxable as a
corporation; or
(d) the Trustee shall be appointed as Successor Servicer pursuant to
subsection 6.2(b) of the Servicing Agreement;
then, an "Early Amortization Period" with respect to all Outstanding Series
shall commence without any notice or other action on the part of the Trustee or
any Investor Certificateholder immediately upon the occurrence of such event.
The Servicer shall notify each Rating Agency, each Agent and the Trustee in
writing of the occurrence of any Early Amortization Period, specifying the cause
thereof. Further, upon the commencement against the Company of a case,
proceeding or other action described in clause (a)(ii) or (iii) above, the
Company shall not purchase Receivables from any Seller, or transfer Receivables
to the Trust, until such time, if any, as such case, proceeding or other action
is vacated, discharged, or stayed or bonded pending appeal.
Additional Early Amortization Events and the consequences thereof
may be set forth in each Supplement with respect to the Series relating thereto.
Section 7.2. Additional Rights Upon the Occurrence of Certain
Events. (a) If an Insolvency Event with respect to the Company occurs, the
Company shall immediately cease to transfer Receivables to the Trust and shall
promptly give notice to the Trustee of such occurrence. Notwithstanding any
cessation of the transfer to the Trust of additional Receivables, Receivables
transferred to the Trust prior to the occurrence of such Insolvency Event and
Collections in respect of such Receivables and interest, whenever created,
accrued in respect of such Receivables, shall continue to be a part of the
Trust. Within 15 days of the Trustee's receipt of notice of the occurrence of an
Insolvency Event in accordance with Section 7.1, if the Aggregate Invested
Amount and all accrued and unpaid interest thereon have not
64
been paid to the Investor Certificateholders, then the Trustee shall (i) publish
a notice in a newspaper with a national circulation (an "Authorized Newspaper")
that an Insolvency Event has occurred and that the Servicer, on behalf of the
Trustee, intends to sell, dispose of or otherwise liquidate the Receivables and
the other Trust Assets in a commercially reasonable manner and (ii) send written
notice to the Investor Certificateholders and request instructions from such
holders, which notice shall request each Investor Certificateholder to advise
the Trustee in writing that it elects one of the following options: (A) the
Investor Certificateholder wishes the Trustee to instruct the Servicer not to
sell, dispose of or otherwise liquidate the Receivables and the other Trust
Assets, or (B) the Investor Certificateholder wishes the Trustee to instruct the
Servicer to sell, dispose of or otherwise liquidate the Receivables and the
other Trust Assets and to instruct the Servicer to reconstitute the Trust upon
the same terms and conditions set forth herein. If after 60 days from the day
notice pursuant to clause (i) above is first published (the "Publication Date"),
the Trustee shall not have received written instructions of (x) holders of
Certificates representing undivided interests in the Trust aggregating in excess
of 50% of the related Invested Amount of each Series (or in the case of a series
having more than one Class of Investor Certificates, each Class of such series)
selecting option (A) above and (y) if the owners of the Exchangeable Company
Interest do not include the Company (and following the delivery of written
notice in the form referred to above by the Company to such owners), the owners
thereof representing undivided interests in the Trust aggregating in excess of
50% of the Company Interest, the Trustee shall instruct the Servicer to proceed
to sell, dispose of, or otherwise liquidate the Receivables and the other Trust
Assets in a commercially reasonable manner and on commercially reasonable terms,
which shall include the solicitation of competitive bids, and the Servicer shall
proceed to consummate the sale, liquidation or disposition of the Receivables
and the other Trust Assets as provided above with the highest bidder therefor;
provided, however, that if the allocable sale price, less all reasonable fees,
expenses and other amounts due hereunder to the Trustee, its agents and counsel
to the Trustee, to be realized from such sale, liquidation or disposition would
be less than the Aggregate Invested Amount plus accrued and unpaid interest
thereon through the Distribution Date next succeeding the date of such sale, the
Trustee must receive the prior unanimous consent of all the Investor
Certificateholders to such sale, liquidation or disposition. The Company or any
of its Affiliates shall be permitted to bid for the Receivables and the other
Trust Assets. In addition, the Company or any of its Affiliates shall have the
right to match any bid by a third person and be granted the right to purchase
the Receivables and the other Trust Assets at such matched bid price. The
Servicer, on behalf of the Trustee, may obtain a prior determination from any
such conservator, receiver or liquidator that the terms and manner of any
proposed sale, disposition or liquidation are commercially reasonable. The
provisions of Sections 7.1 and 7.2 shall be cumulative and not mutually
exclusive. The costs and expenses incurred by the Trustee in such sale shall be
reimbursable to the Trustee as provided in Section 8.5.
(b) The proceeds from the sale, liquidation or disposition of the
Receivables and the other Trust Assets pursuant to subsection (a) above shall be
treated as Collections on the Receivables and such proceeds will be distributed
to any Servicers who are not Affiliates of the Company for the payment of
servicing fees and to the Trustee in an amount equal to the amount of any
expenses incurred by the Trustee acting in its capacity either as Trustee or as
liquidating agent pursuant to subsection 7.2(a) above which have not otherwise
been reimbursed prior thereto. Thereafter, the remaining funds, if any, shall be
distributed (i) to holders of each Series after immediately being deposited in
the Collection Accounts, in
65
accordance with the provisions of subsection 3.1(d) and the related Supplement
for such Series and (ii) after giving effect to the transfer to be made pursuant
to the preceding clause (i), the remainder, if any, shall be allocated to the
Company Interest and shall be released to the owner of the Exchangeable Company
Interest upon cancelation thereof.
ARTICLE VIII
THE TRUSTEE
Section 8.1. Duties of Trustee. (a) The Trustee, prior to the
occurrence of a Servicer Default or an Early Amortization Event of which a
Responsible Officer of the Trustee has actual knowledge and after the curing of
all Servicer Defaults and Early Amortization Events which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in the Pooling and Servicing Agreements and no implied covenants or
obligations shall be read into such Pooling and Servicing Agreements against the
Trustee. If a Servicer Default or Early Amortization Event to the actual
knowledge of a Responsible Officer of the Trustee has occurred (which has not
been cured or waived), the Trustee shall exercise the rights and powers vested
in it in its capacity as Trustee by any Pooling and Servicing Agreement and
shall use the same degree of care and skill in their exercise as a prudent
person would exercise or use under the circumstances in the conduct of such
person's own affairs. The provisions of this Section shall be applicable to the
Trustee in its capacity as Trustee hereunder. If the Trustee shall have
succeeded to the obligations of the Servicer, the provisions of the Servicing
Agreement shall govern the actions of the Trustee as Successor Servicer.
(b) The Trustee may conclusively rely as to the truth of the
statements and the correctness of the opinions expressed therein upon
resolutions, certificates, statements, opinions, reports, documents, orders or
other instruments furnished to the Trustee and believed by it to be genuine and
to have been signed or presented to it pursuant to any Pooling and Servicing
Agreement by the proper party or parties; but in the case of any of the above
which are specifically required to be furnished to the Trustee pursuant to any
provision of the Pooling and Servicing Agreements, the Trustee shall, subject to
Section 8.2, examine them to determine whether they substantially conform to the
requirements of this Agreement; provided, that the Trustee shall not be
responsible for the accuracy or content of any document furnished pursuant to
any Pooling and Servicing Agreement.
(c) Subject to subsection 8.1(a), no provision of any Pooling and
Servicing Agreement shall be construed to relieve the Trustee from liability for
its own negligent action, its own negligent failure to act or its own
misconduct; provided, however, that:
(i) The Trustee shall not be liable in its individual capacity for
an error of judgment unless it shall be proved that the Trustee was
negligent, or acted in bad faith, in ascertaining the pertinent facts;
(ii) The Trustee shall not be liable in its individual capacity with
respect to any action taken, suffered or omitted to be taken by it in good
faith in accordance with the Pooling and Servicing Agreement or at the
direction of the Servicer or the holders
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of Investor Certificates evidencing in excess of 50% (or such lesser
percentage as set forth in any applicable provision) of the Aggregate
Invested Amount;
(iii) The Trustee shall not be charged with knowledge of any failure
by the Servicer to comply with any of its obligations, unless a
Responsible Officer of the Trustee obtains actual knowledge of such
failure or the Trustee receives written notice of such failure from the
Servicer, any Agent or any Investor Certificateholder. In the absence of
written notice, the Trustee may conclusively rely that there is no
Servicer Default or Early Amortization Event;
(iv) The Trustee shall not be charged with knowledge of a Servicer
Default or Early Amortization Event unless a Responsible Officer of the
Trustee obtains actual knowledge of such event or the Trustee receives
written notice of such default or event from the Servicer, any Agent or
any Investor Certificateholder. In the absence of written notice received
by a Responsible Officer of the Trustee, the Trustee may conclusively rely
that there is no Servicer Default or Early Amortization Event;
(v) The Trustee shall not be liable for any investment losses
resulting from any investments of funds on deposit in the Accounts or any
subaccounts thereof; and
(vi) The Trustee shall have no duty to monitor the performance of
the Servicer, nor shall it have any liability in connection with
malfeasance or nonfeasance by the Servicer. The Trustee shall have no
liability in connection with compliance of the Servicer or the Company
with statutory or regulatory requirements related to the Receivables.
(d) The Trustee shall not be required to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties under any Pooling and Servicing Agreement or in the exercise of any
of its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it, and none of the provisions contained in any
Pooling and Servicing Agreement shall in any event require the Trustee to
perform, or be responsible for the manner of performance of, any obligations of
the Servicer under such Agreement except during such time, if any, as the
Trustee shall be the successor to, and be vested with the rights, duties, powers
and privileges of, the Servicer in accordance with the terms of such Agreement.
(e) Except as expressly provided in any Pooling and Servicing
Agreement, the Trustee shall have no power to vary the corpus of the Trust.
(f) Provided that the Servicer and the Company shall have provided
to the Trustee promptly upon request all books, records and other information
reasonably requested by the Trustee and shall have provided the Trustee with all
necessary access to the properties, books and records of the Servicer and the
Company which the Trustee may reasonably require, then within 90 days following
the Initial Closing Date, the Trustee shall have (i) completed the Servicer Site
Review and (ii) established the Standby Liquidation System, and shall have
notified and delivered descriptions to the Servicer, each Rating Agency and each
Agent of such events.
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(g) The Trustee shall deliver the Internal Operating Procedures
Memorandum to the Company and the Servicer on the Initial Closing Date. From and
after such date, the Trustee shall take such actions as are set forth in the
Internal Operating Procedures Memorandum unless prevented from doing so through
no fault of the Trustee.
Section 8.2. Rights of the Trustee. Except as otherwise provided in
Section 8.1:
(a) The Trustee may conclusively rely on and shall be protected in
acting on, or in refraining from acting in accord with, any resolution,
Officer's Certificate, opinion of counsel, certificate of auditors or any
other certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, appraisal, bond, note or other paper
or document believed by it to be genuine and to have been signed or
presented to it pursuant to any Pooling and Servicing Agreement by the
proper party or parties;
(b) The Trustee may consult with counsel (at the Company's expense)
and any Opinion of Counsel or any advice of such counsel shall be full and
complete authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance with
such Opinion of Counsel;
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by any Pooling and Servicing Agreement, or
to institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the Holders, pursuant
to the provisions of any Pooling and Servicing Agreement, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein
or thereby; provided, however, that nothing contained herein shall relieve
the Trustee of liability for its own negligence or willful misconduct or
of the obligation, upon the occurrence of a Servicer Default or Early
Amortization Event (which the Trustee has written notice thereof and which
has not been cured), to exercise such of the rights and powers vested in
it by any Pooling and Servicing Agreement, and to use the same degree of
care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs. The
right of the Trustee to perform any discretionary act enumerated in this
Agreement shall not be construed as a duty, and the Trustee shall not be
answerable for other than its negligence or wilful misconduct in the
performance of any such act;
(d) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by any Pooling and Servicing Agreement;
(e) The Trustee shall not be bound to make any investigation into
the facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, direction, order,
approval, bond, note or other paper or document, or to recompute the
amount of any allocations or distributions contained in any direction from
the Servicer provided for under the Agreement, unless requested in writing
so to do by the holders of Investor Certificates evidencing Fractional
Undivided
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Interests aggregating more than 10% of the Invested Amount of any Series
which could be adversely affected if the Trustee does not perform such
acts; provided, however, that such holders of Investor Certificates shall
provide the Trustee with indemnity reasonably satisfactory to it for any
expense expected to result from any such investigation requested by them
to the extent the Trustee is not otherwise reimbursed hereunder; provided,
further, that the Trustee shall be entitled to make such further inquiry
or investigation into such facts or matters as it may reasonably see fit,
and if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books and records of
the Company, personally or by agent or attorney, at the sole cost and
expense of the Company;
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through affiliates,
agents or attorneys or a custodian or nominee, and the Trustee shall not
be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such affiliate, agent, attorney, custodian or nominee
appointed with due care by it hereunder;
(g) The Trustee shall not be required to make any initial or
periodic examination of any documents or records related to the
Receivables for the purpose of establishing the presence or absence of
defects, the compliance by the Company with its representations and
warranties or for any other purpose;
(h) In the event that the Trustee is also acting as Paying Agent,
Transfer Agent, Liquidating Agent or Registrar hereunder, the rights and
protections afforded to the Trustee pursuant to this Article VIII shall
also be afforded to such Paying Agent, Transfer Agent, Liquidating Agent
and Registrar;
(i) The Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust created hereby or the powers granted
hereunder;
(j) The Trustee shall not in any way be liable by reason of any
insufficiency in any Account held by Trustee unless it is determined by a
court of competent jurisdiction that the Trustee's negligence or willful
misconduct was the primary cause of such insufficiency;
(k) The Trustee shall not in any way be liable by reason of any
insufficiency in the Collateral Account resulting from any investment loss
on any Eligible Investment invested pursuant to Section 3.1(c) of this
Agreement; and
(l) Anything in this Agreement to the contrary notwithstanding, in
no event shall the Trustee be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not
limited to lost profits), even if the Trustee has been advised of the
likelihood of such loss or damage and regardless of the form of action.
Section 8.3. Trustee Not Liable for Recitals in Certificates. The
Trustee assumes no responsibility for the correctness of the recitals contained
herein and in the Certificates (other than the certificate of authentication on
the Certificates). Except as set forth in Section 8.15, the Trustee makes no
representations as to the validity or sufficiency of any
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Pooling and Servicing Agreement or of the Certificates (other than the
certificate of authentication on the Certificates) or of any Receivable or
related document. The Trustee shall not be accountable for the use or
application by the Company of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Company in
respect of the Receivables or from the Accounts or other accounts hereafter
established to effectuate the transactions contemplated herein and in accordance
with the terms of any Pooling and Servicing Agreement.
The Trustee shall not be accountable for the use or application by
the Servicer of any of the Certificates or of the proceeds of such Certificates,
or for the use or application of any funds paid to the Servicer or any
Sub-Servicer in respect of the Receivables or deposited in or withdrawn from the
Accounts or any Lockbox by or at the direction of the Servicer, any Sub-Servicer
or the Lockbox Processor, in each case unless the Trustee, acting in its
capacity as Successor Servicer, itself makes such use or application. The
Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity and enforceability of any Receivable.
Section 8.4. Trustee May Own Certificates. The Trustee in its
individual or any other capacity (a) may become the owner or pledgee of Investor
Certificates with the same rights as it would have if it were not the Trustee
and (b) may transact any banking and trust business with the Company, the
Servicer, any Sub-Servicer or any Seller as it would were it not the Trustee.
Section 8.5. Trustee's Fees and Expenses. The Trustee shall be
entitled to a fee (which shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust) for all services rendered
by the Trustee in the execution of the trusts hereby created and in the exercise
and performance of any of the powers and duties hereunder of the Trustee. The
Servicer covenants and agrees to pay, but only from funds available to it as the
Servicing Fee paid under the Servicing Agreement, to the Trustee an annual fee
agreed upon in writing between the Servicer and the Trustee, payable in advance
on the Initial Closing Date and on each one-year anniversary thereof. The
Trustee also shall be entitled to reimbursement from the Servicer or the Company
upon the Trustee's request for all reasonable expenses (including, without
limitation, expenses incurred in connection with notices, requests for
documentation or other communications to or directions from Holders),
disbursements, losses, liabilities, damages and advances incurred or made by the
Trustee in accordance with any of the provisions of any Pooling and Servicing
Agreement or by reason of its status as Trustee under any Pooling and Servicing
Agreement (including the reasonable fees and expenses of its agents, any
co-trustee and counsel) except any such expense, disbursement, loss, liability,
damage or advance as may arise from its negligence or willful misconduct;
provided that any payments made by the Company in respect of any of the
foregoing items shall be made solely from funds available to the Company which
are not otherwise required to be applied to the payment of any amounts pursuant
to any Pooling and Servicing Agreements (other than to the Company), shall be
non-recourse other than with respect to such funds, and shall not constitute a
claim against the Company to the extent that insufficient funds exist to make
such payment. To the extent that the Trustee has not been paid for any of the
foregoing items (including pursuant to the first sentence of this Section 8.5),
the Trustee shall be entitled to be paid for such items from amounts which
otherwise would be distributable to the Company under Article III of this
Agreement. The Trustee shall be entitled to reimbursement
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for any reasonable out-of-pocket costs or expenses incurred in connection with
the review, negotiation, preparation, execution and delivery of any of the
Transaction Documents or in connection with the issuance of any Certificates on
the Initial Closing Date solely as specified in a separate writing between the
Company and the Trustee. If the Trustee is appointed Successor Servicer in
accordance with the Servicing Agreement, the Trustee, in its capacity as
Successor Servicer, shall also be entitled to be paid the Servicing Fee and any
other compensation to which the Servicer is expressly entitled under any Pooling
and Servicing Agreement. The provisions of this Section 8.5 shall apply to the
reasonable expenses, disbursements and advances made or incurred by the Trustee,
or any other Person, in its capacity as liquidating agent, to the extent not
otherwise paid. The covenants and agreements contained in this Section 8.5
(including, without limitation, the covenants to pay the expenses,
disbursements, losses, liabilities, damages and advances provided for in this
Section 8.5) shall survive the termination of any Pooling and Servicing
Agreement and shall be binding, as applicable, on (i) the Servicer and any
Successor Servicer and (ii) the Company.
Section 8.6. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation organized and doing business under
the laws of the United States of America or any state thereof and authorized
under such laws to exercise corporate trust powers, having (or having a holding
company parent with) a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then,
for the purpose of this Section 8.6, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section 8.6, the Trustee shall resign immediately in the manner and with the
effect specified in Section 8.7.
Section 8.7. Resignation or Removal of Trustee. (a) Subject to
paragraph (c) below, the Trustee may at any time resign and be discharged from
the trust hereby created by giving written notice thereof to the Company, the
Servicer, each Agent and the Rating Agencies. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no successor trustee
shall have been so appointed and have accepted appointment within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor trustee, and
the expenses for such petition shall be paid pursuant to Section 8.5.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.6 hereof and shall fail to resign
after written request therefor by the Servicer, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
if a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Company may remove the Trustee and promptly appoint a successor trustee by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
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(c) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.7 shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 8.8.
(d) The obligations of the Company described in Sections 6.3 and 8.5
hereof and the obligations of the Servicer described in Section 8.5 hereof and
Section 5.1 of the Servicing Agreement shall survive the removal or resignation
of the Trustee as provided in this Agreement.
(e) No Trustee under this Agreement shall be personally liable for
any action or omission of any successor trustee.
Section 8.8. Successor Trustee. (a) Any successor trustee appointed
as provided in Section 8.7 shall execute, acknowledge and deliver to the Company
and to its predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein. The predecessor Trustee shall deliver to the successor
trustee all documents or copies thereof, at the expense of the Servicer, and
statements held by it hereunder; and the Company and the predecessor Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor trustee all such rights, power, duties and obligations. The Servicer
shall immediately and, in any event, no less than ten days prior to any such
resignation or removal, give notice to each Rating Agency upon the appointment
of a successor trustee.
(b) No successor trustee shall accept appointment as provided in
this Section 8.8 unless at the time of such acceptance such successor trustee
shall be eligible under the provisions of Section 8.6.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 8.8, such successor trustee shall mail notice of such
succession hereunder to all Holders at their addresses as shown in the
Certificate Register.
Section 8.9. Merger or Consolidation of Trustee. Any Person into
which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 8.6, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. The Trustee (unless the Trustee is The Chase Manhattan
Bank) shall promptly give notice (except to the extent prohibited under any
Requirement of Law or Contractual Obligation), but in no event less than ten
days prior to any such merger or consolidation, to the Company, the Servicer and
the Rating Agencies upon any such merger or consolidation of the Trustee.
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Section 8.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of any Pooling and Servicing Agreement, at
any time, for the purpose of meeting any legal requirements of any jurisdiction
in which any part of the Trust may at the time be located, the Trustee shall
have the power and may execute and deliver all instruments to appoint one or
more persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity and for the benefit of the Holders, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section 8.10, such powers, duties, obligations, rights and trusts as the Trustee
may consider necessary or desirable. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 8.6 and no notice to Holders of the appointment of any co-trustee or
separate trustee shall be required under Section 8.8. The Trustee shall promptly
notify each Rating Agency of the appointment of any co-trustee.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any statute of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust or any portion thereof in any such jurisdiction) shall
be exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of any Pooling and Servicing Agreement, specifically including every provision
of any Pooling and Servicing Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee and a copy thereof given to the Servicer and the
Company.
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(d) Any separate trustee or co-trustee may at any time constitute
the Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to any
Pooling and Servicing Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 8.11. Tax Returns. In the event the Trust shall be required
to file tax returns, the Company shall prepare and file or shall cause to be
prepared and filed (including, without limitation, by the Servicer) any tax
returns required to be filed by the Trust and shall remit such returns to the
Trustee for signature at least five Business Days before such returns are due to
be filed. The Trustee is hereby authorized to sign any such return on behalf of
the Trust. The Company shall also prepare or shall cause to be prepared
(including, without limitation, by the Servicer) all tax information required by
law to be distributed to Holders and shall deliver such information to the
Trustee at least five Business Days prior to the date it is required by law to
be distributed to the Holders. The Trustee, upon written request, will furnish
the Company, or the Company's designee, with all such information known to the
Trustee as may be reasonably required in connection with the preparation of all
tax returns of the Trust, and shall, upon request, execute such returns. In no
event shall the Trustee in its individual capacity be liable for any
liabilities, costs or expenses of the Trust, the Holders, the Company or the
Servicer arising under any tax law or regulation, including, without limitation,
federal, state or local income or excise taxes or any other tax imposed on or
measured by income (or any interest or penalty with respect thereto or arising
from any failure to comply therewith).
Section 8.12. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under any Pooling and Servicing
Agreement or the Certificates may be prosecuted and enforced by the Trustee
without the possession of any of the Certificates or the production thereof in
any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee. Any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders in respect of which such judgment has been
obtained.
Section 8.13. Suits for Enforcement. If a Servicer Default shall
occur and be continuing, the Trustee may, as provided in Section 6.1 of the
Servicing Agreement, proceed to protect and enforce its rights and the rights of
the Holders under this Agreement or any other Transaction Document by suit,
action or proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or any
other Transaction Document or in aid of the execution of any power granted in
this Agreement or any other Transaction Document or for the enforcement of any
other legal, equitable or other remedy as the Trustee, being advised by counsel,
shall deem most effectual to protect and enforce any of the rights of the
Trustee or the Holders. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Investor Certificateholder any plan of reorganization, arrangement, adjustment
or composition affecting the Certificates or the rights of any holder thereof,
or
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authorize the Trustee to vote in respect of the claim of any Investor
Certificateholder in any such proceeding.
Section 8.14. Rights of Investor Certificateholders to Direct
Trustee. Investor Certificateholders evidencing more than 50% of the Invested
Amount of any Series affected by the conduct of any proceeding or the exercise
of any right conferred on the Trustee shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
however, that, subject to Section 8.1, the Trustee shall have the right to
decline to follow any such direction if the Trustee being advised by counsel
determines that the action so directed may not lawfully be taken, or if the
Trustee in good faith shall, by a Responsible Officer or Responsible Officers of
the Trustee, determine that the proceedings so directed would be illegal or
expose it to personal liability or be unduly prejudicial to the rights of
Investor Certificateholders not party to such direction; and provided, further,
that nothing in any Pooling and Servicing Agreement shall impair the right of
the Trustee to take any action deemed proper by the Trustee and which is not
inconsistent with such direction of the Investor Certificateholders.
Section 8.15. Representations and Warranties of Trustee. The Trustee
represents and warrants that:
(a) the Trustee is a banking corporation organized, existing and in
good standing under the laws of the United States or any of its fifty
states and is duly authorized and empowered to exercise trust powers under
applicable law;
(b) the Trustee has the power and authority to enter into this
Agreement and any Supplement, and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement
and any Supplement; and
(c) each Pooling and Servicing Agreement and each of the Transaction
Documents executed by it have been duly executed and delivered by the
Trustee and, in the case of all such Transaction Documents, are legal,
valid and binding obligations of the Trustee, enforceable in accordance
with their respective terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights generally and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at
law or in equity).
Section 8.16. Maintenance of Office or Agency. The Trustee will
maintain at its expense in the Borough of Manhattan, The City of New York, an
office or offices or agency or agencies where notices and demands to or upon the
Trustee in respect of the Certificates and the Pooling and Servicing Agreements
may be served. The Trustee will give prompt written notice to the Company, the
Servicer and the Holders of any change in the location of the Certificate
Register or any such office or agency.
Section 8.17. Limitation of Liability. The Certificates are executed
by the Trustee, not in its individual capacity but solely as Trustee of the
Trust, in the exercise of the powers and authority conferred and vested in it by
this Agreement. Each of the undertaking
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and agreements made on the part of the Trustee in the Certificates is made and
intended not as a personal undertaking or agreement by the Trustee but is made
and intended for the purpose of binding only the Trust.
ARTICLE IX
TERMINATION
Section 9.1. Termination of Trust; Liquidation of Receivables. (a)
The Trust and the respective obligations and responsibilities of the Company,
the Servicer, the Sub-Servicers and the Trustee created hereby (other than the
obligation of the Trustee to make payments to Holders as hereafter set forth and
any indemnification obligations hereunder) shall terminate, except with respect
to any such obligations or responsibilities expressly stated to survive such
termination, on the earliest of (i) June 5, 2016, (ii) at the option of the
Company, at any time where the Aggregate Invested Amount is zero (unless an
Early Amortization Event as specified in Section 7.1 of this Agreement shall
have occurred and be continuing, in which case the Company shall be deemed to
elect to terminate the Trust pursuant to this clause (ii)) and (iii) upon
completion of distribution of the amounts referred to in subsection 7.2(b) (the
"Trust Termination Date").
(b) If on the Distribution Date in the month immediately preceding
the month in which the Trust Termination Date occurs (after giving effect to all
transfers, withdrawals, deposits and drawings to occur on such date and the
payment of principal on any Series of Certificates to be made on the related
Distribution Date pursuant to Article III) the Invested Amount of any Series
would be greater than zero, the Trustee, at the written direction of the
Servicer, shall sell within 30 days of such Distribution Date all of the
Receivables and other Trust Assets. The proceeds of such sale shall be treated
as Collections on the Receivables and shall be allocated in accordance with
Article III. During such 30-day period, the Servicer shall continue to collect
Collections on the Receivables and allocate Collections in accordance with the
provisions of Article III. The costs and expenses incurred by the Trustee in
such sale shall be reimbursable to the Trustee as provided in Section 8.5.
Section 9.2. Clean-Up Call and Final Termination Date of Investor
Certificates of any Series. (a) On the Distribution Date during the Amortization
Period with respect to any Series on which the Invested Amount (or such other
amount as may be set forth in the related Supplement) of such Series is reduced
to an amount equal to or less than the Clean-Up Call Percentage of the Invested
Amount for such Series as of the day preceding the beginning of such
Amortization Period (or such other amount as may be set forth in the related
Supplement), the Company shall have the option to repurchase, and to the extent
set forth in the related Supplement, shall repurchase, the entire
Certificateholders' Interest of such Series, at a purchase price equal to (i)
the outstanding Invested Amount of the Investor Certificates of such Series plus
(ii) accrued and unpaid interest through the date of such purchase (after giving
effect to any payment of principal and monthly interest on such date of
purchase) plus (iii) all other amounts payable to all Investor
Certificateholders of such Series under the related Supplement (such purchase
price, the "Clean-Up Call Repurchase Price"). The amount of the Clean-Up Call
Repurchase Price will be deposited into the Collection Account for credit to the
Series Collection Subaccount for such Series on the Business Day prior to such
Distribution
76
Date in immediately available funds and will be passed through in full to the
applicable Investor Certificateholders. Following any such repurchase, such
Certificateholders' Interest in the Trust Assets shall terminate and such
interest therein will be allocated to the Company Interest and such Holders will
have no further rights with respect thereto. In the event that the Company fails
for any reason to deposit the Clean-Up Call Repurchase Price for such
Receivables, the Certificateholders' Interest in the Receivables and the other
Trust Assets will continue and monthly payments will continue to be made to the
Holders.
(b) The amount deposited pursuant to subsection 9.2(a) shall be paid
to the Investor Certificateholders of the related Series pursuant to Article III
on the Distribution Date following the date of such deposit. All Certificates of
a Series which are purchased by the Company pursuant to subsection 9.2(a) shall
be delivered by the Company upon such purchase to, and be canceled by (in
accordance with the written directions of the Company), the Transfer Agent and
Registrar and be disposed of in a manner satisfactory to the Trustee and the
Company.
(c) All principal or interest with respect to any Series of Investor
Certificates shall be due and payable no later than the Series Termination Date
with respect to such Series. Unless otherwise provided in a Supplement, in the
event that the Invested Amount of any Series of Certificates is greater than
zero on its Series Termination Date (after giving effect to all transfers,
withdrawals, deposits and drawings to occur on such date and the payment of
principal to be made on such Series on such date), the Servicer, on behalf of
the Trustee, will sell or cause to be sold, in accordance with the directions of
Investor Certificateholders representing more than 50% of the Invested Amount of
such Series, and pay the proceeds to all Holders of such Series pro rata (except
that unless expressly provided to the contrary in the related Supplement, no
payment shall be made to Holders of any Class of any Series that is by its terms
subordinated to any other Class until such senior Class of Certificates has been
paid in full) in final payment of all principal of and accrued interest on such
Series of Certificates, an amount of Receivables or interests in Receivables up
to the Invested Amount of such Series at the close of business on such date.
Absent such direction from Investor Certificateholders representing more than
50% of the Invested Amount of such Series, the Trustee shall continue to hold
the Trust Assets in respect of such Series in accordance with the terms of the
Pooling and Servicing Agreements until the Trust Termination Date (or until
Investor Certificateholders representing more than 50% of the Invested Amount of
such Series shall otherwise direct the Trustee); provided that the terms of this
Agreement, the related Supplement and the Servicing Agreement shall be deemed to
remain in full force and effect, except that no additional Receivables shall be
allocated with respect to such Series. The reasonable costs and expenses
incurred by the Trustee in such sale shall be reimbursable to the Trustee as
provided in Section 8.5. Any proceeds of such sale in excess of such principal
and interest paid shall be paid to the owner of the Exchangeable Company
Interest, unless and to the extent otherwise specified in any applicable
Supplement. Upon such Series Termination Date with respect to the applicable
Series of Certificates, final payment of all amounts allocable to any Investor
Certificates of such Series shall be made in the manner provided in this Section
9.2.
Section 9.3. Final Payment with Respect to Any Series. (a) Written
notice of any termination, specifying the Distribution Date upon which the
Investor Certificateholders of any Series may surrender their Investor
Certificates for payment of the final distribution with
77
respect to such Series and cancelation, shall be given (subject to at least 30
days' (or such shorter period as is acceptable to the Trustee) prior written
notice from the Servicer to the Trustee containing all information required for
the Trustee's notice) by the Trustee to Investor Certificateholders of such
Series, mailed not later than the fifth day of the month of such final
distribution and specifying (i) the Distribution Date upon which final payment
of the Investor Certificates will be made upon presentation and surrender of
Investor Certificates at the office or offices therein designated, (ii) the
amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Investor Certificates at the office or
offices therein specified. The Servicer's notice to the Trustee in accordance
with the preceding sentence shall be accompanied by an Officer's Certificate
setting forth the information specified in Section 4.3 of the Servicing
Agreement covering the period during the then current calendar year through the
date of such notice. The Trustee shall give such notice to the Transfer Agent
and Registrar and the Paying Agent at the time such notice is given to such
Investor Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to
subsection 9.1(a) or the occurrence of the Series Termination Date with respect
to any Series pursuant to Section 9.2, all funds then on deposit in the
Collection Accounts (but only to the extent necessary to pay all outstanding and
unpaid amounts to Holders) shall continue to be held in trust for the benefit of
the Holders, and the Paying Agent or the Trustee shall pay such funds to the
Holders upon surrender of their Certificates in accordance with the terms
hereof. Any Certificate not surrendered on the date specified in subsection
9.3(a)(i) shall cease to accrue any interest provided for such Certificate from
and after such date. In the event that all of the Investor Certificateholders
shall not surrender their Certificates for cancelation within six months after
the date specified in the above-mentioned written notice, the Trustee shall give
a second written notice to the remaining Investor Certificateholders of such
Series to surrender their Certificates for cancelation and receive the final
distribution with respect thereto. If within one year after the second notice
all the Investor Certificates of such Series shall not have been surrendered for
cancelation, the Trustee may take appropriate steps, or may appoint an agent to
take appropriate steps, to contact the remaining Investor Certificateholders of
such Series concerning surrender of their Certificates, and the cost thereof
shall be paid out of the funds in the Collection Accounts held for the benefit
of such Investor Certificateholders. The Trustee and the Paying Agent shall pay
to the Company upon request any monies held by them for the payment of principal
or interest that remains unclaimed for two years. After payment to the Company,
Holders entitled to the money must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another Person.
(c) All Certificates surrendered for payment of the final
distribution with respect to such Certificates and cancelation shall be canceled
by the Transfer Agent and Registrar and be disposed of in a customary manner
satisfactory to the Trustee.
Section 9.4. Company's Termination Rights. Upon the termination of
the Trust pursuant to Section 9.1 and the cancelation of the Exchangeable
Company Interest and payment to the Trustee (in its capacity as such and/or in
its capacity as Successor Servicer) of all amounts owed to it under any Pooling
and Servicing Agreement, the Trustee shall assign and convey to the Company
(without recourse, representation or warranty) in exchange for the Exchangeable
Company Interest all right, title and interest of the Trust in the Trust Assets,
78
whether then existing or thereafter created, and all proceeds thereof except for
amounts held by the Trustee pursuant to subsection 9.3(b). The Trustee shall
execute and deliver such instruments of transfer and assignment, in each case
without recourse, representation or warranty, as shall be reasonably requested
by the Company to vest in the Company all right, title and interest which the
Trust had in the Trust Assets.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1. Amendment. (a) Any Pooling and Servicing Agreement,
including any schedule or exhibit thereto, may be amended in writing from time
to time by the Servicer, the Company and the Trustee, without the consent of any
holder of any outstanding Certificate, to cure any ambiguity, to correct or
supplement any provisions herein or therein which may be inconsistent with any
other provisions herein or therein or to add any other provisions hereto to
change in any manner or eliminate any of the provisions with respect to matters
or questions raised under any Pooling and Servicing Agreement which shall not be
inconsistent with the provisions of any Pooling and Servicing Agreement;
provided, however, that such action shall not, as evidenced by an Officer's
Certificate from the Company and, to the extent, in the reasonable view of the
Company, a question of law exists, supported by an Opinion of Counsel delivered
to the Trustee, adversely affect in any material respect the interests of the
Investor Certificateholders. The Trustee may, but shall not be obligated to,
enter into any such amendment pursuant to this paragraph or paragraph (b) below
which affects the Trustee's rights, duties or immunities under any Pooling and
Servicing Agreement or otherwise.
(b) Any Pooling and Servicing Agreement and any schedule or exhibit
thereto may also be amended in writing from time to time by the Servicer, the
Company and the Trustee with the consent of Investor Certificateholders
evidencing more than 50% of the Invested Amount of any Series adversely affected
by the amendment (or, if any such Series shall have more than one Class of
Investor Certificates adversely affected by the amendment, 50% or more of the
Invested Amount of each such Class) for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of such Pooling
and Servicing Agreement or of modifying in any manner the rights of holders of
any Series then issued and outstanding; provided, however, that no such
amendment shall (i) reduce in any manner the amount of, or delay the timing of,
distributions which are required to be made on any Investor Certificate of such
Series without the consent of such Investor Certificateholder of such Series;
(ii) change the definition of or the manner of calculating the interest of any
Investor Certificateholder of such Series without the consent of such Investor
Certificateholder; or (iii) reduce the aforesaid percentage of Fractional
Undivided Interests the holders of which are required to consent to any such
amendment, in each case without the consent of all Holders of each Series
adversely affected in any material respect.
(c) Notwithstanding anything in this Section 10.1 to the contrary,
the Supplement with respect to any Series may be amended on the terms and with
the procedures provided in such Supplement.
79
(d) The Company or the Servicer shall deliver any proposed amendment
to each Agent at least five days prior to the execution and delivery thereof.
The Servicer shall furnish written notification of the substance of such
amendment to each Rating Agency. No such amendment (including, without
limitation, the amendment of any Supplement, notwithstanding anything to the
contrary contained in any Supplement) shall be effective until the Rating Agency
Condition has been satisfied with respect thereto.
(e) Promptly after the execution of any such amendment or consent
the Trustee shall furnish written notification of the substance of such
amendment to each Holder of each Outstanding Series (or with respect to an
amendment of a Supplement, of the applicable Series).
(f) It shall not be necessary for the consent of Investor
Certificateholders under this Section 10.1 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Investor Certificate holders shall be
subject to such reasonable requirements as the Trustee may prescribe.
(g) In executing or accepting any amendment pursuant to this Section
10.1, the Trustee shall, upon request, be entitled to receive and rely upon (i)
an Opinion of Counsel (A) stating that such amendment is authorized pursuant to
a specific provision of a Pooling and Servicing Agreement and complies with such
provision, (B) stating that all conditions precedent to the execution and
delivery of such amendment shall have been satisfied in full, which opinion in
the case of this clause (B) may, to the extent that such opinion concerns
questions of fact, rely on an Officer's Certificate with respect to such
questions of fact and (C) to the extent such amendment modifies Article I, II,
III or IV hereof, substantially in the form of Exhibit C, (ii) a certificate
from a Responsible Officer of the Company stating that such amendment shall not
adversely affect the interests of the holders of any outstanding Certificates in
any material respect except for holders of the Series whose consent to such
amendment has been obtained in accordance with clause (b) of this Section 10.1
and (iii) a Tax Opinion.
Section 10.2. Protection of Right, Title and Interest to Trust. (a)
The Servicer shall cause this Agreement, any Supplement, all amendments hereto
and/or all financing statements and continuation statements and any other
necessary documents covering the Certificateholders' and the Trustee's right,
title and interest to the Trust and the Trust Assets to be promptly recorded,
registered and filed, and at all times to be kept recorded, registered and
filed, all in such manner and in such places as may be required by law fully to
preserve and protect the right, title and interest of the Trustee hereunder to
all property comprising the Trust. The Servicer shall deliver to the Trustee
file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recording, registration or filing. The Company shall cooperate fully with the
Servicer in connection with the obligations set forth above and will execute any
and all documents reasonably required to fulfill the intent of this subsection
10.2(a).
(b) With respect to any prospective change in its name, identity or
corporate structure, the Company shall comply fully with subsection 2.8(m)
hereof and shall file such financing statements or amendments as may be
necessary to continue the perfection of the
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Trust's security interest in the Receivables and the proceeds thereof. If the
Company determines that no refiling is required, it shall provide to the Trustee
an Opinion of Counsel so stating.
Section 10.3. Limitation on Rights of Holders. (a) The death or
incapacity of any Holder shall not operate to terminate this Agreement or the
Trust, nor shall such death or incapacity entitle such Holder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
(b) Except with respect to the Investor Certificateholders as
expressly provided in any Pooling and Servicing Agreement, no Holder shall have
any right to vote or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto. Nor shall any
Investor Certificateholder be under any liability to any third person by reason
of any action taken by the parties to this Agreement pursuant to any provision
hereof.
(c) No Investor Certificateholder shall have any right by virtue of
any provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Investor Certificateholder previously shall have given to the Trustee written
request to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Investor Certificateholder with every other
Investor Certificateholder and the Trustee, that no one or more Holders shall
have any right in any manner whatever by virtue of or by availing itself or
themselves of any provisions of the Pooling and Servicing Agreements to affect,
disturb or prejudice the rights of any other of the Investor Certificateholders,
or to obtain or seek to obtain priority over or preference to any other such
Investor Certificateholder, or to enforce any right under this Agreement, except
in the manner herein provided and for the equal, ratable and common benefit of
all Investor Certificateholders. For the protection and enforcement of the
provisions of this Section 10.3, each and every Investor Certificateholder and
the Trustee shall be entitled to such relief as can be given either at law or in
equity.
(d) By their acceptance of Certificates pursuant to this Agreement
and the applicable Supplement, the Holders agree to the provisions of this
Section 10.3.
Section 10.4. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 10.5. Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
facsimile), and, unless
81
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or three days after being deposited in the mail,
postage prepaid, or, in the case of facsimile notice, when received, (i)
addressed as follows in the case of the Company, the Servicer and the Trustee
and (ii) in the case of the Sub-Servicers, as set forth under their signatures
in the Receivables Sale Agreements, or, in either case, to such other address as
may be hereafter notified by the respective parties hereto:
The Company: WESCO Receivables Corp.
Commerce Court
4 Station Square, Suite 700
Pittsburgh, Pennsylvania 15219
Attention: Chief Financial Officer
Telephone: 412-454-2270
Facsimile: 412-454-2555
with a copy to the Servicer:
The Servicer: WESCO Distribution, Inc.
Commerce Court
4 Station Square, Suite 700
Pittsburgh, Pennsylvania 15219
Attention: Chief Financial Officer
Telephone: 412-454-2283
Facsimile: 412-454-2555
The Trustee: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Structured Finance Services - ABS
Facsimile: 212-946-3916
Any notice required or permitted to be mailed to an Investor Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Investor Certificateholder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in any Pooling and Servicing Agreement shall
be conclusively presumed to have been duly given, whether or not the Investor
Certificateholder receives such notice.
Section 10.6. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of any Pooling and Servicing
Agreement shall for any reason whatsoever be held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of such Pooling and Servicing
Agreement and shall in no way affect the validity or enforceability of the other
provisions of any Pooling and Servicing Agreement or of the Certificates or
rights of the Holders.
Section 10.7. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.3 of the Servicing Agreement,
no Pooling and Servicing Agreement, nor any rights or interests thereunder, may
be assigned by the Company
82
or the Servicer without the prior written consent of the Trustee acting at the
direction of the holders of 66 2/3% of the Invested Amount of each Outstanding
Series and without the Rating Agency Condition's having been satisfied with
respect to such assignment.
Section 10.8. Certificates Nonassessable and Fully Paid. It is the
intention of the parties to each Pooling and Servicing Agreement that the
Investor Certificateholders shall not be personally liable for obligations of
the Trust, that the interests in the Trust represented by the Investor
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever and that Investor Certificates upon authentication
thereof by the Trustee pursuant to Section 5.2 are and shall be deemed fully
paid.
Section 10.9. Further Assurances. The Company and the Servicer agree
to do and perform, from time to time, any and all acts and to execute any and
all further instruments required or reasonably requested by the Trustee more
fully to effect the purposes of each Pooling and Servicing Agreement, including,
without limitation, the execution of any financing statements or continuation
statements relating to the Receivables for filing under the provisions of the
UCC of any applicable jurisdiction.
Section 10.10. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee or the Investor
Certificateholders, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
Section 10.11. Counterparts. This Agreement may be executed in two
or more counterparts (and by different parties on separate counterparts), each
of which shall be an original, but all of which together shall constitute one
and the same instrument.
Section 10.12. Third-Party Beneficiaries. This Agreement will inure
to the benefit of and be binding upon the parties hereto, the Holders and their
respective successors and permitted assigns. Except as otherwise provided in
Section 6.3 and this Article X and in any Supplement, no other Person will have
any right or obligation hereunder.
Section 10.13. Actions by Holders. (a) Wherever in any Pooling and
Servicing Agreement a provision is made that an action may be taken or a notice,
demand or instruction given by Investor Certificateholders, such action, notice
or instruction may be taken or given by any Investor Certificateholders of any
Series, unless such provision requires a specific percentage of Investor
Certificateholders of a certain Series or all Series.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Investor Certificateholder shall bind such Investor
Certificateholder and every subsequent holder of such Certificate issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done or omitted to be done by the Trustee, the Company or
the Servicer in reliance thereon, whether or not notation of such action is made
upon such Certificate.
83
Section 10.14. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement and the Servicing Agreement sets forth the
entire understanding of the parties relating to the subject matter hereof, and
all prior understandings, written or oral, are superseded by this Agreement and
the Servicing Agreement. This Agreement and the Servicing Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
Section 10.15. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 10.16. Construction of Agreement. (a) The Company hereby
grants to the Trustee, for the benefit of the Holders, a perfected first
priority security interest in all of the Company's right, title and interest in,
to and under the Receivables and the other Trust Assets now existing and
hereafter created, all monies due or to become due and all amounts received with
respect thereto and all "proceeds" thereof (including Recoveries), to secure all
of the Company's and the Servicer's obligations hereunder, including, without
limitation, the Company's obligation to sell or transfer Receivables hereafter
created to the Trust.
(b) This Agreement shall constitute a security agreement under
applicable law.
Section 10.17. No Set-Off. Except as expressly provided in this
Agreement, the Trustee agrees that it shall have no right of set-off or banker's
lien against, and no right to otherwise deduct from, any funds held in the
Collection Accounts for any amount owed to it by the Company, the Servicer or
any Investor Certificateholder.
Section 10.18. No Bankruptcy Petition. Each of the Trustee and the
Servicer hereby covenants and agrees that, prior to the date which is one year
and one day after the date of the end of the Amortization Period with respect to
all Outstanding Series, it will not institute against, or join any other Person
in instituting against, the Company any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any federal or
state bankruptcy or similar law.
Section 10.19. Limitation of Liability. It is expressly understood
and agreed by the parties hereto that (a) each Pooling and Servicing Agreement
is executed and delivered by the Trustee, not individually or personally but
solely as Trustee of the Trust, in the exercise of the powers and authority
conferred and vested in it, (b) except with respect to Section 8.15 hereof the
representations, undertakings and agreements herein made on the part of the
Trust are made and intended not as personal representations, undertakings and
agreements by the Trustee, but are made and intended for the purpose of binding
only the Trust, (c) nothing herein contained shall be construed as creating any
liability of the Trustee, individually or personally, to perform any covenant of
the Trust either expressed or implied contained herein, all such liability, if
any, being expressly waived by the parties who are signatories to this Agreement
and by any Person claiming by, through or under such parties; provided, however,
the Trustee shall be liable in its individual capacity for its own willful
misconduct or negligence and (d) under no circumstances shall the Trustee be
personally liable for the payment of any indebtedness or expenses of the Trust
or be liable for the breach or failure of any obligation, representation,
warranty or covenant made or undertaken by the Trust under
84
any Pooling and Servicing Agreement; provided further, that the foregoing
clauses (a) through (d) shall survive the resignation or removal of the Trustee.
The Company hereby agrees to indemnify and hold harmless the Trustee
and the Trust for the benefit of the Holders (each, an "indemnified person")
from and against any loss, liability, expense, damage or injury suffered or
sustained by reason of any acts, omissions or alleged acts or omissions arising
out of, or relating to, activities of the Company pursuant to any Pooling and
Servicing Agreement to which it is a party, including but not limited to any
judgment, award, settlement, reasonable attorneys' fees and other reasonable
costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim, except to the extent such loss,
liability, expense, damage or injury resulted from the negligence, bad faith or
wilful misconduct of an indemnified person; provided that any payments made by
the Company pursuant to this subsection shall be made solely from funds
available to the Company which are not otherwise required to be applied to the
payment of any amounts pursuant to any Pooling and Servicing Agreements (other
than to the Company), shall be non-recourse other than with respect to such
funds, and shall not constitute a claim against the Company to the extent that
insufficient funds exist to make such payment.
