SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
CHS ELECTRONICS, INC.
(Name of Issuer)
Common Stock, Par Value $.001 Per Share
(Title of Class of Securities)
12 542 A-20-6
(CUSIP Number)
Steven M. Woghin, Esq.
Senior Vice President and General Counsel
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11788
(516) 342-5224
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 26, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a Statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this Schedule because of Rule 13d-1(b)(3) or (4), check the following box
Page 1 of 8 Pages
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CUSIP No. 12542A-20-6 13D Page 2 of 8 Pages
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Computer Associates International, Inc.
2 Check the Appropriate Box if a Member of a Group (See Instructions)
(a)
(b)
3 SEC Use Only
4 Sources of Funds (See Instructions)
WC
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant
to Item 2(d) or 2(e)
6 Citizenship or Place of Organization
Delaware
Number of
Shares 7 Sole Voting Power
4,709,091
Beneficially
Owned by 8 Shared Voting Power
0
Each 9 Sole Dispositive Power
Reporting 4,709,091
Person With 10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
4,709,091
12 Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
13 Percent of Class Represented by Amount in Row (11)
7.5%
14 Type of Reporting Person (See Instructions)
CO
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Item 1. Security and Issuer.
The class of equity securities to which this Statement relates
is the Common Stock, par value $.001 per share (the "Common Stock"), of CHS
Electronics, Inc., a Delaware corporation (the "Issuer"), with its principal
executive offices located at 2000 NW 84th Avenue,Miami, Florida 33122.
Item 2. Identity and Background.
(a)-(c), (f) This Statement is filed by Computer Associates
International, Inc., a Delaware corporation ("Computer Associates"). Computer
Associates is engaged in the design, development, marketing and support of
standardized computer software products for use with a broad range of desktop,
midrange and mainframe computers from many different hardware manufacturers. The
principal executive offices of Computer Associates are located at One Computer
Associates Plaza, Islandia, New York 11788.
The name, business address and present principal occupation or
employment of each director and executive officer of Computer Associates and the
name, principal business and address of any corporation or other organization in
which such employment is conducted is set forth below. Each such person is a
citizen of the United States of America, except for Willem F.P. de Vogel and
Roel Pieper who are each a citizen of The Netherlands. Unless otherwise
indicated below, the business address of each such person is c/o Computer
Associates International, Inc., One Computer Associates Plaza, Islandia, New
York 11788.
Russel M. Artzt is a director and Executive Vice
President-Research and Development of Computer Associates.
Willem F.P. de Vogel, a director of Computer Associates, is
the President of Three Cities Research, Inc., a private investment management
firm. The business address of Mr. de Vogel is c/o Three Cities Research, Inc.,
650 Madison Avenue, New York , New York 10022.
Irving Goldstein, a director of Computer Associates, has
retired from his position as Director General and Chief Executive Officer of
INTELSAT, an international satellite telecommunications company.
Richard A. Grasso, a director of Computer Associates, is the
Chairman and Chief Executive Officer of the New York Stock Exchange, a national
securities exchange. The business address of Mr. Grasso is c/o New York Stock
Exchange, 11 Wall Street, New York, New York 10005.
Shirley Strum Kenny, a director of Computer Associates, is the
President of the State University of New York at Stony Brook, a New York
State-run university. The business address of Ms. Kenny is President's Office,
State University of New York at Stony Brook, Stony Brook, New York 11794.
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Roel Pieper, a director of Computer Associates, is the
Chief Executive Officer of Fifth Force Inc. Mr. Pieper's business address
is Vogelenzangseweg 5, NL-2111HP, Aerdenhout, The Netherlands.
Sanjay Kumar is a director and President and Chief Operating
Officer of Computer Associates.
Charles B. Wang is a director and Chief Executive Officer and
Chairman of the Board of Computer Associates.
Michael A. McElroy is a Vice President-Legal and Secretary of
Computer Associates.
Charles P. McWade is a Senior Vice President-Finance of
Computer Associates.
Ira H. Zar is a Senior Vice President-Finance and Chief
Financial Officer of Computer Associates.
Lisa Savino is a Vice President and Treasurer of Computer
Associates.