Section 10.20. Canadian Taxes. The Company represents and warrants
to the Trustee for the benefit of the Certificateholders that it has not assumed
in any manner whatsoever any obligation of the Sellers under the Canadian
Receivables Sale Agreement (i) to make collections and remittances in respect of
any Canadian goods and services tax, any Canadian provincial sales tax or any
other similar Canadian tax or (ii) to file any returns in respect of such taxes
with Canadian tax authorities and that it was not contemplated by neither any
Seller under the Canadian Receivables Sale Agreement nor the Company that such
obligation was to be assumed by the Company. The parties hereto agree that the
Trust does not assume in any manner whatsoever any obligation of the Sellers
under the Canadian Receivables Sale Agreement to collect such taxes, make such
remittances and file such returns, and that it is not contemplated by the
parties hereto that any such obligation is hereby assumed by the Trust or the
Trustee. The Company hereby indemnifies the Trustee for the benefit of the
Certificateholders and holds it harmless from and against any assessments,
claims or other demands for payment of such taxes by Canadian tax authorities,
as well as interest and penalties; provided that any payments made by the
Company pursuant to this subsection shall be made solely from funds available to
the Company which are not otherwise required to be applied to the payment of any
amounts pursuant to any Pooling and Servicing Agreements (other than to the
Company), shall be non-recourse other than with respect to such funds, and shall
not constitute a claim against the Company to the extent that insufficient funds
exist to make such payment. It is understood that all of the invoices in respect
of the Receivables of the Sellers under the Canadian Receivables Sale Agreement
will bear the GST registration number of such Seller.
Section 10.21. Certain Information. The Servicer and the Company
shall promptly provide to the Trustee such information in computer tape, hard
copy or other form regarding the Receivables as the Trustee may reasonably
request to perform its obligations hereunder.
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IN WITNESS WHEREOF, the Company, the Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers as of the
day and year first above written.
WESCO RECEIVABLES CORP., as Company
By: /s/ [Illegible]
---------------------------------
Name:
Title:
WESCO DISTRIBUTION, INC., as Servicer
By: /s/ [Illegible]
---------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as Trustee
By: /s/ Ruth McKenna
---------------------------------
Name: RUTH MCKENNA
Title: TRUST OFFICER
================================================================================
WESCO RECEIVABLES CORP.
as Company,
WESCO DISTRIBUTION, INC.
as Servicer,
THE CHASE MANHATTAN BANK,
as Funding Agent,
PARK AVENUE RECEIVABLES CORPORATION,
as Initial Purchaser
THE CHASE MANHATTAN BANK,
as an APA Bank
and
THE CHASE MANHATTAN BANK,
as Trustee
-------------------------
SERIES 1998-1 SUPPLEMENT
Dated as of June 5, 1998
to
POOLING AGREEMENT
Dated as of June 5, 1998
-------------------------
WESCO RECEIVABLES MASTER TRUST
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions............................................... 2
ARTICLE II
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE
OF THE VFC CERTIFICATES
SECTION 2.1 Designation............................................... 25
SECTION 2.2. The Series 1998-1 Interests............................... 25
SECTION 2.3. Purchases of Interests in the VFC Certificates............ 25
SECTION 2.4. Delivery.................................................. 26
SECTION 2.5. Procedure for Initial Issuance and for Increasing the
Series 1998-1 Invested Amount............................. 26
SECTION 2.6. Sale by the Initial Purchaser of its Series 1998-1
Purchaser Invested Amount to the APA Banks................ 29
SECTION 2.7. Procedure for Decreasing the Series 1998-1 Invested Amount;
Optional Termination...................................... 31
SECTION 2.8. Reductions of the Commitments............................. 32
SECTION 2.9. Interest; Fees............................................ 33
SECTION 2.10. Indemnification by the Company and the Servicer........... 34
ARTICLE III
ARTICLE III OF THE AGREEMENT
SECTION 3A.2. Establishment of Trust Accounts........................... 35
SECTION 3A.3. Daily Allocations. ....................................... 37
SECTION 3A.4. Determination of Interest................................. 39
SECTION 3A.5. Determination of Series 1998-1 Monthly Principal.......... 41
SECTION 3A.6. Applications.............................................. 42
ARTICLE IV
DISTRIBUTIONS AND REPORTS
SECTION 4A.1. Distributions............................................. 44
SECTION 4A.2. Reports................................................... 44
SECTION 4A.3. Statements and Notices.................................... 44
ARTICLE V
ADDITIONAL EARLY AMORTIZATION EVENTS
SECTION 5.1. Additional Early Amortization Events...................... 45
ARTICLE VI
SERVICING FEE
SECTION 6.1. Servicing Compensation.................................... 49
ARTICLE VII
CHANGE IN CIRCUMSTANCES
SECTION 7.1. Illegality................................................ 49
SECTION 7.2. Increased Costs........................................... 49
SECTION 7.3. Taxes..................................................... 51
SECTION 7.4. Break Funding Payments.................................... 54
SECTION 7.5. Alternate Rate of Interest................................ 54
SECTION 7.6. Mitigation Obligations.................................... 55
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES, COVENANTS
SECTION 8.1. Representations and Warranties of the Company and the
Servicer.................................................. 56
SECTION 8.2. Covenants of the Company and the Servicer................. 56
SECTION 8.3. Covenants of the Servicer................................. 57
SECTION 8.4. Representations and Warranties of the APA Banks and any
Acquiring APA Bank........................................ 57
SECTION 8.5. Obligations Unaffected.................................... 58
ARTICLE IX
CONDITIONS PRECEDENT
SECTION 9.1. Conditions Precedent to Effectiveness of Supplement....... 58
ARTICLE X
THE FUNDING AGENT
SECTION 10.1. Appointment............................................... 62
SECTION 10.2. Delegation of Duties...................................... 62
SECTION 10.3. Exculpatory Provisions.................................... 62
SECTION 10.4. Reliance by Funding Agent................................. 63
SECTION 10.5. Notice of Servicer Default or Early Amortization Event or
Potential Early Amortization Event........................ 63
SECTION 10.6. Non-Reliance on the Funding Agent and Other Purchasers.... 64
SECTION 10.7. Indemnification........................................... 64
SECTION 10.8. The Funding Agent in Its Individual Capacity.............. 65
SECTION 10.9. Successor Funding Agent................................... 65
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Ratification of Agreement................................. 65
SECTION 11.2. Governing Law............................................. 65
SECTION 11.3. Further Assurances........................................ 66
SECTION 11.4. Payments.................................................. 66
SECTION 11.5. Costs and Expenses........................................ 66
SECTION 11.6. No Waiver; Cumulative Remedies............................ 66
SECTION 11.7. Amendments................................................ 67
SECTION 11.8. Severability.............................................. 68
SECTION 11.9. Notices................................................... 68
SECTION 11.10. Successors and Assigns.................................... 69
SECTION 11.11. Participations; Assignments............................... 69
SECTION 11.12. Adjustments; Set-off...................................... 73
SECTION 11.13. Counterparts.............................................. 74
SECTION 11.14. No Bankruptcy Petition.................................... 74
SECTION 11.15. Limitation on Addition and Termination of Sellers......... 74
ARTICLE XII
FINAL DISTRIBUTIONS
SECTION 12.1. Certain Distributions..................................... 76
EXHIBITS
Exhibit A Form of VFC Certificate, Series 1998-1
Exhibit B [Reserved]
Exhibit C Form of Commitment Transfer Supplement
Exhibit D Form of Daily Report
Exhibit E Form of Monthly Settlement Statement
Exhibit F Form of Notice of Increase
Exhibit G Form of Participation Certification
Exhibit H Form of U.C.C. Certificate
SCHEDULES
Schedule 1 Commitments
Schedule 2 Trust Accounts
Schedule 3 Default Ratio Trigger
SERIES 1998-1 SUPPLEMENT, dated as of June 5, 1998 (as amended,
supplemented or otherwise modified from time to time, this "Supplement"), among
WESCO Receivables Corp., a Delaware corporation (the "Company"), WESCO
Distribution, Inc., a Delaware corporation ("WESCO"), as servicer (except where
otherwise noted) (in such capacity, the "Servicer"), Park Avenue Receivables
Corporation, a Delaware corporation (including its successors and assigns and
excluding, however, the APA Banks as assignees pursuant to Section 2.6, the
"Initial Purchasers"), the several banks or financial institutions parties to
this Supplement as of the Issuance Date and the other banks or financial
institutions from time to time parties hereto pursuant to Section 11.11(b)
(collectively, the "APA Banks"; each, individually, an "APA Bank"), The Chase
Manhattan Bank, a New York banking corporation ("Chase"), in its capacity as
Funding Agent (the "Funding Agent"), and The Chase Manhattan Bank, in its
capacity as Trustee (the "Trustee") under the Agreement (as defined below).
W I T N E S S E T H :
WHEREAS, the Company, the Servicer and the Trustee have entered into
a Pooling Agreement, dated as of June 5, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Agreement");
WHEREAS, the Agreement provides, among other things, that the
Company, the Servicer and the Trustee may at any time and from time to time
enter into supplements to the Agreement for the purpose of authorizing the
issuance on behalf of the Trust by the Company for execution and redelivery to
the Trustee for authentication of one or more Series of Investor Certificates;
and
WHEREAS, the Company, the Servicer, the Trustee, the Funding Agent,
the Initial Purchaser and the APA Banks wish to supplement the Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. (a) The following words and phrases shall
have the following meanings with respect to Series 1998-1 and the definitions of
such terms are applicable to the singular as well as the plural form of such
terms and to the masculine as well as the feminine and neuter genders of such
terms:
"ABR": shall mean, for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Reference Rate in effect on such day, (b) the Base CD Rate in effect on
such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: "Reference Rate" shall mean
the rate of interest per annum publicly announced (or, if not announced
publicly, quoted internally) from time to time by the Funding Agent as its
reference rate in effect at its principal office in New York, New York;
"Base CD Rate"
2
shall mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) a fraction, the numerator of which is one and the
denominator of which is one minus the C/D Reserve Percentage and (b) the
C/D Assessment Rate; "Three-Month Secondary CD Rate" shall mean, for any
day, the secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board through the
public information telephone line of the Federal Reserve Bank of New York
(which rate will, under the current practices of the Board, be published
in Federal Reserve Statistical Release H.15(519) during the week following
such day), or, if such rate shall not be so reported on such day or such
next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 A.M., New York City
time, on such day (or, if such day shall not be a Business Day, on the
next preceding Business Day) by the Funding Agent from three New York City
negotiable certificate of deposit dealers of recognized standing selected
by it; and "Federal Funds Effective Rate" shall mean, for any day, the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers,
as published on the next succeeding Business Day by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the Funding Agent from three federal funds
brokers of recognized standing selected by it. Any change in the ABR due
to a change in the Reference Rate, the Three-Month Secondary CD Rate or
the Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Reference Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"Accrual Period" shall mean the period from and including a
Distribution Date, or, in the case of the initial Accrual Period, the
Issuance Date, to but excluding the succeeding Distribution Date.
"Accrued Expense Amount" shall mean, for each Business Day during an
Accrual Period, the sum of (i) the Daily Interest Deposit for such
Business Day, (ii) the Daily Commitment Fee Deposit for such Business Day,
(iii) the Daily Facility Fee Deposit for such Business Day, (iv) the Daily
Servicing Fee Deposit for such Business Day, (v) any fees or other amounts
due in connection with the purchase of the Required Currency Hedge and
(vi) all Program Costs which have accrued since the preceding Business
Day.
"Acquiring APA Bank" shall have the meaning assigned in subsection
11.11(b).
"Additional Interest" shall have the meaning assigned in subsection
3A.4(b).
"Adjusted Liquidity Price" shall mean, in determining the Purchase
Price of the Initial Purchaser's Series 1998-1 Purchaser Invested Amount
on the APA Bank Purchase Date, an amount equal to:
PI [OC + (NDR/1.05)]
where:
3
PI = the Invested Percentage on the APA Bank Purchase
Date;
OC = the sum of (i) any and all amounts due and owing
to the Company in respect of Seller Repurchase
Payments and Seller Adjustment Payments pursuant
to the Transaction Documents and (ii) (without
duplication) any and all amounts due and owing to
the Trust as Transfer Deposit Amounts pursuant to
Section 2.5(b) of the Pooling Agreement on the APA
Bank Purchase Date; and
NDR = the aggregate outstanding Principal Amount of all
Receivables, that are not Defaulted Receivables.
Each of the foregoing shall be determined from the most recent Daily
Report received from the Servicer.
"Aged Receivables Ratio" shall mean, as of the last day of each
Settlement Period, the percentage equivalent of a fraction, (i) the
numerator of which shall be the sum of (A) the aggregate unpaid balance of
Receivables, other than Construction Receivables and BEAR Receivables,
that were 121-150 days past their respective original invoice dates as of
such last day plus the aggregate unpaid balance of Construction
Receivables that were 151-180 days past their respective original invoice
dates as of such last day plus the aggregate unpaid balance of BEAR
Receivables that were 91-120 days past their respective original invoice
dates as of such last day, and (B) the aggregate amount of Receivables of
the Sellers which were charged off as uncollectible prior to the day which
is, in the case of Receivables other than Construction Receivables and
BEAR Receivables, 121 days after their respective original invoice dates
and, in the case of BEAR Receivables, 91 days after their respective
original invoice dates and, in the case of Construction Receivables, 151
days after their respective original invoice dates, in each case during
such Settlement Period, and (ii) the denominator of which shall be the
aggregate Principal Amount of Receivables other than BEAR Receivables and
Construction Receivables originated by the Sellers during the fourth prior
Settlement Period (excluding the Settlement Period ended on such day) plus
the aggregate Principal Amount of BEAR Receivables originated by the
Sellers during the third prior Settlement Period (excluding the Settlement
Period ended on such day) plus the aggregate Principal Amount of
Construction Receivables originated by the Sellers during the fifth prior
Settlement Period (excluding the Settlement Period ended on such day).
"Agent" shall mean the Funding Agent.
"Aggregate Commitment Amount" shall mean, with respect to any day,
the aggregate amount of the Commitments of all APA Banks on such day, as
reduced from time to time pursuant to Section 2.8.
"APA Banks" shall have the meaning specified in the recitals hereto.
4
"APA Bank Purchase Date" shall mean either the date of the Purchase
or, if the APA Banks fund the Series 1998-1 Invested Amount on the
Issuance Date pursuant to Section 2.3, the Issuance Date.
"Applicable Margin" shall mean on any date of determination (i) for
each Eurodollar Tranche, 2.25% per annum, (ii) for each Floating Tranche,
1.25% per annum or (iii) if the APA Banks are obligated to purchase, and
have so purchased, all right, title and interest of the Initial Purchaser
in its Series 1998-1 Purchaser Invested Amount due to the occurrence of a
PARCO Wind-Down Event described in clauses (ii), (iii) or (iv) of the
definition thereof, other than an event described in (ii) or (iv) which is
directly attributable to the Initial Purchaser's investment in the VFC
Certificates (a) for each Eurodollar Tranche, 1.50% per annum, or (b) for
each Floating Tranche, 0.75% per annum.
"Article VII Costs" shall mean any amounts due pursuant to Article
VII.
"Assignment/Participation Certification" shall mean an assignment or
participation certification, as the case may be, in substantially the form
of Exhibit G hereto.
"Available Pricing Amount" shall mean, on any Business Day, the sum
of (i) the Unallocated Balance plus (ii) the Increase, if any, on such
date.
"Base Daily Interest Expense" shall mean (i) for any day prior to
the APA Bank Purchase Date in any Accrual Period, the product of (A) the
Series 1998-1 Invested Amount divided by 360 and (B) the CP Rate for such
day and (ii) for the APA Bank Purchase Date and any day thereafter in any
Accrual Period, the sum of (A) the product of (x) the sum of (a) the
portion of the Series 1998-1 Invested Amount (calculated with respect to
all APA Banks without regard to clauses (d) and (e) of the definition of
Series 1998-1 Purchaser Invested Amount) allocable to the Floating Tranche
on such day and (b) for any day during the period from and including the
APA Bank Purchase Date to but excluding the Distribution Date immediately
succeeding the APA Bank Purchase Date, divided by 365 (or 366, as the case
may be) and (y) the ABR plus the Applicable Margin in effect on such day,
(B) the product of (x) the portion of the Series 1998-1 Invested Amount
(calculated with respect to all Purchasers without regard to clauses (d)
and (e) of the definition of Series 1998-1 Purchaser Invested Amount)
allocable to Eurodollar Tranches on such day divided by 360 and (y) the
weighted average Eurodollar Rate plus the Applicable Margin on such day in
effect with respect thereto and (C) on the APA Bank Purchase Date, the
Unaccrued Discount Payment Amount; provided, however, that for any such
day during the continuance of an Early Amortization Period, the "Base
Daily Interest Expense" for such day shall be equal to the greater of (i)
the sum of the amounts calculated pursuant to clause (ii) above and (ii)
the product of (x) the Series 1998-1 Invested Amount on such day divided
by 365 (or 366, as the case may be) and (y) the ABR plus the Applicable
Margin in effect on such day plus 2.0%.
"Benefitted Purchaser" shall have the meaning assigned in Section
11.12.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States or any successor thereto.
5
"Carrying Cost Reserve Ratio" shall mean, as of any Settlement
Report Date and continuing until (but not including) the next Settlement
Report Date, an amount (expressed as a percentage) equal to (a) the
product of (i) 2.00 times Days Sales Outstanding as of such day and (ii)
1.3 times a rate per annum equal to the ABR plus the Applicable Margin as
of such earlier Settlement Report Date, divided by (b) 365 (or 366, as the
case may be).
"C/D Assessment Rate" shall mean for any day pertaining to a
Floating Tranche, the net annual assessment rate (rounded upwards, if
necessary, to the next 1/100 of 1%) in effect on such day that is payable
by a member of the Bank Insurance Fund classified as "well-capitalized"
and within supervisory subgroup "B" (or a comparable successor risk
classification) within the meaning of 12 C.F.R. Part 327 (or any successor
provision) to the Federal Deposit Insurance Corporation for insurance by
such Corporation of time deposits made in dollars at the offices of such
member in the United States; provided that if, as a result of any change
in any law, rule or regulation, it is no longer possible to determine the
Assessment Rate as aforesaid, then the Assessment Rate shall be such
annual rate as shall be determined by the Funding Agent to be
representative of the cost of such insurance to the APA Banks.
"C/D Reserve Percentage" for any day pertaining to a Floating
Tranche, that percentage (expressed as a decimal) which is in effect on
such day, as prescribed by the Board, for determining the maximum reserve
requirement for a Depositary Institution (as defined in Regulation D of
the Board) in respect of new negotiable non-personal time deposits in
Dollars of over $100,000 having a maturity of 30 days or more.
"Certificate Rate" shall mean, on any date of determination, the
weighted average (weighted based on the respective outstanding amounts of
the Floating Tranche and each Eurodollar Tranche) of the ABR in effect on
such day and the Eurodollar Rates in effect on such day plus, in each
case, the respective Applicable Margins.
"Change in Control" shall mean the occurrence of any event the
result of which causes the Company not to be a direct, wholly owned
Subsidiary of WESCO.
"Change in Law" shall mean (a) the adoption of any law, rule or
regulation after the Issuance Date, (b) any change in law, rule or
regulation or in the interpretation or application thereof by any
Governmental Authority after the Issuance Date or (c) compliance by any
Purchaser with any request, guideline or directive (whether or not having
the force of law) of any Governmental Authority made or issued after the
Issuance Date.
"Chase" shall have the meaning specified in the preamble hereto.
"Clean-Up Call Amount" shall mean the Clean-Up Call Percentage of
the maximum Series 1998-1 Invested Amount at any time during the Series
1998-1 Revolving Period.
"Clean-Up Call Percentage" shall mean 10%.
"Commercial Paper" shall mean the short-term promissory notes of the
Initial Purchaser issued in the United States commercial paper market.
6
"Commitment" shall mean, as to any APA Bank, its obligation to
purchase a VFC Certificate on the Issuance Date, to acquire the Initial
Purchaser's VFC Certificate and to maintain and, subject to certain
conditions, increase, its Series 1998-1 Purchaser Invested Amount, in each
case, in an aggregate amount not to exceed at any one time outstanding the
amount set forth opposite such APA Bank's name on Schedule 1 under the
caption "Commitment", as such amount may be reduced from time to time as
provided herein; collectively, as to all APA Banks, the "Commitments".
"Commitment Expiry Date" shall mean June 4, 2004 (as may be extended
for an additional 364 days from time to time in writing by PARCO, the
Funding Agent and the APA Banks).
"Commitment Fee" shall have the meaning assigned in subsection
2.9(b).
"Commitment Fee Rate" shall have the meaning assigned in the Fee
Letter.
"Commitment Percentage" shall mean, as to any APA Bank and as of any
date, the percentage equivalent of a fraction, the numerator of which is
such APA Bank's Commitment as set forth on Schedule 1 and the denominator
of which is the Aggregate Commitment Amount as of such date.
"Commitment Period" shall mean the period commencing on the Issuance
Date and terminating on the Commitment Termination Date.
"Commitment Reduction" shall have the meaning assigned in subsection
2.8(a).
"Commitment Termination Date" shall mean the earlier to occur of (i)
the date on which the Aggregate Commitment Amount has been reduced to zero
pursuant to Section 2.8 of this Supplement and (ii) the Commitment Expiry
Date.
"Commitment Transfer Supplement" shall have the meaning assigned in
subsection 11.11(a).
"CP Rate" shall mean for any day the weighted average of the
interest rates (or if issued at a discount, the weighted average of the
rates, after converting to interest-bearing equivalents) on all
outstanding Commercial Paper issued by the Initial Purchaser to fund the
Initial Purchaser's Series 1998-1 Purchaser Invested Amount.
"CP Rate Period" shall mean, with respect to any CP Tranche, a
period of days not to exceed 60 days commencing on a Business Day selected
in accordance with subsection 3A.4(c); provided that if a CP Rate Period
would end on a day that is not a Business Day, such CP Rate Period shall
end on the next succeeding Business Day.
"CP Tranche" shall mean a portion of the Series 1998-1 Invested
Amount for which the Series 1998-1 Monthly Interest is calculated by
reference to a particular Discount and a particular CP Rate Period.
"Credit Agreement" shall mean the Amended and Restated Credit
Agreement, dated as of June 5, 1998, among WESCO, the several lenders from
time to time parties
7
thereto, and The Chase Manhattan Bank, as Administrative Agent, as the
same may be amended, supplemented or otherwise modified from time to time.
"Daily Commitment Fee Deposit" shall mean, for any Business Day, an
amount equal to (i) the amount of Daily Commitment Fee Expense for each
day since the preceding Business Day plus (ii) the aggregate amount of all
previously accrued Daily Commitment Fee Expense that has not yet been
deposited in the Series 1998-1 Non-Principal Collection Sub-subaccount.
"Daily Commitment Fee Expense" shall mean, (i) during the Series
1998-1 Revolving Period, for any day in any Accrual Period, the product of
(A) the excess of the Aggregate Commitment Amount over the aggregate
Series 1998-1 Purchaser Invested Amounts of the APA Banks on such day
multiplied by (B) the Commitment Fee Rate divided by 360, (ii) during the
Series 1998-1 Amortization Period, for any day prior to the APA Bank
Purchase Date in any Accrual Period, the product of (A) the Series 1998-1
Invested Amount on such day multiplied by (B) the Commitment Fee Rate
divided by 360 and (iii) during the Series 1998-1 Amortization Period, for
the APA Bank Purchase Date or any day thereafter in any Accrual Period,
zero.
"Daily Facility Fee Deposit" shall mean, for any Business Day, an
amount equal to (i) the amount of Daily Facility Fee Expense for each day
since the preceding Business Day plus (ii) the aggregate amount of all
previously accrued Daily Facility Fee Expense that has not yet been
deposited in the Series 1998-1 Non-Principal Collection Sub-subaccount.
"Daily Facility Fee Expense" shall mean, (i) for any day in any
Accrual Period prior to the APA Bank Purchase Date, the product of (A) (1)
for any day prior to the date on which the Series 1998-1 Amortization
Period commences, the Aggregate Commitment Amount on such day and (2) for
any day on which the Series 1998-1 Amortization Period commences and for
any day thereafter, the Series 1998-1 Invested Amount on such day, in each
case, multiplied by (B) the Facility Fee Rate divided by 360 and (ii) for
the APA Bank Purchase Date or any day thereafter in any Accrual Period,
zero.
"Daily Interest Deposit" shall mean, for any Business Day, an amount
equal to (i) the amount of Daily Interest Expense for each day since the
preceding Business Day plus (ii) the aggregate amount of all previously
accrued Daily Interest Expense that has not yet been deposited in the
Series 1998-1 Non-Principal Collection Sub-subaccount plus (iii) the
aggregate amount of all Additional Interest for each day since the
preceding Business Day.
"Daily Interest Expense" shall mean, for any Business Day, an amount
equal to (i) the amount of accrued and unpaid Base Daily Interest Expense
in respect of such day plus (ii) the aggregate amount of all previously
accrued and unpaid Base Daily Interest Expense plus (iii) the aggregate
amount of all accrued and unpaid Additional Interest.
"Daily Servicing Fee Deposit" shall mean, for any Business Day, an
amount equal to (i) the amount of Daily Servicing Fee Expense for each day
since the preceding Business Day plus (ii) the aggregate amount of all
previously accrued Daily Servicing
8
Fee Expense that has not yet been deposited in the Series 1998-1
Non-Principal Collection Sub-subaccount.
"Daily Servicing Fee Expense" shall mean, for any day in any Accrual
Period the Series 1998-1 Interests' pro rata portion (determined in
accordance with Section 6.1) of the Servicing Fee accruing for such day.
"Days Sales Outstanding" or "DSO" shall mean, in respect of (x) BEAR
Receivables, (y) Construction Receivables or (z) Receivables that are not
BEAR Receivables or Construction Receivables, as of any Settlement Report
Date and continuing until (but not including) the next Settlement Report
Date, the number of days equal to the product of (a) 91 and (b) the amount
obtained by dividing (i) the aggregate Principal Amount of such
Receivables referred to above in (x), (y) or (z), as the case may be, that
were Eligible Receivables as of the last day of the immediately preceding
Settlement Period by (ii) the aggregate Principal Amount of such
Receivables generated by the Sellers for the three Settlement Periods
immediately preceding such earlier Settlement Report Date.
"Decrease" shall have the meaning assigned in Section 2.7.
"Default Ratio" shall mean, as of the last day of each Settlement
Period, the percentage equivalent of a fraction, (i) the numerator of
which shall be the sum of (A) the aggregate unpaid balance of Receivables
that were 91-120 days past their original invoice dates as of such last
day, and (B) the aggregate amount of Receivables which were charged off as
uncollectible prior to the day which is 91 days after their respective
original invoice dates, and (ii) the denominator of which shall be the
aggregate Principal Amount of Receivables originated during the third
prior Settlement Period (excluding the Settlement Period ended on such
day).
"Defaulted Receivables" shall mean Receivables, other than
Construction Receivables and BEAR Receivables, that are not aged more than
121 days past their original invoice date plus the aggregate outstanding
Principal Amount of all Construction Receivables that are not aged more
than 151 days past their original invoice date plus the aggregate
outstanding Principal Amount of all BEAR Receivables that are not aged
more than 91 days past their original invoice date plus any Receivable,
other than a Construction Receivable or a BEAR Receivable, which becomes a
Charged-Off Receivable prior to 121 days past its original invoice date as
of the APA Bank Purchase Date plus any Construction Receivable which
becomes a Charged-Off Receivable prior to 151 days past its original
invoice date as of the APA Bank Purchase Date plus any BEAR Receivable,
which becomes a Charged-Off Receivable prior to 91 days past its original
invoice date as of the APA Bank Purchase Date plus the Aggregate Uncleared
Funds Amount; provided that for the purposes of computing the Principal
Amount of Receivables, Canadian Dollar Receivables shall be converted to
U.S. Dollars using the Valuation Price.
"Defaulting APA Bank" shall have the meaning assigned in subsection
2.6(c).
"Dilution Period" shall mean, in respect of (x) BEAR Receivables,
(y) Construction Receivables or (z) Receivables that are not BEAR
Receivables or Construction Receivables, as of any Settlement Report Date
and continuing until (but not
9
including) the next Settlement Report Date, the quotient of (i) the
product of (A) the aggregate Principal Amount of such Receivables referred
to above in (x), (y) or (z), as the case may be, which were originated by
the Sellers during the Settlement Period immediately preceding such
earlier Settlement Report Date and (B) one-thirtieth of Days Sales
Outstanding in respect of such Receivables and (ii) the Aggregate
Receivables Amount in respect of such Receivables as of the last day of
the Settlement Period preceding such earlier Settlement Report Date.
"Dilution Ratio" shall mean, for each Settlement Period, an amount
(expressed as a percentage) equal to the aggregate amount of Dilution
Adjustments made during such Settlement Period divided by the aggregate
Principal Amount of Receivables which were originated by the Sellers
during the preceding Settlement Period.
"Dilution Reserve Ratio" shall mean, as of any Settlement Report
Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) which is calculated as
follows:
DRR = [(c * d) + [(e-d) * (e/d)]] * f
Where:
DRR = Dilution Reserve Ratio;
c = 2.0;
d = the average of the Dilution Ratio during the period of twelve
consecutive Settlement Periods ending prior to such earlier
Settlement Report Date;
e = the highest Dilution Ratio for any Settlement Period during
the period of twelve consecutive Settlement Periods ending
prior to such earlier Settlement Report Date; and
f = the Dilution Period.
"Discount" shall mean, with respect to any Commercial Paper, the
interest or discount component thereof.
"Early Amortization Event" shall have the meanings assigned in
Section 5.1 of this Supplement and Section 7.1 of the Agreement.
"Early Amortization Period" shall have the meaning assigned in
Section 5.1 of this Supplement and Section 7.1 of the Agreement.
"Effective Date" shall have the meaning assigned in Section 9.1.
"Eligible Assignee" shall mean any financial institution that is a
United States Person (within the meaning of Section 7701(a)(30) of the
Internal Revenue Code) and that has a short term debt rating of at least
A-1 from S&P and P-1 from Moody's.
10
"Eurocurrency Reserve Requirements": for any day pertaining to a
Eurodollar Tranche, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal,
special and emergency reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect thereto) dealing
with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of such Board)
maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate" shall mean, with respect to each day during
each Eurodollar Period pertaining to a Eurodollar Tranche, the rate per
annum determined by the Funding Agent to the rate of interest per annum
(rounded upward if necessary to the nearest 1/16 of 1%) notified to the
Funding Agent by Chase as the rate of interest at which Dollar deposits in
the approximate amount of the portion of the Series 1998-1 Invested Amount
allocable to such Eurodollar Tranche as of such day and having a maturity
comparable to the Eurodollar Period applicable to such Eurodollar Tranche
would be offered to prime banks in the London interbank market at their
request at or about 11:00 a.m. (London time) on the second Business Day
prior to the commencement of such Eurodollar Period.
"Eurodollar Period" shall mean, with respect to any Eurodollar
Tranche:
(a) initially, the period commencing on the Issuance
Date or conversion date, as the case may be, with respect to such
Eurodollar Tranche and ending one month thereafter (or such other
period which is acceptable to the Purchaser and which in no event
will be less than 15 days); and
(b) thereafter, each period commencing on the last day
of the immediately preceding Eurodollar Period applicable to such
Eurodollar Tranche and ending one month thereafter (or such other
period which is acceptable to the Purchaser and which in no event
will be less than 15 days);
provided that all Eurodollar Periods must end on the next Distribution
Date and all of the foregoing provisions relating to Eurodollar Periods
are subject to the following:
(1) if any Eurodollar Period would otherwise end on a day that
is not a Business Day, such Eurodollar Period shall be extended to
the next succeeding Business Day unless the result of such extension
would be to carry such Eurodollar Period into another calendar
month, in which event such Eurodollar Period shall end on the
immediately preceding Business Day;
(2) any Eurodollar Period that would otherwise extend beyond
the Scheduled Revolving Termination Date shall end on the Scheduled
Revolving Termination Date; and
(3) any Eurodollar Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Eurodollar Period) shall end on the last Business Day of the
calendar month at the end of such Eurodollar Period.
11
"Eurodollar Rate" shall mean, with respect to each day during each
Eurodollar Period pertaining to a portion of the Series 1998-1 Invested
Amount allocated to a Eurodollar Tranche, a rate per annum determined for
such day in accordance with the following formula (rounded upwards, if
necessary, to the nearest 1/100th of 1%):
Eurodollar Base Rate
--------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche" shall mean a portion of the Series 1998-1
Invested Amount for which the Series 1998-1 Monthly Interest is calculated
by reference to a Eurodollar Rate determined by reference to a particular
Eurodollar Period.
"Excluded Taxes" shall have the meaning assigned in subsection
7.3(a).
"Facility Fee" shall have the meaning assigned in subsection 2.9(c).
"Facility Fee Rate" shall have the meaning assigned in the Fee
Letter.
"Fee Letter" shall mean that certain Fee Letter, dated as of the
date hereof, among the Company, the Funding Agent and the Initial
Purchaser and acknowledged by the Trustee.
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Funding Agent from three federal funds
brokers of recognized standing selected by it.
"Financial Covenants" shall mean collectively, each as specified in
the Credit Agreement, as in effect as of the date hereof, without giving
effect to any modification, change or amendment thereafter, unless
specifically approved in writing by the Required APA Banks, (i) the
leverage ratio covenant as specified in subsection 6.14 thereof, (ii) the
consolidated net cash interest expense coverage ratio covenant as
specified in subsection 6.15 thereof and (iii) the working capital
covenant as specified in subsection 6.16 thereof.
"Floating Tranche" shall mean, on or after the APA Bank Purchase
Date, that portion of the Series 1998-1 Invested Amount not allocated to a
Eurodollar Tranche for which the Series 1998-1 Monthly Interest is
calculated by reference to the ABR.
"Funding Agent" shall have the meaning specified in the recitals
hereto.
"Increase" shall have the meaning assigned in subsection 2.5(a).
"Increase Amount" shall have the meaning assigned in subsection
2.5(a).
"Increase Date" shall have the meaning assigned in subsection
2.5(a).
12
"Initial Purchaser" shall have the meaning specified in the recitals
hereto.
"Initial Series 1998-1 Invested Amount" shall have the meaning
assigned in subsection 2.5(a).
"Interest Shortfall" shall have the meaning assigned in subsection
3A.4(b).
"Invested Percentage" shall mean, with respect to any Business Day
(i) during the Series 1998-1 Revolving Period, the percentage equivalent
of a fraction, the numerator of which is the Series 1998-1 Allocated
Receivables Amount as of the end of the immediately preceding Business Day
and the denominator of which is the Aggregate Receivables Amount as of the
end of the immediately preceding Business Day and (ii) during the Series
1998-1 Amortization Period, the percentage equivalent of a fraction, the
numerator of which is the Series 1998-1 Allocated Receivables Amount as of
the end of the last Business Day of the Series 1998-1 Revolving Period
(provided that if during the Series 1998-1 Amortization Period, the
amortization periods of all other Outstanding Series which were
outstanding prior to the commencement of the Series 1998-1 Amortization
Period commence, then, from and after the date the last of such Series
commences its Amortization Period, the numerator shall be the Series
1998-1 Allocated Receivables Amount as of the end of the Business Day
preceding such date) and the denominator of which is the greater of (A)
the Aggregate Receivables Amount as of the end of the immediately
preceding Business Day and (B) the sum of the numerators used to calculate
the Invested Percentage for all Outstanding Series on the Business Day for
which such percentage is determined.
"Issuance Date" shall mean June 5, 1998.
"Loss Reserve Ratio" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) which is calculated as follows:
LRR = [(a * b)/c] * d
Where:
LRR = Loss Reserve Ratio;
a = the aggregate Principal Amount of Receivables, other than
Construction Receivables and BEAR Receivables, originated by
the Sellers during the two Settlement Periods immediately
preceding such earlier Settlement Report Date; plus the
aggregate Principal Amount of BEAR Receivables originated by
the Sellers during the two Settlement Periods immediately
preceding such earlier Settlement Report Date plus the
aggregate Principal Amount of Construction Receivables
originated by the Sellers during the two Settlement Periods
immediately preceding such earlier Settlement Report Date;
b = (i) after the earlier of (x) such time as fourteen Settlement
Periods have occurred since the Cut-Off Date or (y) such time
as the Servicer shall have delivered to the Funding Agent
fourteen months of historical aging data
13
showing separate aging of Receivables 91-120, 121-150 and 151-
180 days, respectively, past their original invoice date, the
highest three-month rolling average of the Aged Receivables
Ratio that occurred during the period of twelve consecutive
Settlement Periods preceding such earlier Settlement Report
Date, or (ii) before such time, the highest of (a) 1.5 times
the Aged Receivables Ratio reported for the month of April
1998, (b) the average of the Aged Receivables Ratios reported
for the months of April 1998 and May 1998 and (c) the highest
three-month average of the Aged Receivables Ratio reported
over any three consecutive months since the Cut-Off Date.
c = the Aggregate Receivables Amount as of the last day of the
Settlement Period preceding such earlier Settlement Report
Date; and
d = 2.0
"Majority Purchasers" shall mean, (i) on any day prior to the APA
Bank Purchase Date, the Initial Purchaser and the Required APA Banks and
(ii) on the APA Bank Purchase Date and any day thereafter, the Required
APA Banks.
"Maximum Commitment Amount" shall mean $306,000,000.
"Minimum Ratio" shall mean 15%.
"Monthly Interest Payment" shall have the meaning assigned in
subsection 3A.6(a).
"Moody's" shall mean Moody's Investors Service or any successor
thereto.
"Non-Defaulting APA Bank" shall have the meaning assigned in
subsection 2.6(c).
"Optional Termination Date" shall have the meaning assigned in
subsection 2.7(d).
"Optional Termination Notice" shall have the meaning assigned in
subsection 2.7(d).
"Other Taxes" shall have the meaning assigned in subsection 7.3(b).
"Outstanding Balance" shall mean, with respect to any Receivable at
any time, the then outstanding principal amount thereof, excluding any
accrued and outstanding finance, interest, late or similar charges related
thereto.
"PARCO Insolvency Event" shall mean the occurrence of any one or
more of the following: (i) any proceeding shall have been instituted by
the Initial Purchaser seeking to adjudicate it as bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any
law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of any order for relief or the appointment
of a receiver,
14
trustee or other similar official for it or any substantial part of its
property, or (ii) any proceeding of the type described in the foregoing
clause (i) shall be instituted against the Initial Purchaser and shall
have remained undismissed for a period of sixty (60) consecutive days, or
an order granting relief requested in any such proceeding shall be
entered.
"PARCO Residual Amount" shall have the meaning assigned in
subsection 2.6(e).
"PARCO Wind-Down Event" shall mean the occurrence of any of the
following events:
(i) on the fifteenth Business Day prior to the Commitment Expiry
Date, the Commitments of the APA Banks have not been extended
for at least an additional 364 days;
(ii) the providers of the Initial Purchaser's program liquidity
and/or letter of credit facilities shall have given notice
that an event of default has occurred and is continuing under
their respective agreements with the Initial Purchaser or
shall have given notice that their commitments shall not be
extended thereunder;
(iii) the Initial Purchaser has notified the Funding Agent, the
Company and Trustee that it has elected not to fund the Series
1998-1 Invested Amount or any Increase pursuant to subsection
2.5(b);
(iv) the Commercial Paper shall not be rated at least A-1 by S&P
and P-1 by Moody's, respectively;
(v) the average of the Dilution Ratio for the two previous
Settlement Periods shall exceed 7.3%;
(vi) the average of the Default Ratio for the two previous
Settlement Periods shall exceed the "Default Ratio Trigger"
(as determined in accordance with Schedule 3);
(vii) the average Days Sales Outstanding of Receivables for the two
previous Settlement Periods shall exceed 55 days; and
(viii) an Early Amortization Period has commenced;
provided, however, in the case of the events described in clauses (v),
(vi) and (vii) above, the Funding Agent at its sole discretion may waive
such events as PARCO Wind-Down Events and shall notify the Rating Agencies
in writing of such waiver.
"Participants" shall have the meaning assigned in subsection
11.11(e).
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
15
"Potential PARCO Wind-Down Event" shall mean any event or
circumstance that with notice, the lapse of time, or both, would become a
PARCO Wind-Down Event.
"Program Costs" shall mean, for any Business Day, the sum of (i) the
product of (A) all unpaid fees and expenses due and payable to counsel to,
and independent auditors of, the Company (other than fees and expenses
payable on or in connection with the closing of the issuance of the Series
1998-1 Interests) and (B) a fraction, the numerator of which is the
Aggregate Commitment Amount on such Business Day and the denominator of
which is the sum of (x) the Aggregate Invested Amounts on such Business
Day (other than the Series 1998-1 Invested Amount and the Invested Amount
in respect of any variable funding certificate of any other Outstanding
Series) and (y) the Aggregate Commitment Amount on such Business Day plus
the aggregate Commitment amount for any variable funding certificate of
any other Outstanding Series, and (ii) all unpaid fees and expenses due
and payable to any Rating Agencies rating the VFC Certificates; provided,
however, that the amount of Program Costs payable pursuant to Section
3A.6(b)(iv) shall not exceed $100,000 in the aggregate in any fiscal year
of the Servicer.
"Purchase" shall mean the assignment by the Initial Purchaser to the
APA Banks of the Initial Purchaser's Series 1998-1 Purchaser Invested
Amount pursuant to Section 2.6.
"Purchase Price" shall mean, on the APA Bank Purchase Date, an
amount equal to the lesser of (i) the Initial Purchaser's Series 1998-1
Purchaser Invested Amount (calculated without regard to clauses (d) and
(e) of the definition of Series 1998-1 Purchaser Invested Amount) and (ii)
the Adjusted Liquidity Price on such date, in each case as increased by
the sum of (1) the excess of (x) all accrued and unpaid Discount on all
outstanding Commercial Paper issued to fund the Initial Purchaser's Series
1998-1 Purchaser Invested Amount from the issuance date(s) thereof to but
excluding the APA Bank Purchase Date, over (y) amounts on deposit in the
Series 1998-1 Accrued Interest Collection Sub-subaccount, plus (2) the
aggregate Discount to accrue on all outstanding Commercial Paper issued to
fund the Initial Purchaser's Series 1998-1 Purchaser Invested Amount from
and including the APA Bank Purchase Date, to and excluding the maturity
date of each CP Tranche.
"Purchase Price Deficit" shall have the meaning assigned in
subsection 2.6(c).
"Purchaser" shall mean, prior to the APA Bank Purchase Date, the
Initial Purchaser and, on and after the APA Bank Purchase Date, the APA
Banks and each Acquiring APA Bank.
"Rating Agency" and "Rating Agencies" shall mean Moody's, S&P or any
other nationally recognized statistical rating organization from which a
rating for the Commercial Paper was requested by the Initial Purchaser and
is currently in effect.
"Rating Agency Condition" shall mean, with respect to any action,
that (i) each Rating Agency shall have been given prior notice thereof and
that each of the Rating Agencies shall have notified the Initial Purchaser
and the Funding Agent in writing that such action will not result in a
reduction or withdrawal of the then current rating of the
16
Commercial Paper and (ii) the Funding Agent shall have given their prior
written consent to such action.
"Record Date" shall mean the first Business Day prior to each
Distribution Date.
"Reduction Percentage" shall mean the percentage equivalent of a
fraction, the numerator of which is the PARCO Residual Amount and the
denominator of which is the sum of the PARCO Residual Amount and the
Adjusted Liquidity Price on the APA Bank Purchase Date.
"Reference Rate" shall have the meaning assigned in the definition
of ABR herein.
"Register" shall have the meaning assigned in subsection 11.11(c).
"Required APA Banks" shall mean APA Banks having Commitment
Percentages in the aggregate at least equal to 66-2/3% or, if the
Commitments have been terminated, holding at least 66-2/3% of the
outstanding Series 1998-1 Invested Amount; provided that the Commitment of
any Defaulting APA Bank that has not paid all amounts due and owing by it
in respect of the purchase it was obligated to make shall not be included
in the Aggregate Commitment Amount for purposes of this definition.
"Sale Notice" shall mean an irrevocable written notice given by an
authorized signatory or authorized officer of the Initial Purchaser (or on
behalf of the Initial Purchaser by Chase, in its capacity as the Initial
Purchaser's administrative agent) to the Funding Agent committing to sell,
assign and transfer to the APA Banks, the Initial Purchaser's Series
1998-1 Purchaser Invested Amount, which notice shall designate (i) the APA
Bank Purchase Date, (ii) the Initial Purchaser's Series 1998-1 Purchaser
Invested Amount, (iii) the Purchase Price (including a calculation of the
Purchase Price), (iv) that no PARCO Insolvency Event has occurred and (v)
wire transfer instructions specifying the account(s) into which the
proceeds of the Purchase Price shall be deposited.
"Scheduled Revolving Termination Date" shall mean the last day of
the Settlement Period ending in April of the year of the Commitment Expiry
Date.
"Series 1998-1" shall mean Series 1998-1, the Principal Terms of
which are set forth in this Supplement.
"Series 1998-1 Accrued Interest Sub-subaccount" shall have the
meaning assigned in subsection 3A.2(a).
"Series 1998-1 Adjusted Invested Amount" shall mean, as of any date
of determination, (i) the Series 1998-1 Invested Amount on such date,
minus (ii) the amount on deposit in the Series 1998-1 Principal Collection
Sub-subaccount on such date.
"Series 1998-1 Allocable Charged-Off Amount" shall mean, with
respect to any Special Allocation Settlement Report Date, the "Allocable
Charged-Off Amount", if any, which has been allocated to Series 1998-1.
17
"Series 1998-1 Allocable Recoveries Amount" shall mean, with respect
to any Special Allocation Settlement Report Date, the "Allocable
Recoveries Amount", if any, which has been allocated to Series 1998-1.
"Series 1998-1 Allocated Receivables Amount" shall mean, on any date
of determination, the lower of (i) the Series 1998-1 Target Receivables
Amount on such day and (ii) the product of (x) the Aggregate Receivables
Amount on such day and (y) the percentage equivalent of a fraction the
numerator of which is the Series 1998-1 Target Receivables Amount on such
day and the denominator of which is the Aggregate Target Receivables
Amount on such day.
"Series 1998-1 Amortization Period" shall mean the period commencing
on the Business Day following the earliest to occur of (i) the date on
which an Early Amortization Period is declared to commence or
automatically commences, (ii) the Optional Termination Date and (iii) the
Scheduled Revolving Termination Date and ending on the earlier of (i) the
date when the Series 1998-1 Invested Amount shall have been reduced to
zero and all accrued interest and other amounts owing on the VFC
Certificates and to the Funding Agent and the Purchasers hereunder shall
have been paid in full and (ii) the Series 1998-1 Termination Date.
"Series 1998-1 Canada/Canadian Dollar Collection Subaccount" shall
have the meaning specified in subsection 3A.2(a).
"Series 1998-1 Canada/U.S. Dollar Collection Subaccount" shall have
the meaning specified in subsection 3A.2(a).
"Series 1998-1 Collection Subaccount" shall have the meaning
assigned in subsection 3A.2(a).
"Series 1998-1 Interests" shall mean, collectively, the VFC
Certificates and the Series 1998-1 Subordinated Interest.
"Series 1998-1 Invested Amount" shall mean, as of any date of
determination, the sum of the Series 1998-1 Purchaser Invested Amounts of
all Purchasers on such date.
"Series 1998-1 Monthly Interest" shall have the meaning assigned in
subsection 3A.4(a).
"Series 1998-1 Monthly Principal Payment" shall have the meaning
assigned in Section 3A.5.
"Series 1998-1 Monthly Servicing Fee" shall have the meaning
assigned in Section 6.1.
"Series 1998-1 Non-Principal Collection Sub-subaccount" shall have
the meaning assigned in subsection 3A.2(a).
"Series 1998-1 Principal Collection Sub-subaccount" shall have the
meaning assigned in subsection 3A.2(a).
18
"Series 1998-1 Purchaser Invested Amount" shall mean, with respect
to the Initial Purchaser on the Issuance Date or, if the Initial Purchaser
shall not fund the Initial Series 1998-1 Invested Amount, any APA Bank, an
amount equal to the Initial Series 1998-1 Invested Amount or such APA
Bank's Commitment Percentage of the Initial Series 1998-1 Invested
Amount, and with respect to the Initial Purchaser or any other Purchaser
on any date of determination thereafter, an amount equal to (a) the
Initial Purchaser's or such other Purchaser's Series 1998-1 Purchaser
Invested Amount on the immediately preceding Business Day (or, with
respect to the day as of which such other Purchaser acquires an interest
in the Series 1998-1 Invested Amount, whether pursuant to Section 2.6, by
executing a counterpart hereof, a Commitment Transfer Supplement or
otherwise, the portion of the transferor's Series 1998-1 Purchaser
Invested Amount being purchased), plus (b) the amount of any increases in
such Purchaser's Series 1998-1 Purchaser Invested Amount pursuant to
Section 2.5 made on such day, minus (c) the amount of any distributions to
such Purchaser in respect of principal received and applied on such day
minus (d) the aggregate Series 1998-1 Allocable Charged-Off Amount applied
to such Purchaser on or prior to such date pursuant to subsection
3A.5(b)(ii) plus (e) (but only to the extent of any unreimbursed
reductions made pursuant to clause (d) above) the aggregate Series 1998-1
Allocable Recoveries Amount applied to such Purchaser on or prior to such
date pursuant to subsection 3A.5(c)(i).
"Series 1998-1 Ratio" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date,
the greater of (i) the sum of the Loss Reserve Ratio and the Dilution
Reserve Ratio and (ii) the Minimum Ratio, in each case, then in effect.
"Series 1998-1 Required Reserves" shall mean, (x) as of any date of
determination during the Series 1998-1 Revolving Period, an amount equal
to the sum of:
(a) an amount equal to the product of (A) the Series 1998-1
Adjusted Invested Amount on such day (after giving effect to any
increase or decrease thereof on such day) and (B) a fraction, the
numerator of which is the Series 1998-1 Ratio, and the denominator
of which is one minus the Series 1998-1 Ratio;
(b) the product of (i) the Series 1998-1 Invested Amount on
such day (after giving effect to any increase or decrease thereof on
such day) and (ii) a fraction, the numerator of which is the
Carrying Cost Reserve Ratio in effect for the Accrual Period in
which such day falls, and the denominator of which is one minus the
Series 1998-1 Ratio; and
(c) the product of (i) the aggregate Principal Amount of
Receivables in the Trust on such day, (ii) a fraction, the numerator
of which is the Series 1998-1 Invested Amount on such day, and the
denominator of which is the sum of the Aggregate Invested Amount on
such day (after giving effect to any increase or decrease thereof on
such day), and (iii) a fraction, the numerator of which is the
Servicing Reserve Ratio, and the denominator of which is one minus
the Series 1998-1 Ratio;
and (y) on any date of determination during the Series 1998-1 Amortization
Period, an amount equal to the Series 1998-1 Required Reserves on the last
Business Day of the
19
Series 1998-1 Revolving Period; provided, in the case of this clause (y),
that such amount shall be adjusted on each Special Allocation Settlement
Report Date, if any, to the extent required as set forth in Section
3A.5(b)(i) and Section 3A.5(c)(ii).
"Series 1998-1 Revolving Period" shall mean the period commencing on
the Issuance Date and terminating on the earliest to occur of the close of
business on (i) the date on which an Early Amortization Period is declared
to commence or automatically commences, (ii) the Optional Termination
Date, (iii) the Scheduled Revolving Termination Date and (iv) the
Commitment Termination Date.
"Series 1998-1 Subordinated Interest Amount" shall mean, for any
date of determination, an amount equal to (i) the Series 1998-1 Allocated
Receivables Amount minus (ii) the Series 1998-1 Adjusted Invested Amount.
"Series 1998-1 Subordinated Interest Reduction Amount" shall have
the meaning assigned in subsection 2.7(b).
"Series 1998-1 Subordinated Interest" shall have the meaning
assigned in subsection 2.2(b).
"Series 1998-1 Target Receivables Amount" shall mean, on any date of
determination, the sum of (i) the Series 1998-1 Adjusted Invested Amount
on such day and (ii) the Series 1998-1 Required Reserves for such day.
"Series 1998-1 Termination Date" shall mean the Distribution Date
that occurs nine months following the Scheduled Revolving Termination
Date.
"Servicer Indemnified Person" shall have the meaning specified in
subsection 2.10(b).
"Servicing Reserve Ratio" shall mean, as of any Settlement Report
Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) equal to (i) the product of
(A) the Servicing Fee Percentage and (B) 2.0 times Days Sales Outstanding
as of such earlier Settlement Report Date, divided by (ii) 360.
"Taxes" shall have the meaning assigned in subsection 7.3(a).
"Transaction Parties" shall have the meaning assigned in subsection
2.6(d).
"Transfer Issuance Date" shall mean the date on which a Commitment
Transfer Supplement becomes effective pursuant to the terms of such
Commitment Transfer Supplement.
"Transferee" shall have the meaning assigned in subsection 11.10(f).
"Trust Accounts" shall have the meaning assigned in subsection
3A.2(a).
"U.C.C. Certificate" shall mean a certificate substantially in the
form of Exhibit H to this Supplement.
20
"Unaccrued Discount Payment Amount" shall mean the portion of the
Purchase Price determined in accordance with clause (2) of the definition
thereof.
"Unallocated Balance" shall mean, as of (i) any Business Day prior
to the APA Bank Purchase Date, the portion of the Series 1998-1 Invested
Amount allocated to any CP Tranche the CP Rate Period in respect of which
expires on such Business Day and (ii) the APA Bank Purchase Date or any
Business Day thereafter, the sum of (A) the portion of the Series 1998-1
Invested Amount for which interest is then being calculated by reference
to the ABR and (B) the portion of the Series 1998-1 Invested Amount
allocated to any Eurodollar Tranche the Eurodollar Period in respect of
which expires on such Business Day.
"VFC Certificate" shall mean a VFC Certificate, Series 1998-1,
executed by the Company and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A.
"VFC Certificateholders" shall mean the Purchasers.
"VFC Certificateholders' Interest" shall have the meaning assigned
in subsection 2.2(a).
"WESCO" shall have the meaning specified in the preamble hereto.
(b) If any term or provision contained herein conflicts with or is
inconsistent with any term, definition or provision contained in the Agreement,
the terms and provisions of this Supplement shall govern. All capitalized terms
not otherwise defined herein are defined in the Agreement. All Article, Section
or subsection references herein shall mean Article, Section or subsections of
this Supplement, except as otherwise provided herein. Unless otherwise stated
herein, the context otherwise requires or such term is otherwise defined in the
Agreement, each capitalized term used or defined herein shall relate only to the
Series 1998-1 Interests and no other Series of Investor Certificates issued by
the Trust.
ARTICLE II
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE
OF THE VFC CERTIFICATES
SECTION 2.1. Designation. The Certificates and interests created and
authorized pursuant to the Agreement and this Supplement shall be divided into
two Classes, which shall be designated respectively as (i) the "VFC
Certificates, Series 1998-1" and (ii) an interest designated as the "Series
1998-1 Subordinated Interest."
SECTION 2.2. The Series 1998-1 Interests. (a) The VFC Certificates
shall represent fractional undivided interests in the Trust, including the right
to receive distributions from (i) the Invested Percentage (expressed as a
decimal) of Collections received with respect to the Receivables and all other
funds on deposit in the Collection Accounts and (ii) all other funds on deposit
in the Series Collection Subaccounts and any subaccounts thereof (collectively,
the "VFC Certificateholders' Interest").
21
(b) The "Series 1998-1 Subordinated Interest" shall be a fractional
undivided interest in the Trust, consisting of the right to receive Collections
with respect to the Receivables allocated to the VFC Certificateholders'
Interest and not required to be distributed to or for the benefit of the
Purchasers. The Exchangeable Company Interest and any other Series of Investor
Certificates outstanding shall represent the ownership interest in the remainder
of the Trust not allocated pursuant hereto to the VFC Certificateholders'
Interest or the Series 1998-1 Subordinated Interest.
(c) The VFC Certificates shall be substantially in the form of
Exhibit A and shall, upon issue, be executed and delivered by the Company to the
Trustee for authentication and redelivery as provided in Section 2.4 hereof and
Section 5.2 of the Agreement.
SECTION 2.3. Purchases of Interests in the VFC Certificates. (a)
Initial Purchase. Subject to the terms and conditions of this Supplement,
including delivery of notice in accordance with Section 2.4, (i) on the Issuance
Date, (A) the Initial Purchaser may, in its sole discretion, purchase a VFC
Certificate in an amount equal to the Initial Series 1998-1 Invested Amount or
(B) if the Initial Purchaser shall have notified the Funding Agent that it has
elected not to purchase a VFC Certificate on the Issuance Date, each APA Bank
hereby severally agrees to purchase on the Issuance Date a VFC Certificate in an
amount equal to such APA Bank's Commitment Percentage of the Initial Series
1998-1 Invested Amount and (ii) thereafter, (A) if the Initial Purchaser shall
have purchased a VFC Certificate on the Issuance Date, the Initial Purchaser
may, in its sole discretion, maintain its VFC Certificate, subject to increase
or decrease during the Series 1998-1 Revolving Period, in accordance with the
provisions of this Supplement and (B) if the APA Banks shall have purchased VFC
Certificates on the Issuance Date or, in any case, on or after the APA Bank
Purchase Date, the APA Banks hereby severally agree to maintain their respective
VFC Certificates, subject to increase or decrease during the Series 1998-1
Revolving Period, in accordance with the provisions of this Supplement. The
Company hereby agrees to maintain ownership of the Series 1998-1 Subordinated
Interest, subject to increase or decrease during the Series 1998-1 Revolving
Period, in accordance with the provisions of this Supplement. Payments by the
Initial Purchaser or the APA Banks, as the case may be, in respect of the VFC
Certificates shall be made in immediately available funds on the Issuance Date
to the Funding Agent for payment to the Company.
(b) Subsequent Purchases. Subject to the terms and conditions of
this Supplement, each Acquiring APA Bank hereby severally agrees to maintain its
VFC Certificate, subject to increase or decrease during the Series 1998-1
Revolving Period, in accordance with the provisions of this Supplement.
(c) Maximum Series 1998-1 Purchaser Invested Amount. Notwithstanding
anything to the contrary contained in this Supplement, at no time shall the
Series 1998-1 Purchaser Invested Amount (calculated without regard to clauses
(d) and (e) of the definition thereof) of any APA Bank exceed such APA Bank's
Commitment at such time.
SECTION 2.4. Delivery. On the Issuance Date, the Company shall sign,
on behalf of the Trust, and shall direct the Trustee in writing pursuant to
Section 5.2 of the Agreement to duly authenticate, and the Trustee, upon
receiving such direction, shall so authenticate (i) the VFC Certificates in such
names and such denominations and deliver such VFC Certificates to the Funding
Agent, on behalf of the Initial Purchaser, or the APA Banks, as the case may be,
in accordance with such written directions. The VFC Certificates shall be issued
in minimum denominations of $1,000,000 and in integral multiples of $100,000 in
excess
22
thereof. The Trustee shall mark on its books the actual Series 1998-1 Invested
Amount and Series 1998-1 Subordinated Interest Amount outstanding on any date of
determination, which, absent manifest error, shall constitute prima facie
evidence of the outstanding Series 1998-1 Invested Amount and Series 1998-1
Subordinated Interest Amount from time to time.
SECTION 2.5. Procedure for Initial Issuance and for Increasing the
Series 1998-1 Invested Amount. (a) Subject to subsection 2.5(c), (i) on the
Business Day designated in writing as provided herein (the "Issuance Date"), the
Initial Purchaser may agree, in its sole discretion, and each APA Bank hereby
agrees to purchase a VFC Certificate in accordance with Section 2.3 and (ii) on
any Business Day during the Commitment Period, the Initial Purchaser may agree,
in its sole discretion, and each APA Bank hereby agrees that the Series 1998-1
Invested Amount may be increased by increasing such Purchaser's Series 1998-1
Purchaser Invested Amount (an "Increase"), upon the request of the Servicer or
the Company on behalf of the Trust (each date on which an increase in the Series
1998-1 Invested Amount occurs hereunder being herein referred to as the
"Increase Date" applicable to such Increase); provided, however, that the
Servicer or the Company, as the case may be, shall have given the Funding Agent
(with a copy to the Trustee) irrevocable written notice (effective upon
receipt), substantially in the form of Exhibit F hereto, of such request no
later than (i) 1:00 p.m., New York City time, two Business Days prior to the
Issuance Date or such Increase Date, as the case may be, in the case of any
Increase Date occurring prior to the APA Bank Purchase Date or (ii) (x) if the
Initial Series 1998-1 Invested Amount or Increase Amount is to be priced solely
with reference to the ABR, on or prior to 12:00 noon, New York City time, on the
Issuance Date or such Increase Date, as the case may be, or (y) if all or a
portion of the Initial Series 1998-1 Invested Amount or Increase Amount is to be
allocated to a Eurodollar Tranche, 1:00 p.m., New York City time, three Business
Days prior to the Issuance Date or such Increase Date, as the case may be, in
the case of any Increase Date occurring on or after the APA Bank Purchase Date;
provided, further, that the provisions of this subsection shall not restrict the
allocations of Collections pursuant to Article III. Such notice shall state (x)
the Issuance Date or the Increase Date, as the case may be, (y) the initial
invested amount (the "Initial Series 1998-1 Invested Amount"), or the proposed
amount of such Increase (the "Increase Amount"), as the case may be, and (z) on
and after the APA Bank Purchase Date, what portions thereof will be allocated to
a Eurodollar Tranche and the Floating Tranche.
(b) If, prior to the APA Bank Purchase Date, the Initial Purchaser
elects not to fund any portion of a requested Increase, the Initial Purchaser
shall notify the Funding Agent thereof and deliver a Sale Notice in accordance
with Section 2.6 and each APA Bank shall purchase its Commitment Percentage of
the Initial Purchaser's Series 1998-1 Purchaser Invested Amount in accordance
with Section 2.6 and fund such Increase in an amount equal to its Commitment
Percentage of such Increase; provided, however that an APA Bank shall not be
obligated to fund any portion of an Increase that would cause its Series 1998-1
Purchaser Invested Amount to exceed its Commitment.
(c) The Purchasers shall not be required to make the initial
purchase of VFC Certificates on the Issuance Date or to increase their
respective Series 1998-1 Purchaser Invested Amounts on any Increase Date
hereunder unless:
(i) the related aggregate initial purchase amount or Increase
Amount is equal to $1,000,000 or an integral multiple of $100,000 in
excess thereof;
23
(ii) after giving effect to the initial purchase amount or
Increase Amount, (A) the Series 1998-1 Invested Amount would not exceed
the Maximum Commitment Amount on the Issuance Date or such Increase Date,
as the case may be, and (B) the Series 1998-1 Allocated Receivables Amount
would not be less than the Series 1998-1 Target Receivables Amount on the
Issuance Date or such Increase Date, as the case may be;
(iii) no Early Amortization Event or Potential Early
Amortization Event shall have occurred and be continuing;
(iv) in the case of any funding by the Initial Purchaser, no
PARCO Wind-Down Event or Potential PARCO Wind-Down Event shall have
occurred and be continuing; and
(v) all of the representations and warranties made by each of
the Company and the Servicer in each Transaction Document to which it is a
party are true and correct in all material respects on and as of the
Issuance Date or such Increase Date, as the case may be, as if made on and
as of such date (except to the extent such representations and warranties
are expressly made as of another date).
The Company's acceptance of funds in connection with (x) the Purchasers' initial
purchase of VFC Certificates on the Issuance Date and (y) each Increase
occurring on any Increase Date shall constitute a representation and warranty by
the Company to the Purchasers as of the Issuance Date or such Increase Date
(except to the extent such representations and warranties are expressly made as
of another date or relate to particular receivables), as the case may be, that
all of the conditions contained in this subsection 2.5(c) have been satisfied.
(d) After receipt by the Funding Agent of the notice required by
subsection 2.5(a) from the Servicer or the Company on behalf of the Trust, the
Funding Agent shall, so long as the conditions set forth in subsections 2.5(a)
and (c) are satisfied, promptly provide telephonic notice (i) prior to the APA
Bank Purchase Date, to the Initial Purchaser, and (ii) on and after the APA Bank
Purchase Date, to each APA Bank, of the Increase Date and of the portion of the
Increase Amount allocable to such APA Bank (which shall equal such APA Bank's
Commitment Percentage of the Increase Amount). If the Initial Purchaser elects
to fund an Increase, the Initial Purchaser agrees to pay in immediately
available funds the amount of such Increase on the related Increase Date to the
Funding Agent for payment to the Trust for deposit in the Series 1998-1
Principal Collection Sub-subaccount. On or after the APA Bank Purchase Date,
each APA Bank agrees to pay in immediately available funds such APA Bank's
Commitment Percentage of each Increase on the related Increase Date to the
Funding Agent for payment to the Trust for deposit in the Series 1998-1
Principal Collection Sub-subaccount.
SECTION 2.6. Sale by the Initial Purchaser of its Series 1998-1
Purchaser Invested Amount to the APA Banks. (a) On any date during the
Commitment Period, the Initial Purchaser may, in its own discretion, and the
Initial Purchaser shall upon the occurrence of a PARCO Wind-Down Event, in each
case, by delivering a Sale Notice to the Funding Agent, the Company and the
Trustee, sell to the APA Banks (in accordance with their respective Commitment
Percentages) and each APA Bank hereby agrees to purchase its Commitment
Percentage of all right, title and interest of the Initial Purchaser in its
Series 1998-1 Purchaser Invested Amount. Any Sale Notice shall be delivered by
the Initial Purchaser to the Funding Agent, the Company and the Trustee prior to
12:30 p.m., New York City time, on the APA Bank
24
Purchase Date and shall constitute an irrevocable offer by the Initial Purchaser
to sell 100% of its Series 1998-1 Purchaser Invested Amount at the Purchase
Price. Any Sale Notice shall be deemed to be a representation and warranty by
the Initial Purchaser that no PARCO Insolvency Event shall have occurred and be
continuing. Each APA Bank hereby agrees to purchase from the Initial Purchaser
such APA Bank's Commitment Percentage of the Initial Purchaser's Series 1998-1
Purchaser Invested Amount for a purchase price equal to such APA Bank's
Commitment Percentage of the Purchase Price on the APA Bank Purchase Date (which
date, subject to subsection 2.6(b), may be the same as the date of the Sale
Notice). Notwithstanding anything to the contrary set forth in this Supplement,
no APA Bank shall have any obligation to purchase the Initial Purchaser's Series
1998-1 Purchaser Invested Amount if, on such Purchase Date, any PARCO Insolvency
Event shall have occurred and be continuing.
(b) If, at or prior to 12:30 p.m., New York City time, on any
Business Day, the Initial Purchaser delivers the Sale Notice to the Funding
Agent specifying that the APA Bank Purchase Date shall be the same date as the
date of the Sale Notice, the Funding Agent shall, by no later than 1:00 p.m.,
New York City time, notify (by telecopy or by telephone call promptly confirmed
in writing by telecopy) each APA Bank of the receipt and content of the Sale
Notice. Each APA Bank shall purchase its Commitment Percentage of the Initial
Purchaser's VFC Certificate by depositing its Commitment Percentage of the
Purchase Price in immediately available funds into the account(s) specified by
the Initial Purchaser in the Sale Notice no later than 2:00 p.m., New York City
time. If the Initial Purchaser delivers the Sale Notice to the Funding Agent
after 12:30 p.m., New York City time, on any Business Day or the Initial
Purchaser delivers the Sale Notice to the Funding Agent specifying that the APA
Bank Purchase Date shall be a date other than the date of the Sale Notice, the
Funding Agent shall promptly advise (by telecopy or by telephone call promptly
confirmed in writing by telecopy) each APA Bank of the receipt and content of
the Sale Notice. Notwithstanding the fact that the APA Bank Purchase Date may
occur on a date which is later than the date on which the Sale Notice is
delivered to the Funding Agent, the several obligations of each APA Bank to make
such purchase and to make payment of the amounts required to be paid by it
pursuant to subsection 2.6(a) shall arise immediately upon receipt by the
Funding Agent of the Sale Notice. Upon payment of the Purchase Price as provided
herein and delivery to the Trustee by the Funding Agent of the Initial
Purchaser's VFC Certificate, the Company shall sign, on behalf of the Trust, and
shall direct the Trustee in writing to duly authenticate, and the Trustee, upon
receiving such direction, shall so authenticate, a new VFC Certificate in the
name of each APA Bank and in a denomination equal to such APA Bank's Commitment
Percentage as set forth in such written direction and shall deliver such VFC
Certificate to each such APA Bank in accordance with such written direction.
(c) If, by 2:00 p.m., New York City time, one or more APA Banks
(each, a "Defaulting APA Bank," and each APA Bank other than the Defaulting APA
Bank being referred to as a "Non-Defaulting APA Bank") fails to make its
Commitment Percentage of the Purchase Price available to the Funding Agent
pursuant to subsection 2.6(b) (the aggregate amount not so made available to the
Funding Agent being herein called the "Purchase Price Deficit"), then the
Funding Agent shall, by no later than 2:30 p.m., New York City time, instruct
each Non-Defaulting APA Bank to pay, by no later than 3:00 p.m., New York City
time, in immediately available funds, to the account designated by the Funding
Agent, an amount equal to the lesser of (x) such Non-Defaulting APA Bank's
proportionate share (based upon the relative Commitments of the Non-Defaulting
APA Banks) of the Purchase Price Deficit and (y) its unused Commitment. A
Defaulting APA Bank shall forthwith, upon demand, pay to the Funding Agent for
the ratable benefit of the Non-Defaulting APA Banks all amounts paid by
25
each Non-Defaulting APA Bank on behalf of such Defaulting APA Bank, together
with interest thereon, for each day from the date a payment was made by a
Non-Defaulting APA Bank until the date such Non-Defaulting APA Bank has been
paid such amounts in full, at a rate per annum equal to the sum of the Federal
Funds Effective Rate plus 2%. In addition, without prejudice to any other rights
that the Initial Purchaser may have under applicable law, each Defaulting APA
Bank shall pay to the Initial Purchaser forthwith upon demand, the difference
between the Defaulting APA Bank's unpaid Commitment Percentage of the Purchase
Price and the amount paid with respect thereto by the Non-Defaulting APA Banks,
together with interest thereon, for each day from the date of the Funding
Agent's request for such Defaulting APA Bank's Commitment Percentage of the
Purchase Price pursuant to Section 2.6(b) until the date the requisite amount is
paid to the Initial Purchaser in full, at a rate per annum equal to the sum of
the Federal Funds Effective Rate plus 2%.
(d) The transfer of the Initial Purchaser's VFC Certificate pursuant
to this Section 2.6 shall be without recourse or warranty, express or implied,
except that the Initial Purchasers represent that such VFC Certificate is free
and clear of adverse claims created by or arising as a result of claims against
the Initial Purchaser. By executing and delivering a Sale Notice pursuant to
Section 2.6(a), (i) the Initial Purchaser makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the VFC Certificate or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the VFC Certificate, or any other agreement, instrument or other document
furnished pursuant thereto or in connection therewith, including without
limitation any Transaction Document, and (ii) the Initial Purchaser makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Trust, the Trustee, the Servicer, each Sub-Servicer,
each Seller or any Obligor (collectively, the "Transaction Parties") or the
Funding Agent, or the performance or observance by the Transaction Parties of
any of their respective obligations under the VFC Certificate or the Transaction
Documents.
(e) If the Adjusted Liquidity Price on the APA Bank Purchase Date is
less than the Series 1998-1 Invested Amount on the APA Bank Purchase Date (the
amount of such insufficiency, the "PARCO Residual Amount"), each APA Bank agrees
that (i) on each Distribution Date after the APA Bank Purchase Date on which
interest is distributed to VFC Certificateholders pursuant to subsection
3A.6(a), the Funding Agent shall distribute to the Initial Purchaser its
Reduction Percentage of such interest payments and (ii) on each Distribution
Date after the APA Purchase Date on which amounts in reduction of the Series
1998-1 Invested Amount are distributed to VFC Certificateholders pursuant to
Section 2.7 or subsection 3A.6(c), the Funding Agent shall distribute to the
Initial Purchaser its Reduction Percentage of such amounts only after the Series
1998-1 Invested Amount has been paid in full.
SECTION 2.7. Procedure for Decreasing the Series 1998-1 Invested
Amount; Optional Termination. (a) On any Business Day during the Series 1998-1
Revolving Period or the Series 1998-1 Amortization Period (except for
Distribution Dates during the Series 1998-1 Amortization Period (which shall be
governed by subsection 3A.6(c))), upon the written request of the Servicer or
the Company on behalf of the Trust, the Series 1998-1 Invested Amount may be
reduced (a "Decrease") by the distribution by the Trustee to the Funding Agent
for the pro rata benefit of the Purchasers in accordance with their respective
Series 1998-1 Purchaser Invested Amounts of funds on deposit in the Series
1998-1 Principal Collection Sub-subaccount on such day in an amount not to
exceed the amount of such funds on deposit on such day; provided that the
Servicer shall have given the Funding Agent (with a copy to the Trustee)
26
irrevocable written notice (effective upon receipt), prior to 1:00 p.m., New
York City time, (i) on the second Business Day prior to such Decrease, in the
case of any Decrease occurring prior to the APA Bank Purchase Date and (ii) (A)
if the Decrease relates solely to a Floating Tranche, on the Business Day of
such Decrease or (B) if all or any portion of the Decrease relates to a
Eurodollar Tranche, on the Business Day that is three Business Days prior to
such Decrease, and which notice shall state the amount of such Decrease;
provided, further, that (x) such Decrease shall be in an amount equal to
$1,000,000 and integral multiples of $100,000 in excess thereof or if the Series
1998-1 Invested Amount is less than $1,000,000 then such Decrease shall equal
the Series 1998-1 Invested Amount, and (y) prior to the APA Bank Purchase Date,
such Decrease shall be in an amount no greater than the Unallocated Balance on
such day.
(b) Simultaneously with any such Decrease during the Series 1998-1
Revolving Period, the Series 1998-1 Subordinated Interest Amount shall be
reduced by an amount (the "Series 1998-1 Subordinated Interest Reduction
Amount") such that the Series 1998-1 Subordinated Interest Amount shall equal
the Series 1998-1 Required Reserves after giving effect to such Decrease. During
the Series 1998-1 Revolving Period, after the distribution described in
subsection (a) above has been made, and the Series 1998-1 Subordinated Interest
Amount shall have been reduced by the Series 1998-1 Subordinated Interest
Reduction Amount, a distribution shall be made to the owner of the Series 1998-1
Subordinated Interest out of remaining funds on deposit in the Series 1998-1
Principal Collection Sub-subaccount in an amount equal to the lesser of (x) the
Series 1998-1 Subordinated Interest Reduction Amount and (y) the amount of such
remaining funds on deposit in the Series 1998-1 Principal Collection
Sub-subaccount.
(c) On or after the APA Bank Purchase Date, any reduction in the
Series 1998-1 Invested Amount on any Business Day shall be allocated first to
reduce the Unallocated Balance and then to reduce the portion of the Series
1998-1 Invested Amount allocated to Eurodollar Tranches in such order as the
Company may select in order to minimize costs payable pursuant to Section 7.4.
(d) (i) On any Business Day unless the Scheduled Revolving
Termination Date, an Early Amortization Event or a Potential Early Amortization
Event shall have occurred and be continuing, the Company shall have the right to
deliver an irrevocable written notice (an "Optional Termination Notice") to the
Trustee, the Servicer and the Rating Agencies in which the Company declares that
the Series 1998-1 Revolving Period shall terminate on the date (the "Optional
Termination Date") set forth in such notice (which date, in any event, shall be
the last day of a Settlement Period which is not less than 10 days from the date
on which such notice is delivered).
(ii) From and after the Optional Termination Date, the Series 1998-1
Amortization Period shall commence for all purposes under this Agreement and the
other Transaction Documents. The Trustee shall give prompt written notice of its
receipt of an Optional Termination Notice to the Purchasers and each Rating
Agency.
SECTION 2.8. Reductions of the Commitments. (a) On any Business Day
during the Series 1998-1 Revolving Period, the Company, on behalf of the Trust,
may, upon three Business Days' prior written notice to the Funding Agent
(effective upon receipt) (with copies to the Servicer and the Trustee) reduce or
terminate the Commitments (a "Commitment Reduction") in an aggregate amount
equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof;
provided that no such termination or reduction shall be permitted if, after
giving
27
effect thereto and to any reduction in the Series 1998-1 Invested Amount on such
date, the Series 1998-1 Invested Amount would exceed the Aggregate Commitment
Amount then in effect. Each APA Banks's Commitment shall be reduced by such APA
Bank's Commitment Percentage of the amount of such Commitment Reduction.
(b) On any Business Day subsequent to the APA Bank Purchase Date, if
an Early Amortization Period has commenced, the Aggregate Commitment Amount
shall be reduced to the Series 1998-1 Invested Amount. Each APA Bank's
Commitment shall be reduced by an amount equal to such APA Bank's Commitment
Percentage times the amount of such reduction.
(c) Once reduced, the Commitments may not be subsequently
reinstated. Upon effectiveness of any such reduction, the Funding Agent shall
prepare a revised Schedule 1 to reflect the reduced Commitment of each APA Bank
and Schedule 1 of this Supplement shall be deemed to be automatically superseded
by such revised Schedule 1. The Funding Agent shall distribute such revised
Schedule 1 to the Company, the Servicer, the Trustee and each APA Bank.
SECTION 2.9. Interest; Fees. (a) Interest shall be payable on the
VFC Certificates on each Distribution Date pursuant to subsection 3A.6(a).
(b) The Trustee (acting at the written direction of the Servicer
upon which the Trustee may conclusively rely) shall distribute pursuant to
subsection 3A.6(b), from amounts on deposit in the Series 1998-1 Non-Principal
Collection Sub-subaccount, to the Funding Agent, for the pro rata account of the
APA Banks in accordance with their respective Commitment Percentages, on each
Distribution Date, a commitment fee with respect to each Accrual Period ending
on such date (the "Commitment Fee") (i) during the Series 1998-1 Revolving
Period at the Commitment Fee Rate of the average daily excess of the Aggregate
Commitment Amount over the average aggregate Series 1998-1 Purchaser Invested
Amounts of the APA Banks during such Accrual Period and (ii) during the Series
1998-1 Amortization Period at the Commitment Fee Rate of the average daily
Series 1998-1 Invested Amount during such Accrual Period; provided however, that
no Commitment Fee will be payable hereunder for any Accrual Period or portion
thereof during the Series 1998-1 Amortization Period that commences on or after
the APA Bank Purchase Date. The Commitment Fee shall be payable (i) monthly in
arrears on each Distribution Date and (ii) on the Commitment Termination Date.
To the extent that funds on deposit in the Series 1998-1 Non-Principal
Collection Sub-subaccount at any such date are insufficient to pay the
Commitment Fee due on such date, the Servicer shall so notify the Company and
the Company shall immediately pay the Funding Agent the amount of any such
deficiency.
(c) The Trustee (acting at the written direction of the Servicer
upon which the Trustee may conclusively rely) shall distribute pursuant to
subsection 3A.6(b), from amounts on deposit in the Series 1998-1 Non-Principal
Collection Sub-subaccount, to the Funding Agent, for the account of the Initial
Purchaser, on each Distribution Date prior to the APA Bank Purchase Date and on
the Distribution Date immediately succeeding the APA Bank Purchase Date, a
facility fee (the "Facility Fee") with respect to each Accrual Period ending on
such date (or, in the case of the Distribution Date immediately succeeding the
APA Bank Purchase Date, the period from and including the immediately preceding
Distribution Date to but excluding the APA Bank Purchase Date) (i) during the
Series 1998-1 Revolving Period, at the Facility Fee Rate of the average daily
Aggregate Commitment Amount during such period and (ii) during the Series 1998-1
Amortization Period, at the Facility Fee Rate of the average daily Series 1998-1
28
Invested Amount during such period. The Facility Fee shall be payable (i)
monthly in arrears on each Distribution Date prior to the APA Bank Purchase Date
and (ii) on the Distribution Date immediately succeeding the APA Bank Purchase
Date. To the extent that funds on deposit in the Series 1998-1 Non-Principal
Collection Sub-subaccount at any such date are insufficient to pay the Facility
Fee due on such date, the Servicer shall so notify the Company and the Company
shall immediately pay the Funding Agent the amount of any such deficiency.
(d) Calculations of per annum rates and fees under this Supplement
shall be made on the basis of a 360- (or 365-/366-, in the case of interest on
the Floating Tranche based on the ABR) day year with respect to Commitment Fees,
Facility Fees and interest rates. Each determination of the Eurodollar Rate by
the Funding Agent shall be conclusive and binding upon each of the parties
hereto in the absence of manifest error.
SECTION 2.10. Indemnification by the Company and the Servicer. (a)
The Company agrees to indemnify and hold harmless the Trustee, the Funding
Agent, each Purchaser and each of their respective officers, directors, agents
and employees (each, a "Company indemnified person") from and against any loss,
liability, expense, damage or injury suffered or sustained by (a "Claim") such
Company indemnified person by reason of (i) any acts, omissions or alleged acts
or omissions arising out of, or relating to, activities of the Company pursuant
to any Pooling and Servicing Agreement or the other Transaction Documents to
which it is a party, (ii) a breach of any representation or warranty made or
deemed made by the Company (or any of its officers) in any Pooling and Servicing
Agreement or other Transaction Documents or (iii) a failure by the Company to
comply with any applicable law or regulation or to perform its covenants,
agreements, duties or obligations required to be performed or observed by it in
accordance with the provisions of any Pooling and Servicing Agreement or the
other Transaction Documents, including, but not limited to, any judgment, award,
settlement, reasonable attorneys' fees and other reasonable costs or expenses
incurred in connection with the defense of any actual or threatened action,
proceeding or claim, except to the extent such loss, liability, expense, damage
or injury (A) resulted from the gross negligence, bad faith or wilful misconduct
of such Company indemnified person or its officers, directors, agents,
principals, employees or employers, (B) resulted solely from a default by an
Obligor with respect to any Receivable or (C) include any income or franchise
taxes imposed on (or measured by) any Company indemnified person's net income;
provided that any payments made by the Company pursuant to this subsection shall
be made solely from funds available to the Company which are not otherwise
required to be applied to the payment of any amounts (other than amounts payable
to the Company) pursuant to any Pooling and Servicing Agreements, shall be
non-recourse other than with respect to such funds, and shall not constitute a
claim against the Company to the extent that insufficient funds exist to make
such payment.
(b) The Servicer agrees to indemnify and hold harmless the Trustee,
the Funding Agent, each Purchaser and each of their respective officers,
directors, agents and employees (each, a "Servicer Indemnified Person") from and
against any Claim by reason of (i) any Claims by third parties against any
Seller Indemnified Person resulting from any acts, omissions or alleged acts or
omissions arising out of, or relating to, activities of the Servicer pursuant to
any Pooling and Servicing Agreement or the other Transaction Documents to which
it is a party, (ii) a breach of any representation or warranty made or deemed
made by the Servicer (or any of its officers) in any Pooling and Servicing
Agreement or other Transaction Document or (iii) a failure by the Servicer to
comply with any applicable law or regulation or to perform its covenants,
agreements, duties or obligations required to be performed or observed by it in
accordance with the provisions of any Pooling and Servicing Agreement or the
other Transaction
29
Documents, including, but not limited to, any judgment, award, settlement,
reasonable attorneys' fees and other reasonable costs or expenses incurred in
connection with the defense of any actual or threatened action, proceeding or
claim, except to the extent such loss, liability, expense, damage or injury
resulted from the gross negligence, bad faith or wilful misconduct of such
Servicer Indemnified Person or its officers, directors, agents, principals,
employees or employers.
ARTICLE III
ARTICLE III OF THE AGREEMENT
Section 3.1 of the Agreement and each other section of Article III
of the Agreement relating to another Series shall read in their entirety as
provided in the Agreement. Article III of the Agreement (except for Section 3.1
thereof and any portion thereof relating to another Series) shall read in its
entirety as follows and shall be exclusively applicable to the Series 1998-1
Interests:
SECTION 3A.2. Establishment of Trust Accounts. (a) The Trustee shall
cause to be established and maintained in the name of the Trustee, on behalf of
the Trust, (i) for the benefit of the Purchasers and (ii) in the case of clauses
(A) and (B) below, for the benefit, subject to the prior and senior interest of
the Purchasers, of the owner of the Series 1998-1 Subordinated Interest, (A) a
subaccount of the U.S. Dollar Collection Account (the "Series 1998-1 Collection
Subaccount"), which subaccount is the Series Collection Subaccount with respect
to Series 1998-1; (B) two subaccounts of the Series 1998-1 Collection
Subaccount: (1) the Series 1998-1 Principal Collection Sub-subaccount and (2)
the Series 1998-1 Non-Principal Collection Sub-subaccount (respectively, the
"Series 1998-1 Principal Collection Sub-subaccount" and the "Series 1998-1
Non-Principal Collection Sub-subaccount"); (C) a subaccount of the
Canada/Canadian Dollar Collection Account (the "Series 1998-1 Canada/Canadian
Dollar Collection Subaccount") and a subaccount of the Canada/U.S. Dollar
Collection Account (the "Series 1998-1 Canada/U.S. Dollar Collection
Subaccount") and (D) a subaccount of the Series 1998-1 Non-Principal Collection
Sub-subaccount (the "Series 1998-1 Accrued Interest Sub-subaccount"; all
accounts established pursuant to this subsection 3A.2(a) and listed on Schedule
2, collectively, the "Trust Accounts"), each Trust Account to bear a designation
indicating that the funds deposited therein are held for the benefit of the
Persons (and, for each such Person, to the extent) set forth in clauses (i) and
(ii) above. The Trustee shall possess all right, title and interest in all funds
from time to time on deposit in, and all Eligible Investments credited to, the
Trust Accounts and in all proceeds thereof. The Trust Accounts shall be under
the sole dominion and control of the Trustee for the exclusive benefit of the
Persons (and, for each such Person, to the extent) set forth in clauses (i) and
(ii) above.
(b) All Eligible Investments in the Trust Accounts shall be held by
the Trustee, on behalf of the Certificateholders, for the exclusive benefit of
the Purchasers and, subject to the prior interest of the Purchasers, the owner
of the Series 1998-1 Subordinated Interest; provided, however, that funds on
deposit in a Trust Account which is a Sub-subaccount of a Collection Account
may, at the direction of the Company, be invested together with funds held in
other Sub-subaccounts of the Collection Account. In the absence of written
direction from the Company all funds held in any Trust Account will remain
uninvested. After giving effect to any distribution to the Company pursuant to
subsection 3A.3(b), amounts on deposit and available for investment in the
Series 1998-1 Principal Collection Sub-subaccount, the Series 1998-1
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Canada/U.S. Dollar Collection Subaccount and the Series 1998-1 Canada/Canadian
Dollar Collection Subaccount shall be invested by the Trustee at the written
direction of the Company in Eligible Investments that mature, or that are
payable or redeemable upon demand of the holder thereof, (i) in the case of any
such investment made during the Series 1998-1 Revolving Period, on or prior to
the next Business Day and (ii) in the case of any such investment made during
the Series 1998-1 Amortization Period, on or prior to the Business Day
immediately preceding the next Distribution Date. Amounts on deposit and
available for investment in the Series 1998-1 Non-Principal Collection
Sub-subaccount and the Series 1998-1 Accrued Interest Sub-subaccount shall be
invested by the Trustee at the written direction of the Company in Eligible
Investments that mature, or that are payable or redeemable upon demand of the
holder thereof, on or prior to the Business Day immediately preceding the next
Distribution Date. As of the Business Day immediately preceding such next
Distribution Date, (x) all interest and other investment earnings (net of losses
and investment expenses) on funds deposited in the Series 1998-1 Accrued
Interest Sub-subaccount shall be deposited in the Series 1998-1 Non-Principal
Collection Sub-subaccount and (y) all interest and investment earnings (net of
losses and investment expenses) on funds deposited in the Series 1998-1
Principal Collection Sub-subaccount, the Series 1998-1 Canada/U.S. Dollar
Collection Subaccount and the Series 1998-1 Canada/Canadian Dollar Collection
Subaccount shall be deposited in the Series 1998-1 Non-Principal Collection
Sub-subaccount. In the absence of written direction from the Company all funds
held in any Trust Account will remain uninvested.
SECTION 3A.3. Daily Allocations. In accordance with the written
direction of the Servicer, and based solely on the Daily Report upon which the
Trustee may conclusively rely:
(a) The portion of the Aggregate Daily Collections allocated to the
Series 1998-1 Interests pursuant to Article III of the Agreement shall be
allocated and distributed on each Business Day as set forth in this Article III
by the Trustee as follows:
(i) an amount equal to the Accrued Expense Amount for such day
(or, during the Series 1998-1 Revolving Period, such greater amount as the
Company may request in writing) shall be transferred from the Series
1998-1 Collection Subaccount; provided that if the amount on deposit in
the Series 1998-1 Collection Subaccount is less than the Accrued Expense
Amount required to be transferred to the Series 1998-1 Non-Principal
Collection Sub-subaccount, then an amount equal to the shortfall shall be
retained, first, in the Series 1998-1 Canada/U.S. Dollar Collection
Subaccount and, second, to the extent of any remaining shortfall, in the
Series 1998-1 Canada/Canadian Dollar Collection Subaccount; and provided
further that, on each Distribution Date, such retained amounts shall be
transferred to the Series 1998-1 Non-Principal Collection Sub-subaccount;
(ii) any remaining funds on deposit in the Series 1998-1
Collection Subaccount, the Series 1998-1 Canada/Canadian Dollar Collection
Subaccount and the Series 1998-1 Canada/U.S. Dollar Collection Subaccount
shall be transferred by the Trustee to the Series 1998-1 Principal
Collection Sub-subaccount; provided that during the Series 1998-1
Revolving Period, amounts on deposit in the Series 1998-1 Canada/Canadian
Dollar Collection Subaccount and the Series 1998-1 Canada/U.S. Dollar
Collection Subaccount shall be transferred, in the order of priority set
forth in subsection 3.1(d)(vii) of the Agreement, to the Series 1998-1
Principal Collection Sub-subaccount only to the extent such amounts are
required to be distributed otherwise than to or upon the order of the
Company as provided in subsection (b)(i) below; and provided further that
on any day on which the principal amount of Commercial Paper
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shall be payable by the Initial Purchaser, upon the request of the
Servicer or, after the commencement of an Early Amortization Period, the
Funding Agent, the Trustee shall distribute to the Funding Agent an amount
equal to the principal amount of such maturing Commercial Paper, first,
from amounts on deposit in the Series 1998-1 Collection Subaccount and
second, if the amount on deposit in the Series 1998-1 Collection
Subaccount is less than the principal amount of such maturing Commercial
Paper, from amounts on deposit in the Series 1998-1 Canada/U.S. Dollar
Collection Subaccount and the Series 1998-1 Canada/Canadian Dollar
Collection Subaccount in the order of priority set forth in subsection
3.1(d)(vii) of the Agreement, up to the amount of the shortfall;
(b)(i) On each Business Day during the Series 1998-1 Revolving
Period (including Distribution Dates), after giving effect to (x) all
allocations, transfers and distributions of Aggregate Daily Collections on such
Business Day and any retention of funds in the Series 1998-1 Canada/U.S. Dollar
Collection Subaccount and the Series 1998-1 Canada/Canadian Dollar Collection
Subaccount and (y) any deposit resulting from an Increase, if any, pursuant to
subsection 2.5(c) on such Business Day, amounts on deposit in the Series 1998-1
Principal Collection Sub-subaccount, the Series 1998-1 Canada/U.S. Dollar
Collection Subaccount and the Series 1998-1 Canada/Canadian Dollar Collection
Subaccount shall be distributed by the Trustee to or upon the order of the
Company (but only to the extent that the Trustee has received a Daily Report
which reflects the receipt of the Collections on deposit therein) not later than
2:00 p.m., New York City time, in accordance with directions contained in the
Daily Report; provided that such distribution shall be made only if no Early
Amortization Event or Potential Early Amortization Event in each case set forth
in Section 7.1 of the Agreement or in subsections (a), (d) (but only with
respect to a Servicer Default set forth in subsection 6.1(e) of the Servicing
Agreement), (g), (i) or (j) of Section 5.1 of this Supplement has occurred and
is continuing and only to the extent that, if after giving effect to such
distribution, the Series 1998-1 Target Receivables Amount would not exceed the
Series 1998-1 Allocated Receivables Amount; provided further that if notice of
any Liens of the type described in subsection (j) of Section 5.1 of this
Supplement shall be filed against WESCO, the Company or the Trust that, in any
one instance or in the aggregate secures an amount that is less than $1,000,000,
the Trustee shall withhold from such distribution the aggregate amount secured
by such Liens, until there shall have been delivered to the Trustee and each
Rating Agency proof of the release of, or payment of the amounts secured by,
such Liens; provided further that if the Company or the Servicer, on behalf of
the Company, shall have given the Funding Agent irrevocable written notice
(effective upon receipt) at least two Business Days prior to such day, in the
case of any notice given prior to the APA Bank Purchase Date, on such day, in
the case of any notice given on or after the APA Bank Purchase Date with respect
to the Floating Tranche, or at least three Business Days prior to such day, in
the case of any notice given on or after the APA Bank Purchase Date with respect
to the Eurodollar Tranche, the Company or the Servicer may instruct the Trustee
in writing (specifying the related amount) to withdraw all or a portion of such
amounts on deposit in the Series 1998-1 Principal Collection Sub-subaccount and
apply such withdrawn amounts toward the reduction of the Series 1998-1 Invested
Amount and the Series 1998-1 Subordinated Interest Amount in accordance with
Section 2.7. Amounts distributed to the Company hereunder shall be deemed to be
paid first from Collections received directly by the Servicer and second from
Collections received in the Lockboxes.
(ii) On each Business Day during the Series 1998-1 Amortization
Period (including Distribution Dates), funds deposited in the Series 1998-1
Principal Collection Sub-subaccount shall be invested in Eligible Investments
that mature on or prior to the Business Day
32
immediately preceding the next Distribution Date and shall be distributed on
such Distribution Date in accordance with subsection 3A.6(c). Except as set
forth in subsection 3A.6(c), no amounts on deposit in the Series 1998-1
Principal Collection Sub-subaccount shall be distributed by the Trustee to the
Company or the owner of the Series 1998-1 Subordinated Interest during the
Series 1998-1 Amortization Period.
(c) On each Business Day, an amount equal to the Daily Interest
Deposit for such day shall be transferred by the Trustee from the Series 1998-1
Non-Principal Collection Sub-subaccount to the Series 1998-1 Accrued Interest
Sub-subaccount.
(d) The allocations to be made pursuant to this Section 3A.3 are
subject to the provisions of Sections 2.5, 2.7, 7.2 and 9.1 of the Agreement.
SECTION 3A.4. Determination of Interest. (a) (i) The amount of interest
distributable with respect to the VFC Certificates ("Series 1998-1 Monthly
Interest") on each Distribution Date shall be the amount of Daily Interest
Expense accrued during the Accrual Period ending on such Distribution Date.
(ii) If a change in the CP Rate, the weighted average
Eurodollar Rate or the ABR on or after any Settlement Report Date or any
withdrawal pursuant to the proviso in subsection 3A.3(a)(ii) results in a
change in Series 1998-1 Monthly Interest for the Accrual Period ending on
the Distribution Date immediately succeeding such Settlement Report Date,
the Servicer shall amend the Monthly Settlement Statement to reflect the
adjustment in the Series 1998-1 Monthly Interest for such Accrual Period
caused by such change or withdrawal and any consequent adjustments and the
Servicer shall also provide written notification to the Trustee of any
such change. Any amendment to the Monthly Settlement Statement pursuant to
this subsection 3A.4(a)(ii) shall be completed by 1:00 p.m. on the day
preceding the next Distribution Date.
(b) On each Distribution Date, the Servicer shall determine the
excess, if any (the "Interest Shortfall"), of (i) the Series 1998-1 Monthly
Interest for the Accrual Period ending on such Distribution Date over (ii) the
amount which will be available to be distributed to the Purchasers on such
Distribution Date in respect thereof pursuant to this Supplement. If the
Interest Shortfall with respect to any Distribution Date is greater than zero,
an additional amount ("Additional Interest") equal to the product of (A) the
number of days until such Interest Shortfall shall be repaid divided by 365 (or
366, as the case may be), (B) the ABR plus 2.0% and (C) such Interest Shortfall
(or the portion thereof which has not been paid to the Purchasers) shall be
payable as provided herein with respect to the VFC Certificates on each
Distribution Date following such Distribution Date, to but excluding the
Distribution Date on which such Interest Shortfall is paid to the VFC
Certificateholders.