(d) and (e) Neither Computer Associates nor, to the knowledge
of Computer Associates, any of the other persons specified in Item 2 above has
during the last five years (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
On May 26, 1999, pursuant to the Debenture Purchase Agreement
between the Issuer and Computer Associates, a copy of which is attached as
Exhibit 1 to this Statement (the "Debenture Purchase Agreement"), the Issuer
agreed to issue and deliver to Computer Associates, and Computer Associates
agreed to purchase, in a private placement, the Issuer's Floating Rate
Convertible Debentures Due 2003 in the principal amount of $50 million. A copy
of the form of Floating Rate Convertible Debentures Due 2003 is attached as
Exhibit 2 to this Statement (the "Convertible Debentures"). As part of the
Debenture Purchase Agreement, the Issuer agreed to issue and deliver to Computer
Associates a common stock purchase warrant to purchase 2,000,000 shares of the
Issuer's Common Stock at an exercise price of $5.50 per share (the "Warrant"),
subject to adjustment as set forth in the Warrant. A copy of the Warrant is
attached as Exhibit 3 to this Statement. Pursuant to the terms of the Debenture
Purchase Agreement, on May 26, 1999 the Issuer issued and delivered to Computer
Associates, and Computer Associates purchased the Issuer's Convertible
Debentures in the principal amount of $14,900,000 and the Warrant. Computer
Associates paid the $14.9 million purchase price for the Convertible Debentures
and the Warrant using working capital available to it. The $35.9 million balance
of the Convertible
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Debentures to be issued to and purchased by Computer
Associates, is subject to obtaining the necessary clearance under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR
Approval"). The principal amount of the Convertible Debentures, in whole or in
part, may be converted into shares of Common Stock at a per share conversion
price of $5.50. Such conversion price is subject to adjustment as set forth in
the Convertible Debentures.
The information set forth in this Item 3 is qualified in its
entirety by reference to the Debenture Purchase Agreement, the Convertible
Debentures and the Warrant, each of which is incorporated herein by reference.
Item 4. Purpose of Transaction.
Computer Associates purchased the Convertible Debentures in
the principal amount of $14,900,000 and the Warrant on May 26, 1999 and agreed
to purchase additional Convertible Debentures in the princpal amount of
$35,100,000, subject to obtaining HSR Approval, for investment purposes.
Computer Associates will continue to evaluate its investment in the Issuer on
the basis of various factors, including the Issuer's business, financial
condition, results of operations and prospects, general economic and industry
conditions, the securities markets in general and those for the Issuer's
securities in particular, Computer Associates' own financial condition, other
investment opportunities and other future developments. Based upon such
evaluation, Computer Associates will take such actions in the future as Computer
Associates may deem appropriate in light of the circumstances existing from time
to time. Depending on market and other factors, Computer Associates may
determine to dispose of all or a portion of the Convertible Debentures or the
Warrant, or the shares of Common Stock issuable upon conversion of the
Convertible Debentures, or upon exercise of the Warrant (collectively, the
"Conversion Shares") or to enter into option or other transactions (including,
without limitation, hedging transactions) with third parties with respect to the
Common Stock.
Except as set forth in this Item 4, Computer Associates has no
plans or proposals with respect to any of the actions specified in clauses (a)
through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) As of the close of business on May 26, 1999, Computer
Associates beneficially owned 4,709,091 shares of Common Stock, of which
2,709,091 shares of Common Stock are issuable upon conversion of the Convertible
Debentures, and 2,000,000 shares of Common Stock are issuable upon exercise of
the Warrant. Assuming full conversion of the Convertible Debentures and full
exercise of the Warrant, such 4,709,091 shares represent approximately 7.5% of
the outstanding shares of Common Stock (computed on the basis of 58,040,369
shares of Common Stock outstanding as of May 10, 1999 as specified in the
Issuer's Quarterly Report on Form 10-Q for the Quarterly Period ended March 31,
1999, plus 4,709,091 shares issuable upon conversion of the Convertible
Debentures and exercise of the Warrant).
<PAGE>
Debentures provide, among other things, that the Convertible Debentures may be
converted into shares of Common Stock, at the option of Computer Associates, at
any time and from time to time beginning on the date of issuance of the
Convertible Debentures. The Convertible Debentures were issued in the principal
amount of $14,900,000 on May 26, 1999.
To the knowledge of Computer Associates, none of Computer
Associates' directors, executive officers, affiliates or associates beneficially
owns any equity securities, or rights to acquire any equity securities, of the
Issuer.
(b) Computer Associates has the sole power to vote or to
direct the vote, and to dispose or to direct the disposition of, the 4,709,091
Conversion Shares.
(c) None.
(d) No other person has the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, any of
the 4,709,091 Conversion Shares.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships
with respect to Securities of the Issuer.