(c) On any Business Day, the Company may, subject to subsection
3A.4(e), elect to allocate all or any portion of the Available Pricing Amount
(i), prior to the APA Bank Purchase Date, to one or more CP Tranches with CP
Rate Periods commencing on such Business Day by giving the Funding Agent
irrevocable written or telephonic (confirmed in writing) notice thereof, which
notice must be received by the Funding Agent prior to 1:00 p.m., New York City
time, two Business Days prior to such Business Day or (ii) on or after the APA
Bank Purchase Date, to one or more Eurodollar Tranches with Eurodollar Periods
commencing on such Business Day by giving the Funding Agent irrevocable written
or telephonic (confirmed in writing) notice thereof, which notice must be
received by the Funding Agent prior to 1:00 p.m.,
33
New York City time, three Business Days prior to such Business Day. Such notice
shall specify (i) the applicable Business Day, (ii) the CP Rate Period for each
CP Tranche or the Eurodollar Period for each Eurodollar Tranche, as the case may
be, to which a portion of the Available Pricing Amount is to be allocated and
(iii) the portion of the Available Pricing Amount being allocated to each such
CP Tranche or Eurodollar Tranche, as the case may be. On or after the APA Bank
Purchase Date, the Funding Agent shall notify each APA Bank of the contents of
each such notice promptly upon receipt thereof. Prior to the APA Bank Purchase
Date, the Company shall allocate the Series 1998-1 Invested Amount so that the
aggregate amounts allocated to outstanding CP Rate Periods at all times equal
the Series 1998-1 Invested Amount.
(d) Any reduction in the Series 1998-1 Invested Amount on any
Business Day shall be allocated in the following order of priority:
First, to reduce the Unallocated Balance, as appropriate; and
Second, to reduce the portion of the Series 1998-1 Invested Amount
allocated to Eurodollar Tranches in such order as the Company may select
in order to minimize costs payable pursuant to Section 7.4.
(e) Notwithstanding anything to the contrary contained in this
Section 3A.4, (i) prior to the APA Bank Purchase Date, (A) the Initial Purchaser
shall approve the length of each CP Rate Period and the portion of the Series
1998-1 Invested Amount allocated to such CP Rate Period, (B) the Initial
Purchaser may select, in its sole discretion, any new CP Rate Period if (x) the
Company fails to provide notice of a new CP Rate Period on a timely basis or (y)
the Funding Agent, on behalf of the Initial Purchaser, determines, in its sole
discretion, that the CP Rate Period requested by the Company is unavailable or
for any reason commercially undesirable, (C) the portion of the Series 1998-1
Invested Amount allocable to each CP Tranche must be in an amount equal to
$1,000,000 or an integral multiple of $100,000 in excess thereof and (D) no more
than twenty CP Tranches shall be outstanding at any one time and (ii) on and
after the APA Bank Purchase Date, (A) the portion of the Series 1998-1 Invested
Amount allocable to each Eurodollar Tranche must be in an amount equal to
$500,000 or an integral multiple of $500,000 in excess thereof, (B) no more than
20 Eurodollar Tranches shall be outstanding at any one time, (C) after the
occurrence and during the continuance of any Early Amortization Event or
Potential Early Amortization Event in each case set forth in Section 7.1 of the
Agreement or in subsections (a), (d) (but only with respect to a Servicer
Default set forth in subsection 6.1(e) of the Servicing Agreement), (g), (i),
(j) or (k) of Section 5.1 of this Supplement, the Company may not elect to
allocate any portion of the Available Pricing Amount to a Eurodollar Tranche and
(D) after the end of the Series 1998-1 Revolving Period, the Company may not
select any Eurodollar Period that does not end on or prior to the next
succeeding Distribution Date.
SECTION 3A.5. Determination of Series 1998-1 Monthly Principal. (a)
Payments of Series 1998-1 Principal. The amount (the "Series 1998-1 Monthly
Principal Payment") distributable from the Series 1998-1 Principal Collection
Sub-subaccount on each Distribution Date during the Series 1998-1 Amortization
Period shall be equal to the amount on deposit in such account on the
immediately preceding Settlement Report Date; provided, however, that the Series
1998-1 Monthly Principal Payment on any Distribution Date shall not exceed the
Series 1998-1 Invested Amount on such Distribution Date after giving effect to
the reductions and increases pursuant to paragraphs (b) and (c) below. In
addition, on the last day of any Eurodollar Period that is not a Distribution
Date, the Trustee, at the written direction of the
34
Servicer, shall distribute from amounts on deposit in the Series 1998-1 Accrued
Interest Sub-subaccount an amount equal to the interest due on the Eurodollar
Tranche on the last day of such Eurodollar Period.
(b) Reductions to Series 1998-1 Principal. If, on any Special
Allocation Settlement Report Date, the Series 1998-1 Allocable Charged-Off
Amount is greater than zero for the related Settlement Period, the Trustee shall
(in accordance with written directions from the Servicer, upon which the Trustee
may conclusively rely) make the following allocations of such amounts in the
following order of priority:
(i) the Series 1998-1 Required Reserves shall be reduced (but
not below zero) by an amount equal to the Series 1998-1 Allocable
Charged-Off Amount (which shall also be reduced by the amount so applied);
and
(ii) then, to the extent that the Series 1998-1 Allocable
Charged-Off Amount is greater than zero following the application in
clause (i) above, the Series 1998-1 Invested Amount shall be reduced (but
not below zero) by such remaining Series 1998-1 Allocable Charged-Off
Amount (which shall also be reduced by the amount so applied).
(c) Increases to Series 1998-1 Principal. If, on any Special
Allocation Settlement Report Date, the Series 1998-1 Allocable Recoveries Amount
is greater than zero for the related Settlement Period, the Trustee shall (in
accordance with written directions from the Servicer upon which the Trustee may
conclusively rely) make the following allocations (after giving effect to the
applications in paragraph (b) of such amount in the following order of
priority):
(i) the Series 1998-1 Invested Amount shall be increased (but
only to the extent of any previous reductions of the Series 1998-1
Invested Amount pursuant to subsection 3A.5(b)(ii)) by the amount of the
Series 1998-1 Allocable Recoveries Amount (which shall also be reduced by
the amount so applied);
(ii) then, to the extent that the Series 1998-1 Allocable
Recoveries Amount is greater than zero following the applications in
clause (i) above, the Series 1998-1 Required Reserves shall be increased
(but only to the extent of any previous reductions of the Series 1998-1
Required Reserves pursuant to subsection 3A.5(b)(i)) by such remaining
Series 1998-1 Allocable Recoveries Amount (which shall also be reduced by
the amount so applied).
SECTION 3A.6. Applications. (a) (i) On each Distribution Date, based
solely on the Monthly Settlement Statement, the Trustee shall distribute to the
Purchasers, from amounts on deposit in the Series 1998-1 Accrued Interest
Sub-subaccount, an amount equal to the Series 1998-1 Monthly Interest payable on
such Distribution Date (such amount, the "Monthly Interest Payment"), plus the
amount of any Monthly Interest Payment previously due but not distributed to the
Purchasers on a prior Distribution Date, plus the amount of any Additional
Interest for such Distribution Date and any Additional Interest previously due
but not distributed to the Purchasers on a prior Distribution Date, provided
that the Monthly Interest Payment will be reduced by distributions made pursuant
to clause (ii);
(ii) on any day during an Accrual Period, the Funding Agent
may request the Trustee to distribute from the Series 1998-1 Accrued
Interest Sub-subaccounts, an
35
amount sufficient to pay the discount component of Commercial Paper notes
issued by PARCO to fund the Series 1998-1 Invested Amount and maturing on
such day.
(b) On each Distribution Date, based solely on the Monthly
Settlement Statement, the Trustee shall apply funds on deposit in the Series
1998-1 Non-Principal Collection Sub-subaccount in the following order of
priority to the extent funds are available:
(i) an amount equal to the Series 1998-1 Monthly Servicing Fee
for the Accrual Period ending on such Distribution Date shall be withdrawn
from the Series 1998-1 Non-Principal Collection Sub-subaccount by the
Trustee and paid to the Servicer or, if WESCO or any Affiliate thereof is
not the Servicer, an amount equal to the Series 1998-1 Monthly Servicing
Fee shall be paid to the Person acting as Successor Servicer (less, in
each case, any amounts payable to the Trustee pursuant to Section 8.5 of
the Agreement, which shall be paid to the Trustee);
(ii) an amount equal to the Facility Fee for the Accrual
Period ending on such Distribution Date shall be withdrawn from the Series
1998-1 Non-Principal Collection Sub-subaccount by the Trustee and paid to
the Funding Agent, for the account of the Initial Purchaser;
(iii) an amount equal to the Commitment Fee for the Accrual
Period ending on such Distribution Date shall be withdrawn from the Series
1998-1 Non-Principal Collection Sub-subaccount by the Trustee and paid to
the Funding Agent, for the pro rata account of the APA Banks, in
accordance with their respective Commitment Percentages; and
(iv) an amount equal to any unpaid Program Costs due and
payable shall be withdrawn from the Series 1998-1 Non-Principal Collection
Sub-subaccount by the Trustee and paid to the Persons owed such amounts.
Any remaining amounts on deposit in the Series 1998-1 Non-Principal Collection
Sub-subaccount (in excess of the Accrued Expense Amount as of such day) not
allocated pursuant to clauses (i) through (v) above shall be paid to the owner
of the Series 1998-1 Subordinated Interest; provided, however, that during the
Series 1998-1 Amortization Period, such remaining amounts shall be deposited in
the Series 1998-1 Principal Collection Sub-subaccount for distribution in
accordance with subsection 3A.6(c).
(c) During the Series 1998-1 Amortization Period, the Trustee shall
apply, on each Distribution Date, amounts on deposit in the Series 1998-1
Principal Collection Sub-subaccount in the following order of priority:
(i) an amount equal to the Series 1998-1 Monthly Principal
Payment for such Distribution Date shall be distributed from the Series
1998-1 Principal Collection Sub-subaccount to the Purchasers; and
(ii) if, following the repayment in full of the Series 1998-1
Invested Amount, and the PARCO Residual Amount, if any, any amounts are
owed to the Trustee, the Purchasers or any other Person hereunder, such
amounts shall be transferred from the Series 1998-1 Principal Collection
Sub-subaccount and paid to the Trustee, the Purchasers or such other
Person; and
36
(iii) following the repayment in full of the Series 1998-1
Invested Amount and the PARCO Residual Amount, if any, and of all of the
amounts set forth in clause (ii), the remaining amount on deposit in the
Series 1998-1 Principal Collection Sub-subaccount on such Distribution
Date, if any, shall be distributed to the owner of the Series 1998-1
Subordinated Interest;
(iv) following the APA Bank Purchase Date, to the extent that
funds received as the Purchase Price are not used to repay Commercial
Paper, the Initial Purchaser shall invest such funds in Eligible
Investments which mature on or prior to the day prior to the maturity of
its Commercial Paper and any funds resulting from earnings on such
Eligible Investments shall be distributed to the Series 1998-1
Non-Principal Collection Sub-subaccount.
Further, on any other Business Day during the Series 1998-1
Amortization Period, funds may be distributed from the Series 1998-1 Principal
Collection Sub-subaccount to the Purchasers in accordance with Section 2.7(a) of
this Supplement.
ARTICLE IV
DISTRIBUTIONS AND REPORTS
Article IV of the Agreement (except for any portion thereof relating
to another Series) shall read in its entirety as follows and the following shall
be exclusively applicable to the VFC Certificates:
SECTION 4A.1. Distributions. (a) On each Distribution Date, the
Trustee shall distribute to each Purchaser its applicable pro rata share (based
on each such Purchaser's Series 1998-1 Invested Amount) of the amount to be
distributed to the Purchasers pursuant to Article III.
(b) All allocations and distributions hereunder shall be in
accordance with the Daily Report and the Monthly Settlement Statement and shall
be made in accordance with the provisions of Section 11.4 hereof and subject to
Section 3.1(g) of the Agreement.
SECTION 4A.2. Reports. The Servicer shall provide the Funding Agent
and the Trustee with a Daily Report in accordance with subsection 4.1 of the
Servicing Agreement. The Funding Agent shall make copies of the Daily Report
available to the Purchaser at its reasonable request at the Funding Agent's
office in New York, New York.
SECTION 4A.3. Statements and Notices. (a) Monthly Settlement
Statements. On each Settlement Report Date, the Servicer shall deliver to the
Trustee and the Funding Agent (commencing with the Settlement Report Date
occurring on June 15, 1998) a Monthly Settlement Statement in the Form of
Exhibit E setting forth, among other things, the Loss Reserve Ratio, the
Dilution Reserve Ratio, the Minimum Ratio, the Carrying Cost Reserve Ratio, the
Servicing Reserve Ratio and the components of the calculation thereof, the
Series 1998-1 Monthly Interest, the Additional Interest, the Series 1998-1
Monthly Servicing Fee, the Commitment Fee and the Series 1998-1 Monthly
Principal Payment, each as recalculated for the period until the next succeeding
Settlement Report Date. The Funding Agent shall forward a copy of each Monthly
Settlement Statement to any Purchaser upon request by such Purchaser. The
Company and the Servicer will deliver copies of all notices, reports, statements
and other
37
documents delivered by it pursuant to the Pooling and Servicing Agreements to
each Rating Agency. A copy of any such items may be obtained by any
Certificateholder upon a written request delivered to the Trustee at the
Corporate Trust Office.
(b) Annual Certificateholders' Tax Statement. On or before January
31 of each calendar year (or such earlier date as required by applicable law),
beginning with calendar year 1999, the Trustee shall furnish, or cause to be
furnished, to each Person who at any time during the preceding calendar year was
a Purchaser, a statement prepared by the Company containing the aggregate amount
distributed to such Person for such calendar year or the applicable portion
thereof during which such Person was a Purchaser, together with such other
information as is required to be provided by an issuer of indebtedness under the
Internal Revenue Code and such other customary information as the Company deems
necessary or desirable to enable the Purchasers to prepare their tax returns.
Such obligation of the Trustee shall be deemed to have been satisfied to the
extent that substantially comparable information shall have been prepared by the
Servicer and provided to the Trustee or the Funding Agent and to the Purchasers,
in each case pursuant to any requirements of the Internal Revenue Code as from
time to time in effect.
(c) Early Amortization Event/Distribution of Principal Notices. Upon
the occurrence of an Early Amortization Event or Potential Early Amortization
Event with respect to Series 1998-1, the Company or the Servicer, as the case
may be, shall give prompt written notice thereof to the Trustee and the Funding
Agent. As promptly as reasonably practicable after its receipt of notice of the
occurrence of an Early Amortization Event with respect to Series 1998-1, the
Trustee shall give notice thereof (i) to each Rating Agency (which notice shall
be given in writing not later than the second Business Day after such receipt)
and (ii) to the Funding Agent, who in turn shall give notice to each Purchaser.
In addition, on the Business Day preceding each day on which a distribution of
principal is to be made during the Series 1998-1 Amortization Period, the
Servicer shall direct the Funding Agent to send notice to each Purchaser, which
notice shall set forth the amount of principal to be distributed on the related
date to the Purchasers with respect to the outstanding VFC Certificates.
ARTICLE V
ADDITIONAL EARLY AMORTIZATION EVENTS
SECTION 5.1. Additional Early Amortization Events. If any one of the
events specified in Section 7.1 of the Agreement (after any grace periods or
consents applicable thereto) or any one of the following events (each, an "Early
Amortization Event") shall occur during the Series 1998-1 Revolving Period with
respect to the Series 1998-1 Interests:
(a) (i) failure on the part of the Servicer to direct any payment or
deposit to be made or failure of any payment or deposit to be made in
respect of interest owing on any VFC Certificates or the Commitment Fee
within two Business Days of the date such interest or Commitment Fee is
due, (ii) failure on the part of the Servicer to direct any payment or
deposit to be made in respect of principal owing on any VFC Certificates
on the date such principal is due or (iii) failure on the part of the
Servicer to direct any payment or deposit to be made, or of the Company to
make any payment or deposit in respect of any other amounts owing by the
Company, under any Pooling and Servicing Agreement within two Business
Days of the date such other amount is due or such deposit is required to
be made;
38
(b) (i) failure on the part of the Company to duly observe or
perform in any material respect any of the covenants or agreements of the
Company set forth in Sections 2.7(b) or (l) or Section 2.8 of the
Agreement or (ii) failure on the part of the Company to duly observe or
perform in any material respect any other covenants or agreements of the
Company set forth in any Pooling and Servicing Agreement, which failure
continues unremedied 30 days after the earlier of the date on which a
Responsible Officer of the Company or the Servicer has knowledge thereof
and the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Company by the Trustee, or to
the Company and the Trustee by the Funding Agent or Purchasers
representing 25% or more of the Series 1998-1 Invested Amount.
(c) any representation or warranty made or deemed made by the
Company in any Pooling and Servicing Agreement to or for the benefit of
the Purchasers (i) proves to have been incorrect in any material respect
when made or when deemed made and (ii) continues to be incorrect until 30
days after the earlier of the date on which a Responsible Officer of the
Company or the Servicer has knowledge thereof and the date on which notice
of such failure, requiring the same to be remedied, has been given by the
Trustee to the Company or by Purchasers representing 25% or more of the
Series 1998-1 Invested Amount to the Company and the Trustee; provided,
however, that an Early Amortization Event with respect to the Series
1998-1 Interests shall not be deemed to have occurred under this paragraph
if the incorrectness of such representation or warranty gives rise to an
obligation to repurchase the related Receivables and the Company has
repurchased the related Receivable or all such Receivables, if applicable,
in accordance with the provisions of any Pooling and Servicing Agreement
within two Business Days of the day on which the Company was obligated to
do so;
(d) a Servicer Default with respect to the Servicer shall have
occurred and be continuing;
(e) a Purchase Termination Event (as defined in the Receivables Sale
Agreement) shall have occurred with respect to WESCO and be continuing
under the Receivables Sale Agreement;
(f) a Change in Control shall have occurred;
(g) the Series 1998-1 Allocated Receivables Amount shall be less
than the Series 1998-1 Target Receivables Amount for more than five
Business Days;
(h) any of the Agreement, the Servicing Agreement, this Supplement
or the Receivables Sale Agreements shall cease, for any reason, to be in
full force and effect in any material respect, or the Company, any Seller,
the Servicer, any Sub-Servicer or any Affiliate of any thereof shall so
assert in writing;
(i) the Trust shall for any reason cease to have a valid and
perfected first priority undivided ownership or security interest in
substantially all of the Filing Trust Assets (subject to no other Liens
other than Permitted Liens described in clause (i) of the definition
thereof), or any of WESCO, the Company or any Affiliate of either thereof
shall so assert; or
39
(j) 15 days shall have elapsed after there shall have been filed
against WESCO, the Company or the Trust (i) a notice of federal tax Lien
from the Internal Revenue Service or (ii) a notice of Lien from the PBGC
under Section 412(n) of the Internal Revenue code or Section 302(f) of
ERISA for a failure to make a required installment or other payment to a
plan to which either of such sections applies and, in any one instance or
in the aggregate, the amount secured by such Liens exceeds $1,000,000,
unless in each case there shall have been delivered to the Trustee and
each Rating Agency proof of the release of, or payment of amounts secured
by, such Lien;
(k) there shall have been filed against WESCO, the Company or the
Trust a notice of any other Lien the existence of which could reasonably
be expected to have a material adverse effect on the business, operations
or financial condition of such Person, unless in each case there shall
have been delivered to the Trustee and each Rating Agency proof of the
release of, or payment of amounts secured by, such Lien;
(l) (i) WESCO or any of its Subsidiaries shall default in the
payment of any of its outstanding Indebtedness (including, without
limitation, Indebtedness outstanding under the Credit Agreement) or in the
observance or performance of any agreement or condition relating to such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause
such Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance of such Indebtedness, prior to its stated
maturity; or (ii) after the occurrence of either of the events described
in paragraphs (v) or (vi) of the definition of PARCO Wind-Down Event,
WESCO or any of its subsidiaries shall default in the observance or
performance of any of the Financial Covenants, the effect of which default
or other event or condition is to cause, or to permit the holder or
holders of the Indebtedness outstanding under the Credit Agreement or any
trustee or agent on its or their behalf to cause, such Indebtedness to
become due, or to require the prepayment, repurchase, redemption or
defeasance of such Indebtedness, prior to its stated maturity; provided,
however, that no Early Amortization Event with respect to any Indebtedness
other than Indebtedness outstanding under the Credit Agreement shall be
deemed to occur under this paragraph unless the aggregate amount of such
Indebtedness in respect of which any default or other event or condition
referred to in this paragraph shall have occurred shall be equal to at
least $20,000,000;
(m) any action, suit, investigation or proceeding at law or in
equity (including, without limitation, injunctions, writs or restraining
orders) shall be brought or commenced or filed by or before any
arbitrator, court or Governmental Authority against the Company or the
Servicer or any properties, revenues or rights of either thereof which
could reasonably be expected to have a Material Adverse Effect;
(n) one or more judgments or decrees shall be entered against the
Servicer or the Company involving in the aggregate a liability (not paid
or fully covered by insurance) of (i) in the case of the Servicer,
$20,000,000 or (ii) in the case of the Company, $25,000, or more and such
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 30 days from the entry thereof; or
(o) any event of the type described in Section 7.1(a) of the
Agreement shall occur with respect to the Servicer of any Sub-Servicer;
40
then, in the case of (x) any event described in Section 7.1 of the Agreement and
paragraphs (h), (i) and (o) above, automatically without any notice or action on
the part of the Trustee or Purchasers, an early amortization period shall
immediately commence or (y) any other event described above, after the
applicable grace period (if any) set forth in such subsections, the Trustee may,
and at the written direction of the Required APA Banks shall, by written notice
then given to the Company and the Servicer, declare that an early amortization
period has commenced as of the date of such notice with respect to Series 1998-1
(any such period under clause (x) or (y) above, an "Early Amortization Period");
provided however, that in the case of the event described in clause (g) above,
if an Early Amortization Period has not been declared within ten Business Days
after the occurrence of such event, then an Early Amortization Period shall
occur automatically unless, (i) prior to the end of such ten Business Day
period, the Series 1998-1 Allocated Receivables Amount shall no longer be less
than the Series 1998-1 Target Receivables Amount and (ii) so long as the Series
1998-1 Allocated Receivables Amount continues to be equal to or greater than the
Series 1998-1 Target Receivables Amount, the Majority Purchasers shall have
waived the occurrence of such event.
ARTICLE VI
SERVICING FEE
SECTION 6.1. Servicing Compensation. A monthly servicing fee (the
"Series 1998-1 Monthly Servicing Fee") shall be payable to the Servicer on each
Distribution Date for the preceding Settlement Period in an amount equal to the
product of (a) the Servicing Fee and (b) a fraction the numerator of which is
the daily average Aggregate Commitment Amount for such Settlement Period and the
denominator of which is the sum of (i) the Aggregate Invested Amounts (other
than the Series 1998-1 Invested Amount and the Invested Amount in respect of any
variable funding certificate of any other Outstanding Series) on the first day
of such Settlement Period and (ii) the Aggregate Commitment Amount on the first
day of such Settlement Period plus the Aggregate Commitment amount for any
variable funding certificate of any other Outstanding Series.
ARTICLE VII
CHANGE IN CIRCUMSTANCES
SECTION 7.1. Illegality. Notwithstanding any other provision herein,
if, after the Issuance Date, the adoption of or any change in any Requirement of
Law or in the interpretation, administration or application thereof shall make
it unlawful for any APA Bank to make or maintain its portion of the VFC
Certificateholders' Interest in any Eurodollar Tranche and such APA Bank shall
notify in writing the Funding Agent, the Trustee and the Company, then the
portion of each Eurodollar Tranche applicable to such APA Bank shall thereafter
be calculated by reference to the ABR. If any such change in the method of
calculating interest occurs on a day which is not the last day of the Eurodollar
Period with respect to any Eurodollar Tranche, the Company shall pay to the
Funding Agent for the account of such APA Bank the amounts, if any, as may be
required pursuant to Section 7.4.
SECTION 7.2. Increased Costs. (a) If any Change in Law (except with
respect to Taxes which shall be governed by Section 7.3) shall:
41
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any APA Bank (except any such reserve
requirement reflected in the Eurodollar Rate); or
(ii) impose on any APA Bank or the London interbank market any
other condition affecting the Transaction Documents or the funding of
Eurodollar Tranches by such APA Bank;
and the result of any of the foregoing shall be to increase the cost to such APA
Bank of making, converting into, continuing or maintaining Eurodollar Tranches
(or maintaining its obligation to do so) or to reduce any amount received or
receivable by such APA Bank hereunder (whether principal, interest or
otherwise), then the Company will pay to such APA Bank such additional amount or
amounts as will compensate such APA Bank for such additional costs incurred or
reduction suffered.
(b) If any APA Bank determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of return
on such APA Bank's capital or the capital of any corporation controlling such
APA Bank as a consequence of its obligations hereunder to a level below that
which such APA Bank or such corporation could have achieved but for such Change
in Law (taking into consideration such APA Bank's or such corporation's policies
with respect to capital adequacy), then from time to time, the Company shall pay
to such APA Bank such additional amount or amounts as will compensate such APA
Bank for any such reduction suffered.
(c) A certificate of an APA Bank setting forth the amount or amounts
necessary to compensate such APA Bank as specified in subsections (a) and (b) of
this Section 7.2 shall be delivered to the Company (with a copy to the Funding
Agent) and shall be conclusive absent manifest error. The agreements in this
Section shall survive the termination of this Supplement and the Agreement and
the payment of all amounts payable hereunder and thereunder.
(d) Failure or delay on the part of any APA Bank to demand
compensation pursuant to this Section 7.2 shall not constitute a waiver of such
APA Bank's right to demand such compensation; provided, however, that the
Company shall not be required to compensate an APA Bank pursuant to this Section
7.2 for any increased costs or reductions incurred more than 270 days prior to
the date that such APA Bank notifies the Company of the Change in Law giving
rise to such increased costs or reductions and of such APA Bank's intention to
claim compensation therefor; provided further that, if the Change in Law giving
rise to such increased costs or reductions is retroactive, then the 270-day
period referred to above shall be extended to include the period of retroactive
effect thereof.
SECTION 7.3. Taxes. (a) Any and all payments made by the Company to
the Funding Agent or the APA Banks (including any Acquiring APA Bank) hereunder
or under the other Transaction Documents shall be made free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding (i) in the case of the Funding Agent or any APA Bank, taxes that would
not be imposed but for a connection between such APA Bank or the Funding Agent
(as the case may be) and the jurisdiction imposing such tax, other than a
connection arising solely by virtue of the activities of such APA Bank or the
Funding Agent (as the case may be) pursuant to or in respect of this Agreement
or under any other Transaction Document or any transaction
42
contemplated hereunder or thereunder; (ii) any taxes imposed on the Funding
Agent or such APA Bank as a result of payments not related to the VFC
Certificates or this Supplement; (iii) any taxes that would not have been
imposed but for the failure of the Funding Agent or such APA Bank, as
applicable, to provide and keep current to the extent required by law any
certification or other documentation required to be furnished by the Funding
Agent or such APA Bank under Subsection 7.3(f) of this Supplement; (iv) any
taxes imposed as a result of a change (other than a change mandated by law or
this Agreement) by the Funding Agent or any APA Bank of the office in which any
VFC Certificate is held, accounted for or booked; and (v) any Withholding Taxes
(as defined in Subsection 7.3(g) below) except to the extent provided in
Subsection 7.3(g) below (all such excluded taxes being referred to hereinafter
as "Excluded Taxes" and all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities other than Excluded Taxes being hereinafter
referred to as "Taxes"). If any Taxes shall be required by law to be deducted
from or in respect of any sum payable hereunder or under any other Transaction
Document to any APA Bank or the Funding Agent, (i) the sum payable by the
Company shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 7.3) such APA Bank or the Funding Agent, as the case may be,
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Company shall make such deductions and (iii) the
Company shall pay the full amount deducted to the relevant taxing authority or
other authority in accordance with applicable law.
(b) In addition, the Company agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Transaction Document
(hereinafter referred to as "Other Taxes").
(c) The Company will indemnify each APA Bank and the Funding Agent
for the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Section 7.3) paid by
such APA Bank or the Funding Agent, as the case may be, and any liability
(including penalties, interest and expenses including reasonable attorney's fees
and expenses) arising therefrom or with respect thereto whether or not such
Taxes or Other Taxes were correctly or legally asserted. A certificate as to the
amount of such payment or liability prepared by a APA Bank or the Funding Agent,
absent manifest error, shall be final, conclusive and binding for all purposes,
provided that if the Company reasonably believes that such Taxes were not
correctly or legally asserted, such APA Bank or the Funding Agent, as the case
may be shall use reasonable efforts to cooperate with the Company to obtain a
refund of such Taxes or Other Taxes. Such indemnification shall be made within
10 days after the date any APA Bank or the Funding Agent, as the case may be,
makes written demand therefor. If a APA Bank or the Funding Agent shall become
aware that it is entitled to receive a refund in respect of Taxes or Other
Taxes, it shall promptly notify the Company of the availability of such refund
and shall, within 30 days after receipt of a request by the Company, pursue or
timely claim such refund at the Company's expense. If any APA Bank or the
Funding Agent receives a refund in respect of any Taxes or Other Taxes for which
such APA Bank or the Funding Agent has received payment from the Company
hereunder, it shall promptly repay such refund (plus any interest received) to
the Company (but only to the extent of indemnity payments made, or additional
amounts paid, by the Company under this Section 7.3 with respect to the Taxes or
Other Taxes giving rise to such refund), provided that the Company, upon the
request of such APA Bank or Funding Agent, agrees to return such refund (plus
any penalties, interest or other charges required to be paid) to such APA Bank
or the Funding Agent in the event such APA Bank or the Funding Agent is required
to repay such refund to the relevant
43
taxing authority. Nothing contained herein shall require the Funding Agent or an
APA Bank (or Transferee) to make its tax returns (or any other information
relating to its taxes which it deems confidential) available to the Company or
any other Person.
(d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by the Company in respect of any payment to any APA Bank or the
Funding Agent, the Company will furnish to the Funding Agent at its address
referred to in Section 11.9, the original or a certified copy of a receipt
evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 7.3
shall survive the payment in full of principal and interest hereunder and the
termination of the Trust.
(f) The Funding Agent and each of the APA Banks (or Transferees)
agrees that, prior to the date on which the first interest payment on a VFC
Certificate is due hereunder, it will deliver to the Servicer and the Trustee
(i) if the Funding Agent or such APA Bank is not incorporated under the laws of
the United States or any State thereof (a "Non-U.S. Person"), two duly completed
copies of the United States Internal Revenue Service Form 4224 or successor
applicable or required form and (ii) an Internal Revenue Service Form W-8 or W-9
or successor applicable or required form. The Funding Agent and each APA Bank
also agrees to deliver to the Servicer and the Trustee two further copies of the
said Form 4224 and Form W-8 or W-9, or successor applicable forms or other
manner of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to the Servicer and
the Trustee and such extensions or renewals thereof as may reasonably be
requested by the Servicer or the Trustee, unless in any such case the Funding
Agent or such APA Bank is unable to deliver any such form due to a change in law
prior to the date on which any such delivery would otherwise be required which
renders any such form inapplicable. Notwithstanding any provision of this
Supplement or the Agreement to the contrary, the Servicer and the Trustee shall
be entitled to withhold or cause such withholding, and additional amounts in
respect of Taxes need not be paid under this Section 7.03, with respect to the
Funding Agent, a APA Bank, a Participant or an Acquiring APA Bank in the event
that such Person fails to provide all of the forms and statements required
pursuant to this paragraph (f) to the Servicer and the Trustee.
(g) None of the Trustee, the Servicer or the Company shall withhold
with respect to any payments to the Funding Agent or the APA Banks pursuant to
Section 1446 of the Code (a "Withholding Tax") unless such withholding is
required pursuant to a written determination received by the Trustee, the
Servicer or the Company from the Internal Revenue Service. Following such
determination, notwithstanding anything to the contrary in this Section 7.3,
each APA Bank or Participant which is not created or organized under the laws of
the United States or any State thereof (including the District of Columbia)
agrees that, upon written notice by the Trustee or the Company to such APA Bank
or Participant, as the case may be, that the Trustee, the Servicer or the
Company intends to withhold Withholding Tax (such determination being a
"Withholding Event"):
(i) such APA Bank or Participant shall for tax years for which the
APA Bank or Participant has already filed United States federal income tax
returns (each a "Prior Tax Year") prior to proper notice of such
Withholding Event and as a condition to the obligations of the Servicer
and the Trustee pursuant to Subsection 7.3(a), provide (A) a signed
Officer's Certificate of such APA Bank or Participant stating that amounts
paid
44
hereunder have been included in such APA Bank's or Participant's United
States federal income tax returns for each such Prior Tax Year, which
certificate may be relied on by the Trustee and Company in asserting to
the Internal Revenue Service the applicability of Section 1463 of the Code
with respect to its liability for any Withholding Tax for each such Prior
Tax Year and (B) provide information to the Trustee and the Company or, at
the option of such APA Bank or Participant, to the Internal Revenue
Service in support of the application of Section 1463 of the Code for each
such Prior Tax Year; and
(ii) if Section 1463 of the Code is not applicable for any prior Tax
Year of such APA Bank or Participant because such APA Bank or Participant
did not properly pay the United States federal income tax due on amounts
payable on its VFC Certificates or hereunder during such Prior Tax Year,
the APA Bank or Participant shall indemnify the Trust, the Trustee and the
Company for any Withholding Tax (and any interest and penalties thereon)
payable by the Trustee, the Company, the Servicer or the Trust on such
amounts that are attributable to such Prior Tax Year and with respect to
which such APA Bank or Participant did not properly pay such United States
federal income tax.
(h) Any payments made by the Company pursuant to this Section 7.3
shall be made solely from funds available to the Company which are not otherwise
required to be applied to the payment of any amounts (other than amounts payable
to the Company) pursuant to any Pooling and Servicing Agreements, shall be
non-recourse other than with respect to funds in excess of the funds needed to
make such payment, and shall not constitute a claim against the Company to the
extent that insufficient funds exist to make such payment.
SECTION 7.4. Break Funding Payments. The Company agrees to indemnify
each APA Bank and to hold each APA Bank harmless from any loss or expense which
such APA Bank may sustain or incur as a consequence of (a) default by the
Company in making a borrowing of, conversion into or continuation of a
Eurodollar Tranche after the Company has given irrevocable notice requesting the
same in accordance with the provisions of this Supplement, or (b) default by the
Company in making any prepayment in connection with a Decrease after the Company
has given irrevocable notice thereof in accordance with the provisions of
Section 2.7 of this Supplement or (c) the making of a prepayment of a Eurodollar
Tranche prior to the termination of the Eurodollar Period for such Eurodollar
Tranche. Such indemnification may include an amount equal to the excess, if any,
of (i) the amount of interest which would have accrued on the amount so prepaid
or not so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the Eurodollar Period (or in the case of a failure to borrow, convert or
continue, the Eurodollar Period that would have commenced on the date of such
prepayment or of such failure) in each case at the Eurodollar Rate for such
Eurodollar Tranche provided for herein over (ii) the amount of interest (as
reasonably determined by such APA Bank) which would have accrued to such APA
Bank on such amount by placing such amount on deposit for a comparable period
with leading banks in the interbank eurodollar market; provided that any
payments made by the Company pursuant to this subsection shall be made solely
from funds available to the Company which are not otherwise required to be
applied to the payment of any amounts (other than amounts payable to the
Company) pursuant to any Pooling and Servicing Agreements, shall be non-recourse
other than with respect to funds in excess of the funds needed to make such
payment, and shall not constitute a claim against the Company to the extent that
insufficient funds exist to make such payment. This covenant shall survive the
termination of this Supplement and the Agreement and the payment of all amounts
payable hereunder and
45
thereunder. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by any APA Bank to the Company shall be conclusive
absent manifest error.
SECTION 7.5. Alternate Rate of Interest. If prior to the
commencement of any Eurodollar Period:
(a) the Funding Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Eurodollar Period,
or
(b) the Funding Agent is advised by the Majority Purchasers that the
Eurodollar Rate for such Eurodollar Period will not adequately and fairly
reflect the cost to such Purchasers of making or maintaining the
Eurodollar Tranches during such Eurodollar Period,
then the Funding Agent shall forthwith give telecopy or telephonic notice
thereof to the Company, the Trustee and the Purchasers, whereupon until the
Funding Agent notifies the Company and the Trustee that the circumstances giving
rise to such notice no longer exist, the Available Pricing Amount shall not be
allocated to any Eurodollar Tranche.
SECTION 7.6. Mitigation Obligations. (a) If any APA Bank requests
compensation under Section 7.2, or if the Company is required to pay any
additional amount to any APA Bank or any Governmental Authority for the account
of any APA Bank pursuant to Section 7.3, then such APA Bank shall use reasonable
efforts to designate a different lending office for funding or booking its
obligations under this Supplement and the Agreement or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such APA Bank, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 7.2 or 7.3, as the case
may be, in the future and (ii) would not subject such APA Bank to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
APA Bank. The Company hereby agrees to pay all reasonable costs and expenses
incurred by any APA Bank in connection with any such designation or assignment.
(b) If any APA Bank requests compensation under Section 7.2, or if
the Company is required to pay any additional amount to any APA Bank or any
Governmental Authority for the account of any APA Bank pursuant to Section 7.3,
or if any APA Bank defaults in its obligations hereunder, then the Company may,
at its sole expense and effort, upon notice to such APA Bank and the Funding
Agent, require such APA Bank to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in Section 11.11), all
its interests, rights and obligations under this Supplement to an assignee that
shall assume such obligations (which assignee may be another APA Bank, if an APA
Bank accepts such assignment); provided that (i) the Company shall have received
the prior written consent of the Funding Agent, which consent shall not
unreasonably be withheld, (ii) such APA Bank shall have received payment of an
amount equal to its Series 1998-1 Purchaser Invested Amount, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such Series 1998-1 Purchaser Invested Amount and
accrued interest and fees) or the Company (in the case of all other amounts) and
(iii) in the case of any such assignment resulting from a claim for compensation
under Section 7.2 or payments required to be made pursuant to Section 7.3, such
assignment will result in a reduction in such compensation or payments. An APA
Bank shall not be required to make any such assignment
46
and delegation if, prior thereto, as a result of a waiver by such APA Bank or
otherwise, the circumstances entitling the Company to require such assignment
and delegation cease to apply.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES, COVENANTS
SECTION 8.1. Representations and Warranties of the Company and the
Servicer. The Company and the Servicer each hereby represents and warrants to
the Trustee, the Funding Agent and each of the Purchasers that each and every of
their respective representations and warranties contained in the Agreement is
true and correct in all material respects as of the Issuance Date and as of the
date of each Increase.
SECTION 8.2. Covenants of the Company and the Servicer. The Company
and the Servicer hereby agree, in addition to their obligations under the
Agreement and the Servicing Agreement, that:
(a) they shall not terminate the Agreement unless in compliance with
the terms of the Agreement and each Supplement relating to an Outstanding
Series;
(b) within 60 days of the date hereof, they will (i) deliver to the
Trustee executed copies of software licenses or sublicenses, in a form
reasonably acceptable to the Trustee, which grant to the Trustee the right
to utilize any of the software owned or licensed by the Servicer that is
necessary to perform the collection and administrative functions to be
performed by the Trustee under the Transaction Documents, (ii) deliver to
the Trustee executed copies of any landlord waivers, in a form reasonably
acceptable to the Trustee, that may be necessary to grant to the Trustee
access to the leased premises of the Servicer for which the Trustee may
require access to perform the collection and administrative functions to
be performed by the Trustee under the Transaction Documents, except to the
extent the Company or the Servicer, as the case may be, owns such property
and (iii) have taken all actions reasonably requested by the Trustee in
connection with, and to ensure completion of, each of the Servicer Site
Review and the Standby Liquidation System;
(c) they shall afford the Funding Agent or any representatives of
the Funding Agent access to all records relating to the Receivables at any
reasonable time during regular business hours, upon reasonable prior
notice (and without prior notice if an Early Amortization Event has
occurred), according to the Servicer's normal security and confidentiality
requirements, for purposes of inspection and shall permit the Funding
Agent or any representative of the Funding Agent to visit any of the
Company's or the Servicer's, as the case may be, offices or properties
during regular business hours and as often as may reasonably be desired to
discuss the business, operations, properties, financial and other
conditions of the Company or the Servicer with their respective officers
and employees and with their independent certified public accountants;
provided that Funding Agent shall notify the Company or the Servicer, as
the case may be, prior to any contact with such accountants and shall give
the Company or the Servicer the opportunity to participate in such
discussions;
47
(d) neither the Company nor the Servicer shall take any action, nor
permit any Seller to take any action, requiring the satisfaction of the
Rating Agency Condition pursuant to any Transaction Document without the
prior written consent of the Majority Purchasers; and
(e) it shall cooperate in good faith to allow the Trustee to use the
Servicer's available facilities and expertise upon the Servicer's
termination or default.
SECTION 8.3. Covenants of the Servicer. The Servicer hereby agrees
that:
(a) it shall provide to the Funding Agent on the Initial Closing
Date and in the case of an addition of a Seller, prior to the related Seller
Addition Date (as defined in the Receivables Sale Agreement), evidence that each
Seller, or such Seller, as the case may be, maintains disaster recovery systems
and back-up computer and other information management systems that are
reasonably satisfactory to the Funding Agent;
(b) it shall provide to the Funding Agent, simultaneously with
delivery to the Trustee or the Rating Agencies, all reports, notices,
certificates, statements and other documents required to be delivered to the
Trustee or the Rating Agencies pursuant to the Agreement, the Servicing
Agreement and the other Transaction Documents and furnish to the Funding Agent
promptly after receipt thereof a copy of each material notice, material demand
or other material communication (excluding routine communications) received by
or on behalf of the Company or the Servicer with respect to the Transaction
Documents; and
(c) it shall provide notice to the Funding Agent of the appointment
of a Successor Servicer pursuant to Section 6.2 of the Servicing Agreement.
SECTION 8.4. Representations and Warranties of the APA Banks and any
Acquiring APA Bank. Each APA Bank and any Acquiring APA Bank represents,
warrants and covenants to the Company that:
(a) it is not a trust, estate, partnership or "S Corporation"
(within the meaning of Section 1361(a) of the Code) for United States federal
income tax purposes, or if it is such an entity, the value of the entity's
interest in the VFC Certificates is less than 50% of the total value of all the
entity's assets;
(b) it has not acquired and agrees that it will not sell, trade or
transfer any interest in a VFC Certificate or cause a Participation or any other
interest in a VFC Certificate or this Supplement, to be marketed on or through
an "established securities market" within the meaning of Section 7704(b)(1) of
the Code (and the Treasury regulations promulgated thereunder) including,
without limitation, an over-the-counter market or an interdealer quotation
system that regularly disseminates firm buy or sell quotations;
(c) it is the sole beneficial owner of its VFC Certificates and it
will remain the sole beneficial owner of such VFC Certificates until such time
as such VFC Certificates, or any Participation or other interest therein, are
sold, assigned or otherwise transferred in accordance with Section 11.11 of this
Supplement; and
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(d) it will not sell, assign or transfer any VFC Certificate, or any
Participation or other interest therein, except as allowed and to the extent
permitted under Section 11.11 of this Supplement.
SECTION 8.5. Obligations Unaffected. The obligations of the Company
and the Servicer to the Funding Agent and the Purchasers under this Supplement
shall not be affected by reason of any invalidity, illegality or irregularity of
any of the Receivables or any sale of any of the Receivables.
ARTICLE IX
CONDITIONS PRECEDENT
SECTION 9.1. Conditions Precedent to Effectiveness of Supplement.
This Supplement shall become effective on the date (the "Effective Date") on
which the following conditions precedent have been satisfied:
(a) Documents. The Funding Agent shall have received an original
copy for the Initial Purchaser and each APA Bank, each executed and
delivered in form and substance satisfactory to it of (i) the Agreement,
executed by a duly authorized officer of each of the Company, the Servicer
and the Trustee, (ii) this Supplement, executed by a duly authorized
officer of each of the Company, the Servicer, the Trustee, the Funding
Agent, the Initial Purchaser and the APA Banks and (iii) the other
Transaction Documents, each duly executed by the parties thereto.
(b) Corporate Documents; Corporate Proceedings of the Company and
Servicer. The Funding Agent shall have received, with a copy for the
Initial Purchaser and each APA Bank, from the Company, each Seller and the
Servicer, true and complete copies of:
(i) the certificate of incorporation, including all
amendments thereto, of such Person, certified as of a recent date by
the Secretary of State or other appropriate authority of the state
of incorporation, as the case may be, and a certificate of
compliance, of status or of good standing, as and to the extent
applicable, of each such Person as of a recent date, from the
Secretary of State or other appropriate authority of such
jurisdiction;
(ii) a certificate of the Secretary of such Person,
dated the Effective Date and certifying (A) that attached thereto is
a true and complete copy of the by-laws of such Person, as in effect
on the Effective Date and at all times since a date prior to the
date of the resolutions described in clause (B) below, (B) that
attached thereto is a true and complete copy of the resolutions, in
form and substance reasonably satisfactory to the Funding Agent, of
the Board of Directors of such Person or committees thereof
authorizing the execution, delivery and performance of the
Transaction Documents to which it is a party and the transactions
contemplated thereby, and that such resolutions have not been
amended, modified, revoked or rescinded and are in full force and
effect, (C) that the certificate of incorporation of such Person has
not been amended since the date of the last amendment thereto shown
on the certificate of good standing (or
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its equivalent) furnished pursuant to clause (i) above and (D) as to
the incumbency and specimen signature of each officer executing any
Transaction Documents or any other document delivered in connection
herewith or therewith on behalf of such Person; and
(iii) a certificate of another officer as to the
incumbency and specimen signature of the Secretary or Assistant
Secretary executing the certificate pursuant to clause (ii) above.
(c) Good Standing Certificates. The Funding Agent shall have
received copies of certificates of compliance, of status or of good
standing, dated as of a recent date, from the Secretary of State or other
appropriate authority of such jurisdiction, with respect to the Company,
the Servicer and each Seller, in each State where the ownership, lease or
operation of property or the conduct of business requires it to qualify as
a foreign corporation, except where the failure to so qualify would not
have a material adverse effect on the business, operations, properties or
condition (financial or otherwise) of the Company, the Servicer or such
Seller, as the case may be.
(d) Consents, Licenses, Approvals, Etc. The Funding Agent shall have
received, with a counterpart for the Initial Purchaser and each APA Bank,
certificates dated the date hereof of a Responsible Officer of the
Company, the Servicer and each Seller either (i) attaching copies of all
material consents, licenses and approvals required in connection with the
execution, delivery and performance by the Company, the Servicer or such
Seller, as the case may be, of this Supplement or the Receivables Sale
Agreements, as the case may be, and the validity and enforceability of
this Supplement and the Agreement against the Company and the Servicer and
the Receivables Sale Agreements against such Seller, and such consents,
licenses and approvals shall be in full force and effect or (ii) stating
that no such consents, licenses or approvals are so required.
(e) No Litigation. The Funding Agent shall have received
confirmation that there is no pending or, to their knowledge after due
inquiry, threatened action or proceeding affecting WESCO or any of its
Subsidiaries before any Governmental Authority that could reasonably be
expected to have a Material Adverse Effect with respect to WESCO and its
Subsidiaries taken as a whole.
(f) Lien Searches. The Funding Agent shall have received a written
search report listing all effective financing statements that name the
applicable Seller or the Company as debtor or assignor and that are filed
in the jurisdictions in which filings were made pursuant to paragraph (h)
below and in any other jurisdictions that the Funding Agent determines are
necessary or appropriate, together with copies of such financing
statements (none of which, except for those described in paragraph (g)
below shall cover any Receivables or Receivables Property), and tax and
judgment lien searches showing no such liens that are not permitted by the
Transaction Documents
(g) UCC Certificate. The Funding Agent shall have received from each
Seller and the Company a UCC Certificate, completed in a manner
satisfactory to the Funding Agent, duly executed by a Responsible Officer
of such Seller or the Company, as the case may be, and dated the Issuance
Date.
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(h) Filings, Registrations and Recordings. Any documents (including,
without limitation, financing statements) required to be filed in order
(i) to perfect the sale of the Receivables by each Seller to the Company
pursuant to the Receivables Sale Agreements and (ii) to create, in favor
of the Trustee, a perfected ownership/security interest in the Trust
Assets under the Agreement with respect to which an ownership/security
interest may be perfected by a filing under the UCC or other comparable
statute, shall, in each case, have been properly prepared and executed for
immediate filing in each office in each jurisdiction listed in the
Agreement or the Receivables Sale Agreements, as the case may be, and such
filings are the only filings required in order to perfect the sale of the
Receivables to the Company under the Receivables Sale Agreements or to the
Trust, under the Agreement, as the case may be, in the jurisdictions
listed therein. The Funding Agent shall have received evidence reasonably
satisfactory to it of each such filing, registration or recordation and
reasonably satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto.