On May 26, 1999, pursuant to the Debenture Purchase Agreement,
the Issuer issued and delivered to Computer Associates, and Computer Associates
purchased, in a private placement, the Convertible Debentures in the principal
amount of $14,900,000 and the Warrant. The principal amount of the Convertible
Debentures, in whole or in part, may be converted into shares of Common Stock at
a per share conversion price of $5.50, subject to adjustment as set forth in the
Convertible Debentures, and the Warrant may be exercised, in whole or in part,
at an exercise price of $5.50 per share, subject to adjustment as set forth in
the Warrant, for the issuance of up to 2,000,000 shares of Common Stock. The
Debenture Purchase Agreement provides for the issuance and delivery by the
Issuer to Computer Associates and the purchase by Computer Associates of
additional Convertible Debentures in the principal amount of $35,100,000,
subject to obtaining HSR Approval. The Debenture Purchase Agreement, the
Convertible Debentures and the Warrant also contain, among other things, certain
covenants and representations and warranties of the Issuer, registration rights
with respect to the Conversion Shares, transfer restrictions on the Convertible
Debentures, the Warrant and the Conversion Shares, and anti-dilution provisions.
In addition, the holders of a majority of the outstanding principal amount of
Convertible Debentures have the right to designate an individual who will be
appointed to the Issuer's Board of Directors.
The information set forth above in this Item 6 is qualified in
its entirety by reference to the Debenture Purchase Agreement, the Convertible
Debentures and the Warrant, each of which is incorporated herein by reference.
<PAGE>
Except as described in this Statement, to the knowledge of
Computer Associates, there are no contracts, arrangements, understandings or
relationships (legal or otherwise) among the persons named in Item 2 hereof and
between such persons and any other person with respect to any securities of the
Issuer, including, but not limited to, transfer or voting of any of such
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 Debenture Purchase Agreement, dated May 26, 1999, between the
Issuer and Computer Associates
Exhibit 2 $14,900,000 Floating Rate Convertible Debentures Due 2003
issued on May 26, 1999 by the Issuer to Computer Associates
Exhibit 3 Common Stock Purchase Warrant to purchase 2,000,000 shares
of Common Stock issued on May 26,1999 by the Issuer to
Computer Associates.
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in this
Statement is true, complete and correct.
Dated: June 4, 1999 COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By:/s/ Steven M. Woghin
-----------------------
Name: Steven M. Woghin
Title:Sr. Vice President and
General Counsel
$50,000,000
FLOATING RATE CONVERTIBLE DEBENTURES
Due 2003
DEBENTURE PURCHASE AGREEMENT
dated
May 26, 1999
between
CHS ELECTRONICS, INC.
and
COMPUTER ASSOCIATES INTERNATIONAL, INC.
<PAGE>
TABLE OF CONTENTS
Section Page
1. Issuance of Securities and Reservation of Reserved Shares..................1
not defined.
2. Purchase, Sale and Delivery................................................1
3. Representations and Warranties of the
Corporation...........................................................1
(a) Organization...................... ..............................1
(b) Capital Stock; Indebtedness; Liens...............................2
(c) Authorization of Agreement.......................................2
(d) Authorization of Debentures......................................2
(e) Authorization of Shares..........................................3
(f) Non-Contravention; No Required
Consents.........................................................3
(g) Litigation.......................................................4
(h) Compliance; Governmental
Authorizations...................................................4
(i) Financial Statements.............................................4
(j) Absence of Changes...............................................4
(k) Taxes............................................................5
(l) Intellectual Property............................................5
(m) Compliance with ERISA............................................5
(n) No Defaults......................................................6
(o) SEC Reports......................................................6
(p) Offering Exemption...............................................7
(q) Use of Proceeds..................................................7
(r) Investment Company...............................................7
(s) Disclosure.......................................................7
(t) No Finders' Fees.................................................7
(u) Delaware Law; Rights Agreement...................................7
4. Representations and Warranties of the Purchaser............................8
(a) Investment Purpose...............................................8
(b) Restricted Securities............................................8
(c) Accredited Investor..............................................8
5. Conditions of Obligations of the Purchaser.................................9
(a) Debenture........................................................9
(b) Actions Authorized...............................................9
(c) Legal Opinion....................................................9
(d) Representations and Warranties; Compliance; No Default...........9
(e) HSR Act......................................................... 9
<PAGE>