(i) Legal Opinions. The Funding Agent shall have received, with a
counterpart for the Initial Purchaser and each APA Bank and the Trustee,
opinions of counsel to the Company and the Servicer, dated the Issuance
Date, as to corporate, tax, bankruptcy ("true sale" and "non-substantive
consolidation"), perfection and priority of security and/or ownership
interests and other matters in form and substance acceptable to the
Funding Agent and their counsel.
(j) Fees. The Funding Agent shall have received payment of all fees
and other amounts due and payable to it, the Initial Purchaser or the APA
Banks on or before the Effective Date, pursuant to the Fee Letter.
(k) Establishment of Accounts. The Funding Agent (x) shall have
received evidence reasonably satisfactory to it that the Collection
Accounts, the Collection Concentration Accounts, the Lockbox Accounts, the
Eligible Segregated Account and all other Trust Accounts shall have been
established in accordance with the terms and provisions of the Pooling and
Servicing Agreements, and (y) shall otherwise be satisfied with the
arrangements for collection of the Receivables pursuant thereto.
(l) Policies. The Funding Agent shall have received, with sufficient
copies for the Initial Purchaser and each APA Bank, a copy of the Policies
of each Seller, which shall be satisfactory in form and substance to the
Funding Agent.
(m) Financial Statements. The Funding Agent shall have received,
with a counterpart for the Initial Purchaser, each APA Bank and the
Trustee, on or prior to the Effective Date consolidated balance sheets,
consolidated statements of income, consolidated and consolidating
statements of shareholders' equity and consolidated statements of cash
flows of WESCO and its consolidated Subsidiaries as of and for the Fiscal
Years ended December 31, 1995, and December 31, 1996 and December 31,
1997, in each case audited by and accompanied by the opinion of Coopers &
Lybrand L.L.P., which shall be satisfactory in form and substance to the
Funding Agent, the Initial Purchaser and the Trustee.
(n) Execution of the Credit Agreement. The Credit Agreement shall
have been executed prior to or on the date hereof.
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(o) Insurance. The Funding Agent shall have received, with a
counterpart for each Purchaser and the Trustee, on or prior to the
Effective Date a schedule listing all policies of product liability
insurance maintained by each Seller and certification by a Responsible
Officer of such Seller with respect thereto.
(p) Back-up Servicing Arrangements. The Funding Agent shall have
received evidence that each Seller maintains disaster recovery systems and
back-up computer and other information management systems that, in the
Funding Agent's reasonable judgment, are sufficient to protect such
Seller's business against material interruption or loss or destruction of
its primary computer and information management systems.
(q) Representations and Warranties. The representations and
warranties of the Company and the Servicer in the Agreement and this
Supplement shall be true and correct in all material respects.
ARTICLE X
THE FUNDING AGENT
SECTION 10.1. Appointment. Each Purchaser hereby irrevocably
designates and appoints the Funding Agent as the agent of such Purchaser under
this Supplement and each such Purchaser irrevocably authorizes the Funding
Agent, in such capacity, to take such action on its behalf under the provisions
of this Supplement and to exercise such powers and perform such duties as are
expressly delegated to the Funding Agent by the terms of this Supplement,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Supplement, the
Funding Agent shall not have any duties or responsibilities except those
expressly set forth herein, or any fiduciary relationship with any Purchaser,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Supplement or otherwise exist against the
Funding Agent.
SECTION 10.2. Delegation of Duties. The Funding Agent may execute
any of its duties under this Supplement by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel (who may be counsel
for the Company or the Servicer), independent public accountants and other
experts selected by it concerning all matters pertaining to such duties. The
Funding Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys in-fact selected by it with reasonable care.
SECTION 10.3. Exculpatory Provisions. Neither the Funding Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with the Agreement or this
Supplement (x) with the consent or at the request of the Majority Purchasers or
(y) in the absence of its own gross negligence or willful misconduct or (ii)
responsible in any manner to any of the Purchasers for any recitals, statements,
representations or warranties made by the Company or any officer thereof
contained in this Supplement or any other Transaction Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Funding Agent under or in connection with, this Supplement or
any other Transaction Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Supplement or any other
Transaction Document or for any failure of the Company to perform its
obligations hereunder or thereunder. The Funding Agent shall not be
52
under any obligation to any Purchaser to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Supplement or any other Transaction Document, or to inspect the
properties, books or records of the Company.
SECTION 10.4. Reliance by Funding Agent. The Funding Agent shall be
entitled to rely, and shall be fully protected in relying, upon any Certificate,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Company or the Servicer),
independent accountants and other experts selected by the Funding Agent 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. The
Funding Agent may deem and treat the payee of any Certificate as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Funding Agent. The Funding Agent
shall be fully justified in failing or refusing to take any action under this
Supplement or any other Transaction Document unless it shall first receive such
advice or concurrence of the Majority Purchasers as it deems appropriate or it
shall first be indemnified to its satisfaction by the Purchasers against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Funding Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Supplement
and the other Transaction Documents in accordance with a request of the Majority
Purchasers, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Purchasers.
SECTION 10.5. Notice of Servicer Default or Early Amortization Event
or Potential Early Amortization Event. The Funding Agent shall not be deemed to
have knowledge or notice of the occurrence of any Servicer Default with respect
to the Servicer or any Early Amortization Event or Potential Early Amortization
Event hereunder unless the Funding Agent has received notice from a Purchaser,
the Company or the Servicer referring to the Agreement or this Supplement,
describing such Servicer Default or Early Amortization Event or Potential Early
Amortization Event and stating that such notice is a "notice of a Servicer
Default with respect to the Servicer" or a "notice of an Early Amortization
Event or Potential Early Amortization Event", as the case may be. In the event
that the Funding Agent receives such a notice, the Funding Agent shall give
notice thereof to the Purchasers, the Trustee, the Company and the Servicer. The
Funding Agent shall take such action with respect to such Servicer Default or
Early Amortization Event or Potential Early Amortization Event as shall be
reasonably directed by the Majority Purchasers, provided that unless and until
the Funding Agent shall have received such directions, the Funding Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Servicer Default or Early Amortization Event or
Potential Early Amortization Event as it shall deem advisable in the best
interests of the Purchasers.
SECTION 10.6. Non-Reliance on the Funding Agent and Other
Purchasers. Each Purchaser expressly acknowledges that neither the Funding Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representations or warranties to it and that no act by
the Funding Agent hereinafter taken, including any review of the affairs of the
Company, shall be deemed to constitute any representation or warranty by the
Funding Agent to any Purchaser. Each Purchaser represents to the Funding Agent
that it has, independently and without reliance upon the Funding Agent or any
other Purchaser, and based
53
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Company and made its
own decision to enter into this Supplement. Each Purchaser also represents that
it will, independently and without reliance upon the Funding Agent or any other
Purchaser, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Supplement and the other
Transaction Documents, and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices, reports and
other documents expressly required to be furnished to the Purchasers by the
Funding Agent hereunder, the Funding Agent shall not have any duty or
responsibility to provide any Purchaser with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Company which may come into the
possession of the Funding Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
SECTION 10.7. Indemnification. The Purchasers agree to indemnify the
Funding Agent in its capacity as such (to the extent not reimbursed by the
Company and the Servicer and without limiting the obligation of the Company and
the Servicer to do so), ratably according to their respective Series 1998-1
Purchaser Invested Amounts in effect on the date on which indemnification is
sought, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time be imposed on, incurred by or asserted
against the Funding Agent in any way relating to or arising out of the
Commitments, this Supplement, any of the other Transaction Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Funding
Agent under or in connection with any of the foregoing; provided that no
Purchaser shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Funding Agent's gross
negligence or willful misconduct. The agreements in this Section shall survive
the payment of all amounts payable hereunder.
SECTION 10.8. The Funding Agent in Its Individual Capacity. The
Funding Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Company, the Servicer or any
of their Affiliates as though the Funding Agent were not the Funding Agent
hereunder. With respect to any VFC Certificate held by the Funding Agent, the
Funding Agent shall have the same rights and powers under this Supplement and
the other Transaction Documents as any Purchaser and may exercise the same as
though it were not the Funding Agent, and the terms "APA Bank" and "Purchaser"
shall include the Funding Agent in its individual capacity.
SECTION 10.9. Successor Funding Agent. The Funding Agent may resign
as Funding Agent upon 10 days' notice to the Purchaser and the Company, such
resignation not to be effective until a successor funding agent is appointed. If
the Funding Agent shall resign as Funding Agent under this Supplement, then the
Majority Purchasers shall appoint from among the Purchasers a successor
administrative agent for the Purchasers, which successor administrative agent
shall be approved by the Company and the Servicer (which approval shall not be
unreasonably withheld), whereupon such successor administrative agent shall
succeed to the rights, powers and duties of the Funding Agent, and the term
"Funding Agent" shall mean such successor administrative agent effective upon
such appointment and approval, and the
54
former Funding Agent's rights, powers and duties as Funding Agent shall be
terminated, without any other or further act or deed on the part of such former
Funding Agent or any of the parties to this Supplement. After any retiring
Funding Agent's resignation as Funding Agent, the provisions of this Article 10
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Funding Agent under this Supplement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Ratification of Agreement. As supplemented by this
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
SECTION 11.2. Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 11.3. Further Assurances. Each of the Company, the Servicer
and the Trustee agrees, from time to time, to do and perform any and all acts
and to execute any and all further instruments required or reasonably requested
by the Funding Agent or the Majority Purchasers more fully to effect the
purposes of this Supplement and the sale of the VFC Certificates hereunder,
including, without limitation, in the case of the Company and the Servicer, the
execution of any financing or registration statements or similar documents or
notices or continuation statements relating to the Receivables and the other
Trust Assets for filing or registration under the provisions of the U.C.C. or
similar legislation of any applicable jurisdiction.
SECTION 11.4. Payments. Each payment to be made hereunder shall be
made on the required payment date in lawful money of the United States and in
immediately available funds, if to the Purchasers, at the office of the Funding
Agent set forth in Section 11.9. Except in the circumstances described in
subsection 2.6(c), then on each Distribution Date, the Funding Agent shall remit
in like funds to each Purchaser its applicable pro rata share (based on each
such Purchaser's Series 1998-1 Purchaser Invested Amount) of each such payment
received by the Funding Agent for the account of the Purchasers.
SECTION 11.5. Costs and Expenses. The Company agrees to pay all
reasonable out-of-pocket costs and expenses of the Funding Agent (including,
without limitation, reasonable fees and disbursements of one counsel to the
Funding Agent) in connection with (i) the preparation, execution and delivery of
this Supplement, the Agreement and the other Transaction Documents and
amendments or waivers of any such documents and (ii) the enforcement by the
Funding Agent of the obligations and liabilities of the Company and the Servicer
under the Agreement, this Supplement, the other Transaction Documents or any
related document; provided that any payments made by the Company pursuant to
this subsection shall be made solely from funds available to the Company which
are not otherwise required to be applied to the payment of any amounts (other
than amounts payable to the Company) pursuant to
55
any Pooling and Servicing Agreements, shall be non-recourse other than with
respect to funds in excess of the funds needed to make such payment, and shall
not constitute a claim against the Company to the extent that insufficient
proceeds exist to make such payment.
SECTION 11.6. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Trustee, the Funding Agent or any
Purchaser, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 11.7. Amendments. (a) Subject to subsection (c) of this
Section 11.7, this Supplement may be amended in writing from time to time by the
Servicer, the Company and the Trustee, with the consent of the Funding Agent but
without the consent of any holder of any outstanding VFC Certificate, to cure
any ambiguity, to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein or to add any other provisions to
or change in any manner or eliminate any of the provisions with respect to
matters or questions raised under this Supplement which shall not be
inconsistent with the provisions of any Pooling and Servicing Agreement;
provided, however, that such action shall not, as evidenced by an Officer's
Certificate or, to the extent in the reasonable view of the Company, a question
of law exists, an Opinion of Counsel delivered to the Trustee, adversely affect
in any material respect the interests of the VFC Certificateholders. The Trustee
may, but shall not be obligated to, enter into any such amendment pursuant to
this paragraph or paragraph (b) below which affects the Trustee's rights, duties
or immunities under any Pooling and Servicing Agreement or otherwise.
(b) Subject to subsection (c) of this Section 11.7, this Supplement
may also be amended in writing from time to time by the Servicer, the Company
and the Trustee with the consent of the Majority Purchasers for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Supplement or of modifying in any manner the rights of the
VFC Certificateholders (including, without limitation, the acceleration of the
payment of sums payable to or for the account of the Purchasers under any
provision of this Supplement); provided, however, that no such amendment shall,
unless signed or consented to in writing by all Purchasers, (i) extend the time
for payment, or reduce the amount, of any sum payable to or for the account of
any Purchaser under any provision of this Supplement or extend the Series 1998-1
Termination Date, (ii) subject any Purchaser to any additional obligation
(including, without limitation, any change in the determination of any amount
payable by any Purchaser) or (iii) change the Aggregate Commitment Amount, the
amount of any interest or fees or the percentage of Purchasers which shall be
required for any action under this subsection or any other provision of this
Supplement.
(c) Any amendment hereof can be effected without the Funding Agent's
being party thereto; provided, however, that no such amendment, modification or
waiver of this Supplement that affects rights or duties of the Funding Agent
shall be effective unless the Funding Agent shall have given its prior written
consent thereto.
(d) No amendment hereof shall be effective until the Rating Agency
Condition has been satisfied (unless Series 1998-1 has not been rated, in which
case this subsection 11.7(d) shall not apply).
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SECTION 11.8. Severability. If any provision hereof is void or
unenforceable in any jurisdiction, such voidness or unenforceability shall not
affect the validity or enforceability of (i) such provision in any other
jurisdiction or (ii) any other provision hereof in such or any other
jurisdiction.
SECTION 11.9. Notices. All notices, requests and demands to or upon
any party hereto to be effective shall be given (i) in the case of the Company,
the Servicer and the Trustee, in the manner set forth in Section 10.5 of the
Agreement and (ii) in the case of the Funding Agent, the Initial Purchaser, each
APA Bank and the Rating Agencies (if the Series 1998-1 has been rated), in
writing, and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand or three days after being
deposited in the mail, postage prepaid, or, in the case of facsimile notice,
when received, (A) in the case of each APA Bank, at its address set forth on
Schedule 1 hereto, (B) addressed as follows in the case of the Funding Agent and
(C) addressed to the Rating Agencies (if the Series 1998-1 has been rated) as
notified by such Rating Agencies; or to such other address as may be hereafter
notified by the respective parties hereto:
Funding Agent: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Andrew Taylor
Fax: 212-946-7776
S&P: Standard & Poor's Ratings Service
25 Broadway
New York, New York 10004
Attention: Asset-Backed Surveillance Group
Fax: 212-412-0225
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: Sam Pilcer
Fax: 212-553-3850
Initial Purchaser: Park Avenue Receivables Corporation
25 West 43rd Street, Suite 704
New York, New York 10036
Attention: Andy Stidd
Fax: 212-302-8767
SECTION 11.10. Successors and Assigns. This Supplement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights under this Supplement without the prior written consent of all of
the Purchasers, the Initial Purchaser may not assign or transfer any of its
rights under this Supplement except as set forth in Section 2.6 and each APA
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Bank may not assign or transfer any of its rights under this Supplement except
as set forth in Section 11.11.
SECTION 11.11. Participations; Assignments. (a) Any APA Bank may,
upon prior written notice to the Funding Agent and the Rating Agencies and the
satisfaction of all applicable requirements under Section 5.3 of the Agreement
and in accordance with applicable law, assign to one or more assignees (any such
assignee shall be referred to herein as an "Acquiring APA Bank") all or a
portion of its interests, rights and obligations under this Supplement and the
Transaction Documents; provided, however, that no such assignment shall be
permitted (i) except in the case of an assignment to another APA Bank, without
the Company's prior written consent to such assignment (which consent shall not
be unreasonably withheld or delayed), (ii) if such assignment is not otherwise
permitted under subsection 5.3(e) of the Agreement, (iii) if such assignment is
for any amount less than $5,000,000, (iv) if such Acquiring APA Bank is not an
Eligible Assignee, (iv) if such assignment would cause there to be more than 30
Targeted Holders of the VFC Certificates at any time, and (v) unless the parties
to each such assignment shall execute and deliver to the Funding Agent a
commitment transfer supplement (each, a "Commitment Transfer Supplement"),
substantially in the form of Exhibit C, together with a processing and
recordation fee of $3,500, and the Acquiring APA Bank, if it shall not be a APA
Bank, shall deliver to the Funding Agent an administrative questionnaire in the
form provided by the Funding Agent. Upon acceptance and recording pursuant to
paragraph (e) of this Section 11.11, from and after the effective date specified
in each Commitment Transfer Supplement, which effective date shall be at least
five Business Days after the execution thereof, (A) the Acquiring APA Bank
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Commitment Transfer Supplement, have the rights and obligations of an
APA Bank under this Supplement and (B) the assigning APA Bank thereunder shall,
to the extent of the interest assigned by such Commitment Transfer Supplement,
be released from its obligations under this Supplement and the other Transaction
Documents (and, in the case of a Commitment Transfer Supplement covering all or
the remaining portion of an assigning APA Bank's rights and obligations under
this Supplement and the other Transaction Documents, such APA Bank shall cease
to be a party hereto but shall continue to be entitled to receive Article VII
Costs, as well as any fees accrued for its account and not yet paid).
(b) By executing and delivering a Commitment Transfer Supplement,
the assigning APA Bank thereunder and the Acquiring APA Bank thereunder shall be
deemed to confirm to and agree with each other and the other parties hereto as
follows: (i) such assigning APA Bank warrants that it is the legal and
beneficial owner of the interest being assigned thereby free and clear of any
adverse claim and that its Commitment, and the outstanding balances of its VFC
Certificates, in each case without giving effect to assignments thereof which
have not become effective, are as set forth in such Commitment Transfer
Supplement; (ii) except as set forth in (i) above, such assigning APA Bank makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Supplement, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Supplement, any other Transaction Document or any
other instrument or document furnished pursuant hereto or thereto, or the
financial condition of the Seller, the Company or the Servicer, or the
performance or observance by the Seller, the Company or the Servicer of any of
its obligations under this Supplement, any other Transaction Document or any
other instrument or document furnished pursuant hereto or thereto; (iii) such
Acquiring APA Bank represents and warrants that it is legally authorized to
enter into such Commitment Transfer Supplement; (iv) such Acquiring APA Bank
confirms that it has received a copy of this Supplement and such other documents
and information as it has deemed
58
appropriate to make its own credit analysis and decision to enter into such
Commitment Transfer Supplement; (v) such Acquiring APA Bank will independently
and without reliance upon the Funding Agent, the Trustee, the assigning APA Bank
or any other APA Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Supplement or any other Transaction
Document; (vi) such Acquiring APA Bank appoints and authorizes the Funding Agent
and the Trustee to take such action as agent on its behalf and to exercise such
powers under this Supplement as are delegated to the Funding Agent and the
Trustee, respectively, by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vii) such Acquiring APA Bank agrees that it
will perform in accordance with their terms all the obligations which by the
terms of this Supplement are required to be performed by it as a APA Bank.
(c) Notwithstanding and in addition to the provisions of Section 5.3
of the Agreement, the Funding Agent shall maintain at one of its offices in The
City of New York a copy of each Commitment Transfer Supplement delivered to it
and a register for the recordation of the names and addresses of the APA Banks,
and the Commitments of, and the principal amount of the VFC Certificates issued
to, each APA Bank pursuant to the terms hereof from time to time (the
"Register"). Notwithstanding the provisions of Section 5.5 of the Agreement, the
entries in the Register as provided in this subsection 11.11(c) shall be
conclusive and the Company, the Servicer, the APA Banks, the Paying Funding
Agent, the Transfer Funding Agent and Registrar, the Funding Agent and the
Trustee shall treat each person whose name is recorded in the Register pursuant
to the terms hereof as an APA Bank hereunder for all purposes of this
Supplement, notwithstanding notice to the contrary. However, in accordance with
Section 5.5 of the Agreement, in determining whether the holders of the
requisite Fractional Undivided Interests have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, VFC Certificates
owned by the Company, the Servicer or any Affiliate thereof, shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only VFC Certificates which
a Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. VFC Certificates so owned by the Company, the Servicer or any
Affiliate thereof which have been pledged in good faith shall not be disregarded
and may be regarded as outstanding if the pledgee establishes to the
satisfaction of the trustee the pledgee's right so to act with respect to such
VFC Certificates and that the pledgee is not the Company, the Servicer or any
Affiliate thereof. The Register shall be available for inspection by the
Company, the Servicer, the APA Banks and the Trustee, at any reasonable time and
from time to time upon reasonable prior notice.
(d) Upon its receipt of a copy of the written consent of the Company
(if required under Section 11.11(a) above) and a duly completed Commitment
Transfer Supplement executed by an assigning APA Bank and an Acquiring APA Bank,
an administrative questionnaire completed in respect of the Acquiring APA Bank
(unless the Acquiring APA Bank shall already be a APA Bank hereunder) and the
processing and recordation fee referred to in paragraph (a) above, the Funding
Agent shall (i) accept such Commitment Transfer Supplement, (ii) record the
information contained therein in the Register and (iii) give prompt written
notice thereof to the APA Banks, the Company, the Servicer and the Trustee. No
assignment shall be effective unless and until it has been recorded in the
Register as provided in this paragraph (d).
(e) Any APA Bank may sell participations to one or more banks or
other entities (the "Participants") in all or a portion of its rights and
obligations under this Supplement and the other Transaction Documents (including
all or a portion of its Commitment and VFC
59
Certificates); provided that any Participant shall, prior to entering into a
Participation, execute and deliver to the Company and the Trustee an
Assignment/Participation Certification; and provided further, that (i) such APA
Bank's obligations under this Agreement shall remain unchanged, (ii) such APA
Bank shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the Participants shall be entitled to
receive Article VII Costs, and shall be required to provide the tax forms and
certifications described in Section 7.3(f), to the same extent as if they were
APA Banks, provided that no such Participant shall be entitled to receive any
greater amount of Article VIII Costs than an APA Bank would have been entitled
to receive in respect of the amount of the Participation sold by such APA Bank
to such Participant had no sale occurred, (iv) the Company, the Servicer, the
other APA Banks, the Funding Agent and the Trustee, shall continue to deal
solely and directly with such APA Bank in connection with such APA Bank's rights
and obligations under this Supplement, and such APA Bank shall retain the sole
right to enforce its rights under VFC Certificates and to approve any amendment,
modification or waiver of any provision of this Supplement (other than
amendments, modifications or waivers decreasing any fees payable hereunder or
the amount of principal of or the rate at which interest is payable on the VFC
Certificates, extending any scheduled principal payment date or date fixed for
the payment of interest on the VFC Certificates or increasing or extending the
Commitments) (v) the sum of the aggregate amount of any Commitment or portion
thereof subject to each such Participation plus the portion of the Series 1998-1
Invested Amount represented by an VFC Certificates subject to such Participation
shall not be less than $5,000,000 and (vi) such Participation shall not cause
there to more than 30 Targeted Holders of the VFC at any time. Each APA Bank
that grants a participation to a Non-U.S. Person pursuant to this Subsection
shall provide the Company and the Trustee with appropriately executed copies of
Internal Revenue Service Form 4224 with respect to each Participant (i) prior to
any such disposition and (ii) upon the occurrence of any event which would
require the amendment or resubmission of any such form previously provided
hereunder. No Participant may grant a subparticipation in a VFC Certificate or
this Supplement under any circumstances.
(f) Any APA Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
11.11, disclose to the Acquiring APA Bank or Participant (each, a "Transferee")
or proposed Acquiring APA Bank or Participant any information relating to the
Seller, the Servicer, the Trust or the Company furnished to such APA Bank by or
on behalf of such entities; provided that if any such information is subject to
a confidentiality agreement between such APA Bank and the Company or the
Servicer, the Transferee or prospective Transferee shall have agreed to be bound
by the terms and conditions of such confidentiality agreement.
(g) The Company shall not assign or delegate any of its rights or
duties hereunder other than to the Servicer without the prior written consent of
the Funding Agent, the Trustee and each APA Bank, and any attempted assignment
without such consent shall be null and void.
(h) If, pursuant to this Supplement, any interest in this Supplement
or in a VFC Certificate is transferred to any Transferee which is a Non-U.S.
Person, the APA Bank making such transfer shall cause such Transferee,
concurrently with the effectiveness of such Transfer, (i) to furnish to the
assigning APA Bank (and, in the case of any Acquiring APA Bank, the Funding
Agent, the Company and the Trustee), with copies to the Servicer, United States
Internal Revenue Service Form 4224 (or successor applicable forms) unless a
change in law has occurred prior to the date on which such delivery would
otherwise be required which renders such form inapplicable and (ii) to agree
(for the benefit of the APA Banks, the Funding Agent,
60
the Servicer, the Company and the Trustee) to provide the assigning APA Bank
(and, in the case of any Acquiring APA Bank, the Funding Agent, the Company and
the Trustee) a new Form 4224 (or successor applicable forms) upon the expiration
or obsolescence of any previously delivered form and comparable statements in
accordance with applicable United States laws and regulations and amendments
duly executed and completed by such Transferee unless a change in law has
occurred prior to the date on which such form inapplicable, and to comply from
time to time with all applicable United States laws and regulations with regard
to such withholding tax exemption.
(i) Notwithstanding any other provisions herein, no transfer or
assignment of any interests or obligations of any APA Bank hereunder or any
grant of participations therein shall be permitted if such transfer, assignment
or grant would result in a prohibited transaction under Section 4975 of the
Internal Revenue Code or Section 406 of ERISA or cause the Trust Assets to be
regarded as "plan assets" pursuant to 29 C.F.R. ss. 2510.3-101, or require the
Company or the Seller to file a registration statement with the Securities and
Exchange Commission or to qualify under the "blue sky" laws of any state.
SECTION 11.12. Adjustments; Set-off. (a) If any Purchaser (a
"Benefitted Purchaser") shall at any time receive in respect of its Series
1998-1 Invested Amount any distribution of principal, interest, Commitment Fees
or other fees, or any interest thereon, or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by set-off or otherwise) in a
greater proportion than any such distribution received by any other Purchaser,
if any, in respect of such other Purchaser's Series 1998-1 Invested Amount, or
interest thereon, such Benefitted Purchaser shall purchase for cash from the
other Purchasers such portion of each such other Purchaser's interest in the VFC
Certificates, or shall provide such other Purchasers with the benefits of any
such collateral, or the proceeds thereof, as shall be necessary to cause such
Benefitted Purchaser to share the excess payment or benefits of such collateral
or proceeds ratably with each of the Purchasers; provided, however, that if all
or any portion of such excess payment or benefits is thereafter recovered from
such Benefitted Purchaser, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. The Company agrees that each Purchaser so purchasing a portion of the
VFC Certificateholders' Interest may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such portion as fully as
if such Purchaser were the direct holder of such portion.
(b) In addition to any rights and remedies of the Purchasers
provided by law, each Purchaser shall have the right, without prior notice to
the Company, any such notice being expressly waived by the Company to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Company hereunder or under the VFC Certificates to set-off and appropriate and
apply against any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Purchaser to
or for the credit or the account of the Company. Each Purchaser agrees promptly
to notify the Company and the Funding Agent after any such set-off and
application made by such Purchaser; provided that the failure to give such
notice shall not affect the validity of such set-off and application.
SECTION 11.13. Counterparts. This Supplement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of
61
which when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
SECTION 11.14. No Bankruptcy Petition. (a) The Funding Agent and
each Purchaser hereby covenants and agrees that, prior to the date which is one
year and one day after the later of (i) the last day of the Series 1998-1
Amortization Period and (ii) the last day of the amortization period of any
other Outstanding Series, it will not institute against, or join any other
Person in instituting against, the Company any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other similar proceedings
under any federal or state bankruptcy or similar law.
(b) The Company, the Servicer, the Trustee, the Funding Agent and
each APA Bank hereby covenants and agrees that, prior to the date which is one
year and one day after the payment in full of all outstanding Commercial Paper,
it will not institute against, or join any other Person in instituting against,
the Initial Purchaser any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other similar proceedings under any federal or state
bankruptcy or similar law.
SECTION 11.15. Limitation on Addition and Termination of Sellers.
(a) Notwithstanding anything to the contrary contained in the Receivables Sale
Agreements, no Seller or Seller Division shall be added thereunder unless each
of the following conditions shall have been satisfied:
(i) (x) in the case of a proposed addition of a Seller, each of the
conditions set forth in Section 3.02 of each of the Receivables Sale
Agreements, and (y) in the case of a proposed addition of a Seller
Division, the conditions set forth in subsections (c), (g), (h), (i), (j),
(k) and (l) (in each case, applied to the applicable New Division as if it
were a proposed additional Seller) of Section 3.02 of each of the
Receivables Sale Agreements, shall have been satisfied.
(ii) The Company shall have received copies of the Policies of such
additional Seller (or such Seller Division, as the case may be, if
different from the Policies of the Seller of which it is a New Division),
which Policies shall be in form and substance satisfactory to the Company.
(iii) The Company shall have received confirmation (A) that there is
no pending or, to its knowledge after due inquiry, threatened action or
proceeding affecting such additional Seller (or such Seller Division, as
the case may be) before any Governmental Authority (I) that could
reasonably be expected to have a Material Adverse Effect or (II) that
purports to affect the legality, validity or enforceability of this
Supplement, the Agreement or any other Transaction Document or any of the
transactions contemplated hereby or thereby.
(iv) The Company and the Trustee shall have received evidence that
the Rating Agency Condition shall have been satisfied with respect to the
addition of such Seller (or addition of such Seller Division, as the case
may be); provided that such satisfaction of the Rating Agency Condition
(and such receipt of evidence thereof) shall not be required with respect
to the addition of up to three Subsidiaries of WESCO (and/or New
Divisions) as Sellers (or Seller Divisions) during any calendar year, each
of which Subsidiaries (or New Divisions) meets the following criteria: (x)
such Subsidiary
62
(or New Division) is in the same line of business as the existing Sellers
as of the related Seller Addition Date (as defined in the Receivables Sale
Agreements) and (y) as of such date, immediately prior to giving effect to
such addition (the "Measurement Date"), the ratio (expressed as a
percentage) of (A) the aggregate Principal Amount of what would constitute
all Eligible Receivables of such Subsidiary (or New Division) at the end
of the Business Day immediately preceding the Measurement Date if it were
a Seller (or Seller Division) minus the amount which would constitute the
Overconcentration Amount applicable to such Receivables on the Measurement
Date if such Subsidiary (or New Division) were a Seller (or Seller
Division) to (B) the sum of the Aggregate Receivables Amount as of the end
of such day plus the amount described pursuant to clause (A) is less than
10 percent.
(v) The Trustee shall have received Opinions of Counsel of outside
counsel addressed to the Trustee covering matters with respect to such
Seller as were covered in the opinions delivered on the Issuance Date with
respect to the original Sellers, including "true-sale" and non-substantive
consolidation opinions (only in the case of the addition of an Additional
Seller).
(vi) The Company and the Trustee shall have received a certificate
prepared by a Responsible Officer of the Servicer certifying that after
giving effect to the addition of such Seller (or such Seller Division, as
the case may be), the Aggregate Target Receivables Amount shall equal the
Aggregate Allocated Receivables Amount on the related Seller Addition
Date.
(b) Notwithstanding anything to the contrary contained in the
Receivables Sale Agreements, the Company shall not consent to any request made
pursuant to Section 9.13 thereof, nor shall any Seller which is the subject of
such request be terminated under the Receivables Sale Agreements, in each case
unless (i) no Early Amortization Event, Potential Early Amortization Event or
Potential Purchase Termination Event (as defined in the Receivables Sale
Agreements) (other than with respect to the Seller to be so terminated) has
occurred and is continuing (both before and after giving effect to such
termination) and (ii) the Trustee shall have received prior notice of such
termination (which notice shall be accompanied by a pro forma Daily Report
confirming that the Aggregate Target Receivables Amount equals or exceeds the
Aggregate Allocated Receivables Amount, each calculated after giving effect to
such termination and excluding all Receivables originated by the Seller to be
terminated).
(c) Upon the termination of a Seller pursuant to the applicable
section of the Receivables Sale Agreements and the foregoing paragraph (b), all
calculations for purposes of Series 1998-1 (including, without limitation, for
purposes of the pro forma calculations pursuant to paragraph (b) above) shall
exclude in each case the Receivables originated by such terminated Seller.
ARTICLE XII
FINAL DISTRIBUTIONS
SECTION 12.1. Certain Distributions. (a) Not later than 2:00 p.m.,
New York City time, on the Distribution Date following the date on which the
proceeds from the disposition of the Receivables pursuant to subsection 7.2(b)
of the Agreement are deposited into
63
the Series 1998-1 Non-Principal Collection Sub-subaccount and the Series 1998-1
Principal Collection Sub-subaccount, the Trustee shall distribute such amounts
pursuant to Article III of this Supplement.
(b) Notwithstanding anything to the contrary in this Supplement or
the Agreement, any distribution made pursuant to this Section shall be deemed to
be a final distribution pursuant to Section 9.3 of the Agreement with respect to
the VFC Certificates.
IN WITNESS WHEREOF, the Company, the Servicer, the Trustee, the
Funding Agent and the Initial Purchasers have caused this Series 1998-1
Supplement to be duly executed by their respective officers as of the day and
year first above written.
WESCO RECEIVABLES CORP.
By: /s/ [ILLEGIBEL]
-------------------------------
Name:
Title:
WESCO DISTRIBUTION, INC., in its individual capacity
and as Servicer
By: /s/ [ILLEGIBEL]
-------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Funding Agent
By:
-------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, not in its individual
capacity but solely as Trustee
By: /s/ Ruth McKenna
-------------------------------
Name: RUTH MCKENNA
Title: TRUST OFFICER
IN WITNESS WHEREOF, the Company, the Servicer, the Trustee, the
Funding Agent and the Initial Purchasers have caused this Series 1998-1
Supplement to be duly executed by their respective officers as of the day and
year first above written.
WESCO RECEIVABLES CORP.
By:
-------------------------------
Name:
Title:
WESCO DISTRIBUTION, INC., in its individual capacity
and as Servicer
By:
-------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Funding Agent
By: /s/ Andrew Taylor
-------------------------------
Name: Andrew Taylor
Title: Vice President
THE CHASE MANHATTAN BANK, not in its individual
capacity but solely as Trustee
By: /s/ Ruth McKenna
-------------------------------
Name: RUTH MCKENNA
Title: TRUST OFFICER
PARK AVENUE RECEIVABLES CORPORATION,
as the Initial Purchaser
By: /s/ Andrew L. Stidd
-------------------------------
Name: Andrew L. Stidd
Title: President
THE CHASE MANHATTAN BANK, as an APA Bank
By: /s/ Bradley S. Schwartz
-------------------------------
Name: Bradley S. Schwartz
Title: Vice President
Schedule 1
Commitments
ABA Bank/Address Commitment
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017 $_______________
Schedule 2
Trust Accounts
================================================================================
Account Account Number
- - - - --------------------------------------------------------------------------------
Series 1998-1 Canada/Canadian Dollar Collection 06900397976
Subaccount
- - - - --------------------------------------------------------------------------------
Series 1998-1 Canada/U.S. Dollar Collection Subaccount 06907331313
- - - - --------------------------------------------------------------------------------
Series 1998-1 Collection Subaccount 507-895649
- - - - --------------------------------------------------------------------------------
Series 1998-1 Principal Collection Sub-subaccount 507-895657
- - - - --------------------------------------------------------------------------------
Series 1998-1 Non-Principal Collection Sub-subaccount 507-895665
- - - - --------------------------------------------------------------------------------
Series 1998-1 Accrued Interest Sub-subaccount 507-895673
================================================================================
Schedule 3
The Default Ratio Trigger shall initially be 6.5%, provided however that at such
time as the Servicer shall have delivered to the Funding Agent twelve months of
historical aging data the Default Ratio Trigger shall be recalculated as
follows:
Default Ratio Trigger = A + B + a Margin
Acceptable to the Funding Agent
where:
A= The average of the Default Ratio for the twelve month period
ending with April 1998.
B= 2 times the standard deviation of the Default Ratio for such
twelve month period.
================================================================================
WESCO INTERNATIONAL, INC.
----------------
AMENDED AND RESTATED
REGISTRATION AND PARTICIPATION AGREEMENT
----------------
Dated as of June 5, 1998
================================================================================
TABLE OF CONTENTS
(Not Part of Agreement)
Page
----
1. Background ............................................................. 1
2. Definitions ............................................................ 2
3. Registration ........................................................... 6
3.1. Registration on Request ........................................ 6
(a) Requests by Holders ..................................... 6
(b) Reserved ................................................ 6
(c) Obligation to Effect Registration ....................... 6
(d) Registration Statement Form ............................. 7
(e) Expenses ................................................ 7
(f) Inclusion of Other Securities ........................... 8
(g) Effective Registration Statement ........................ 8
(h) Pro Rata Allocation ..................................... 8
3.2. Incidental Registration ......................................... 8
3.3. Registration Procedures ......................................... 10
3.4. Underwritten Offerings .......................................... 14
(a) Underwritten Offerings Exclusive ........................ 14
(b) Underwriting Agreement .................................. 14
(c) Selection of Underwriters ............................... 14
(d) Incidental Underwritten Offerings ....................... 14
(e) Hold Back Agreements .................................... 15
(f) Notice of Impending Effective Date ...................... 15
3.5. Preparation; Reasonable Investigation ........................... 15
3.6. Other Registrations ............................................. 16
3.7. Indemnification ................................................. 16
(a) Indemnification by the Company .......................... 16
(b) Indemnification by the Sellers .......................... 17
(c) Notices of Claims, etc .................................. 17
(d) Other Indemnification ................................... 18
(e) Other Remedies .......................................... 18
(f) Officers and Directors .................................. 19
4. Participation Rights, Take-Along Rights and Rights of First Refusal .... 19
4.1. Participation Rights ........................................... 19
(a) Procedures for Qualifying Sales ......................... 19
(b) Qualifying Sale Defined ................................. 20
4.2. Take-Along Rights ............................................... 20
(a) Take-Along Notice ....................................... 20
(b) Conditions to Take-Along ................................ 20
(c) Equal Treatment ......................................... 21
i
Page
----
(d) Remedies ................................................ 21
(e) Public Offering ......................................... 22
4.3. Rights of First Refusal ........................................ 22
(a) Rights of First Refusal ................................. 22
(b) Public Offering ......................................... 23
(c) Permitted Transfers ..................................... 23
4.4. Participation in Cypress' Right of First Refusal ............... 23
5. Parties' Rights to Purchase Additional Capital Stock .................... 23
5.1. Additional Equity Sale ......................................... 23
5.2. Offer Procedures ............................................... 24
(a) Procedures .............................................. 24
(b) Allocated Amount Defined ................................ 24
(c) Terms of Offer .......................................... 25
6. Additional Investor Provisions ...................................... 26
6.1. Designation of Directors by Cypress ........................... 26
6.2. Delivery of Financial Statements and Other Information ........ 27
6.3. Limitation on Transactions with Affiliates .................... 28
6.4. Special Provisions Applicable to Regulation Y Holders ......... 28
7. Miscellaneous ........................................................... 29
7.1. Rule 144; Legended Securities; etc ............................ 29
7.2. Amendments and Waivers ........................................ 29
7.3. Nominees for Beneficial Owners ................................ 30
7.4. Successors, Assigns and Transferees ........................... 30
7.5. Notices ....................................................... 30
7.6. No Inconsistent Agreements .................................... 32
7.7. Remedies ...................................................... 32
7.8. Stock Splits, etc ............................................. 32
7.9. Term .......................................................... 33
7.10. Severability .................................................. 33
7.11. Headings ...................................................... 33
7.12. Counterparts .................................................. 33
7.13. Governing Law ................................................. 33
7.14. No Third Party Beneficiaries .................................. 33
7.15. Consent to Jurisdiction ....................................... 33
7.16. Waiver of Jury Trial .......................................... 34
ii
AMENDED AND RESTATED
REGISTRATION AND PARTICIPATION AGREEMENT
AMENDED AND RESTATED REGISTRATION AND PARTICIPATION AGREEMENT, dated
as of June 5, 1998 (this "Agreement"), among WESCO International, Inc. (formerly
known as CDW Holding Corporation), a Delaware corporation (the "Company"), and
the undersigned parties hereto.
1. Background. (a) The Company, CBS Corporation, formerly known as
Westinghouse Electric Corporation ("CBS"), and The Clayton & Dubilier Private
Equity Fund IV Limited Partnership (the "C&D Fund") have entered into the
original Registration and Participation Agreement, dated as of February 28, 1994
(the "Original Registration Agreement").
(b) In connection with and following the execution and delivery of
the Original Registration Agreement, the Company has issued and sold directly,
or pursuant to options or other rights, shares of Class A Common Stock to
certain directors, executive officers and key employees of the Company or one of
its Subsidiaries (the "Management Purchasers"), and shares of Class A Common
Stock to certain other investors or other purchasers (the "Subsequent
Purchasers"), in each case, pursuant to stock subscription or purchase
agreements the terms of which were not inconsistent with the terms of the
Original Registration Agreement (the "Management Stock Subscription Agreements")
or stock option or rights agreements, plans or arrangements the terms of which
were not inconsistent with the terms of the Original Registration Agreement (the
"Management Stock Option Agreements").
(c) The Company, the C&D Fund, CBS, the Subsequent Purchasers and
the Management Purchasers are parties to the Recapitalization Agreement, dated
as of March 27, 1998 (as amended, the "Recapitalization Agreement"), with Thor
Acquisitions L.L.C. ("Thor Acquisitions"), a Delaware limited liability company
organized by Cypress Merchant Banking Partners L.L.C. ("Cypress"), and,
immediately prior to the closing under the Recapitalization Agreement, Thor
Acquisitions assigned all of its rights and obligations thereunder to an
investor group, arranged by Cypress, consisting of Cypress Merchant Banking
Partners L.P., Cypress Offshore Partners L.P., Chase Equity Associates, L.P.,
Co-Investment Partners, L.P., The Travelers Insurance Company, The Travelers
Life and Annuity Company, The Travelers Indemnity Company and The Phoenix
Insurance Company (each an "Investor" and collectively the "Investors").
Pursuant to the Recapitalization Agreement, the Company repurchased shares of
Common Stock from certain of its existing stockholders and issued and sold
shares of Common Stock to the Investors and the Investors purchased additional
shares of Common Stock from certain other existing stockholders of the Company,
as a result of which the Investors own approximately 88% of the outstanding
shares of Common Stock and the Management Purchasers own the remaining 12% of
such shares.
2
(d) The Company and/or the Investors may in the future issue or sell
directly, or pursuant to options or other rights, additional shares of Class A
Common Stock to the Management Purchasers or other purchasers, in each case
pursuant to stock subscription or purchase agreements the terms of which are not
inconsistent with the terms of this Agreement (the "Subsequent Stock
Subscription Agreement") or stock option or rights agreements, plans or
arrangements the terms of which are not inconsistent with the terms of this
Agreement (the "Subsequent Stock Option Agreements").
(e) The Management Purchasers and any trusts holding shares of Class
A Common Stock or options to purchase shares of Class A Common Stock for the
benefit of relatives or dependents of any Management Purchaser are referred to
herein collectively as the "Management Stockholders". The Management Stock
Subscription Agreements, the Management Stock Option Agreements, the Subsequent
Stock Subscription Agreements and the Subsequent Stock Option Agreements are
referred to herein collectively as the "Stock Subscription Agreements".
(f) The Company, and holders of a majority of the shares of
Registrable Securities desire to amend and restate the Original Registration
Agreement and agree with the Investors that such agreement shall be amended and
restated as follows.
2. Definitions. For purposes of this Agreement, the following terms
have the following respective meanings:
"Accepting Holder": See Section 5.2(a).
"Affiliate": With respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the first Person. "Control"
(including the terms "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the ownership
of voting securities, by contract or credit arrangement, as trustee or executor,
or otherwise. Any director, member of management or other employee of the
Company or any of its Subsidiaries who would not otherwise be an Affiliate of
Cypress shall not be deemed to be an Affiliate of Cypress.
"Allocated Amount": See Section 5.2(b).
"Allocation Calculation": See Section 5.2(b).
"BHC Act": The Bank Holding Company Act of 1956, as the same may be
amended or supplemented from time to time, or any successor or statue, and the
rules and regulations thereunder, as the same are from time to time in effect.
"Business Day": A day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required to close.
3
"CBS": See Section 1.
"C&D Fund": See Section 1.
"Class A Common Stock": The Class A Common Stock, par value $.01 per
share, of the Company.
"Class B Common Stock": The Class B Common Stock, par value $5.01
per share, of the Company.
"Common Stock": The Class A Common Stock and the Class B Common
Stock.
"Company": See the introduction to this Agreement.
"Cypress": See Section 1.
"Cypress Offeree": See Section 5.1.
"Cypress Sale": See Section 5.1.
"Eligible Holder": See Section 5.1.
"Exchange Act": The Securities Exchange Act of 1934, as amended, or
any successor Federal statute, and the rules and regulations thereunder which
shall be in effect at the time. Any reference to a particular section thereof
shall include a reference to the corresponding section, if any, of any such
successor Federal statute, and the rules and regulations thereunder.
"Initial Public Offering": The consummation of a bona fide public
offering of Common Stock pursuant to a registration statement filed under the
Securities Act, which offering is underwritten on a firm commitment basis by a
syndicate of underwriters led by one or more underwriters at least one of which
is an underwriter of recognized national standing.
"Investors": See Section 1.
"Management Purchaser": See Section 1.
"Management Stockholders": See Section 1.
"Management Stock Option Agreements": See Section 1.
"Management Stock Subscription Agreements": See Section 1.
"NASD": National Association of Securities Dealers, Inc.
4
"NASDAQ": The NASD Automated Quotation System.
"New Investors": Directors or senior executives of corporations in
which entities managed or sponsored by Cypress have made substantial equity
investments.
"Offer": See Section 5.1.
"Offered Securities": See Section 5.2(a).
"Original Registration Agreement": See Section 1.
"Participants": See Section 5.2(b).
"Person": Any natural person, firm, partnership, association,
corporation, company, trust, business trust, governmental entity or other
entity.
"Proportionate First Share": See Section 5.2(b).
"Proportionate Subsequent Share": See Section 5.2(b).
"Qualifying Sale": See Section 4.1(b).
"Qualifying Securities": See Section 4.1(a).
"Recapitalization Agreement": See Section 1.
"Registrable Securities": (a) Any Class A Common Stock or Class B
Common Stock owned by the Investors, (b) any Class A Common Stock or Class B
Common Stock issued pursuant to the Stock Subscription Agreements (including
upon exercise of options granted pursuant to the Management Stock Option
Agreements or the Subsequent Stock Option Agreements), only if, in the case of
the issuance pursuant to any Stock Subscription Agreement, such Stock
Subscription Agreement provides that such Common Stock shall be entitled to the
benefits of this Agreement applicable to Registrable Securities, (c) any Class A
Common Stock issued upon conversion of the Class B Common Stock referred to in
clause (a) or (b) above, (d) any Class B Common Stock issued in exchange for the
Class A Common Stock referred to in clause (a) or (b) above, (e) any equity
securities of the Company issued pursuant to the terms of, and under the
circumstances set forth in, Section 5, and (f) any securities issued or issuable
with respect to any equity securities of the Company referred to in the
foregoing clauses (i) upon any conversion or exchange thereof, (ii) by way of
stock dividend or stock split, (iii) in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or (iv)
otherwise, in all cases subject to the last paragraph of Section 3.3. As to any
particular Registrable Securities, once issued such securities shall cease to be
Registrable Securities when(A) a registration statement (other than a Special
Registration pursuant to which such securities were issued by the Company) with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (B)
5
such securities shall have been distributed to the public in reliance upon Rule
144, (C) subject to the provisions of the second paragraph of Section 7.1, such
securities shall have been otherwise transferred, new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of such securities shall not
require registration or qualification of such securities under the Securities
Act or any similar state law then in force or (D) such securities shall have
ceased to be outstanding. Subject to the immediately preceding sentence,
Registrable Securities shall not cease to be Registrable Securities upon
transfer.
"Registration Expenses": All expenses incident to the Company's
performance of its obligations under or compliance with Section 3, including,
but not limited to, all registration and filing fees, all fees and expenses of
complying with securities or blue sky laws, all fees and expenses associated
with listing securities on exchanges or NASDAQ, all fees and other expenses
associated with filings with the NASD (including, if required, the fees and
expenses of any "qualified independent underwriter" and its counsel), all
printing expenses, the fees and disbursements of counsel for the Company and of
its independent public accountants, the fees and disbursements of one counsel
retained by the holders of a majority of the Registrable Securities to be
registered and the expenses of any special audits made by such accountants
required by or incidental to such performance and compliance, but not including
any underwriting discounts or commissions or any transfer taxes payable in
respect of the sale of Registrable Securities by the holders thereof
"Regulation Y Holder": Any holder of Registrable Securities that is
a bank holding company within the meaning of the BHC Act, or a subsidiary
thereof, subject to Regulation Y under the BHC Act.
"Requisite Percentage of Stockholders": At any time prior to an
Initial Public Offering, the holder or holders of at least 50% (by number of
shares) of the Registrable Securities at the time outstanding; thereafter, the
holder or holders of at least 20% (by number of shares) of the Registrable
Securities at the time outstanding.
"Rule 144": Rule 144 (or any successor provision) under the
Securities Act.
"Rule 144A": Rule 144A (or any successor provision) under the
Securities Act.
"Sale Notice": See Section 4.1(a).
"Securities Act": The Securities Act of 1933, as amended, or any
successor Federal statute, and the rules and regulations thereunder which shall
be in effect at the time. Any reference to a particular section thereof shall
include a reference to the corresponding section, if any, of any such successor
Federal statute, and the rules and regulations thereunder.
"Securities and Exchange Commission": The Securities and Exchange
Commission or any other Federal agency at the time administering the Securities
Act or the Exchange Act.
6
"Special Registration": The registration of shares of equity
securities and/or options or other rights in respect thereof (a) to be offered
to directors, members of management, employees or sales agents, distributors or
similar representatives of the Company or its Subsidiaries, (b) concerning or
relating to shares of Class A Common Stock to be offered to New Investors or (g)
made solely on Form S-4 or S-8 or any successor form.
"Specified Securities": See Section 4.1(a).
"Stock Subscription Agreements": See Section 1.
"Subscribed Amount": See Section 5.2(a).
"Subsequent Purchasers": See Section 1.
"Subsequent Stock Option Agreements": See Section 1.
"Subsequent Stock Subscription Agreements": See Section 1.
"Subsidiary": Each corporation or other Person in which a person
owns or controls, directly or indirectly, capital stock or other equity
interests representing at least a majority of the outstanding voting stock or
other equity interests.
3. Registration.
3. 1. Registration on Request.
(a) Requests by Holders. Subject to the provisions of Section 3.6,
at any time or from time to time the Requisite Percentage of Stockholders shall
have the right to make one or more written requests that the Company effect the
registration under the Securities Act of all or part of the Registrable
Securities of the holder or holders making such request, which requests shall
specify the intended method of disposition thereof by such holder or holders.
(b) Reserved.
(c) Obligation to Effect Registration. Upon receipt by the Company
of any request for registration pursuant to Section 3.1(a), the Company will
promptly give written notice of such requested registration to all holders of
Registrable Securities, and thereupon will use its best efforts to effect the
registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register pursuant to Section 3.1(a), and
(ii) all other Registrable Securities which the Company has
been requested to register by the holders thereof by written request given
to the Company within 30
7
days after the Company has given such written notice (which request shall
specify the intended method of disposition of such Registrable
Securities),
all to the extent required to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. Notwithstanding the preceding sentence:
(A) the Company shall not be required to effect a registration
requested pursuant to Section 3.1(a) if the aggregate number of
Registrable Securities referred to in clauses (i) and (ii) of the
preceding sentence to be included in such registration shall be less than
20% of the Registrable Securities at the time outstanding; and
(B) if the Board of Directors of the Company determines in its good
faith judgment, after consultation with a firm of nationally recognized
underwriters, that there will be an adverse effect on a then contemplated
Initial Public Offering unless such Initial Public Offering is not made
contemporaneously with a registration pursuant to Section 3.1(a), each
holder of Registrable Securities to be included pursuant to this Section
3.1(c) in a requested registration shall be given notice of such fact and
the holder or holders of Registrable Securities initiating such request
for registration pursuant to Section 3.1(a), shall be deemed to have
withdrawn such request and such registration shall not be deemed to have
been effected pursuant to this Section 3.1.
(d) Registration Statement Form. Each registration requested
pursuant to this Section 3.1 shall be effected by the filing of a registration
statement on Form S-1, Form S-2 or Form S-3 (or any other form which includes
substantially the same information as would be required to be included in a
registration statement on such forms as presently constituted), unless the use
of a different form is required by law or (ii) permitted by law and agreed to in
writing by holders holding at least a majority (by number of shares) of the
Registrable Securities as to which registration has been requested pursuant to
this Section 3.1. At any time after the Company has issued and sold any shares
of its capital stock registered under an effective registration statement under
the Securities Act, or after the Company shall have registered any class of
equity securities pursuant to Section 12 of the Exchange Act, it will use its
best efforts to qualify for registration on Form S-2 or Form S-3 (or any other
comparable form hereinafter adopted).
(e) Expenses. The Company will pay all Registration Expenses in
connection with the first three registrations effected pursuant to a request
under Section 3.1(a). The Registration Expenses in connection with each other
registration, if any, requested under Section 3.1(a) shall be apportioned among
the holders whose Registrable Securities are then being registered, on the basis
of the respective amounts (by number of shares) of Registrable Securities then
being registered. However, in the case of each registration requested under
Section 3.1(a), the Company shall pay all amounts in respect of (A) any
allocation of salaries of personnel of the Company and its Subsidiaries or other
general overhead expenses of the Company and its Subsidiaries or other expenses
for the preparation of financial statements or other data normally prepared by
the Company and its
8
Subsidiaries in the ordinary course of its business, (B) the expenses of any
officers' and directors' liability insurance, (C) the expenses and fees for
listing the securities to be registered on each exchange on which similar
securities issued by the Company are then listed or, if no such securities are
then listed, on an exchange selected by the Company or on NASDAQ and (D) all
fees associated with filings required to be made with the NASD (including, if
required, the fees and expenses of any "qualified independent underwriter" and
its counsel).
(f) Inclusion of Other Securities. The Company shall not register
securities (other than Registrable Securities) for sale for the account of any
Person other than the Company in any registration requested pursuant to Section
3.1(a) unless permitted to do so by the written consent of holders holding at
least a majority (by number of shares) of the Registrable Securities proposed to
be sold in such registration.
(g) Effective Registration Statement. A registration requested
pursuant to Section 3.1(a) will not be deemed to have been effected unless it
has become effective for the period specified in Section 3.3(b). Notwithstanding
the preceding sentence, a registration requested pursuant to Section 3.1(a)
which does not become effective after the Company has filed a registration
statement with respect thereto solely by reason of the refusal to proceed of the
holder or holders of Registrable Securities requesting the registration shall be
deemed to have been effected by the Company at the request of such holder or
holders.
(h) Pro Rata Allocation. If the holders of a majority (by number of
shares) of the Registrable Securities for which registration is being requested
pursuant to Section 3.1(a) determine, based on consultation with the managing
underwriters or, in an offering which is not underwritten, with an investment
banking firm of nationally recognized standing, that the number of securities to
be sold in any such offering should be limited due to market conditions or
exceeds the number of securities which can be sold in such offering, all holders
of Registrable Securities proposing to sell their securities in such
registration and (if the Company proposes to sell securities for its own account
in such offering) the Company shall share pro rata in the number of securities
being offered and registered for their account, such sharing to be based on the
number of Registrable Securities as to which registration was requested by such
holders and the number of securities that the Company proposed to sell for its
own account in such offering, respectively.
3.2. Incidental Registration. If the Company at any time proposes to
register any of its equity securities (as defined in the Exchange Act) under the
Securities Act (other than pursuant to Section 3.1 or pursuant to a Special
Registration), whether or not for sale for its own account, and the registration
form to be used may be used for the registration of Registrable Securities, it
will each such time give prompt written notice to all holders of Registrable
Securities of its intention to do so and, upon the written request of any holder
of Registrable Securities given to the Company within 30 days after the Company
has given any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holders thereof, to the extent
required
9
to permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, provided that:
(a) if such registration shall be in connection with the Initial
Public Offering, the Company shall not include any Registrable Securities
in such proposed registration if the Company's Board of Directors shall
have determined, after consultation with the managing underwriters for
such offering, that it is not in the best interests of the Company to
include any Registrable Securities in such registration, provided that, if
the Company's Board of Directors makes such a determination, the Company
shall not include in such registration any securities not being sold for
the account of the Company;
(b) if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities,
the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities that was previously
notified of such registration and, thereupon, shall not register any
Registrable Securities in connection with such registration (but shall
nevertheless pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights of any holder or holders of
Registrable Securities to request that a registration be effected under
Section 3.1; and
(c) if the Company shall be advised in writing by the managing
underwriters (or, in connection with an offering which is not
underwritten, by an investment banking firm of nationally recognized
standing) that in their or its opinion the number of securities requested
to be included in such registration (whether by the Company, pursuant to
this Section 3.2 or pursuant to any other rights granted by the Company to
a holder or holders of its securities to request or demand such
registration or inclusion of any such securities in any such registration)
exceeds the number of such securities which can be sold in such offering,
(i) the Company shall include in such registration the number
(if any) of Registrable Securities so requested to be included which
in the opinion of such underwriters or investment banking firm, as
the case may be, can be sold and shall not include in such
registration any securities (other than securities being sold by the
Company, which shall have priority in being included in such
registration) so requested to be included other than Registrable
Securities unless all Registrable Securities requested to be so
included are included therein, and
(ii) if in the opinion of such underwriters or investment
banking firm, as the case may be, some but not all of the
Registrable Securities may be so included, all holders of
Registrable Securities requested to be included therein shall share
pro rata in the number of shares of Registrable Securities included
in such public offering on the basis of the number of Registrable
10
Securities requested to be included therein by such holders,
provided that, in the case of a registration initially requested or
demanded by a holder or holders of securities other than Registrable
Securities, the holders of the Registrable Securities requested to
be included therein and the holders of such other securities shall
share pro rata (based on the number of shares if the requested or
demanded registration is to cover only Common Stock and, if not,
based on the proposed offering price of the total number of
securities included in such public offering requested to be included
therein),
and the Company shall so provide in any registration agreement hereinafter
entered into with respect to any of its securities.
The Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this Section
3.2. No registration effected under this Section 3.2 shall relieve the Company
from its obligation to effect registrations upon request under Section 3.1.
3.3. Registration Procedures. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 3.1 and 3.2, the
Company will promptly:
(a) prepare and file with the Securities and Exchange Commission
within 120 days, and use its best efforts to prepare and file within 60
days, after receipt of a request pursuant to Section 3.1 a registration
statement with respect to such securities, make all required filings with
the NASD and use best efforts to cause such registration statement to
become effective;
(b) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith and such other documents as may be
necessary to keep such registration statement effective and to comply with
the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement until such time as
all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth
in such registration statement, but in no event for a period of more than
six months after such registration statement becomes effective;
(c) furnish to counsel (if any) selected by the holders of a
majority (by number of shares) of the Registrable Securities covered by
such registration statement and to counsel for the underwriters in any
underwritten offering copies of all documents proposed to be filed with
the Securities and Exchange Commission (including all documents to be
filed on a confidential basis) in connection with such registration, which
documents will be subject to the review of such counsel;
(d) furnish to each seller of such securities, without charge, such
number of conformed copies of such registration statement and of each such
amendment and
11
supplement thereto (in each case, including all exhibits and documents
filed therewith (other than those filed on a confidential basis), except
that the Company shall not be obligated to furnish any seller of
securities with more than two copies of such exhibits and documents),
such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary
prospectus) in conformity with the requirements of the Securities Act,
and such other documents, as such seller may reasonably request in order
to facilitate the disposition of the securities owned by such seller;
(e) use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as each seller shall request, and do
any and all other acts and things which may be necessary or advisable to
enable such seller to consummate the disposition in such jurisdictions of
the securities owned by such seller, except that the Company shall not
for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified,
subject itself to taxation in any jurisdiction wherein it is not so
subject, or take any action which would subject it to general service of
process in any jurisdiction wherein it is not so subject;
(f) in connection with an underwritten public offering only, furnish
to each seller a signed counterpart, addressed to the sellers, of
(i) an opinion of counsel for the Company experienced in
securities law matters, dated the effective date of the registration
statement, and
(ii) a "comfort" letter signed by the independent public
accountants who have issued an audit report on the Company's
financial statements included in the registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities;
(g) (i) notify each holder of Registrable Securities covered by such
registration statement if such registration statement, at the time it or
any amendment thereto became effective, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and,
as promptly as practicable, prepare and file with the Securities and
Exchange Commission a post-effective amendment to such registration
statement and use best efforts to cause such post-effective amendment to
become effective such that such registration statement, as so amended,
shall not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) notify each holder of
Registrable Securities covered by such registration statement, at any time
12
when a prospectus relating thereto is required to be delivered under the
Securities Act, if the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, and, as promptly as is practicable,
prepare and furnish to such holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement of the Company complying with the provisions of Section
11(a) of the Securities Act and Rule 158 under the Securities Act;
(i) notify each seller of any securities covered by such
registration statement (i) when such registration statement, or any
post-effective amendment to such registration statement, shall have become
effective, or any amendment of or supplement to the prospectus used in
connection therewith shall have been filed, (ii) of any request by the
Securities and Exchange Commission to amend such registration statement or
to amend or supplement such prospectus or for additional information,
(iii) of the issuance by the Securities and Exchange Commission of any
stop order suspending the effectiveness of such registration statement or
of any order preventing or suspending the use of any preliminary
prospectus, and (iv) of the suspension of the qualification of such
securities for offering or sale in any jurisdiction, or of the institution
of any proceedings for any of such purposes;
(j) use its best efforts (i) (A) to list such securities on any
securities exchange on which the Common Stock is then listed or, if no
Common Stock is then listed, on an exchange selected by the Company, if
such listing is then permitted under the rules of such exchange or (B) if
such listing is not practicable or the Board of Directors of the Company
determines that quotation as a NASDAQ National Market System security is
preferable, to secure designation of such securities as a NASDAQ "national
market system security" within the meaning of Rule 11 Aa2-1 under the
Exchange Act or, failing that, to secure NASDAQ authorization for such
securities, and, without limiting the foregoing, to arrange for at least
two market makers to register as such with respect to such securities with
the NASD, (ii) to provide a transfer agent and registrar for such
Registrable Securities not later than the effective date of such
registration statement and (iii) to obtain a CUSIP number for the
Registrable Securities; and
13
(k) use every reasonable effort to obtain the lifting of any stop
order that might be issued suspending the effectiveness of such
registration statement or of any order preventing or suspending the use of
any preliminary prospectus.
The Company may require each seller of any securities as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
in connection therewith. Each such holder agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such holder not materially
misleading.
The Company agrees not to file or make any amendment to any
registration statement with respect to any Registrable Securities, or any
amendment of or supplement to the prospectus used in connection therewith, which
refers to any seller of any securities covered thereby by name, or otherwise
identifies such seller as the holder of any securities of the Company, without
the consent of such seller, such consent not to be unreasonably withheld, except
that no such consent shall be required for any disclosure that is required by
law.
By acquisition of Registrable Securities, each holder of such
Registrable Securities shall be deemed to have agreed that upon receipt of any
notice from the Company pursuant to Section 3.3(g), such holder will promptly
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such holder
shall have received, in the case of clause (i) of Section 3.3(g), notice from
the Company that such registration statement has been amended, as contemplated
by Section 3.3(g), and, in the case of clause (ii) of Section 3.3(g), copies of
the supplemented or amended prospectus contemplated by Section 3.3(g). If so
directed by the Company, each holder of Registrable Securities will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, in such holder's possession of the prospectus covering such Registrable
Securities at the time of receipt of such notice. In the event that the Company
shall give any such notice, the period mentioned in Section 3.3(b) shall be
extended by the number of days during the period from and including the date of
the giving of such notice to and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
Section 3.3(g).
Although shares of Class A Common Stock issuable upon the exercise
of options and shares of Class B Common Stock are included in the definition of
Registrable Securities, the Company shall, in respect of any such Registrable
Securities requested to be registered pursuant hereto, be required to include in
any registration statement only shares of Class A Common Stock issuable upon
conversion of or pursuant to such Registrable Securities and only if the Company
has received assurances, reasonably satisfactory to it, in the case of shares
issuable upon exercise of options, that such options will be exercised and in
the case of Class B Common Stock that such Registrable Securities will be
converted into shares of Class A Common Stock, in each case, promptly after such
registration statement has
14
become effective or the sale to an underwriter has been consummated so that only
Class A Common Stock shall be distributed to the public under such registration
statement.
3.4. Underwritten Offerings. The provisions of this Section 3.4 do
not establish additional registration rights but instead set forth procedures
applicable, in addition to those set forth in Sections 3.1 through 3.3, to any
registration which is an underwritten offering.
(a) Underwritten Offerings Exclusive. Whenever a registration
requested pursuant to Section 3.1 is for an underwritten offering, only
securities which are to be distributed by the underwriters may be included in
the registration.
(b) Underwriting Agreement. If requested by the underwriters for any
underwritten offering by holders of Registrable Securities pursuant to a
registration requested under Section 3.1, the Company shall enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to the holders of a majority
(by number of shares) of the Registrable Securities to be covered by such
registration and to the underwriters and to contain such representations and
warranties by the Company and such other terms and provisions as are customarily
contained in agreements of this type, including, but not limited to, indemnities
to the effect and to the extent provided in Section 3,7, provisions for the
delivery of officers' certificates, opinions of counsel and accountants'
"comfort" letters and hold-back arrangements. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to such
underwriting agreement and may, at their option, require that any or all of the
representations and warranties by, and the agreements on the part of, the
Company to and for the benefit of such underwriters be made to and for the
benefit of such holders of Registrable Securities and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement shall also be conditions precedent to the obligations of
such holders of Registrable Securities.
(c) Selection of Underwriters. Whenever a registration requested
pursuant to Section 3.1 is for an underwritten offering, the Company will have
the right to select one or more underwriters to administer the offering at least
one of which shall be an underwriter of nationally recognized standing. If the
Company at any time proposes to register any of its securities under the
Securities Act for sale for its own account and such securities are to be
distributed by or through one or more underwriters, the Company will have the
right to select one or more underwriters to administer the offering at least one
of which shall be an underwriter of nationally recognized standing.
(d) Incidental Underwritten Offerings. Subject to the provisions of
the proviso to the first sentence of Section 3.2, if the Company at any time
proposes to register any of its equity securities under the Securities Act
(other than pursuant to Section 3.1 or pursuant to a Special Registration),
whether or not for its own account, and such securities are to be distributed by
or through one or more underwriters, the Company will give prompt written notice
to all holders of Registrable Securities of its intention to do so and, if
requested by any holder of Registrable Securities, will arrange for such
underwriters to include the
15
Registrable Securities to be offered and sold by such holder among those to be
distributed by such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between the Company and such underwriters and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of the
underwriters under such underwriting agreement shall also be conditions
precedent to the obligations of such holders of Registrable Securities. No such
holder of Registrable Securities shall be required by the Company to make any
representations or warranties to, or agreements with, the Company or the
underwriters other than as set forth in Section 3.4(e) and representations,
warranties or agreements regarding such holder and such holder's intended method
of distribution.
(e) Hold Back Agreements. If and whenever the Company proposes to
register any of its equity securities under the Securities Act for its own
account (other than pursuant to a Special Registration) or is required to use
its best efforts to effect the registration of any Registrable Securities under
the Securities Act pursuant to Section 3.1 or 3.2, each holder of Registrable
Securities agrees by acquisition of such Registrable Securities not to effect
(other than pursuant to such registration) any public sale or distribution,
including, but not limited to, any sale pursuant to Rule 144 or Rule 144A, of
any Registrable Securities, any other equity securities of the Company or any
securities convertible into or exchangeable or exercisable for any equity
securities of the Company for 120 days (180 days if such registration statement
relates to the Initial Public Offering) after, and (assuming compliance by the
Company with Section 3.4(f) during the 20 days prior to, the effective date of
such registration and the Company agrees to cause each holder of any equity
security, or of any security convertible into or exchangeable or exercisable for
any equity security, of the Company purchased from the Company at any time other
than in a public offering to enter into a similar agreement with the Company.
The Company further agrees not to effect (other than pursuant to such
registration or pursuant to a Special Registration) any public sale or
distribution, or to file any registration statement (other than such
registration or a Special Registration) covering any, of its equity securities,
or any securities convertible into or exchangeable or exercisable for such
securities, during the 20 days prior to, and for 120 days (180 days if such
registration statement relates to the Initial Public Offering) after, the
effective date of such registration.
(f) Notice of Impending Effective Date. The Company will give at
least 20 days' written notice to each holder of Registrable Securities of the
date when the Company expects, in its good faith judgment, that any registration
pursuant to Section 3.1 or 3.2 will become effective (such notice to specify the
expected effective date) and will respond promptly to any subsequent reasonable
requests from any holder of Registrable Securities concerning the likely
effective date of such registration.
3.5. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of such
Registrable Securities so to be registered and
16
their underwriters, if any, and their respective counsel and accountants the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Securities and Exchange
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers, independent public accountants
who have issued audit reports on its financial statements and counsel (subject,
as necessary, to the Company's right to ensure the preservation of its
attorney-client privilege), in each case as shall be necessary, in the opinion
of such holders' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
3.6. Other Registrations. If and whenever the Company is required to
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act pursuant to Section 3.1 or 3.2, and if such
registration shall not have been withdrawn or abandoned, the Company shall not
be obligated to and shall not file any registration statement with respect to
any of its securities (including Registrable Securities) under the Securities
Act (other than a Special Registration), whether of its own accord or at the
request or demand of any holder or holders of such securities, until a period of
120 days (180 days if such registration statement relates to the Initial Public
Offering) shall have elapsed from the effective date of such previous
registration; and the Company shall so provide in any registration agreement
with respect to any of its securities.
3.7. Indemnification.
(a) Indemnification by the Company. In the event of any registration
of any Registrable Securities under the Securities Act pursuant to Section 3.1
or 3.2, the Company will indemnify and hold harmless the seller of such
securities, its directors, officers, and employees, each other person who
participates as an underwriter, broker or dealer in the offering or sale of such
securities and each other person, if any, who controls such seller or any such
participating person within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, against any and all losses, claims,
damages or liabilities, joint or several, to which such seller or any such
director, officer, employee, participating person or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein or related thereto, or
any amendment or supplement thereto, or (ii) any omission or alleged omission to
state a fact required to be stated in any such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement or necessary to make the statements therein not misleading; and the
Company will reimburse such seller and each such director, officer, employee,
participating person and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding, provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon an untrue
17
statement or omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such seller or participating person expressly for use in the
preparation thereof and provided, further, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission in the prospectus, if such untrue
statement or alleged untrue statement or omission or alleged omission is
completely corrected in an amendment or supplement to the prospectus and the
seller of Registrable Securities thereafter fails to deliver such prospectus as
so amended or supplemented prior to or concurrently with the sale of Registrable
Securities to the person asserting such loss, claim, damage, liability or
expense after the Company had furnished such seller with a sufficient number of
copies of the same or if the seller received notice from the Company of the
existence of such untrue statement or alleged untrue statement or omission or
alleged omission and the seller continued to dispose of Registrable Securities
prior to the time of the receipt of either (A) an amended or supplemented
prospectus which completely corrected such untrue statement or omission or (B) a
notice from the Company that the use of the existing prospectus may be resumed.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, officer,
employee, participating person or controlling person and shall survive the
transfer of such securities by such seller.
(b) Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to Section 3.3, that the Company shall have received an
undertaking satisfactory to it from each of the prospective sellers of such
securities, to severally and not jointly indemnify and hold harmless (in the
same manner and to the extent as set forth in Section 3.7(a)) the Company, each
director of the Company, each officer of the Company who shall sign such
registration statement and each other person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any statement in or
omission from such registration statement, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, if such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company by such seller expressly for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement, provided that the
liability of each such seller will be in proportion to and limited to the net
amount received by such seller (after deducting any underwriting discount and
expenses) from the sale of Registrable Securities pursuant to such registration
statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such seller.
(c) Notices of Claims. etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraphs of this Section 3.7, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party hereunder, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
18
to give notice as provided therein shall not relieve the indemnifying party of
its obligations under the preceding paragraphs of this Section 3.7. In case any
such action is brought against an indemnified party, the indemnifying party will
be entitled to participate therein and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof, provided that if such indemnified
party and the indemnifying party reasonably determine, based upon advice of
their respective independent counsel, that a conflict of interest may exist
between the indemnified party and the indemnifying party with respect to such
action and that it is advisable for such indemnified party to be represented by
separate counsel, such indemnified party may retain other counsel, reasonably
satisfactory to the indemnifying party, to represent such indemnified party, and
the indemnifying party shall pay all reasonable fees and expenses of such
counsel. No indemnifying party, in the defense of any such claim or litigation,
shall, except with the consent of such indemnified party, which consent shall
not be unreasonably withheld, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified
in the preceding paragraphs of this Section 3.7 with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of such Registrable
Securities under any Federal or state law or regulation of governmental
authority other than the Securities Act.
(e) Other Remedies. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an indemnified party, other
than by reason of the exceptions provided therein, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other from
the offering of Registrable Securities (taking into account the portion of the
proceeds of the offering realized by each such party) or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, or provides a
lesser sum to the indemnified party than the amount hereinafter calculated, in
such proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified party on
the other but also the relative fault of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. No party shall be
liable for contribution under this Section 3.7(e) except to the extent and under
such circumstances as such party would have been liable to indemnify under this
Section 3.7 if such indemnification were enforceable under applicable law.
19
(f) Officers and Directors. As used in this Section 3.7, the terms
"officers" and "directors" shall include the partners of the holders of
Registrable Securities which are partnerships.
4. Participation Rights, Take-Along Rights and Rights of First
Refusal.
4.1. Participation Rights. Cypress shall not make or cause to be
made any Qualifying Sale, except pursuant to the following provisions of this
Section 4.1.
(a) Procedures for Qualifying Sales. At least 30 days prior to
making any Qualifying Sale, Cypress will deliver a written notice (the "Sale
Notice") to the Company and the holders of Registrable Securities. The Sale
Notice will fully disclose the identity of the prospective transferee and the
terms and conditions of the proposed Qualifying Sale, including the class of
Registrable Securities to be sold (the "Specified Securities"), the maximum
amount of Specified Securities that the prospective transferee is willing to
purchase, the intended consummation date of such Qualifying Sale and the terms
of each agreement with respect to such Qualifying Sale between Cypress or its
Affiliates and such prospective transferee. Cypress may not give a Sale Notice
with respect to any Qualifying Sale unless both Cypress and the prospective
transferee shall be legally bound to complete such Qualifying Sale (subject only
to the satisfaction of the conditions of such Qualifying Sale disclosed in such
Sale Notice and compliance with this Section 4.1 and any applicable law or
exchange regulation). Cypress will not consummate any Qualifying Sale until at
least 30 days after the related Sale Notice has been given to the holders of
Registrable Securities, unless Cypress shall have received a notice from each
holder of Specified Securities or securities presently convertible into or
exchangeable or exercisable for Specified Securities (collectively, "Qualifying
Securities") indicating whether or not such holder has elected to participate in
such Qualifying Sale and the amount of Specified Securities to be sold by each
such holder so electing to participate has been finally determined pursuant
hereto prior to the expiration of such 30-day period. Each holder of Qualifying
Securities may elect to participate in the contemplated Qualifying Sale by
giving written notice to Cypress and the Company within 30 days after Cypress
has given the related Sale Notice to such holder. If a holder of Qualifying
Securities elects to participate, such holder will be entitled to sell in the
contemplated Qualifying Sale, at the same price and (subject to the immediately
following sentence) on the same terms and conditions as set forth in the related
Sale Notice, an amount of Specified Securities equal to the product of (i) the
quotient determined by dividing (A) the amount of Specified Securities then held
by such holder (including in such amount all Specified Securities issuable upon
conversion, exchange or exercise of all Qualifying Securities then held by such
holder) by (B) the aggregate amount of Specified Securities held by Cypress and
its Affiliates and all holders of Qualifying Securities (other than Cypress and
its Affiliates) so electing to participate (including in such aggregate amount
all Specified Securities issuable upon conversion, exchange or exercise of
Qualifying Securities then held by Cypress and its Affiliates and such holders)
and (ii) the amount of Specified Securities such transferee has agreed to
purchase in the contemplated Qualifying Sale. If a holder of Qualifying
Securities elects to participate in any Qualifying Sale, Cypress will not
consummate such Qualifying Sale unless such holder has been afforded the
opportunity to consummate simultaneously the sale by such holder of the amount
of Specified Securities determined in accordance with the
20
preceding sentence with respect to such holder. Each holder of Qualifying
Securities proposing to include in any contemplated Qualifying Sale Specified
Securities to be issued to such holder upon the conversion of other Qualifying
Securities then held by such holder shall effect such conversion prior to the
time of such Qualifying Sale.
(b) Qualifying Sale Defined. The term "Qualifying Sale" shall mean
any sale or transfer of securities of the Company by Cypress or its Affiliates
other than any sale or transfer (i) pursuant to a bona fide firm commitment
underwritten public offering (A) pursuant to a registration under the Securities
Act effected pursuant to Section 3.1 or (B) pursuant to a registration under the
Securities Act not effected pursuant to Section 3.1 if Section 3.2 applies to
such registration and, in each of clauses (A) and (B), the Company has complied
with all its obligations under Section 3 with respect to such registration, (ii)
if the Company is subject to the reporting requirements of the Exchange Act, in
transactions that comply with the manner of sale requirements set forth in Rule
144(f)) or (iii) to New Investors or Management Stockholders.
4.2. Take-Along Rights. By acquisition of Registrable Securities,
each Investor (other than Cypress and its Affiliates) agrees to comply with the
following take-along rights (it being agreed and understood that, with respect
to the Management Stockholders, such stockholders will be subject to, and will
comply in all respects with, the comparable take-along rights set forth in their
respective Stock Subscription Agreements).
(a) Take-Along Notice. So long as Cypress and its Affiliates hold a
number of shares of Registrable Securities equal to at least one-half of the
Registrable Securities originally purchased by Cypress and its Affiliates as of
the date hereof, if Cypress and its Affiliates intend to effect a sale of all of
their shares of Registrable Securities to a third party (which in no event may
be an Affiliate of Cypress) (a "100% Buyer") and elect to exercise their rights
under this Section 4.2, Cypress shall deliver written notice (a "Take-Along
Notice") to the other Investors, which notice shall (i) state (1) that Cypress
wishes to exercise its rights under this Section 4.2 with respect to such
transfer, (2) the name and address of the 100% Buyer, (3) the per share amount
and form of consideration Cypress and its Affiliates propose to receive for
their shares of Registrable Securities and (4) the terms and conditions of
payment of such consideration and all other material terms and conditions of
such transfer (including the terms of each agreement with respect to such sale
between Cypress or its Affiliates and such prospective 100% Buyer), (ii) contain
an offer (the "Take Alone Offer") by the 100% Buyer to purchase from the other
Investors all of their respective shares of Registrable Securities on and
subject to the same terms and conditions offered to Cypress and (iii) state the
anticipated time and place of the closing of the purchase and sale of such
shares (a "Take-Along Closing"), which (subject to such terms and conditions)
shall occur not fewer than ten (10) business days nor more than ninety (90) days
after the date such Take-Along Notice is delivered, provided that if such
Take-Along Closing shall not occur prior to the expiration of such 90-day
period, Cypress shall be entitled to deliver another Take-Along Notice with
respect to such Take-Along Offer.
(b) Conditions to Take-Along. Subject to Section 4.2(c), each
Investor (other than Cypress and its Affiliates) shall, upon delivery of a
Take-Along Notice, have the
21
obligation to transfer all of such Investor's shares of Registrable Securities
pursuant to the Take-Along Offer, as the same may be modified from time to time,
provided that Cypress and its Affiliates transfer all of their shares of
Registrable Securities to the 100% Buyer at the Take-Along Closing. Within 10
business days of receipt of the Take-Along Notice, each Investor (other than
Cypress and its Affiliates) shall (i) execute and deliver to Cypress a power of
attorney and a letter of transmittal and custody agreement in favor of, and in
form and substance satisfactory to, Cypress constituting Cypress, The Cypress
Group LLC or one or more of their respective Affiliates designated by Cypress
(the "Custodian") the true and lawful attorney-in-fact and custodian for such
Investor, with full power of substitution, and authorizing the Custodian to take
such actions as the Custodian may deem necessary or appropriate to effect the
sale and transfer of such Investor's Registrable Securities to the 100% Buyer,
upon receipt of the purchase price therefor at the Take-Along Closing, free and
clear of all security interests, liens, claims, encumbrances, charges, options,
restrictions on transfer, proxies and voting and other agreements of whatever
nature, and to take such other action as may be necessary or appropriate in
connection with such sale, including consenting to any amendments, waivers,
modifications or supplements to the terms of the sale (provided that Cypress and
its Affiliates also so consent, and sell and transfer their Registrable
Securities on the same terms as so amended, waived, modified or supplemented)
and (ii) deliver to Cypress certificates representing such Investor's
Registrable Securities, together with all necessary duly executed stock powers.
(c) Equal Treatment. Each Investor will receive the same proportion
of the aggregate consideration from the consummation of such Take-Along Offer
that each other Investor receives based upon each Investor's proportionate
ownership of Registrable Securities at the time of the Take-Along Closing. If
any holder of Registrable Securities is given an option as to the form and
amount of such consideration to be received, each holder of Registrable
Securities will be given the same option. In connection with any sale pursuant
to a Take-Along Offer, no Investor shall have any liability or other obligation
(including any indemnification obligation), or otherwise be required to pay any
amounts in respect of such liability or obligation, which is disproportionate to
such Investor's proportionate ownership of Registrable Securities at the time of
the related Take-Along Closing.
(d) Remedies. Each Investor (other than Cypress and its Affiliates)
acknowledges that Cypress would be irreparably damaged in the event of a breach
or a threatened breach by such Investor of any of its obligations under this
Section 4.2 and such Investor agrees that, in the event of a breach or a
threatened breach by such Investor of any such obligation, Cypress shall, in
addition to any other rights and remedies available to it, in respect of such
breach, be entitled to an injunction from a court of competent jurisdiction
granting it specific performance by such Investor of its obligations under this
Section 4.2. In the event that Cypress shall file suit to enforce the covenants
contained in this Section 4.2 (or obtain any other remedy in respect of any
breach thereof), the prevailing party in the suit shall be entitled to recover,
in addition to all other damages to which it may be entitled, the costs incurred
by such party in conducting the suit, including reasonable attorney's fees and
expenses.
22
(e) Public Offering. In the event that an Initial Public Offering
has been consummated, the provisions of this Section 4.2 shall terminate and
cease to have further effect.
4.3. Rights of First Refusal. By acquisition of Registrable
Securities, each Investor (other than Cypress and its Affiliates) agrees to
comply with the following rights of first refusal (it being agreed and
understood that, with respect to the Management Stockholders, such stockholders
will be subject to, and will comply in all respects with, the comparable rights
of first refusal set forth in their respective Stock Subscription Agreements).
(a) Rights of First Refusal. If any Investor (other than Cypress and
its Affiliates) desires to accept an offer (which must be in writing and for
cash, be irrevocable by its terms for at least 90 days and be a bona fide offer
as determined in good faith by the Company's Board of Directors or the Executive
Committee thereof) from any prospective purchaser to purchase all or any part of
the Registrable Securities at any time owned by such Investor, such Investor (a
"ROFR Selling Investor") shall give notice in writing to the Company and the
other Investors (i) designating the number of Registrable Securities proposed to
be sold, (ii) naming the prospective purchaser of such Registrable Securities
and (iii) specifying the price (the "ROFR Offer Price") at and terms (the "ROFR
Offer Terms") upon which such ROFR Selling Investor desires to sell the same
(including the terms of each agreement with respect to the sale between such
ROFR Selling Investor and such prospective purchaser). During the 30-day period
following receipt of such notice by the Company and the other Investors (the
"First Refusal Period"), the Company shall have the right to purchase from such
ROFR Selling Investor all (but not less than all) of the Registrable Securities
specified in such notice, at the ROFR Offer Price and on the ROFR Offer Terms.
The Company hereby undertakes to use reasonable efforts to act as promptly as
practicable following such notice to determine whether it shall elect to
exercise such right and to provide notice of such determination to each Investor
promptly thereafter. If the Company fails to exercise such rights within the
First Refusal Period, the other Investors shall have the right to purchase all
(but not less than all) of the Registrable Securities specified in such notice,
at the ROFR Offer Price and on the ROFR Offer Terms and on a pro rata basis
(based on the number of Registrable Securities owned by such other Investors as
may elect to participate in such purchase (such other Investors, the "ROFR
Buying Investors")), at any time during the period beginning at the earlier of
(x) the end of the First Refusal Period and (y) the date of receipt by such
other Investors of written notice that the Company has elected not to exercise
its rights and ending 30 days thereafter (the "Second Refusal Period"). The
rights provided hereunder shall be exercised by written notice to a ROFR Selling
Investor given at any time during the applicable period. If such right is
exercised, the Company or the ROFR Buying Investor(s), as the case may be, shall
deliver to such ROFR Selling Investor a certified or bank check(s) for the ROFR
Offer Price, payable to the order of such ROFR Selling Investor, against
delivery of certificates or other instruments representing the Registrable
Securities so purchased, appropriately endorsed by such ROFR Selling Investor.
If such right shall not have been exercised prior to the expiration of the
Second Refusal Period, then at any time during the 90 days following the
expiration of the Second Refusal Period, such ROFR Selling Investor may sell
such Registrable Securities to (but only to) the intended purchaser named in
such ROFR Selling Investor's notice to the Company and the other Investors at
the ROFR
23
Offer Price and on substantially the ROFR Offer Terms specified in such notice,
free of all restrictions or obligations imposed by, and free of any rights or
benefits set forth in, Sections 4.2 and 4.3 of this Agreement, provided that
such intended purchaser shall have agreed in writing, pursuant to an instrument
of assumption satisfactory in substance and form to the Company, to make and be
bound by customary securities law representations and warranties with respect to
such purchaser's acquisition of such Registrable Securities.
(b) Public Offering. In the event that an Initial Public Offering
has been consummated, the provisions of this Section 4.3 shall terminate and
cease to have further effect. This Section 4.3 shall not apply to a sale to the
underwriters as part of an Initial Public Offering.
(c) Permitted Transfers. Notwithstanding anything herein to the
contrary, the restrictions set forth in this Section 4.3 shall not apply with
respect to any sale, transfer, assignment or other disposal (whether with or
without consideration and whether voluntarily or involuntarily or by operation
of law) by any Investor upon at least 15 days' prior written notice to (a) any
of its Affiliates (provided that no such assignment may be made to a Person that
is, as determined in good faith by the Company's Board of Directors or the
Executive Committee thereof, a competitor of the Company or its subsidiaries in
any of their respective primary business activities) or (b) any Person to which
such Investor shall sell or transfer all or substantially all of its assets or
with which it shall be merged, provided that, in the case of clauses (a) and
(b), the assignee agrees in writing to be bound by the terms and conditions of,
and assume such Investor's obligations under, this Agreement.
4.4. Participation in Cypress' Right of First Refusal. As permitted
by Section 12(d) of each Management Stock Subscription Agreement, Cypress hereby
grants to each other Investor the right to participate, on a pro rata basis
(based on the number of Registrable Securities owned by such other Investors as
may elect to participate in such purchase), with Cypress in exercising its right
of first refusal during the "Second Refusal Period" in accordance with and as
defined in Section 5 of such Management Stock Subscription Agreement. Cypress
will deliver copies of any notice received under such Section 5 to each other
Investor promptly following its receipt of such notice and each other Investor
agrees to follow the procedures for any participation in such purchase in the
manner and in the time periods provided in such Section 5.
5. Parties' Rights to Purchase Additional Capital Stock.
5. 1. Additional Equity Sale. If, prior to the consummation of an
Initial Public Offering, the Company shall propose to issue any additional
shares of its capital stock (or any securities that may be exercised or
exchanged for or converted into such capital stock) to any Person (including any
holder of Registrable Securities) (such Persons to whom the Company proposes to
issue securities are referred to collectively as an "Additional Offeree", and
such issuance is referred to as an "Additional Sale"), the Company shall offer
each holder of Registrable Securities (other than any Additional Offeree) that
is an accredited investor (as defined in Rule 501 of Regulation D under the
Securities Act) (each, an "Eligible Holder") the right to acquire such holder's
Allocated Amount of such securities (an "Offer").
24
Notwithstanding the foregoing, none of the following transactions shall
constitute an Additional Sale: the issuance by the Company of any shares of its
capital stock (or any securities that may be exercised or exchanged for or
converted into such capital stock) (A) in exchange for Class A Common Stock, (B)
upon conversion of Class B Common Stock, (C) as a dividend or other distribution
(including, but not limited to, in connection with any merger, consolidation or
other reorganization) made pro rata to the holders of the Common Stock
outstanding on the record date for such dividend or distribution, (D) to any
directors, officers, employees, sales agents or similar representatives of the
Company or its Subsidiaries in connection with a compensatory or other stock
ownership plan for such Persons or (E) pursuant to any registered offering of
such stock on Form S-4 or S-8 or any successor form.
5.2. Offer Procedures.
(a) Procedures. The Company shall make an Offer by giving to each
Eligible Holder at least 30 Business Days' prior written notice of the proposed
Additional Sale. Such notice will (i) identify the class and number of shares or
amount of securities proposed to be issued (the "Offered Securities"), the
proposed date of issuance and the price and other terms of the issuance and (ii)
constitute an offer to issue to each such Eligible Holder its Allocated Amount
of the Offered Securities at the same price and on the same other terms (subject
to Section 5.2(c)) as are proposed for such Additional Sale, which offer shall
remain open for a period of 15 Business Days from the date such notice is given
by the Company. Any Offer and any Offered Securities to be made to an Eligible
Holder that is a Regulation Y Holder shall provide for such holder to acquire
non-voting equivalents of such Offered Securities. Each Eligible Holder desiring
to accept such Offer shall give written notice to the Company prior to the end
of the 15-Business Day period of such Offer. Such notice (a "Notice of
Acceptance") will (A) set forth the maximum amount of the Offered Securities
which such Eligible Holder elects to purchase (such Eligible Holder's
"Subscribed Amount") and (B) constitute an acceptance of the Offer with respect
to such Eligible Holder's Allocated Amount of the Offered Securities. If any
such Eligible Holder fails to give a Notice of Acceptance, such Eligible Holder
shall be deemed to have rejected such Offer in full. At the closing of an
Additional Sale, each Eligible Holder who shall have timely accepted the related
Offer pursuant to this Section 5.2(a) (each, an "Accepting Holder") shall
acquire from the Company, and the Company shall issue to such Eligible Holder,
its Allocated Amount of the Offered Securities at the same price and on the same
other terms (subject to Section 5.2(c)) as such Additional Sale. The Additional
Offeree shall be entitled to acquire at the closing of the related Additional
Sale its Allocated Amount of the Offered Securities. Any Offered Securities not
issued at such Additional Sale may not thereafter be sold or otherwise issued by
the Company to an Additional Offeree until they are again offered to the
Eligible Holders under the procedures specified in this Section 5.1(a).
(b) Allocated Amount Defined. For the purposes of Section 5.2(a),
the term "Allocated Amount" shall mean, with respect to each Accepting Holder
and the Additional Offeree (collectively, the "Participants") in an Additional
Sale, the aggregate amount of the Offered Securities in such Additional Sale
allocated to such Participant in a series of calculations (each, an "Allocation
Calculation") as follows: first, each Participant shall be allocated an amount
of the Offered Securities in such Additional Sale equal to the
25
lesser of (a) such Participant's Subscribed Amount of such Offered Securities
and (b) such Participant's Proportionate First Share of such Offered Securities;
thereafter, in each subsequent Allocation Calculation for such Additional Sale,
each Participant whose Subscribed Amount of such Offered Securities exceeds the
aggregate amount of Offered Securities allocated to such Participant in prior
Allocation Calculations in respect of such Additional Sale shall be allocated an
additional amount of Offered Securities equal to the lesser of (i) such
Participant's Proportionate Subsequent Share of such Offered Securities and (ii)
the excess of such Participant's Subscribed Amount of such Offered Securities
over the aggregate amount of Offered Securities allocated to such Participant in
all prior Allocation Calculations in respect of such Additional Sale. For the
purposes of this Section 5.2(a), the term "Proportionate First Share" shall
mean, with respect to each Participant in an Additional Sale, an amount of the
Offered Securities in such Additional Sale that is equal to the product of (a)
the quotient determined by dividing (i) the percentage of the outstanding Common
Stock (on a fully diluted basis) held by such Participant by (ii) the aggregate
percentage of the outstanding Common Stock (on a fully diluted basis) held by
all Participants in such Additional Sale and (b) the aggregate amount of such
Offered Securities. For the purposes of this Section 5.2(b), the term
"Proportionate Subsequent Share" shall mean, with respect to each Participant in
an Additional Sale being allocated a Proportionate Subsequent Share of Offered
Securities in an Allocation Calculation for such Additional Sale, an amount of
the Offered Securities in such Additional Sale equal to the product of (a) the
quotient determined by dividing (i) the percentage of the outstanding Common
Stock (on a fully diluted basis) held by such Participant by (ii) the aggregate
percentage of the outstanding Common Stock (on a fully diluted basis) held by
all Participants being allocated a Proportionate Subsequent Share of Offered
Securities in such Allocation Calculation and (b) the aggregate amount of the
Offered Securities not allocated to the Participants in such Additional Sale in
any prior Allocation Calculation.
(c) Terms of Offer. Notwithstanding Section 5.2(a), if the terms of
any Additional Sale provide for the payment by any Additional Offeree of
consideration other than cash, then the purchase price payable by each Accepting
Holder per unit of Offered Securities shall be an amount in cash equal to the
fair market value of the aggregate consideration payable by such Additional
Offeree per unit of Offered Securities. For the purpose of determining the fair
market value of any noncash consideration, (i) any portion of such consideration
in the form of securities shall be valued at the arithmetical average of the
closing sale prices of such securities over the five trading days immediately
preceding the relevant date on the national securities exchange on which such
securities are listed, or, if not so listed, as reported by the National
Association of Securities Dealers Automated Quotations System or, if not so
reported, at the average of the high bid and low asked quotations for the
securities as reported by the National Quotations Bureau Incorporated or a
similar organization, or, if no price quotations are available, such securities
shall be valued by the Board of Directors of the Company in good faith as of the
relevant date; and (ii) any other portion of such consideration shall be valued
by the Board of Directors of the Company in good faith as of the relevant date
or, at the election (which shall be made in its Notice of Acceptance) and
expense of such an Accepting Holder, by an independent valuer with expertise in
valuing such consideration selected by the Company with the approval of such
Accepting Holder, such approval not to be unreasonably withheld.
26
6. Additional Investor Provisions.
6.1. Designation of Directors by Cypress. (a) So long as Cypress
owns, directly or indirectly, any securities of the Company, Cypress shall have
the right to nominate one candidate for election to the board of directors
(each, a "Board") of each of the Company, WESCO Distribution, Inc. ("WESCO") and
WESCO Distribution Canada, Inc. ("WESCO Canada"). In the event that Cypress
shall exercise its rights under this Section 6.1, (i) each of the parties hereto
(other than the Company) shall vote, or cause to be voted, the capital stock of
the Company held or controlled by such party or any Affiliate of such party and
(ii) the Company shall vote, or cause to be voted, the capital stock of WESCO
and WESCO Canada held or controlled by the Company or any Affiliate of the
Company, in each case, in favor of a slate of directors which includes the
nominees of Cypress for the Boards of the Company, WESCO and WESCO Canada
respectively.
(b) The respective By-Laws of the Company, WESCO and WESCO Canada
shall provide that, in the event that a vacancy shall be created on the Board of
such party as a result of the death, resignation or removal (with or without
cause) of a director nominated by Cypress in accordance with Section 6.1(a),
such Board shall within five Business Days of the creation of such vacancy
request Cypress to nominate a candidate to be appointed by such Board to fill
such vacancy. In the event that any such vacancy shall be created on the Board
of the Company, WESCO or WESCO Canada immediately before or at the annual
meeting of the stockholders of such party, Cypress shall have the right to
nominate a candidate to fill such vacancy and the provisions of the second
sentence of the immediately preceding paragraph shall apply with respect to the
election of such nominee to fill such vacancy. If the preceding sentence shall
not be applicable and a candidate nominated by Cypress to fill any such vacancy
shall not have been appointed to fill such vacancy within five Business Days of
the Board of the applicable party having been given the name of such candidate
by Cypress, then, as applicable, (i) in the case of a vacancy on the Board of
the Company, each of the parties hereto (other than the Company) shall act by
written consent, or call a special meeting of stockholders of the Company for
the sole purpose of filling such vacancy and at such special meeting vote or
cause to be voted the capital stock of the Company held or controlled by such
party or any Affiliate of such party, and (ii) in the case of a vacancy on the
Board of WESCO or WESCO Canada, the Company shall (or shall cause each Affiliate
of the Company owning outstanding voting securities of WESCO or WESCO Canada, as
the case may be, to) act by written consent, or call a special meeting of
stockholders of WESCO or WESCO Canada, as the case may be, for the sole purpose
of filling such vacancy and at such special meeting vote or cause to be voted
the capital stock of WESCO or WESCO Canada, as the case may be, held or
controlled by the Company or any Affiliate of the Company, in each case, to
elect such nominee to fill such vacancy.