6. Transfer of Securities.....................................................9
(a) Restriction on Transfer..........................................9
(b) Restrictive Legend...............................................9
(c) Notice of Transfer..............................................10
7. Registration of Registrable Stock.........................................10
(a) Shelf Registration..............................................10
(b) Registration Procedures ........................................11
(c) Designation of Underwriter......................................12
(d) Cooperation by Prospective Sellers..............................12
(e) Expenses........................................................12
(f) Indemnification.................................................13
8. Covenants.................................................................14
(a) Information.....................................................14
(b) Payment of Obligations..........................................15
(c) Conduct of Business and Maintenance of Existence................16
(d) Compliance with Laws............................................16
(e) Inspection of Property, Books and Records.......................16
(f) Prohibited Transactions.........................................16
(g) Increase in Authorized Capital..................................16
9. Survival of Representations, Warranties and Agreements Etc................17
10. Miscellaneous............................................................17
(a) Entire Agreement................................................17
(b) Headings........................................................17
(c) Notices.........................................................17
(d) Counterparts....................................................18
(e) Amendments......................................................18
(f) Assignment......................................................19
(g) Expenses; Documentary Taxes; Indemnification....................19
(h) CHOICE OF LAW...................................................20
(i) CONSENT TO JURISDICTION.........................................20
(j) WAIVER OF JURY TRIAL............................................20
<PAGE>
EXHIBITS
Exhibit A - Form of Floating Rate Convertible Debenture Due 2003
Exhibit B - Form of Warrant
Exhibit C - (Reserved)
Exhibit D - Form of Opinion of Counsel to the Company
<PAGE>
DEBENTURE PURCHASE AGREEMENT dated as of May 26, 1999 between
CHS ELECTRONICS, INC., a Florida corporation (the "Company" or
"CHS"), and COMPUTER ASSOCIATES INTERNATIONAL,INC., a Delaware
corporation (the "Purchaser").
The parties hereto agree as follows:
1. Issuance of Securities and Reservation of Reserved Shares. Subject to the
terms and conditions of this Agreement, the Company has authorized the issuance
of its Floating Rate Convertible Debentures due 2003 (the "Debentures") in
substantially the form of Exhibit A hereto in the aggregate principal amount of
$50,000,000, and the Company has authorized the reservation of a sufficient
number of shares of Common Stock, par value $.001 per share (the "Common
Stock"), including the associated Rights (as defined below in Section 3(b)) of
the Company to provide for conversion of the Debentures and exercise of the
Warrants (as defined below in Section 2) (such reserved shares being referred to
herein as the "Reserved Shares").
2. Purchase, Sale and Delivery On the basis of the representations, warranties,
covenants and agreements, but subject to the terms and conditions, set forth in
this Agreement, at the Closings (as defined below), the Company agrees to sell
and deliver to the Purchaser, and the Purchaser agrees to purchase from the
Company, one or more Debentures in the aggregate principal amount of $50,000,000
at 100% of the principal amount (the "Purchase Price"). The Purchaser will
designate to the Company the number and denominations of Debentures at least one
business day prior to the Closing. The closings (the "Closings") for the
consummation of the transactions contemplated by this Agreement shall take place
at the offices of the Purchaser, as follows: (a) at the first closing (the
"First Closing"), which shall occur simultaneously with the execution of this
Agreement, subject to satisfaction of the conditions set forth in Section 5, the
Company shall issue to the Purchaser warrants to purchase an aggregate of
2,000,000 shares of Common Stock (the "Warrants"), (the terms of such Warrants
to be evidenced by a warrant certificate in substantially the form of Exhibit B)
and issue and deliver, and Purchaser shall purchase and pay for, $14,900,000 in
principal amount of Debentures; and (b) at the second closing (the "Second
Closing"), the Company shall issue and deliver, and Purchaser shall purchase and
pay for, $35,100,000 in principal amount of the Debentures. The Second Closing
shall take place within five (5) business days after the date the parties
receive the necessary clearances under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), subject to satisfaction of the
conditions set forth in Section 5. Promptly after the date hereof, the parties
shall make the necessary filings under the HSR Act, and shall use their
commercially reasonable efforts to obtain such clearances as promptly as
possible.(such dates of the Closing being herein referred to as the "Closing
Dates"). The applicable portions of the Purchase Price shall be delivered to the
Company at each Closing by wire transfer of immediately available Federal funds
(instructions for which will be provided by the Company to the Purchaser),
against receipt of the Debentures.