(c) Cypress may elect, at its option, not to have a designated
director on any Board.
(d) No party hereto shall, and the Company shall not permit WESCO
to, vote, or give any consent, in favor of the removal as a director of the
Company, WESCO or
27
WESCO Canada, respectively, of any candidate nominated by Cypress for election
as such director in accordance with Section 6.1(a) without the prior written
consent of Cypress.
(e) No party hereto shall give, and the Company shall not permit
WESCO to give, any proxy with respect to shares of the capital stock of the
Company, WESCO or WESCO Canada, respectively, entitling the holder of such proxy
to vote on, or give consents with respect to, the election of directors unless
the holder of such proxy shall have agreed to comply with the obligations of
such party under this Section 6.1.
(f) If, in connection with the election of any candidate nominated
by Cypress for election as a director of the Company or WESCO, any party hereto
fails or refuses to vote as required by this Section 6.1, or votes or gives any
consent in contravention of this Section 6.1, Cypress shall have an irrevocable
proxy pursuant to Section 212(e) of the General Corporation Law of the State of
Delaware, coupled with an interest, to vote (i) if the defaulting party is any
party hereto other than the Company, all the shares of capital stock of the
Company held or controlled by such party or (ii) if the defaulting party is the
Company, all the shares of capital stock of WESCO held or controlled by the
Company, in each case, in accordance with this Section 6.1, and each party
hereto hereby grants such proxy.
6.2. Delivery of Financial Statements and Other Information; Board
Observation Rights; Confidentiality. (a) So long as any Investor and its
Affiliates own, directly or indirectly, securities of the Company representing
at least 5% of the Registrable Securities beneficially owned by such Investor as
of the date hereof, the Company shall deliver to each such Investor (i) audited
consolidated financial statements of the Company and its subsidiaries within 100
days after the end of the Company's fiscal year, (ii) unaudited consolidated
financial statements of the Company and its subsidiaries within 60 days after
the end of each fiscal quarter (other than its fourth fiscal quarter) of the
Company, and (iii) such other reports, information or data as the Company may
deliver to the Securities and Exchange Commission in respect of any securities
of the Company registered under the federal securities laws, within five days of
the delivery thereof.
(b) So long as an Investor (other than Cypress) and its Affiliates
own, directly or indirectly, securities of the Company representing at least
one-half of the Registrable Securities owned by such Investor as of the date
hereof, such Investor shall be entitled to designate, in a written notice
delivered to the Company, one person to attend, solely as an observer and not as
a director, all meetings of each of the Company's, WESCO's and WESCO Canada's
Board of Directors (such person, with respect to each such Investor, the
"Investor's Board Observer"). Each Investor's Board Observer will be furnished
with all information that is provided to all other directors of such Boards (in
their capacities as directors) at the same time as such information is furnished
to such other directors (in such capacity). An Investor may, from time to time,
upon advance written notice to the Company, change the person designated to be
such Investor's Board Observer. Each Investor's Board Observer shall abide by
all procedural rules and provisions of all laws, regulations, Certificates of
Incorporation and By-Laws applicable to each of the Company's, WESCO's and WESCO
Canada's Board of Directors, provided that such Investor's Board Observer shall
not be entitled to vote on matters being acted upon by the directors or
otherwise be permitted
28
to take actions inuring solely to such directors. The Company and Cypress agree
to cause the Company's, WESCO's and WESCO Canada's Board of Directors to have
regularly scheduled meetings at least four times per year.
(c) Each Investor agrees that all non-public information with
respect to the Company and its subsidiaries delivered to such Investor (or such
Investor's Board Observer) hereunder will be kept strictly confidential by such
Investor (and such Investor's Board Observer) and will not be disclosed by such
Investor or its Affiliates or representatives without the prior written consent
of the Company, except as required by applicable law, regulation or legal
process or exchange regulations (following the prompt notification of the
Company of any request for such disclosure so that the Company may seek a
protective order or other appropriate remedy to avoid such disclosure).
6.3. Limitation on Transactions with Affiliates. So long as any
Investor and its Affiliates (other than Cypress and its Affiliates) own,
directly or indirectly, securities of the Company representing at least 5% of
the Registrable Securities beneficially owned by such Investor as of the date
hereof, the Company and its Subsidiaries will not enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate unless such transaction is
upon terms no less favorable to the Company or such Subsidiary, as the case may
be, than it would obtain in a comparable arm's length transaction with a Person
which is not an Affiliate; provided, that nothing contained in this Section 6.3
shall be deemed to prohibit any transaction otherwise specifically permitted
under this Agreement or the Recapitalization Agreement (or the Company's senior
subordinated notes indenture or the Company's senior credit agreement, each of
which were entered into by the Company in connection with the transactions
contemplated by the Recapitalization Agreement).
6.4. Special Provisions Applicable to Regulation Y Holders. (a) The
Company shall use its commercially reasonable efforts not to redeem, purchase,
acquire or take any other action affecting outstanding securities of the Company
(including any merger, recapitalization or other business combination) if, after
giving effect to such redemption, purchase or other action, (i) a Regulation Y
Holder would own more than 24.99% of the total equity of the Company or more
than 24.99% of the total value of all capital stock and subordinated debt of the
Company or (ii) a Regulation Y Holder would own more than 5% of the total
voting power of the Company's outstanding securities (in each case determined by
assuming such Regulation Y Holder (but not any other holder) has exercised,
converted or exchanged all of its options, warrants and other convertible or
exchangeable securities). Each holder of Registrable Securities that is a
Regulation Y Holder shall promptly notify the Company in writing of its status
as a Regulation Y Holder and of its aggregate total equity holdings in respect
of the Company's outstanding securities (and any material change in respect of
such holdings). The Company hereby acknowledges that Chase Equity Associates,
L.P. is a Regulation Y Holder.
(b) Upon the reasonable written request of a Regulation Y Holder,
the Company and each holder of Registrable Securities will reasonably cooperate
to amend the terms of the Class B Common Stock to further restrict its
conversion to Class A Common
29
Stock to address any Regulatory Problem in the manner reasonably requested by
such Regulation Y Holder, provided that any fees, costs, expenses or other
liabilities incurred by the Company in connection with such amendments
(including reasonable attorneys' fees and expenses) shall be for the sole
account of such holder (and shall be paid promptly upon receipt of invoices in
respect thereof).
(c) For purposes of this Section 6.4, "Regulatory Problem" means,
with respect to a Regulation Y Holder, (i) any set of facts or circumstances
wherein it has been asserted in writing by any governmental regulatory agency
(or a Regulation Y Holder reasonably believes, based on the written advice of
outside legal counsel reasonably acceptable to the Company) that there is a
significant risk of such assertion) that such Regulation Y Holder (or any bank
holding company that controls such Regulatory Y Holder) is not entitled to hold
all or any portion of such Regulation Y Holder's Registrable Securities or (ii)
when such Regulation Y Holder and its Affiliates would own, control or have
power (including voting fights) over a greater quantity of securities of the
Company than is permitted under any law or regulation or any requirement of any
governmental authority applicable to such Regulation Y Holder or to which such
Regulation Y Holder is subject; provided that such Regulation Y Holder shall
promptly notify the Company in writing of any Regulatory Problem of which it
becomes aware.
7. Miscellaneous.
7.1. Rule 144; Legended Securities; etc. If the Company shall have
filed a registration statement pursuant to Section 12 of the Exchange Act or a
registration statement pursuant to the Securities Act relating to any class of
equity securities (other than a registration statement pursuant to a Special
Registration), the Company will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Securities and Exchange Commission thereunder (or, if the Company
is not required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available such information as necessary to
permit sales pursuant to Rule 144), and will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell shares of Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144.
The Company will not issue new certificates for shares of
Registrable Securities without a legend restricting further transfer unless such
shares have been sold to the public pursuant to an effective registration
statement under the Securities Act or Rule 144, or unless otherwise permitted
under the Securities Act and the holder of such shares expressly so requests in
writing.
7.2. Amendments and Waivers. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of at least a majority of the shares of Registrable Securities; provided
that no such amendment, action or omission with
30
respect to any provision contained in Sections 3.1, 3.2, 3.3, 3.4, 3.7, 4, 5 and
6 that adversely affects the holders of Registrable Securities shall be
effective unless the holder or holders of at least 75% of the shares of
Registrable Securities shall have consented in writing thereto; provided further
that no such amendment, action or omission with respect to Section 6.4 shall be
effective unless approved by each Regulation Y Holder; and provided further that
no such amendment, action or omission with respect to Section 4.2 or 4.3 shall
be effective unless a comparable amendment, action or omission is made to the
corresponding section of the Stock Subscription Agreements then in effect. Each
holder of any Registrable Securities at the time or thereafter outstanding shall
be bound by any consent authorized by this Section 7.2, whether or not such
Registrable Securities shall have been marked to indicate such consent. No
amendment, modification or discharge of this Agreement, and no waiver hereunder,
shall be valid or binding unless set forth in writing. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party or parties granting
such waiver in any other respect or at any other time.
7.3. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election and unless notice is otherwise
given to the Company by the record owner, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7.4. Successors, Assigns and Transferees. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than the Company shall also be for the
benefit of and enforceable by any subsequent holder of any Registrable
Securities, subject to the provisions respecting the minimum numbers or
percentages of shares of Registrable Securities required in order to be entitled
to certain rights, or take certain action, contained herein.
7.5. Notices. All notices and other communications in connection
with this Agreement shall be in writing. Any notice or other communication in
connection herewith shall be deemed duly given to any party (a) two Business
Days after it is sent by express, registered or certified mail, return receipt
requested, postage prepaid or (b)one Business Day after it is sent by overnight
courier, in each case, to the address of such party set forth beneath its name
on the schedules hereto, or to such other address as such party may have
designated to the Company in writing, or if to any holder of Registrable
Securities not a party hereto on the date hereof, at the address of such holder
in the stock record books of the Company, and if to the Company or Cypress or
the other Investors to the following addresses:
31
(i) if to the Company, to:
WESCO International, Inc.
Commerce Court, Suite 700
Four Station Square
Pittsburgh, Pennsylvania 15219
Telecopy: (412) 454-2555
Telephone: (412) 454-2200
Attention: General Counsel
(ii) if to Cypress or its Affiliates, to:
c/o The Cypress Group L.L.C.
65 East 55th Street, 19th Floor
New York, New York 10022
Telecopy: (212) 705-0153
Telephone: (212) 705-0199
Attention: James L. Singleton
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 455-2502
Telephone: (212) 455-2530
Attention: David Chapnick
(iii) if to Chase Equity Associates, L.P.:
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, New York 10017
Telecopy: (212) 622-3643
Telephone: (212) 622-3100
Attention: Mathew Lorri
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 24th Floor
New York, New York 10112
Telecopy: (212) 408-2420
Telephone: (212) 408-2400
Attention: Harvey Eisenberg
32
(iii) if to Co-Investment Partners, L.P.:
Co-Investment Partners, L.P.
660 Madison Avenue
New York, New York 10021
Telecopy: (212) 754-1494
Telephone: (212) 754-0411
Attention: Christian Melhado
(iv) if to any of The Travelers Insurance Company, The Travelers
Life and Annuity Company, The Travelers Indemnity Company and
The Phoenix Insurance Company:
c/o The Travelers Investment Group
Securities Department 9PB
205 Columbus Boulevard, Loading Dock
Hartford, Connecticut 06183
Telecopy: (860)
Telephone: (860)
Attention: Craig Farnsworth
or at such other address or addresses as the Company or any Investor or Cypress,
as the case may be, may have designated in writing to each holder of Registrable
Securities at the time outstanding. Any party may give any notice or other
communication in connection herewith using any other means (including, but not
limited to, personal delivery, messenger service, telecopy, telex or ordinary
mail), but no such notice or other communication shall be deemed to have been
duly given unless and until it is actually received by the individual for whom
it is intended.
7.6. No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities by this
Agreement.
7.7. Remedies. Each holder of Registrable Securities, in addition to
being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
any provision of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
7.8. Stock Splits. etc. Each party hereto agrees that it will vote
to effect a stock split (forward or reverse, as the case may be) with respect to
any Registrable Securities in connection with any registration of such
Registrable Securities hereunder, or otherwise, if the managing underwriter
shall advise the Company in writing (or, in connection with an offering that is
not underwritten, if an investment banking firm of nationally recognized
33
standing shall advise the Company in writing) that in their or its opinion such
a stock split would facilitate or increase the likelihood of success of the
offering. Each party hereto agrees that any number of shares of Common Stock
referred to in this Agreement shall be equitably adjusted to reflect any stock
split, stock dividend, stock combination, recapitalization or similar
transaction.
7.9. Term. This Agreement shall be effective as of the date hereof
and shall continue in effect thereafter until the earliest of (a) its
termination by the consent of holders of at least 75% of the shares of the then
outstanding Registrable Securities, (b) the date on which no Registrable
Securities remain outstanding and (c) the dissolution, liquidation or winding up
of the Company.
7.10. Severability. If any provision of this Agreement is
inoperative or unenforceable for any reason, such circumstances shall not have
the effect of rendering the provision in question inoperative or unenforceable
in any other case or circumstance, or of rendering any other provision or
provisions herein contained invalid, inoperative, or unenforceable to any extent
whatsoever. The invalidity of any one or more phrases, sentences, clauses,
Sections or subsections of this Agreement shall not affect the remaining
portions of this Agreement.
7.11. Headings. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or interpretation
of this Agreement.
7.12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which
together constitute one and the same instrument.
7.13. Governing Law. This Agreement shall be governed in all
respects, including, but not limited to, as to validity, interpretation and
effect, by the internal laws of the State of New York, without giving effect to
the conflict of law rules thereof.
7.14. No Third Party Beneficiaries. Except as provided in Sections
3.7 and 7.4, nothing in this Agreement shall confer any rights upon any person
or entity other than the parties hereto, each such party's respective successors
and permitted assigns.
7.15. Consent to Jurisdiction. Each party irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New
York County, and (b) the United States District Court for the Southern District
of New York, for the purposes of any suit, action or other proceeding arising
out of this Agreement or any transaction contemplated hereby (and agrees not to
commence any such suit, action or proceeding except in such courts). Each party
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth above shall be
effective service of process for any such suit, action or proceeding. Each party
irrevocably and unconditionally waives any objection to the laying of venue of
any such suit, action or proceeding in (i) the Supreme Court of the State of New
York, New York County, and (ii)
34
the United States District Court for the Southern District of New York, that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
7.16. Waiver of Jury Trial. Each party hereby waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury in
respect of any suit, action or proceeding arising out of this Agreement or any
transaction contemplated hereby. Each party (a) certifies that no
representative, agent or attorney of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (b) acknowledges that it and the other
parties have been induced to enter into the Agreement by, among other things,
the mutual waivers and certifications in this Section 7.16.
35
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
WESCO INTERNATIONAL, INC.
By:
-----------------------------------
Name:
Title:
CYPRESS MERCHANT BANKING PARTNERS L.P.
CYPRESS OFFSHORE PARTNERS L.P.
Each by: Cypress Associates L.P., its
general partner
Each by: Cypress Merchant Banking Partners
L.L.C., its general partner
By:
-----------------------------------
Name:
Title:
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners, its general
partner
By:
-----------------------------------
Name:
Title:
CO-INVESTMENT PARTNERS, L.P.
By: CIP Partners, LLC, its general partner
By:
-----------------------------------
Name:
Title:
36
THE TRAVELERS INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
THE TRAVELERS LIFE AND ANNUITY COMPANY
By:
-----------------------------------
Name:
Title:
THE TRAVELERS INDEMNITY COMPANY
By:
-----------------------------------
Name:
Title:
THE PHOENIX INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
Agreed and acknowledged as of the date first
above written for purposes of amending and
restating the Original Registration Agreement(1).
THE CLAYTON & DUBILIER PRIVATE
EQUITY FUND IV LIMITED PARTNERSHIP
By: Clayton & Dubilier Associates IV Limited Partnership, its general
partner
By:
-----------------------------------
Name:
Title:
s----------
(1) CBS and the Subsequent Purchasers and the Management Purchasers that are
parties to the Recapitalization Agreement have agreed, pursuant to Section
6.12(b) of the Recapitalization Agreement, to the amendment and
restatement of this Agreement.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is entered into as of this fifth day of
June, 1998 by and among WESCO International, Inc., a Delaware corporation
("Holding"), its wholly owned subsidiary WESCO Distribution, Inc., a Delaware
corporation (the "Company"), and Roy W. Haley ("Executive").
W I T N E S S E T H :
WHEREAS, Executive is currently employed as President and Chief
Executive Officer of each of Holding and the Company;
WHEREAS, Holding and the Company each desires to continue
Executive's employment and to enter into an agreement setting forth the terms
and conditions of such continued employment;
WHEREAS, Executive desires to accept such continued employment and
to enter into such an agreement;
WHEREAS, Holding, the Company and Executive each acknowledges and
agrees that, in the course of his employment with Holding and the Company,
Executive has had and will continue to have a prominent role in the management
of the business, and the development of the goodwill, of the Holding, Company
and their respective Affiliates (as defined below) and has established and
developed and will continue to establish and develop relations and contacts with
the principal customers and suppliers of Holding, the Company and their
respective Affiliates in the United States, Canada and Mexico and the rest of
the world, all of which constitute valuable goodwill of, and could be used by
Executive to compete unfairly with, Holding, the Company and their respective
Affiliates; and
WHEREAS, (i) in the course of his employment with Holding and the
Company, Executive has obtained and will continue to obtain confidential and
proprietary information and trade secrets concerning the business and operations
of Holding, the Company and their respective Affiliates in the United States,
Canada and Mexico and the rest of the world that could be used to compete
unfairly with Holding, the Company and their respective Affiliates; (ii) the
covenants and restrictions contained in Sections 7 through 12, inclusive, are
intended to protect the legitimate interests of Holding, the Company and their
respective Affiliates in their respective goodwill, trade secrets and other
confidential and proprietary information; and (iii) Executive desires to be
bound by such covenants and restrictions;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, Holding, the Company and Executive hereby agree as follows:
1. Agreement to Employ. Upon the terms and subject to the conditions
of this Agreement, Holding and the Company each hereby continues the employment
of Executive and Executive hereby accepts such continued employment with Holding
and the Company.
2. Term; Position and Responsibilities.
(a) Term of Employment. Unless Executive's employment is sooner
terminated pursuant to Section 6, Holding and the Company shall each employ
Executive during the period commencing on the date hereof (the "Commencement
Date") and ending on the third anniversary of the Commencement Date; provided,
however, that on each day following the Commencement Date, the period of
Executive's employment pursuant to this Agreement shall be automatically
extended, upon the same terms and conditions, for an additional day unless
either the Company (on its own behalf and on behalf of Holding) or Executive
gives written notice (a "Non-Extension Notice") to the other of its intention
not to extend such period of Executive's employment hereunder, provided,
further, that delivery of a Non-Extension Notice by the Company shall not
constitute a termination of Executive's employment by Holding or the Company
unless such notice specifically provides for such termination of employment and
the specific date thereof. The period during which Executive is employed
pursuant to this Agreement, including any extension thereof in accordance with
the preceding sentence, shall be referred to as the "Employment Period".
(b) Position and Responsibilities. During the Employment Period,
Executive shall serve as the President and Chief Executive Officer of each of
Holding and the Company and, in addition, in such other executive capacity or
capacities for Holding, the Company or any of their respective Subsidiaries (as
defined below) as may be determined from time to time by or under the authority
of the Board of Directors of the Company (the "Board") or the Board of Director
of Holding (the "Holding Board"). During the Employment Period, Executive shall
devote all of his skill, knowledge and working time (except for (i) reasonable
vacation time and absence for sickness or similar disability and (ii) to the
extent that it does not interfere with the performance of Executive's duties
hereunder and is in compliance with Section 7 through 12, inclusive, and normal
Company policies, such reasonable time as may be devoted to the fulfillment of
civic responsibilities) to the conscientious performance of the duties if his
positions with Holding, the Company and any of their respective Subsidiaries.
Executive represents that he is entering into this Agreement voluntarily and
that his employment and compliance by him with the terms and conditions of this
Agreement will not conflict with or result in the breach of any agreement to
which he is a party or by which he
2
may be bound. Holding and the Company will each use its reasonable best efforts
to cause Executive to be nominated and elected to serve as a member of the Board
and the Holding Board during the Employment Period.
3. Compensation.
(a) Base Salary. As compensation for the services to be performed by
Executive during the Employment Period, the Company will pay Executive a base
salary at the annual rate of $500,000. The Compensation Committee of the Holding
Board (the "Compensation Committee") will review Executive's annual base salary
rate from time to time during the Employment Period and, may, in its discretion,
adjust such annual rate from time to time based upon the performance of
Executive, the financial condition of Holding and the Company, prevailing
industry salary scales and such other factors as the Compensation Committee
shall consider relevant. The Company shall pay Executive his base salary in
semi-monthly installments, or in such other installments as may be mutually
agreed upon by the Company and Executive. The annual base salary payable to
Executive under this Section 3(a), as the same may be increased from time to
time and without regard to any reduction therefrom in accordance with the next
sentence, shall hereinafter be referred to as the "Base Salary". The Base Salary
payable under this Section 3(a) shall be reduced to the extent that Executive
elects to defer such Base Salary under the terms of any deferred compensation,
savings plan or other voluntary deferral arrangement that may be maintained or
established by the Company.
(b) Incentive Compensation. During the Employment Period, Executive
shall be entitled to participate at a level commensurate with his positions and
duties with Holding and the Company in the Company's annual incentive
compensation program for executive officers (the "Annual Incentive Plan") in
accordance with the generally applicable terms thereof as in effect from time to
time. Executive shall be entitled to an annual cash bonus under the Annual
Incentive Plan for each fiscal year of the Company ending during the Employment
Period equal to a percentage of his Base Salary, not to exceed 200%, if the
Compensation Committee determines that the Company and Executive have achieved
the financial and other performance objectives established by the Compensation
Committee for such fiscal year. Notwithstanding the foregoing, in the event of a
Change in Control (as defined below), Executive shall be entitled to a minimum
annual cash bonus equal to 50% of his then current Base Salary for each fiscal
year of the Company ending thereafter during the Employment Period.
4. Benefits.
(a) General. During the Employment Period, Executive shall be
entitled to participate in all of the Company's profit
3
sharing, pension, savings, deferred compensation, supplemental savings, life,
medical, dental and disability insurance plans, as the same may be amended and
in effect from time to time, applicable to its senior executives, provided that
Executive shall not be entitled to participate in any severance plan of the
Company or otherwise receive any severance benefits under any other type of
plan.
(b) Vacation. During the Employment Period, Executive shall be
entitled to four weeks of paid vacation annually.
(c) Certain Club Dues. The Company shall reimburse Executive for the
annual dues paid by him for membership in one local country club selected by
Executive.
5. Expenses. The Company shall reimburse Executive for reasonable
travel, lodging and meal expenses incurred by him in connection with his
performance of services hereunder upon submission of evidence, satisfactory to
the Company, of the incurrence and purpose of each such expense.
6. Termination of Employment.
(a) Termination Due to Death or Disability. Executive's employment
with Holding and the Company shall automatically terminate upon his death or
Disability. For purposes of this Agreement, "Disability" shall mean a physical
or mental disability or infirmity that prevents the performance by Executive of
his duties hereunder lasting (or likely to last, based on competent medical
evidence presented to the Board) for a continuous period of six months or
longer. The reasoned and good faith judgment of the Board as to Disability shall
be final and binding and shall be based on such competent medical evidence as
shall be presented to it by Executive or by any physician or group of physicians
or other competent medical experts employed by Executive or the Company to
advise the Board.
(b) Termination by the Company for Cause. Executive's employment
with Holding and the Company may be terminated during the Employment Period by
Holding and the Company for "Cause". "Cause" shall mean (i) the willful failure
of Executive substantially to perform his duties hereunder (other than any such
failure due to physical or mental illness) after a demand for substantial
performance is delivered to Executive by the Board, which notice identifies the
manner in which the Board believes that Executive has not substantially
performed his duties hereunder, (ii) Executive's engaging in willful serious
misconduct that is materially injurious to Holding, the Company or any of their
respective Affiliates, (iii) Executive's conviction of, or entering a plea of
nolo contendere to, a crime that constitutes a felony, (iv) the material or
willful breach by Executive of any written covenant or agreement with Holding,
the Company or any of their respective Affiliates (x) not to disclose any
information pertaining to Holding, the Company or any of
4
their respective Affiliates, (y) not to compete or interfere with Holding, the
Company or any of their respective Affiliates, including without limitation a
breach of any of the covenants set forth in any of Sections 7, 8, 9, 10, 11 or
12 hereof, or (z) relating to any shares of capital stock of Holding or options
in respect of any such stock owned or controlled by Executive. For purposes of
this paragraph, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause without (1) 60 days notice to the
Executive setting forth the reasons for the Company's intention to terminate for
Cause, during which 60 day period the Executive may, if possible, cure or remedy
the action or omission giving rise to Cause, (2) an opportunity for the
Executive, together with his counsel, to be heard before the Board of Directors
of the Company and (3) delivery to the Executive of a Notice of Termination, as
defined in subsection (e) hereof, from the Board of Directors finding that in
the good faith opinion of the Board of Directors the Executive was guilty of
conduct set forth in this paragraph (b), and specifying the particulars thereof
in detail.
(c) Termination Without Cause. A termination "Without Cause" shall
mean a termination during the Employment Period of Executive's employment with
the Company and Holding by the Company and Holding other than any such
termination due to death or Disability as described in Section 6(a) or for Cause
as described in Section 6(b).
(d) Termination by Executive. During the Employment Period,
Executive may terminate his employment with the Company and Holding for "Good
Reason". "Good Reason" shall mean a termination of Executive's employment with
Holding and the Company by Executive during the Employment Period and within 30
days following (i) any assignment to Executive of any duties that are
significantly different from, and result in a substantial diminution of,
Executive's duties as of the Commencement Date, (ii) delivery by the Company of
a Non-Extension Notice, (iii) the failure of Holding or the Company, whichever
is applicable, to obtain the assumption of this Agreement by a Successor (as
defined below) as contemplated by Section 13, (iv) the removal of Executive
from, or the failure to reelect or redesignate Executive to, the positions of
President and Chief Executive Officer of Holding and the Company or the failure
by Holding or the Company to use its reasonable best efforts to cause Executive
to be nominated and elected to serve as a member of the Board or the Holding
Board, (v) a reduction in the rate of Executive's Base Salary or (vi) a material
reduction in the aggregate level of employee benefits provided to Executive
pursuant to Section 4(a) hereof, provided that, (x) within 30 days following the
occurrence of any such event, Executive shall have delivered
5
written notice to the Board of his intention to terminate his employment for
Good Reason, which notice specifies in reasonable detail the circumstances
claimed to give rise to Executive's right to terminate his employment for Good
Reason, and Holding or the Company, whichever is applicable, shall not have
cured such circumstance to the reasonable satisfaction of Executive, (y) the
occurrence of any such event in connection with a termination of Executive's
employment for Cause as provided in Section 6(b) or due to Executive's death or
Disability as provided in Section 6(a) shall not constitute an event permitting
Executive to terminate his employment for Good Reason and (z) the events
described in clauses (v) and (vi) shall constitute an event permitting Executive
to terminate his employment for Good Reason only if such event occurs following
a Change in Control.
(e) Notice of Termination. Any termination of Executive's employment
by the Company and Holding pursuant to Section 6(a) (in the case of Disability),
6(b) or 6(c), or by Executive pursuant to Section 6(d), shall be communicated by
a written "Notice of Termination" addressed to Executive, in the case of any
such termination by Holding and the Company, or to Holding and the Company, in
the case of any such termination by Executive. A "Notice of Termination" shall
mean a notice stating that Executive's employment hereunder has been or will be
terminated, indicating the specific termination provisions of Section 6 of this
Agreement relied upon and setting forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination of employment.
(f) Payments Upon Certain Terminations.
(i) Termination Without Cause or for Good Reason. In the event of a
termination during the Employment Period of Executive's employment with
Holding and the Company as a result of (A) Executive's death, (B)
Executive's Disability, (C) a termination by the Company and Holding
Without Cause or (D) a termination by Executive for Good Reason (any such
termination, a "Qualifying Termination"), the Company shall pay to
Executive (or in the case of his death, to his spouse) his full Base
Salary through the Date of Termination (as defined below) and an amount
equal to the pro rata amount of annual incentive compensation for the
portion of the fiscal year preceding the Date of Termination that would
have been payable to Executive pursuant to Section 3(b) if he had remained
employed for the entire fiscal year, determined on the basis of the actual
performance achieved by the Company and Executive through the Date of
Termination and the performance objectives established for such fiscal
year, pro rated to reflect the calculation of such annual incentive
compensation for the portion of the fiscal year preceding the Date of
Termination. In addition, in the event of a Qualifying Termination, (x)
all options to purchase shares of the Class A Common Stock of Holding (the
6
"Options") granted to Executive on or after the Commencement Date shall
become fully vested as of the Date of Termination and shall remain
exercisable until the eighteen month anniversary of the Date of
Termination in accordance with the terms set forth in the management stock
option agreements evidencing each such Option and (y) the Company shall
pay or, in the case of the Continued Benefits (as defined below), provide
to Executive (or, following his death, to Executive's designated
beneficiary or beneficiaries), as liquidated damages,
(A) his Average Base Salary (as defined below), which shall be
payable in installments on the Company's regular payroll dates, for
the period beginning on the Date of Termination and ending (I) in
the case of a termination due to Executive's death or Disability, on
the second anniversary of the Date of Termination or (II) in the
case of a termination by the Company and Holding Without Cause or by
Executive with Good Reason, on the third anniversary of the Date of
Termination (the applicable period, the "Severance Period") and
(B) on the last day of each calendar month included in the Severance
Period, an amount equal to one-twelfth of the Average Annual Bonus
(as defined below); and
(C) continued coverage for Executive and his eligible dependents
under the Company's medical and life insurance plans referred to in
Section 4(a) (the "Continued Benefits") during the period commencing
on the Date of Termination and ending on the second anniversary of
the Date of Termination, subject to timely payment by Executive of
all premiums, contributions and other co-payments required to be
paid by senior executives of the Company under the terms of such
plans as in effect from time to time;
provided that the Company may, at any time, pay to Executive, in a
single lump sum and in satisfaction of the Company's obligations
under clauses (A) and (B) of this Section 6(f)(i), an amount equal
to the present value (as determined by the Company using a discount
rate equal to the then prevailing applicable federal short-term rate
under section 1274(d) of the Internal Revenue Code of 1986, as
amended (the "Code"), of the sum of the installments of the Average
Base Salary and Average Annual Bonus then remaining to be paid to
Executive pursuant to clauses (A) and (B) above and, provided
further, that in the event of a Qualifying Termination due to
Executive's death or Disability, each installment of Average Base
Salary shall be reduced by the amount, if any, payable as salary
continuation or other similar compensation replacement
7
pursuant to any disability or death benefit plan of the Company.
Executive shall not have a duty to mitigate the costs to the Company
under this Section 6(f)(i), except that the Continued Benefits shall
be reduced or canceled if comparable medical benefit coverage is
provided or offered to Executive by any subsequent employer or other
Person for which Executive performs services, including but not
limited to consulting services, at any time after the Date of
Termination.
The term "Average Annual Bonus" means the average of the annual
bonuses paid to Executive pursuant to the Annual Incentive Plan for
each of the two fiscal years of the Company ending immediately prior
to the Date of Termination and the term "Average Base Salary" means
the average of the annual base salary rate of Executive in effect
immediately prior to the Date of Termination and as of the last day
of the fiscal year of the Company ending immediately prior to the
Date of Termination; provided that if Executive's employment is
terminated by Executive following a Change in Control pursuant to
clause (v) of the definition of Good Reason, Executive's annual base
salary rate in effect immediately prior to any reduction thereof
shall be substituted for Executive's annual base salary rate in
effect immediately prior to the Date of Termination in calculating
the Average Base Salary.
(ii) Qualifying Termination Following a Change in Control. In the
event of a termination of Executive's employment with Holding and the Company by
the Company Without Cause or by Executive for Good Reason at any time during the
Employment Period and during the two year period following a Change in Control,
in addition to the compensation and benefits described in (f)(i) above, (x)
Executive shall be entitled to Continued Benefits during the entire Severance
Period and (y) Executive shall be granted three additional years of service
credit for vesting and benefit accrual purposes under the Company's
non-qualified pension plans.
For purposes of this Agreement, the term "Change in Control" shall
mean any of the following occuring on or after the Commencement Date:
(W) the acquisition by any person, entity or "group" (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended), other
than Holding, the Company, any of their respective Subsidiaries, any
employee benefit plan of Holding, the Company or any such Subsidiary, or
Cypress Merchant Banking Partners, L.P. ("Cypress") or its affiliates, of
50% or more of the combined voting power of
8
Holding's or the Company's then outstanding voting securities;
(X) the merger or consolidation of Holding or the Company, as a
result of which persons who were stockholders of Holding or the Company,
as the case may be, immediately prior to such merger or consolidation, do
not, immediately thereafter, own, directly or indirectly, more than 50% of
the combined voting power entitled to vote generally in the election of
directors of the merged or consolidated company;
(Y) the liquidation or dissolution of Holding or the Company, other
than any such liquidation of Holding or the Company into the other; and
(Z) the sale, transfer or other disposition of all or substantially
all of the assets of Holding or the Company to one or more persons or
entities that are not, immediately prior to such sale, transfer or other
disposition, Affiliates of Holding, the Company or Cypress.
The June 5, 1998 recapitalization (the "Recapitalization") of the Company,
pursuant to the Recapitalization Agreement among Thor Acquisitions L.L.C., CDW
Holding Corporation and certain Securityholders of CDW Holding Corporation,
dated as of March 27, 1998 shall be deemed to result in a Change in Control.
(iii) Termination for Cause or by Executive without Good Reason. In
the event of a termination of Executive's employment with Holding and the
Company during the Employment Period as a result of a termination by the Company
for Cause or a termination by Executive without Good Reason, the Company shall
pay Executive his full Base Salary through the Date of Termination and Executive
shall not be entitled to the payment of, or to be provided, any severance or
termination compensation or benefits.
(iv) Accrued Benefits Under Company Plans. Except as specifically
set forth in this Section 6(f), Executive shall be entitled to receive all
amounts payable and benefits accrued under any otherwise applicable plan,
policy, program or practice of the Company in which Executive was a participant
during his employment with the Company or Holding in accordance with the terms
thereof, provided that Executive shall not be entitled to receive any payments
or benefits under any such plan, policy, program or practice providing any bonus
or incentive compensation or severance compensation or benefits (and the
provisions of this Section 6(f) shall supersede the provisions of any such plan,
policy, program or practice).
(g) Date of Termination. As used in this Agreement, the term "Date
of Termination" shall mean (i) if Executive's employment is terminated by his
death, the date of his death,
9
(ii) if Executive's employment is terminated by the Company for Cause, the date
on which Notice of Termination is given as contemplated by Section 6(e) or, if
later, the date of termination specified in such Notice, and (iii) if
Executive's employment is terminated by the Company Without Cause, due to
Executive's Disability or by Executive for any reason, the date that is 30 days
after the date on which Notice of Termination is given as contemplated by
Section 6(e) or, if no such Notice is given, 30 days after the date of
termination of employment.
(h) Resignation upon Termination. Effective as of any Date of
Termination under this Section 6 or otherwise as of the date of Executive's
termination of employment with the Company, Executive shall resign, in writing,
from all Board memberships and other positions then held by him with Holding,
the Company and their respective Affiliates.
(i) Certain Additional Payments by the Company.
(i) Anything in this Agreement to the contrary notwithstanding, if
it is determined that any payment or distribution by the Company to or for
the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise
pursuant to or by reason of any other agreement, policy, plan, program or
arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of
the Code (or any successor provision thereto) by reason of being
"contingent on a change in ownership or control" of the Company, within
the meaning of Section 280G of the Code (or any successor provision
thereto) or to any similar tax imposed by state or local law, or any
interest or penalties with respect to such excise tax (such tax or taxes,
together with any such interest and penalties, are hereafter collectively
referred to as the "Excise Tax"), then the Executive will be entitled to
receive an additional payment or payments (a "Gross-Up Payment") in an
amount such that, after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including
any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. All determinations required to be made under this Section,
including whether an Excise Tax is payable by the Executive and the amount
of such Excise Tax and whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment, will be made by a nationally recognized
firm of certified public accountants (the "Accounting Firm") selected by
the Company in its sole discretion.
10
(ii) The Executive will notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification will be
given as promptly as practicable but no later than 10 business days after
the Executive actually receives notice of such claim and the Executive
will further apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive will not pay such claim prior to
the earlier of (y) the expiration of the 30-calendar-day period following
the date on which he gives such notice to the Company and (z) the date
that any payment of amount with respect to such claim is due. If the
Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive will:
(a) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;
(b) take such action in connection with contesting such claim as the
Company will reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such
claim by an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(c) cooperate with the Company in good faith in order effectively to
contest such claim; and
(d) permit the Company to participate in any proceedings relating to
such claim.
Without limiting the foregoing provisions of this Section 6(i), the Company will
control all proceedings taken in connection with the contest of any claim
contemplated by this Section 6(i) and, at its sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim (provided, however, that the
Executive may participate therein at his own cost and expense) and may, at its
option, either direct the Executive to pay the tax claimed and sue for a refund
or contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company will determine.
7. Unauthorized Disclosure. During the period of Executive's
employment with Holding or the Company and the ten year period following any
termination of such employment, without the prior written consent of the Holding
Board or its authorized representative, except to the extent required by an
order of
11
a court having jurisdiction or under subpoena from an appropriate government
agency, in which event, Executive shall use his best efforts to consult with the
Holding Board prior to responding to any such order or subpoena, and except as
required in the performance of his duties hereunder, Executive shall not
disclose any confidential or proprietary trade secrets, customer lists,
drawings, designs, information regarding product development, marketing plans,
distribution plans, sales plans, management organization information (including
but not limited to data and other information relating to members of the Holding
Board, the Board or the Board of Directors of any of Holding's or the Company's
Affiliates or to management of Holding, the Company or any of their respective
Affiliates), operating policies or manuals, business or strategic plans,
financial records, packaging design or other financial, commercial, business or
technical information (a) relating to Holding, the Company or any of their
respective Affiliates or (b) that Holding, the Company or any of their
respective Affiliates may receive belonging to suppliers, customers or others
who do business with the Holding, the Company or any of their respective
Affiliates (collectively, "Confidential Information") to any third person unless
such Confidential Information has been previously disclosed to the public or is
in the public domain (other than by reason of Executive's breach of this Section
7).
8. Non-Competition. During the period of Executive's employment with
Holding or the Company and, following any termination thereof, the period ending
on (i) in the case of a Qualifying Termination, the date the Severance Period
expires or (ii) in the event of any other termination of Executive's employment,
the second anniversary of the Date of Termination (such applicable periods,
collectively, the "Restriction Period"), Executive shall not, directly or
indirectly, become employed in an executive capacity by, engage in business
with, serve as an agent or consultant to, or become a partner, member, principal
or stockholder (other than a holder of less than 1% of the outstanding voting
shares of any publicly held company) of, any Person that competes, anywhere in
the United States, Canada or Mexico, with any part of the business of Holding,
the Company or any of their respective Subsidiaries. For purposes of this
Section 8, the phrase employment "in an executive capacity" shall mean
employment in any position in connection with which Executive has or reasonably
would be viewed as having powers and authorities with respect to any other
Person or any part of the business thereof that are substantially similar, with
respect thereto, to the powers and authorities assigned to the President or
Chief Executive Officer or any other executive officer of Holding or the Company
in the By-Laws of Holding or the Company as in effect on the date hereof, a copy
of the relevant portions of which has been delivered to Executive on or before
the date hereof, and which Executive hereby confirms that he has reviewed.
12
9. Non-Solicitation of Employees. During the Restriction Period,
Executive shall not, directly or indirectly, for his own account or for the
account of any other Person anywhere in the United States, Canada or Mexico, (i)
solicit for employment, employ or otherwise interfere with the relationship of
Holding, the Company or any of their respective Affiliates with any natural
person throughout the United States, Canada or Mexico who is or was employed by
or otherwise engaged to perform services for Holding, the Company or any of
their respective Affiliates during the six-month period preceding such
solicitation, employment or interference, other than any such solicitation or
employment on behalf of Holding, the Company or any of their respective
Affiliates during Executive's employment with Holding and the Company, or (ii)
induce any employee of Holding, the Company or any of their respective
Affiliates who is a member of management to engage in any activity which
Executive is prohibited from engaging in under any of Sections 7, 8, 9 or 10 or
to terminate his employment with Holding, the Company or any of their respective
Affiliates.
10. Non-Solicitation of Customers. During the Restriction Period,
Executive shall not, directly or indirectly, for his own account or for the
account of any other Person anywhere in the United States, Canada or Mexico,
solicit or otherwise attempt to establish any business relationship of a nature
that is competitive with the business or relationship of Holding, the Company or
any of their respective Affiliates with any Person throughout the United States,
Canada or Mexico which is or was a customer, client or distributor of Holding,
the Company or any of their respective Affiliates during the twelve-month period
preceding the Date of Termination, other than any such solicitation on behalf of
Holding, the Company or any of their respective Affiliates during Executive's
employment with Holding and the Company.
11. Return of Documents. In the event of the termination of
Executive's employment for any reason, Executive shall deliver to the Company
all of (a) the property of each of Holding, the Company or any of their
respective Affiliates and (b) the non-personal documents and data of any nature
and in whatever medium of each of Holding, the Company or any of their
respective Affiliates, and he shall not take with him any such property,
documents or data or any reproduction thereof, or any documents containing or
pertaining to any Confidential Information.
12. Injunctive Relief with Respect to Covenants; Forum, Venue and
Jurisdiction. Executive acknowledges and agrees that the covenants, obligations
and agreements of Executive contained in Sections 7, 8, 9, 10, 11 and 12 relate
to special, unique and extraordinary matters and that a violation of any of the
terms of such covenants, obligations or agreements will cause Holding and the
Company irreparable injury for which adequate
13
remedies are not available at law. Therefore, Executive agrees that Holding and
the Company shall be entitled to an injunction, restraining order or such other
equitable relief (without the requirement to post bond) as a court of competent
jurisdiction may deem necessary or appropriate to restrain Executive from
committing any violation of such covenants, obligations or agreements. These
injunctive remedies are cumulative and in addition to any other rights and
remedies Holding or the Company may have. Holding, the Company and Executive
each hereby irrevocably submits to the exclusive jurisdiction of the courts of
Pennsylvania and the Federal courts of the United States of America, in each
case located in Pittsburgh, Pennsylvania, in respect of the injunctive remedies
set forth in this Section 12 and the interpretation and enforcement of Sections
7, 8, 9, 10, 11 and 12 insofar as such interpretation and enforcement relate to
any request or application for injunctive relief in accordance with the
provisions of this Section 12, and the parties hereto hereby irrevocably agree
that (a) the sole and exclusive appropriate venue for any suit or proceeding
relating solely to such injunctive relief shall be in such a court, (b) all
claims with respect to any request or application for such injunctive relief
shall be heard and determined exclusively in such a court, (c) any such court
shall have exclusive jurisdiction over the person of such parties and over the
subject matter of any dispute relating to any request or application for such
injunctive relief, and (d) each hereby waives any and all objections and
defenses based on forum, venue or personal or subject matter jurisdiction as
they may relate to an application for such injunctive relief in a suit or
proceeding brought before such a court in accordance with the provisions of this
Section 12.
Notwithstanding any other provision hereof, the Company's
obligations to pay Executive any amount pursuant to Section 6(f) is subject to
Executive's compliance with his obligations under Sections 7, 8, 9, 10, 11 and
12.
13. Assumption of Agreement. Holding or the Company will require any
successor (by purchase, merger, consolidation or otherwise) to all or
substantially all of its business and/or assets, by agreement in form and
substance reasonably satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that Holding or
the Company, whichever is applicable, would be required to perform it if no such
succession had taken place. As used in this Agreement, the term "Holding" or
"Company" shall mean Holding or the Company, as the case may be, as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
14
14. Entire Agreement. Except as otherwise expressly provided herein,
this Agreement constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof, and all promises, representations,
understandings, arrangements and prior agreements relating to such subject
matter (including those made to or with Executive by any other person or entity)
are merged herein and superseded hereby.
15. Indemnification. The Company agrees that it shall indemnify and
hold harmless Executive to the fullest extent permitted by Delaware law from and
against any and all liabilities, costs, claims and expenses including without
limitation all costs and expenses incurred in defense of litigation, including
attorneys' fees, arising out of the employment of Executive hereunder, except to
the extent arising out of or based upon the gross negligence or willful
misconduct of Executive.
16. Miscellaneous.
(a) Binding Effect. This Agreement shall be binding on and inure to
the benefit of each of Holding and the Company and their respective successors
and permitted assigns. This Agreement shall also be binding on and inure to the
benefit of Executive and his heirs, executors, administrators and legal
representatives.
(b) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement (except in connection with any request or
application for injunctive relief in accordance with Section 12) shall be
resolved by binding arbitration. The arbitration shall be held in Pittsburgh,
Pennsylvania and, except to the extent inconsistent with this Agreement, shall
be conducted in accordance with the Rules of the American Arbitration
Association then in effect at the time of the arbitration, and otherwise in
accordance with principles which would be applied by a court of law or equity.
The arbitrator shall be acceptable to both the Company and Executive. If the
parties cannot agree on an acceptable arbitrator, the dispute shall be heard by
a panel of three arbitrators, one appointed by the Company, one appointed by
Executive, and the third appointed by the other two arbitrators. All expenses of
arbitration shall be borne by the party who incurs the expense, or, in the case
of joint expenses, by both parties in equal portions.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Pennsylvania without reference to
principles of conflict of laws.
(d) Taxes. Holding or the Company may withhold from any payments
made under this Agreement all federal, state, city or other applicable taxes as
shall be required pursuant to any law, governmental regulation or ruling.
15
(e) Amendments. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is approved
by the Board and the Holding Board or a person authorized thereby and is agreed
to in writing by Executive and such officer as may be specifically designated by
the applicable Board. No waiver by any party hereto at any time of any breach by
any other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No waiver of any provision of this Agreement shall be implied
from any course of dealing between or among the parties hereto or from any
failure by any party hereto to assert its rights hereunder on any occasion or
series of occasions. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement.
(f) Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
(g) Notices. Any notice or other communication required or permitted
to be delivered under this Agreement shall be (i) in writing, (ii) delivered
personally, by courier service or by certified or registered mail, first-class
postage prepaid and return receipt requested, (iii) deemed to have been received
on the date of delivery or on the third business day after the mailing thereof,
and (iv) addressed as follows (or to such other address as the party entitled to
notice shall hereafter designate in accordance with the terms hereof):
(A) if to the Company or Holding, to it at:
WESCO Distribution, Inc.
One Riverfront Center
Pittsburgh, Pennsylvania 15222
Attention: Chairman
(B) if to Executive, to him at the address listed on the signature
page hereof.
Copies of any notices or other communications given under this Agreement shall
also be given to:
The Cypress Group
65 East 56th Street, 19th Floor
New York, New York 10022
Attention: Mr. Anthony D. Tutrone
16
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Alvin H. Brown, Esq.
(h) Survival. Sections 7 through 16, inclusive, and, if Executive's
employment terminates in a manner giving rise to a payment under Section 6(f),
Section 6(f), shall survive the termination of the employment of Executive
hereunder.
(i) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
(j) Headings. The section and other headings contained in this
Agreement are for the convenience of the parties only and are not intended to be
a part hereof or to affect the meaning or interpretation hereof.
(k) Certain Definitions.
(k) Certain Definitions.
"Affiliate": with respect to any Person, means any other Person
that, directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with the first Person, including but
not limited to a Subsidiary of the first Person, a Person of which the first
Person is a Subsidiary, or another Subsidiary of a Person of which the first
Person is also a Subsidiary.