<PAGE>
3. Representations and Warranties of the Company. Except in the case of any
representation and warranty below, to the extent described under the caption
identifying such representation and warranty in the Company Disclosure Letter
dated the date of this Agreement and furnished by the Company to the Purchaser
on the date of this Agreement (the "Company Disclosure Letter"), the Company
represents and warrants, and agrees, as follows:
(a) Organization The Company and each of the subsidiaries of the Company, a
list of which are set forth on Schedule 3(a) of the Company Disclosure Letter
(each a "Subsidiary" and, collectively, the "Subsidiaries"), are corporations
duly organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation, and are duly qualified and in good
standing to do business in each jurisdiction in which such qualification is
necessary because of the property owned or leased or because of the nature of
business conducted by it, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), assets, liabilities,
operations, earnings or business of the Company and its Subsidiaries, taken as a
whole (a "Material Adverse Effect"). The Company does not own, directly or
indirectly, any equity interest in any corporation, partnership, joint venture
or other entity other than the Subsidiaries.
(b) Capital Stock; Indebtedness; Liens.
(i) The authorized capital stock of the Company as of the date hereof consists
of 100,000,000 shares of Common Stock, par value $.001 per share, and 5,000,000
shares of Preferred Stock, of which 58,049,580 shares of Common Stock, including
associated Rights (the "Rights") issued pursuant to the Rights Agreement, as
amended, dated as of March 18, 1998, between the Company and American Stock
Transfer and Trust Company, as Rights Agent (the "Rights Agreement"), are
validly issued and outstanding, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof, and no shares of Preferred Stock
are issued or outstanding. All outstanding shares of capital stock of the
Company are duly authorized and not subject to any pre-emptive rights. Except
for such 58,049,580 shares of Common Stock and the Rights, there are no other
shares of capital stock or other equity securities of the Company issued or
outstanding.
(ii) Except as set forth in the Reports (as defined below) and in Schedule
3(b)(ii): (A) there are no options, warrants, contracts, commitments or
agreements to which the Company is a party or is bound relating to any shares of
capital stock or other securities of the Company, whether or not outstanding,
and (B) other than the Purchaser pursuant to this Agreement, no person has any
right to cause the Company to effect the registration under the Securities Act
of 1933, as amended (the "Securities Act"), of Common Stock or any other
securities of the Company, and (C) there are no voting trusts, voting
agreements, proxies or other agreements or instruments with respect to the
voting of the Company's capital stock to which the Company is a party or, to the
best of the Company's knowledge, among or between any persons other than the
Company.
(c) Authorization of Agreement. The execution, delivery and performance by the
Company of this Agreement are within the Company's corporate powers and
<PAGE>
have been duly authorized by all requisite corporate action by the Company; and
this Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company.
(d) Authorization of Debentures and Warrants. The issuance, sale and delivery of
the Debentures and the Warrants are within the Company's corporate powers and
have been duly authorized by all requisite corporate action of the Company, and
when issued, sold and delivered in accordance with the provisions of this
Agreement, the Debentures and the Warrants will constitute the valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.
(e) Authorization of Shares. The Debentures are convertible into Common Stock in
accordance with the terms of this Agreement and of the Debentures. The Warrants
are exercisable for shares of Common Stock in accordance with the terms set
forth in this Agreement and the Warrant Certificate. The reservation, issuance
and delivery of the Reserved Shares are within the Company's corporate powers
and have been duly authorized by all requisite corporate action of the Company,
and when issued and delivered in accordance with the terms of this Agreement and
the terms of the Debentures and the Warrants, as the case may be, and accepted
for listing on The New York Stock Exchange ("NYSE"), the Reserved Shares will be
validly issued and outstanding, fully paid and non-assessable with no personal
liability attaching to the ownership thereof, and not subject to preemptive or
any other similar rights of the shareholders of the Company or others. The
stockholders of the Company have no preemptive rights with respect to the
Debentures, the Warrants, the Reserved Shares or the Common Stock.
(f) Non-Contravention; No Required Consents. The execution, delivery and
performance of this Agreement, the issuance, sale and delivery of the Debentures
and the Warrants and the reservation, issuance and delivery of the Reserved
Shares, and compliance with the provisions hereof and thereof by the Company
will not (i) violate any provision of law, statute, rule or regulation, or any
ruling, writ, injunction, order, judgment, or decree of any court,
administrative agency or other governmental body applicable to the Company, any
of the Subsidiaries or any of their properties or assets or (ii) conflict with
or result in any breach of any of the terms, conditions or provisions of, or
constitute (with due notice or lapse of time, or both) a default (or give rise
to any right of termination, cancellation or acceleration) under, or result in
the creation of any lien, security interest, charge or encumbrance upon any of
the properties or assets of the Company under, (A) the Company's or any
Subsidiary's articles of incorporation or bylaws, or (B) any note, indenture,
mortgage, lease, contract, agreement or instrument (1) to which the Company is a
party or by which it or any of its properties or assets are bound or affected
and (2) relating to any debt owed by, or any capital stock issued by, the
Company, (C) any other material lease, contract, agreement or other instrument
to which the Company is a party or by which any of its properties or assets are
bound or affected or (D) any material note, indenture, mortgage, lease,
agreement or other contract, agreement or instrument to which any Subsidiary is
a party or by which it or any of its properties or assets are bound or affected.
Except for the filing of any notice subsequent to the Closings that may be
required under applicable Federal or state securities laws (which, if required,
shall be filed on a timely basis as may be so required), obtaining the necessary
<PAGE>
clearances under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and
listing the Reserved Shares on the NYSE, no consent, approval or authorization
of, or declaration to, or filing with, any Person is required for the valid
authorization, execution, delivery, and performance by the Company of this
Agreement or for the valid authorization, issuance, sale and delivery of the
Debentures or for the valid authorization, reservation, issuance and delivery of
the Reserved Shares. The term "Person", as used herein, means an individual, a
corporation, a partnership, a limited liability company, a trust, an
unincorporated association or any other entity or organization, including,
without limitation, a government or political subdivision or an agency,
instrumentality or official thereof.
(g) Litigation. Except as disclosed in Schedule 3(g) or in the Reports (i) there
are no actions, suits, claims, investigations or legal or administrative or
arbitration proceedings pending or, to the knowledge of the Company or any
Subsidiary, threatened against or affecting the Company or any Subsidiary,
whether at law or in equity, or before or by any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality which individually or in the aggregate would, if adversely
determined, have a Material Adverse Effect, or which in any manner draws into
question the validity of this Agreement, the Debentures or the Reserved Shares
or the transactions contemplated hereby or thereby; and (ii) there are no
judgments, decrees, injunctions or orders of any court, governmental department,
commission, agency, instrumentality or arbitrator against or affecting the
Company or any Subsidiary, which individually or in the aggregate, would have a
Material Adverse Effect.
(h) Compliance; Governmental Authorizations. Each of the Company and each
Subsidiary has complied, and is in compliance with, in all respects with the
Federal, state, local or foreign laws, ordinances, regulations and orders
(including environmental laws, ordinances, regulations and orders) necessary for
the conduct of its business, except where the failure to comply with any of the
foregoing would not have a Material Adverse Effect. Each of the Company and each
Subsidiary has all Federal, state and foreign governmental licenses and permits
necessary for the conduct of its business as presently being conducted
(including all those required by the United States Environmental Protection
Agency and similar state agencies), such licenses and permits are in full force
and effect, no violations are or have been recorded in respect of any thereof
and no proceeding is pending or, to the knowledge of the Company or any
Subsidiary, threatened to revoke or limit any thereof, except where the failure
to comply with any of the foregoing would not have a Material Adverse Effect.
(i) Financial Statements. The consolidated financial statements of the Company
and the Subsidiaries set forth in the (i) Company's Annual Report on Form 10-K
for the year ended December 31, 1998, reported on by Grant Thornton LLP, and
(ii) Company's Quarterly Report on Form 10-Q for the three months ended March
31, 1999, in each case fairly present the consolidated financial position of the
Company and the Subsidiaries as of such date and the consolidated results of
operation and cash flows for such period then ended in conformity with generally
accepted accounting principles. Grant Thornton is the Company's independent
accountant as defined under the Securities Act and the rules and regulations
promulgated thereunder.
<PAGE>
(j) Absence of Changes. Since March 31, 1999, and except as disclosed in
Schedule 3(j), the Company and each Subsidiary has been operated in the ordinary
course of business consistent with past practice and there has not been (i) any
material adverse change in the condition (financial or otherwise), assets,
liabilities, operations, earnings or business of the Company and its
Subsidiaries, taken as a whole; or (ii) any declaration, setting aside or
payment of any dividend or other distribution with respect to any shares of
Common Stock, or any direct or indirect redemption, purchase or other
acquisition of any such shares of Common Stock.