"Control": with respect to any Person, means the possession,
directly or indirectly, severally or jointly, of the power to direct or cause
the direction of the management policies of such Person, whether through the
ownership of voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
"Person": any natural person, firm, partnership, limited liability
company, association, corporation, company, trust, business trust, governmental
authority or other entity.
"Subsidiary": with respect to any Person, each corporation or other
Person in which the first Person owns or Controls, directly or indirectly,
capital stock or other ownership interests representing 50% or more of the
combined voting power of the outstanding voting stock or other ownership
interests of such corporation or other Person.
"Successor": of a Person means a Person that succeeds to the first
Person's assets and liabilities by merger,
17
liquidation, dissolution or otherwise by operation of law, or a Person to which
all or substantially all the assets and/or business of the first Person are
transferred.
18
IN WITNESS WHEREOF, Holding and the Company have each duly executed
this Agreement by its authorized representative and Executive has hereunto set
his hand, in each case effective as of the date first above written.
WESCO INTERNATIONAL, INC.
By:
-------------------------------
Name:
Title:
WESCO DISTRIBUTION, INC.
By:
-------------------------------
Name:
Title:
Executive:
----------------------------------
Roy W. Haley
Address:
----------------------------------
----------------------------------
----------------------------------
19
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands)
Adjusted
Two Months Ten Months Combined
Year Ended Ended Ended Year Ended
December 31, February 28, December 31, December 31,
------------ ------------ ------------ ------------
1993 1994 1994 1994
------------ ------------ ------------ ------------
Consolidated Statements of Income Data
Income (loss) before income taxes,
cumulative effect and extraordinary
charge $ (23,486) $ (6,013) $ 7,216 $ 1,203
Add:
Portion of rents representative of the
interest factor 3,667 633 4,418 5,051
Interest on indebtedness 14,175 2,328 14,817 17,145
Amortization of deferred financing costs - - 2,837 2,837
------------ ------------ ------------ ------------
Income as adjusted $ (5,644) $ (3,052) $ 29,288 $ 26,236
============ ============ ============ ============
Fixed charges:
Portion of rents representative of the
interest factor $ 3,667 $ 633 $ 4,418 $ 5,051
Interest on indebtedness 14,175 2,328 14,817 17,145
Amortization of deferred financing costs - - 2,837 2,837
------------ ------------ ------------ ------------
Fixed charges $ 17,842 $ 2,961 $ 22,072 $ 25,033
============ ============= ============ ============
Ratio of earnings to fixed charges - - 1.3 -
============ ============= ============ ============
Year Ended Three Months Ended
December 31, March 31,
--------------------------------- ----------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
Consolidated Statements of Income Data
Income (loss) before income taxes,
cumulative effect and extraordinary
charge $ 39,920 $ 50,826 $ 59,947 $ 10,092 $ 13,972
Add:
Portion of rents representative of the
interest factor 5,442 7,344 8,790 1,238 1,512
Interest on indebtedness 15,020 17,067 19,721 4,685 6,082
Amortization of deferred financing costs 793 315 388 113 120
--------- --------- --------- --------- ---------
Income as adjusted $ 61,175 $ 75,552 $ 88,846 $ 16,128 $ 21,686
========= ========= ========= ========= =========
Fixed charges:
Portion of rents representative of the
interest factor $ 5,442 $ 7,344 $ 8,790 $ 1,238 $ 1,512
Interest on indebtedness 15,020 17,067 19,721 4,685 6,082
Amortization of deferred financing costs 793 315 388 113 120
--------- --------- --------- --------- ---------
Fixed charges $ 21,255 $ 24,726 $ 26,899 $ 6,036 $ 7,714
========= ========= ========= ========= =========
Ratio of earnings to fixed charges 2.9 3.1 3.1 2.7 2.8
========= ========= ========= ========= =========
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement of Form S-4 of our
report, dated February 6, 1998, except for Note 17, as to which the date is May
8, 1998, on our audits of the consolidated financial statements and financial
statement schedule of WESCO International, Inc. and subsidiaries. We also
consent to the references to our firm under the captions "Experts" and "Selected
Historical Consolidated Financial Data."
/s/ Coopers & Lybrand LLC
600 Grant Street
Pittsburgh, Pennsylvania
June 23, 1998
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, N.A.
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code) executive offices)
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-6229
(Name, address and telephone number of agent for service)
WESCO International, Inc.
(Exact name of obligor as specified in its charter)
Delaware 25-1723345
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
WESCO Distribution, Inc.
(Exact name of obligor as specified in its charter)
Delaware 25-1723345
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
Commerce Court, Suite 700 15219
Four Station Square, Pittsburgh, PA (Zip Code)
(Address of principal executive
office)
9 1/8% Senior Subordinated Notes due 2008, Series B
11 1/8% Senior Discount Notes due 2008, Series B
(Title of the Indenture securities)
GENERAL
1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington,
D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with Obligor and Underwriters.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
16. List of Exhibits
List below all exhibits filed as a part of this statement of eligibility
and qualification. (Exhibits identified in parentheses, on file with the
Commission, are incorporated herein by reference as exhibits hereto.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business, see Exhibit 2 to Form T-1, filed in connection with Form S-3 relating
to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003, Securities and
Exchange Commission File No. 33-50709.
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers, see Exhibit 3 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business on
March 31, 1998, published pursuant to the requirements of the Comptroller of the
Company, see attached.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in default.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One, NA, a national banking association organized
under the National Banking Act, has duly caused this statement of eligibility
and qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in Columbus, Ohio, on ________, 1998.
Bank One, NA
By: /s/
----------------------
Authorized Signer
Exhibit 1
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business of
banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS, NATIONAL
ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus, County of
Franklin, State of Ohio. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined from
time-to-time by resolution of the shareholders at any annual or special meeting
thereof, provided, however, that the Board of Directors, by resolution of a
majority thereof, shall be authorized to increase the number of its members by
not more than two between regular meetings of the shareholders. Each Director,
during the full term of his directorship, shall own, as qualifying shares, the
minimum number of shares of either this Association or of its parent bank
holding company in accordance with the provisions of applicable law. Unless
otherwise provided by the laws of the United States, any vacancy in the Board of
Directors for any reason, including an increase in the number thereof, may be
filled by action of the Board of Directors.
FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office of this Association or such other
place as the Board of Directors may designate, on the day of each year specified
therefor in the By-Laws, but if no election is held on that day, it may be held
on any subsequent business day according to the provisions of law; and all
elections shall be held according to such lawful regulations as may be
prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association shall be
2,073,750 shares of common stock of the par value of Ten Dollars ($10) each; but
said capital stock may be increased or decreased from time-to-time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the
Association shall have the preemptive or preferential right of subscription to
any share of any class of stock of this Association, whether now or hereafter
authorized or to any obligations convertible into stock of this Association,
issued or sold, nor any right of subscription to any thereof other than such, if
any, as the Board of Directors, in its discretion, may from time-to-time
determine and at such price as the Board of Directors may from time-to-time fix.
This Association, at any time and from time-to-time, may authorize
and issue debt obligations, whether or not subordinated, without the approval of
the shareholders.
SIXTH. The Board of Directors shall appoint one of its members President
of the Association, who shall be Chairman of the Board, unless the Board
appoints another director to be the Chairman. The Board of Directors shall have
the power to appoint one or more Vice Presidents and to appoint a Secretary and
such other officers and employees as may be required to transact the business of
this Association.
The Board of Directors shall have the power to define the duties of
the officers and employees of this Association; to fix the salaries to be paid
to them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of this
Association shall be made; to manage and administer the business and affairs of
this Association; to make all By-Laws that it may be lawful for them to make;
and generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Columbus, Ohio, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 10 percent of the stock of
this Association, may call a special meeting of shareholders at any time. Unless
otherwise provided by the laws of the United States, a notice of the time, place
and purpose of every annual and special meeting of the shareholders shall be
given by first-class mail, postage prepaid, mailed at least ten days prior to
the date of such meeting to each shareholder of record at his address as shown
upon the books of this Association.
TENTH. Every person who is or was a Director, officer or employee of the
Association or of any other corporation which he served as a Director, officer
or employee at the request of the Association as part of his regularly assigned
duties may be indemnified by the Association in accordance with the provisions
of this paragraph against all liability (including, without limitation,
judgments, fines, penalties and settlements) and all reasonable expenses
(including, without limitation, attorneys' fees and investigative expenses) that
may be incurred or paid by him in connection with any claim, action, suit or
proceeding, whether civil, criminal or administrative (all referred to hereafter
in this paragraphs as "Claims") or in connection with any appeal relating
thereto in which he may become involved as a party or otherwise or with which he
may be threatened by reason of his being or having been a Director, officer or
employee of the Association or such other corporation, or by reason of any
action taken or omitted by him in his capacity as such Director, officer or
employee, whether or not he continues to be such at the time such liability or
expenses are incurred, provided that nothing contained in this paragraph shall
be construed to permit indemnification of any such person who is adjudged guilty
of, or liable for, willful misconduct, gross neglect of duty or criminal acts,
unless, at the time such indemnification is sought, such indemnification in such
instance is permissible under applicable law and regulations, including
published rulings of the Comptroller of the Currency or other appropriate
supervisory or regulatory authority, and provided further that there shall be no
indemnification of directors, officers, or employees against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by an appropriate regulatory agency which proceeding or action
results in a final order assessing civil money penalties or requiring
affirmative action by an individual or individuals in the form of payments to
the Association. Every person who may be indemnified under the provisions of
this paragraph and who has been wholly successful on the merits with respect to
any Claim shall be entitled to indemnification as of right. Except as provided
in the preceding sentence, any indemnification under this paragraph shall be at
the sole discretion of the Board of Directors and shall be made only if the
Board of Directors or the Executive Committee acting by a quorum consisting of
Directors who are not parties to such Claim shall find or if independent legal
counsel (who may be the regular counsel of the Association) selected by the
Board of Directors or Executive Committee whether or not a disinterested quorum
exists shall render their opinion that in view of all of the circumstances then
surrounding the Claim, such indemnification is equitable and in the best
interests of the Association. Among the circumstances to be taken into
consideration in arriving at such a finding or opinion is the existence or
non-existence of a contract of insurance or indemnity under which the
Association would be wholly or partially reimbursed for such indemnification,
but the existence or non-existence of such insurance is not the sole
circumstance to be considered nor shall it be wholly determinative of whether
such indemnification shall be made. In addition to such finding or opinion, no
indemnification under this paragraph shall be made unless the Board of Directors
or the Executive
Committee acting by a quorum consisting of Directors who are not parties to such
Claim shall find or if independent legal counsel (who may be the regular counsel
of the Association) selected by the Board of Directors or Executive Committee
whether or not a disinterested quorum exists shall render their opinion that the
Director, officer or employee acted in good faith in what he reasonably believed
to be the best interests of the Association or such other corporation and
further in the case of any criminal action or proceeding, that the Director,
officer or employee reasonably believed his conduct to be lawful. Determination
of any Claim by judgment adverse to a Director, officer or employee by
settlement with or without Court approval or conviction upon a plea of guilty or
of nolo contendere or its equivalent shall not create a presumption that a
Director, officer or employee failed to meet the standards of conduct set forth
in this paragraph. Expenses incurred with respect to any Claim may be advanced
by the Association prior to the final disposition thereof upon receipt of an
undertaking satisfactory to the Association by or on behalf of the recipient to
repay such amount unless it is ultimately determined that he is entitled to
indemnification under this paragraph. The rights of indemnification provided in
this paragraph shall be in addition to any rights to which any Director, officer
or employee may otherwise be entitled by contract or as a matter of law.
Every person who shall act as a Director, officer or employee of this
Association shall be conclusively presumed to be doing so in reliance upon the
right of indemnification provided for in this paragraph.
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
Exhibit 4
BY-LAWS
OF
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the Shareholders of
the Bank for the election of Directors and for the transaction of such business
as may properly come before the meeting shall be held at its main banking house,
or other convenient place duly authorized by the Board of Directors, on the
third Monday of January of each year, or on the next succeeding banking day, if
the day fixed falls on a legal holiday. If from any cause, an election of
directors is not made on the day fixed for the regular meeting of shareholders
or, in the event of a legal holiday, on the next succeeding banking day, the
Board of Directors shall order the election to be held on some subsequent day,
as soon thereafter as practicable, according to the provisions of law; and
notice thereof shall be given in the manner herein provided for the annual
meeting. Notice of such annual meeting shall be given by or under the direction
of the Secretary or such other officer as may be designated by the Chief
Executive Officer by first-class mail, postage prepaid, to all shareholders of
record of the Bank at their respective addresses as shown upon the books of the
Bank mailed not less than ten days prior to the date fixed for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of this
Bank may be called at any time by the Board of Directors or by any three or more
shareholders owning, in the aggregate, not less than ten percent of the stock of
this Bank. The notice of any special meeting of the shareholders called by the
Board of Directors, stating the time, place and purpose of the meeting, shall be
given by or under the direction of the Secretary, or such other officer as is
designated by the Chief Executive Officer, by first-class mail, postage prepaid,
to all shareholders of
record of the Bank at their respective addresses as shown upon the books of the
Bank, mailed not less than ten days prior to the date fixed for such meeting.
Any special meeting of shareholders shall be conducted and its proceedings
recorded in the manner prescribed in these By-Laws for annual meetings of
shareholders.
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors may
designate a person to be the Secretary of the meetings of shareholders. In the
absence of a presiding officer, as designated in these By-Laws, the Board of
Directors may designate a person to act as the presiding officer. In the event
the Board of Directors fails to designate a person to preside at a meeting of
shareholders and a Secretary of such meeting, the shareholders present or
represented shall elect a person to preside and a person to serve as Secretary
of the meeting.
The Secretary of the meetings of shareholders shall cause the returns made
by the judges and election and other proceedings to be recorded in the minute
book of the Bank. The presiding officer shall notify the directors-elect of
their election and to meet forthwith for the organization of the new board.
The minutes of the meeting shall be signed by the presiding officer and
the Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many as
three shareholders to be judges of the election, who shall hold and conduct the
same, and who shall, after the election has been held, notify, in writing over
their signatures, the secretary of the shareholders' meeting of the result
thereof and the names of the Directors elected; provided, however, that upon
failure for any reason of any judge or judges of election, so appointed by the
directors, to serve, the presiding officer of the meeting shall appoint other
shareholders or their proxies to fill the vacancies. The judges of election at
the request of the chairman of the
meeting, shall act as tellers of any other vote by ballot taken at such meeting,
and shall notify, in writing over their signatures, the secretary of the Board
of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
record, who is qualified to vote under the provisions of Federal Law, shall have
the right to vote the number of shares of record in his name for as many persons
as there are Directors to be elected, or to cumulate such shares as provided by
Federal Law. In deciding all other questions at meetings of shareholders, each
shareholder shall be entitled to one vote on each share of stock of record in
his name. Shareholders may vote by proxy duly authorized in writing. All proxies
used at the annual meeting shall be secured for that meeting only, or any
adjournment thereof, and shall be dated, and if not dated by the shareholder,
shall be dated as of the date of receipt thereof. No officer or employee of this
Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
capital stock of the Bank, eligible to be voted, present either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of shareholders, but shareholders present at any meeting and constituting less
than a quorum may, without further notice, adjourn the meeting from time to time
until a quorum is obtained. A majority of the votes cast shall decide every
question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
ARTICLE II
DIRECTORS
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be managed
by the Board of Directors. Each director of the Bank shall be the beneficial
owner of a substantial number of shares of BANC ONE CORPORATION and shall be
employed either in the position of Chief Executive Officer or active leadership
within his or her business, professional or community interest which shall be
located within the geographic area in which the Bank operates, or as an
executive officer of the Bank. A director shall not be eligible for nomination
and re-election as a director of the Bank if such person's executive or
leadership position within his or her business, professional or community
interests which qualifies such person as a director of Bank terminates. The age
of 70 is the mandatory retirement age as a director of the Bank. When a person's
eligibility as director of the Bank terminates, whether because of change in
share ownership, position, residency or age, within 30 days after such
termination, such person shall submit his resignation as a director to be
effective at the pleasure of the Board provided, however, that in no event shall
such person be nominated or elected as a director. Provided, however, following
a person's retirement or resignation as a director because of the age
limitations herein set forth with respect to election or re-election as a
director, such person may, in special or unusual circumstances, and at the
discretion of the Board, be elected by the directors as a Director Emeritus of
the Bank for a limited period of time. A Director Emeritus shall have the right
to participate in board meetings but shall be without the power to vote and
shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
prescribed by law. No person elected a director may exercise any of the powers
of his office until he has taken the oath of such office.
SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office until the
annual meeting for the year in which his term expires and until his successor
shall be elected and shall qualify, subject, however, to his prior death,
resignation, or removal from office. Whenever any vacancy shall occur among the
directors, the remaining directors shall constitute the directors of the Bank
until such vacancy is filled by the remaining directors, and any director so
appointed shall hold office for the unexpired term of his or her successor.
Notwithstanding the foregoing, each director shall hold office and serve at the
pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share- holders
shall meet for organization of the new board at the time fixed by the presiding
officer of the annual meeting. If at the time fixed for such meeting there is no
quorum present, the Directors in attendance may adjourn from time to time until
a quorum is obtained. A majority of the number of Directors elected by the
shareholders shall constitute a quorum for the transaction of business.
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of Directors
shall be held on the third Monday of each calendar month excluding March and
July, which meeting will be held at 4:00 p.m. When any regular meeting of the
Board falls on a holiday, the meeting shall be held on such other day as the
Board may previously designate or should the Board fail to so designate, on such
day as the Chairman of the Board of President may fix. Whenever a quorum is not
present, the directors in attendance shall adjourn the meeting to a time not
later than the date fixed by the Bylaws for the next succeeding regular meeting
of the Board.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors shall
be held at the call of the Chairman of the Board or President, or at the request
of two or more Directors. Any special meeting may be held
at such place in Franklin County, Ohio, and at such time as may be fixed in the
call. Written or oral notice shall be given to each Director not later than the
day next preceding the day on which special meeting is to be held, which notice
may be waived in writing.
The presence of a Director at any meeting of the Board shall be deemed a waiver
of notice thereof by him. Whenever a quorum is not present the Directors in
attendance shall adjourn the special meeting from day to day until a quorum is
obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a quorum at
any meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time-to-time, and the meeting may be held, as
adjourned, without further notice. When, however, less than a quorum as herein
defined, but at least one-third and not less than two of the authorized number
of Directors are present at a meeting of the Directors, business of the Bank may
be transacted and matters before the Board approved or disapproved by the
unanimous vote of the Directors present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall receive
such fees for, and transportation expenses incident to, attendance at Board and
Board Committee Meetings and such fees for service as a Director irrespective of
meeting attendance as from time to time are fixed by resolution of the Board;
provided, however, that payment hereunder shall not be made to a Director for
meetings attended and/or Board service which are not for the Bank's sole benefit
and which are concurrent and duplicative with meetings attended or board service
for an affiliate of the Bank for which the Director receives payment; and
provided further, that payment hereunder shall not be made in the case of any
Director in the regular employment of the Bank or of one of its affiliates.
SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of the
Board of Directors known as the Executive Committee which shall possess and
exercise, when the Board is not in session, all powers of the Board that may
lawfully be delegated. The Executive Committee shall also exercise the powers of
the Board of Directors in accordance with the Provisions of the "Employees
Retirement Plan" and the "Agreement and Declaration of Trust" as the same now
exist or may be amended hereafter. The Executive Committee shall consist of not
fewer than four board members, including the Chairman of the Board and President
of the Bank, one of whom, as hereinafter required by these By-laws, shall be the
Chief Executive Officer. The other members of the Committee shall be appointed
by the Chairman of the Board or by the President, with the approval of the Board
and shall continue as members of the Executive Committee until their successors
are appointed, provided, however, that any member of the Executive Committee may
be removed by the Board upon a majority vote thereof at any regular or special
meeting of the Board. The Chairman or President shall fill any vacancy in the
Committee by the appointment of another Director, subject to the approval of the
Board of Directors. The regular meetings of the Executive Committee shall be
held on a regular basis as scheduled by the Board of Directors. Special meetings
of the Executive Committee shall be held at the call of the Chairman or
President or any two members thereof at such time or times as may be designated.
In the event of the absence of any member or members of the Committee, the
presiding member may appoint a member or members of the Board to fill the place
or places of such absent member or members to serve during such absence. Not
fewer than three members of the Committee must be present at any meeting of the
Executive Committee to constitute a quorum, provided, however that with regard
to any matters on which the Executive Committee shall vote, a majority of the
Committee members present at the meeting at which a vote is to be taken shall
not be officers of the Bank and, provided further, that if, at any meeting at
which the Chairman of the Board and President are both present, Committee
members who are not officers are not in the majority, then the Chairman of the
Board or President, which ever of such officers is not also the Chief Executive
Officer, shall not be eligible to vote at such meeting and shall not be
recognized for purposes of determining if a quorum is present at such meeting.
When neither the Chairman of the Board nor President are present, the Committee
shall appoint a presiding officer. The Executive Committee shall keep a record
of its proceedings and report its
proceedings and the action taken by it to the Board of Directors.
SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE. There
shall be a standing committee of the Board of Directors known as the Community
Reinvestment Act and Compliance Policy Committee the duties of which shall be,
at least once in each calendar year, to review, develop and recommend policies
and programs related to the Bank's Community Reinvestment Act Compliance and
regulatory compliance with all existing statutes, rules and regulations
affecting the Bank under state and federal law. Such Committee shall provide and
promptly make a full report of such review of current Bank policies with regard
to Community Reinvestment Act and regulatory compliance in writing to the Board,
with recommendations, if any, which may be necessary to correct any
unsatisfactory conditions. Such Committee may, in its discretion, in fulfilling
its duties, utilize the Community Reinvestment Act officers of the Bank, Banc
One Ohio Corporation and Banc One Corporation and may engage outside Community
Reinvestment Act experts, as approved by the Board, to review, develop and
recommend policies and programs as herein required. The Community Reinvestment
Act and regulatory compliance policies and procedures established and the
recommendations made shall be consistent with, and shall supplement, the
Community Reinvestment Act and regulatory compliance programs, policies and
procedures of Banc One Corporation and Banc One Ohio Corporation. The Community
Reinvestment Act and Compliance Policy Committee shall consist of not fewer than
four board members, one of whom shall be the Chief Executive Officer and a
majority of whom are not officers of the Bank. Not fewer than three members of
the Committee, a majority of whom are not officers of the Bank, must be present
to constitute a quorum. The Chairman of the Board or President of the Bank,
whichever is not the Chief Executive Officer, shall be an ex officio member of
the Community Reinvestment Act and Compliance Policy Committee. The Community
Reinvestment Act and Compliance Policy Committee, whose chairman shall be
appointed by the Board, shall keep a record of its proceedings and report its
proceedings and the action taken by it to the Board of Directors.
SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees known as
the Trust Management Committee and the Trust Examination Committee appointed as
hereinafter provided.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such special
committees from time to time as are in its judgment necessary in the interest of
the Bank.
ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
(a) The officers of the Bank shall include a President, Secretary and
Security Officer and may include a Chairman of the Board, one or
more Vice Chairmen, one or more Vice Presidents (which may include
one or more Executive Vice Presidents and/or Senior Vice Presidents)
and one or more Assistant Secretaries, all of whom shall be elected
by the Board. All other officers may be elected by the Board or
appointed in writing by the Chief Executive Officer. The salaries of
all officers elected by the Board shall be fixed by the Board. The
Board from time-to-time shall designate the President or Chairman of
the Board to serve as the Bank's Chief Executive Officer.
(b) The Chairman of the Board, if any, and the President shall be
elected by the Board from their own number. The President and
Chairman of the Board shall be re-elected by the Board annually at
the organizational meeting of the Board of Directors following the
Annual Meeting of Shareholders. Such officers as the Board shall
elect from their own number shall hold office from the date of their
election as officers until the organization meeting of the Board of
Directors following the next Annual Meeting of Shareholders,
provided, however, that such officers may be relieved of their
duties at any time by action of the Board in which event all the
powers incident to their office shall immediately terminate.
(c) Except as provided in the case of the elected officers who are
members of the Board, all officers, whether elected or appointed,
shall hold office at the pleasure of the Board. Except as otherwise
limited by law or these By-laws, the Board assigns to Chief
Executive Officer and/or his
designees the authority to appoint and dismiss any elected or
appointed officer or other member of the Bank's management staff and
other employees of the Bank, as the person in charge of and
responsible for any branch office, department, section, operation,
function, assignment or duty in the Bank.
(d) The management staff of the Bank shall include officers elected by
the Board, officers appointed by the Chief Executive Officer, and
such other persons in the employment of the Bank who, pursuant to
written appointment and authorization by a duly authorized officer
of the Bank, perform management functions and have management
responsibilities. Any two or more offices may be held by the same
person except that no person shall hold the office of Chairman of
the Board and/or President and at the same time also hold the office
of Secretary.
(e) The Chief Executive Officer of the Bank and any other officer of the
Bank, to the extent that such officer is authorized in writing by
the Chief Executive Officer, may appoint persons other than officers
who are in the employment of the Bank to serve in management
positions and in connection therewith, the appointing officer may
assign such title, salary, responsibilities and functions as are
deemed appropriate by him, provided, however, that nothing contained
herein shall be construed as placing any limitation on the authority
of the Chief Executive Officer as provided in this and other
sections of these By-Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Bank
shall have general and active management of the business of the Bank and shall
see that all orders and resolutions of the Board of
Directors are carried into effect. Except as otherwise prescribed or limited by
these By-Laws, the Chief Executive Officer shall have full right, authority and
power to control all personnel, including elected and appointed officers, of the
Bank, to employ or direct the
employment of such personnel and officers as he may deem necessary, including
the fixing of salaries and the dismissal of them at pleasure, and to define and
prescribe the duties and responsibility of all Officers of the Bank, subject to
such further limitations and directions as he may from time-to-time deem proper.
The Chief Executive Officer shall perform all duties incident to his office and
such other and further duties, as may, from time-to-time, be required of him by
the Board of Directors or the shareholders. The specification of authority in
these By-Laws wherever and to whomever granted shall not be construed to limit
in any manner the general powers of delegation granted to the Chief Executive
Officer in conducting the business of the Bank. The Chief Executive Officer or,
in his absence, the Chairman of the Board or President of the Bank, as
designated by the Chief Executive Officer, shall preside at all meetings of
shareholders and meetings of the Board. In the absence of the Chief Executive
Officer, such officer as is designated by the Chief Executive Officer shall be
vested with all the powers and perform all the duties of the Chief Executive
Officer as defined by these By-Laws. When designating an officer to serve in his
absence, the Chief Executive Officer shall select an officer who is a member of
the Board of Directors whenever such officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive
Officer, the Chairman of the Board, the President, and those officers so
designated and authorized by the Chief Executive Officer are authorized for an
on behalf of the Bank, and to the extent permitted by law, to make loans and
discounts; to purchase or acquire drafts, notes, stock, bonds, and other
securities for investment of funds held by the Bank; to execute and purchase
acceptances; to appoint, empower and direct all necessary agents and attorneys;
to sign and give any notice required to be given; to demand payment and/or to
declare due for any default any debt or obligation due or payable to the Bank
upon demand or authorized to be declared due; to foreclose any mortgages, to
exercise any option, privilege or election to forfeit, terminate, extend or
renew any lease; to authorize and direct any proceedings for the collection of
any money or for the enforcement
of any right or obligation; to adjust, settle and compromise all claims of every
kind and description in favor of or against the Bank, and to give receipts,
releases and discharges therefor; to borrow money and in connection therewith to
make, execute and deliver notes, bonds or other evidences of indebtedness; to
pledge or hypothecate any securities or any stocks, bonds, notes or any
property real or personal held or owned by the Bank, or to rediscount any notes
or other obligations held or owned by the Bank, to employ or direct the
employment of all personnel, including elected and appointed officers, and the
dismissal of them at pleasure, and in furtherance of and in addition to the
powers hereinabove set forth to do all such acts and to take all such
proceedings as in his judgment are necessary and incidental to the operation of
the Bank.
Other persons in the employment of the Bank, including but not limited to
officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
chief Executive Officer, to perform the powers set forth above, subject,
however, to such limitations and conditions as are set forth in the
authorization given to such persons.
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and control of
the records of the Bank and, subject to the direction of the Chief Executive
Officer, shall undertake other duties and functions usually performed by a
corporate secretary. Other officers may be designated by the Chief Executive
Officer or the Board of Directors as Assistant Secretary to perform the duties
of the Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
the Board, President,
any officer being a member of the Bank's management staff who is also a person
in charge of and responsible for any department within the Bank and any other
officer to the extent such officer is so designated and authorized by the Chief
Executive Officer, the Chairman of the
Board, the President, or any other officer who is a member of the Bank's
management staff who is in charge of and responsible for any department within
the Bank, are hereby authorized on behalf of the Bank to sell, assign, lease,
mortgage, transfer, deliver and convey any real or personal property now or
hereafter owned by or standing in the name of the Bank or its nominee, or held
by this Bank as collateral security, and to execute and deliver such deeds,
contracts, leases, assignments, bills of sale, transfers or other papers or
documents as may be appropriate in the circumstances; to execute any loan
agreement, security agreement, commitment letters and financing statements and
other documents on behalf of the Bank as a lender; to execute purchase orders,
documents and agreements entered into by the Bank in the ordinary course of
business, relating to purchase, sale, exchange or lease of services, tangible
personal property, materials and equipment for the use of the Bank; to execute
powers of attorney to perform specific or general functions in the name of or on
behalf of the Bank; to execute promissory notes or other instruments evidencing
debt of the Bank; to execute instruments pledging or releasing securities for
public funds, documents submitting public fund bids on behalf of the Bank and
public fund contracts; to purchase and acquire any real or personal property
including loan portfolios and to execute and deliver such agreements, contracts
or other papers or documents as may be appropriate in the circumstances; to
execute any indemnity and fidelity bonds, proxies or other papers or documents
of like or different character necessary, desirable or incidental to the conduct
of its banking business; to execute and deliver settlement agreements or other
papers or documents as may be appropriate in connection with a dismissal
authorized by Section 3.01(c) of these By-laws; to execute agreements,
instruments, documents, contracts or other papers of like or difference
character necessary, desirable or incidental to the conduct of its banking
business; and to execute and deliver partial releases from and discharges or
assignments of mortgages, financing statements and assignments or surrender of
insurance policies, now or hereafter held by this Bank.
The Chief Executive Officer, Chairman of the Board, President, any officer
being a member of the Bank's management staff who is also a person in charge of
and responsible for any department within the Bank, and any other officer of the
Bank so designated and authorized by the Chief Executive Officer, Chairman of
the Board, President or any officer who is a member of the Bank's management
staff who is in charge of and responsible for any department within the Bank are
authorized for and on behalf of the Bank to sign and issue checks, drafts, and
certificates of deposit; to sign and endorse bills of exchange, to sign and
countersign foreign and domestic letters of credit, to receive and receipt for
payments of principal, interest, dividends, rents, fees and payments of every
kind and description paid to the Bank, to sign receipts for property acquired by
or entrusted to the Bank, to guarantee the genuineness of signatures on
assignments of stocks, bonds or other securities, to sign certifications of
checks, to endorse and deliver checks, drafts, warrants, bills, notes,
certificates of deposit and acceptances in all business transactions of the
Bank.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management staff,
may be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and conditions
as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall be
bonded for the honest and faithful performance of their duties for such amount
as may be prescribed by the Board of Directors.
ARTICLE IV
TRUST DEPARTMENT
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to this
Bank under the provisions of Federal Law and Regulations of the Comptroller of
the Currency, there shall be maintained a separate Trust Department of the Bank,
which shall be operated in the manner specified herein.
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing Committee
known as the Trust Management Committee, consisting of at least five members, a
majority of whom shall not be officers of the Bank. The Committee shall consist
of the Chairman of the Board who shall be Chairman of the Com- mittee, the
President, and at least three other Directors appointed by the Board of
Directors and who shall continue as members of the Committee until their
successors are appointed. Any vacancy in the Trust Management Committee may be
filled by the Board at any regular or special meeting. In the event of the
absence of any member or members, such Committee may, in its discretion, appoint
members of the Board to fill the place of such absent members to serve during
such absence. Three members of the Committee shall constitute a quorum. Any
member of the Committee may be removed by the Board by a majority vote at any
regular or special meeting of the Board. The Committee shall meet at such times
as it may determine or at the call of the Chairman, or President or any two
members thereof.
The Trust Management Committee, under the general direction of the Board
of Directors, shall supervise the policy of the Trust Department which shall be
formulated and executed in accordance with Law, Regulations of the Comptroller
of the Currency, and sound fiduciary principles.
SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing Committee
known as the Trust Examination Committee, consisting of three directors
appointed by the Board of Directors and who shall continue as members of the
committee until their successors are appointed. Such members shall not be active
officers of the Bank. Two members of the Committee shall constitute a quorum.
Any member of the Committee may be removed by the Board by a majority vote at
any regular or special meeting of the Board. The Committee shall meet at such
times as it may determine or at the call of two members thereof.
This Committee shall, at least once during each calendar year and within
fifteen months of the last such audit, or at such other time(s) as may be
required by Regulations of the Comptroller of the Currency, make suitable audits
of the Trust Department or cause suitable audits to be made by auditors
responsible only to the Board of Directors, and at such time shall ascertain
whether the Department has been administered in accordance with Law, Regulations
of the Comptroller of the Currency and sound fiduciary principles.
The Committee shall promptly make a full report of such audits in writing
to the Board of Directors of the Bank, together with a recommendation as to what
action, if any, may be necessary to correct any unsatisfactory condition. A
report of the audits together with the action taken thereon shall be noted in
the Minutes of the Board of Directors and such report shall be a part of the
records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the management and
supervision of an officer of the Bank or of the trust affiliate of the Bank
designated by and subject to the advice and direction of the Chief Executive
Officer. Such officer having supervisory responsibility over the Trust
Department shall do or cause to be done all things necessary or proper in
carrying on the business of the Trust Department in accordance with provisions
of law and applicable regulations.
SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department may be
carried in the name of the Bank in its fiduciary capacity, in the name of Bank,
or in the name of a nominee or nominees.
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary capacity
awaiting investment or distribution shall not be held uninvested or
undistributed any longer than is reasonable for the proper management of the
account and shall be invested in accordance with the instrument establishing a
fiduciary relationship and local law. Where such instrument does not specify the
character or class of investments to be made and does not vest in the Bank any
discretion in the matter, funds held pursuant to such instrument shall be
invested in any investment which corporate fiduciaries may invest under local
law.
The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint custody
or control of not less than two of the officers or employees of the Bank or of
the trust affiliate of the Bank designated for the purpose by the Trust
Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
the Board, President, any officer of the Trust Department, and such other
officers of the trust affiliate of the Bank as are specifically designated and
authorized by the Chief Executive Officer, the President, or the officer in
charge of the Trust Department, are hereby authorized, on behalf of this Bank,
to sell, assign, lease, mortgage, transfer, deliver and convey any real property
or personal property and to purchase and acquire any real or personal property
and to execute and deliver such agreements, contracts, or other papers and
documents as may be appropriate in the circumstances for property now or
hereafter owned by or standing in the name of this Bank, or its nominee, in any
fiduciary capacity, or in the name of any principal for whom this Bank may now
or hereafter be acting under a
power of attorney, or as agent and to execute and deliver partial releases from
any discharges or assignments or mortgages and assignments or surrender of
insurance policies, to execute and deliver deeds, contracts, leases,
assignments, bills of sale, transfers or such other papers or documents as may
be appropriate in the circumstances for property now or hereafter held by this
Bank in any fiduciary capacity or owned by any principal for whom this Bank may
now or hereafter be acting under a power of attorney or as agent; to execute and
deliver settlement agreements or other papers or documents as may be appropriate
in connection with a dismissal authorized by Section 3.01(c) of these By-laws;
provided that the signature of any such person shall be attested in each case by
any officer of the Trust Department or by any other person who is specifically
authorized by the Chief Executive Officer, the President or the officer in
charge of the Trust Department.
The Chief Executive Officer, Chairman of the Board, President, any officer
of the Trust Department and such other officers of the trust affiliate of the
Bank as are specifically designated and authorized by the Chief Executive
Officer, the President, or the officer in charge of the Trust Department, or any
other person or corporation as is specifically authorized by the Chief Executive
Officer, the President or the officer in charge of the Trust Department, are
hereby authorized on behalf of this Bank, to sign any and all pleadings and
papers in probate and other court proceedings, to execute any indemnity and
fidelity bonds, trust agreements, proxies or other papers or documents of like
or different character necessary, desirable or incidental to the appointment of
the Bank in any fiduciary capacity and the conduct of its business in any
fiduciary capacity; also to foreclose any mortgage, to execute and deliver
receipts for payments of principal, interest, dividends, rents, fees and
payments of every kind and description paid to the Bank; to sign receipts for
property acquired or entrusted to the Bank; also to sign stock or bond
certificates on behalf of this Bank in any fiduciary capacity and on behalf of
this Bank as transfer agent or registrar; to guarantee the genuineness of
signatures on assignments of stocks, bonds or other securities, and to
authenticate bonds, debentures, land or lease trust certificates or other forms
of security issued pursuant to any indenture under which this Bank now or
hereafter is acting as
Trustee. Any such person, as well as such other persons as are specifically
authorized by the Chief Executive Officer or the officer in charge of the Trust
Department, may sign checks, drafts and orders for the payment of money executed
by the Trust Department in the course of its business.
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any officer
of the Trust Department, any officer of the trust affiliate of the Bank and such
other persons as may be specifically authorized by Resolution of the Trust
Management Committee or the Board of Directors, may vote shares of stock of a
corporation of record on the books of the issuing company in the name of the
Bank or in the name of the Bank as fiduciary, or may grant proxies for the
voting of such stock of the granting if same is permitted by the instrument
under which the Bank is acting in a fiduciary capacity, or by the law applicable
to such fiduciary account. In the case of shares of stock which are held by a
nominee of the Bank, such shares may be voted by such person(s) authorized by
such nominee.
ARTICLE V
STOCKS AND STOCK CERTIFICATES
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
evidenced by certificates which shall bear the signature of the Chairman of the
Board, the President, or a Vice President (which signature may be engraved,
printed or impressed), and shall be signed manually by the Secretary, or any
other officer appointed by the Chief Executive Officer for that purpose.
In case any such officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its fact
that the stock represented thereby is transferable only upon the books of the
Bank properly endorsed and shall recite such other information as is required by
law and deemed appropriate by the Board. The corporate seal may be facsimile
engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall be
transferable only upon the stock transfer books of the Bank and except as
hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of any affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory to the Chairman of the
Board, the President, or a Vice President. The Board of Directors, or the Chief
Executive Officer, may authorize the issuance of a new certificate therefor
without the furnishing of indemnity. Stock Transfer Books, in which all
transfers of stock shall be recorded, shall be provided.
The stock transfer books may be closed for a reasonable period and under
such conditions as the Board of Directors may at any time determine for any
meeting of shareholders, the payment of dividends or any other lawful purpose.
In lieu of closing the transfer books, the Board may, in its discretion, fix a
record date and hour constituting a reasonable period prior to the day
designated for the holding of any meeting of the shareholders or the day
appointed for the payment of any dividend or for any other purpose at the time
as of which shareholders entitled to notice of and to vote at any such meeting
or to receive such dividend or to be treated as shareholders for such other
purpose shall be determined, and only shareholders of record at such time shall
be entitled to notice of or to vote at such meeting or to receive such dividends
or to be treated as shareholders for such other purpose.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. SEAL. The impression made below is an impression of the seal
adopted by the Board of Directors of BANK ONE, NA f/k/a Bank One, Columbus, NA.
The Seal may be affixed by any officer of the Bank to any document executed by
an authorized officer on behalf of the Bank, and any officer may certify any
act, proceedings, record, instrument or authority of the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive Committee,
the Bank and each of its Branches shall be open for business on such days and
during such hours as the Chief Executive Officer of the Bank shall, from time to
time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the Articles of
Association, the returns of the judges of elections, the By-Laws and any
amendments thereto, the proceedings of all regular and special meetings of the
shareholders and of the Board of Directors, and reports of the committees of the
Board of Directors shall be recorded in the minute book of the Bank. The minutes
of each such meeting shall be signed by the presiding Officer and attested by
the secretary of the meetings.
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of a
majority of the Directors.
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
The undersigned, designated to act as Trustee under the Indenture for WESCO
International, Inc. and WESCO Distribution, Inc. described in the attached
Statement of Eligibility and Qualification, does hereby consent that reports of
examinations by Federal, State, Territorial, or District Authorities may be
furnished by such authorities to the Commission upon the request of the
Commission.
This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Bank One, NA
Dated: By: /s/
-----------------------------
Authorized Signer
EXHIBIT 7
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
Expires March 31, 2000
Federal Financial Institutions Examination Council
- - - - -------------------------------------------------------------------------------
[LOGO] |1|
Please refer to page i,
Table of Contents, for
the required disclosure
of estimated burden.
- - - - -------------------------------------------------------------------------------
Consolidated Reports of Condition and Income for
A Bank With Domestic And Foreign Offices -- FFIEC 031
(980331)
Report at the close of business March 31, 1998 --------
(RCRI 9999)
This report is required by law: 12 U.S.C. ss.324 (State member banks); 12 U.S.C.
ss.1817 (State nonmember banks); and 12 U.S.C. ss.161 (National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- - - - -------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, C. William Willen, Vice President
---------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that the Reports of Condition and Income
(including the supporting schedules) for this report date have been prepared in
conformance with the instructions issued by the appropriate Federal regulatory
authority and are true to the best of my knowledge and belief.
/s/ C. William Willen
- - - - -----------------------------------------------------
Signature of Officer Authorized to Sign Report
April 30, 1998
- - - - -----------------------------------------------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions.
We, the undersigned directors (trustees), attest to the correctness of the
Report of Condition (including the supporting schedules) for this report date
and declare that it has been examined by us and to the best of our knowledge and
belief has been prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and is true and correct.
/s/ [ILLEGIBLE]
- - - - -----------------------------------------------------
Director (Trustee)
/s/ [ILLEGIBLE]
- - - - -----------------------------------------------------
Director (Trustee)
/s/ [ILLEGIBLE]
- - - - -----------------------------------------------------
Director (Trustee)
- - - - -------------------------------------------------------------------------------
Submission of Reports
Each bank must prepare its Reports of Condition and Income either:
(a) in electronic form and then file the computer data file directly with the
banking agencies' collection agent, Electronic Data Systems Corporation
(EDS), by modem or on computer diskette; or
(b) in hard-copy (paper) form and arrange for another party to convert
the paper report to electronic form. That party (if other than EDS) must
transmit the bank's computer data file to EDS.
To fulfill the signature and attestation requirement for the Reports of
Condition and Income for this report date, attach this signature page to the
hard-copy record of the completed report that the bank places in its files.
- - - - -------------------------------------------------------------------------------
FDIC Certificate Number -----------
(RCRI 9050)
CALL NO. 203 31 08-31-98
STBX: 39-1580 00089 STCERT: 39-06559
BANK ONE, NATIONAL ASSOCIATION
100 EAST BROAD STREET, OH1-0121
COLUMBUS, OH 43271
Bank One, NA
100 East Broad Street, OH1-1066
Columbus, OH 43271
Transmitted to EDS as 0101467 on 04/30/98 at 09:05:47 CST
Call Date: 03/31/98 State #: FFIEC 031
Vendor ID: D Cert#: 06559 RC-1
Transit #: 04400037 ---------
11
---------
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC - Balance Sheet
C400 <-
Dollar Amounts in Thousands
- - - - --------------------------------------------------------------------------------------------------------------------------
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCFD
---- -------------
a. Noninterest-bearing balances and currency and coin (1)____________________________________ 0081 1,108,408 1.a
-------------
b. Interest-bearing balances (2)_____________________________________________________________ 0071 1,100 1.b
-------------
2. Securities:
-------------
a. Held-to-maturity securities (from Schedule RC-B, column A)________________________________ 1754 153,124 2.a
-------------
b. Available-for-sale securities (from Schedule RC-B, column D)______________________________ 1773 2,285,146 2.b
-------------
3. Federal funds sold and securities purchased under agreements to resell_______________________ 1350 0 3
-------------
4. Loans and lease financing receivables: RCFD
---- ------------
a. Loans and leases, net of unearned income (from Schedule RC-C)________ 2122 18,887,996 4.a
------------
b. LESS: Allowance for loan and lease losses____________________________ 3123 422,079 4.b
------------
c. LESS: Allocated transfer risk reserve________________________________ 3128 0 4.c
------------
d. Loans and losses, net of unearned income, RCFD
---- -------------
allowance, and reserve (item 4.a minus 4.b and 4.c)_______________________________________ 2125 18,455,917 4.d
-------------
5. Trading assets (from Schedule RC-D)__________________________________________________________ 3545 0 5.
-------------
6. Premises and fixed assets (including capitalized leases)_____________________________________ 2145 194,830 6.
-------------
7. Other real estate owned (from Schedule RC-M)_________________________________________________ 2160 9,427 7.
-------------
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)_____ 2130 39,238 8.
-------------
9. Customers' liability to this bank on acceptances outstanding_________________________________ 2155 3,827 9.
-------------
10. Intangible assets (from Schedule RC-M)_______________________________________________________ 2143 140,696 10.
-------------
11. Other assets (from Schedule RC-F)____________________________________________________________ 2160 2,107,317 11.
-------------
12. Total assets (sum of items 1 through 11)_____________________________________________________ 2170 24,509,030 12.
-------------
- - - - ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
Bank One, NA
100 East Broad Street, OH1-1066
Columbus, OH 43271
Transmitted to EDS as 0101467 on 04/30/98 at 09:05:47 CST
Call Date: 03/31/98 State #: FFIEC 031
Vendor ID: D Cert#: 06558 RC-2
Transit #: 04400037 ---------
12
---------
Schedule RC - Continued
Dollar Amounts in Thousands
- - - - --------------------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits RCON
---- ----------
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, RCON 2200 15,013,853 13.a
part I)___________________________________________________________________ ---- ----------
----------
(1) Noninterest-bearing (1)_______________________________________________ 6631 3,550,812 13.a.1
----------
(2) Interest-bearing______________________________________________________ 6636 11,463,041 13.a.2
----------
RCFN
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from RCFN ---- ----------
Schedule RC-E, part II)___________________________________________________ ---- 2200 1,251,180 13.b
---------- ----------
(1) Noninterest-bearing___________________________________________________ 6631 0 13.b1
----------
(2) Interest-bearing______________________________________________________ 6636 1,251,180 RCFD 13.b2
---------- ---- ----------
14. Federal funds purchased and securities sold under agreements to repurchase_________________________ 2800 1,932,651 14
----------
RCON
---- ----------
15.a. Demand notes issued to the U.S. Treasury_________________________________________________________ 2840 48,512 15.a
----------
RCFD
---- ----------
b. Trading liabilities (from Schedule RC-D)_________________________________________________________ 3548 0 15.b
----------
16. Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases):
----------
a. With a remaining maturity of one year or less___________________________________________________ 2332 1,415,753 16.a
----------
b. With a remaining maturity of more than one year through three years_____________________________ A547 470,997 16.b
----------
c. With a remaining maturity of more than three years______________________________________________ A548 639,840 16.c
----------
17. Not applicable
----------
18. Bank's liability on acceptances executed and outstanding___________________________________________ 2920 3,827 18
----------
19. Subordinated notes and debentures(2)_______________________________________________________________ 3200 729,183 19
----------
20. Other liabilities (from Schedule RC-G)_____________________________________________________________ 2930 1,038,774 20
----------
21. Total liabilities (sum of items 13 through 20)_____________________________________________________ 2948 22,544,880 21
----------
22. Not applicable
EQUITY CAPITAL
----------
23. Perpetual preferred stock and related surplus______________________________________________________ 3838 0 23
----------
24. Common stock_______________________________________________________________________________________ 3230 127,043 24
----------
25. Surplus (exclude all surplus related to preferred stock)___________________________________________ 3839 738,352 25
----------
26. a. Undivided profits and capital reserves__________________________________________________________ 3632 1,082,183 26.a
----------
b. Net unrealized holding gains (losses) on available-for-sale securities__________________________ 8434 16,872 26.b
----------
27. Cumulative foreign currency translation adjustments________________________________________________ 3284 0 27
----------
28. Total equity capital (sum of items 23 through 27)__________________________________________________ 3210 1,964,450 28
----------
29. Total liabilities and equity capital (sum of items 21 and 28)______________________________________ 3300 24,509,030 29
----------
Memorandum
to be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the RCFD Number
most comprehensive level of auditing work performed for the bank by independent external ---- ----------
auditors as of any date during 1997 _______________________________________________________________ 6724 N/A M.1
----------
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated holding
company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- - - - ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.