(k) Taxes. Except as disclosed in Schedule 3.2(k), the federal income tax
returns of the Company or its predecessors have never been examined by the
Internal Revenue Service. Neither the Company nor its predecessors has taken any
reporting positions for which they do not have a reasonable basis and the
Company does not anticipate any further material tax liability with respect to
the years for which returns have been filed prior to the date of this Agreement.
For purposes of this paragraph, the term "Company" shall include each other
corporation with which the Company files consolidated or combined income tax
returns or reports. The Company and each Subsidiary have timely filed (or
received extensions for filing) all United States federal income tax returns and
all other material tax returns (federal, state, local and foreign) required to
be filed by it, which returns are true and correct in all material respects, and
all taxes, assessments, fees and othergovernmental charges thereupon and upon
its properties, assets, income and franchises which are due and payable prior to
the date of this Agreement, the failure of which to pay when due and payable has
or is likely to have a Material Adverse Effect, have been paid when due and
payable, or reserves have been provided for payment thereof to the extent
required under generally accepted accounting standards. The Company does not
know of any actual or proposed additional tax assessments for any fiscal period
against it or any of the Subsidiaries which, singly or in the aggregate, would
have a Material Adverse Effect and the Company has established adequate reserves
for such additional tax assessments, if any.
(l) Intellectual Property. The Company or a Subsidiary
exclusively or jointly owns, or is licensed to use, all patents, licenses,
copyrights, trademarks or trade names or other intellectual property rights
("Intellectual Property") which the Company believes are necessary, required or
desirable for the conduct of the business of the Company and the Subsidiaries as
presently conducted or as presently proposed to be conducted. There are no
pending or threatened claims against the Company or any Subsidiary alleging that
the conduct of the Company's or such Subsidiary's business (as now conducted or
presently proposed to be conducted) infringes or conflicts with or will infringe
or will conflict with the rights of others in any Intellectual Property. To the
knowledge of the Company, no third party is infringing any of the Intellectual
Property of the Company or any Subsidiary. To the Company's knowledge, neither
the Company nor any Subsidiary is making unauthorized use of any confidential
information or trade secrets of any person, including without limitation, any
former or present employees of the Company or any Subsidiary.
(m) Compliance with ERISA. Each member of the ERISA Group has fulfilled its
obligations under the minimum funding standards of ERISA and the Internal
Revenue Code with respect to each Plan and is in compliance in all material
respects with the
<PAGE>
presently applicable provisions of ERISA and the Internal Revenue Code with
respect to each Plan. No member of the ERISA Group has (i) sought a waiver of
the minimum funding standard under Section 412 of the Internal Revenue Code in
respect of any Plan, (ii) failed to make any contribution or payment to any Plan
or Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could result
in the imposition of a lien or the posting of a bond or other security under
ERISA or the Internal Revenue Code or (iii) incurred any liability under Title
IV of ERISA other than a liability to the PBGC for premiums under Section 4007
of ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute. "ERISA Group" means the Company and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414 of the Internal
Revenue Code. "PBGC" means the Pension Benefit Guaranty Company or any entity
succeeding to any or all of its functions under ERISA. "Benefit Arrangement"
means at any time an employee benefit plan within the meaning of Section 3(3) of
ERISA which is not a Plan or a Multiemployer Plan and which is maintained or
otherwise contributed to by any member of the ERISA Group. "Multiemployer Plan"
means at any time an employee pension benefit plan within the meaning of Section
4001(a) (3) of ERISA to which any member of the ERISA Group is then making or
accruing an obligation to make contributions or has within the preceding five
Plan years made contributions, including for these purposes any Person which
ceased to be a member of the ERISA Group during such five year period. "Plan"
means at any time an employee pension benefit plan (other than a Multiemployer
Plan) which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Internal Revenue Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (ii) has at any time within the preceding five
years been maintained, or contributed to, by any Person which was at such time a
member of the ERISA Group for employees of any Person which was at such time a
member of the ERISA Group.
(n) No Defaults. Except as disclosed in Schedule 3(n), (A) neither the Company
nor any Subsidiary is in default (i) under its articles of incorporation or
bylaws, or any indenture, mortgage, lease, purchase or sales order, or any other
contract, agreement or instrument to which the Company or any Subsidiary is a
party or by which they or any of their properties are bound or affected or (ii)
with respect to any order, writ, injunction or decree of any court or any
Federal, state, municipal or other domestic or foreign governmental department,
commission, board, bureau, agency or instrumentality, which defaults
individually or in the aggregate would have a Material Adverse Effect; and (B)
there exists no condition, event or act which constitutes, or which after
notice, lapse of time, or both, would constitute, a default under any of the
foregoing, which defaults individually or in the aggregate would have a Material
Adverse Effect.
(o) SEC Reports. The Company has delivered to the Purchaser its (i) AnnualReport
on Form 10-K for the year ended December 31, 1998 and (ii) Quarterly Report on
Form 10-Q for the three months ended March 31, 1999 (together, the "Reports").
The description of the business, operations, properties and assets of the
Company contained in the Reports, as well as all other factual statements
concerning the Company contained therein,are true,
<PAGE>
correct and complete in all material respects and do not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(p) Offering Exemption. Neither the Company nor any
of its agents has offered or sold any Debentures, Warrants or Common Stock, or
any similar security or securities to, or solicited any offers to buy any of the
foregoing from, or otherwise approached or negotiated in respect thereof with,
any person or persons so as to require registration of the Debentures, the
Warrants or the Reserved Shares under the Securities Act or qualification under
the Trust Indenture Act of 1939. The offering and sale of the Debentures and the
Warrants and the issuance of the Reserved Shares upon conversion of the
Debentures and the Warrants, as the case may be, are each exempt from
registration under the Securities Act pursuant to Section 4(2) of such Act.
(q) Use of Proceeds. The proceeds received by the Company from the sale of the
Debentures and the Warrants shall be used by the Company for general corporate
purposes. None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of buying or carrying any
"margin stock" within the meaning of Regulation T, U or X of the Board of
Governors of the Federal Reserve System.
(r) Investment Company. The Company is
not an "investment company" or an entity "controlled" by an "investment company"
as such terms are defined in the Investment Company Act of 1940, as amended.
(s) Disclosure. No document, certificate, instrument or written statement or
information furnished or made available to the Purchaser by or on behalf of the
Company in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained therein not misleading. There is no
fact peculiar to the Company which materially adversely affects (without regard
to general market and economic conditions), or in the future may (so far as the
Company can now foresee), to the best knowledge of the Company, materially
adversely affect the business, operations, condition, properties or assets of
the Company which has not been set forth in this Agreement or in the other
documents, certificates, instruments or written statements furnished to the
Purchaser by or on behalf of the Company pursuant hereto.
(t) No Finders' Fees. There is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of the
Company or any Subsidiary who might be entitled to any fee or commission from
the Company, any Subsidiary, the Purchaser or any of Purchaser's affiliates upon
consummation of the transactions contemplated by this Agreement or thereafter.
(u) Florida Law; Rights Agreement. The Company has delivered to the Purchaser a
complete and correct copy of the Rights Agreement, including all amendments and
exhibits thereto. The Company has taken, and as soon as possible after the date
hereof (but in no event later than five business days after the date hereof),
the Rights Agent will take, all actions necessary or appropriate to amend the
Rights Agreement to ensure that the execution of this Agreement and the issuance
and delivery of the Reserved Shares in accordance with the terms of thiS
<PAGE>
Agreement and the terms of the Debentures and the other transactions
contemplated by this Agreement and the Debentures and the Warrants will not
cause (i) the Purchaser or any of its affiliates to be considered an Acquiring
Person (as such term isdefined in the Rights Agreement), (ii) the occurrence of
a Distribution Date or Stock Acquisition Date (as such terms are defined in the
Rights Agreement) or (iii) the separation of the Rights from the underlying
Shares, and will not give the holders thereof the right to acquire securities of
any party hereto;provided that: (A) the amendments described in subsections (i)
through (iii) above shall be effective only so long as Purchaser does not
acquire, upon conversion of the Debenture, exercise of the Warrants, or
otherwise, 20% or more of the outstanding Common Stock; and (B) if Purchaser
acquires Common Stock ("Excess Shares") in excess of the amounts set forth in
subsection (A), such acquisition will be considered a "Triggering Event," and
Purchaser will be deemed an "Acquiring Person," all as defined in the Rights
Agreement. If the shareholders of the Company approve the Holder's purchase of
Excess Shares upon conversion of the Debentures and exercise of the Warrants (in
accordance with Section 3(g) of the Debentures), then the Company and its Board
of Directors shall take such further actions as may be necessary to exempt such
Excess Shares (and the Holder's acquisition thereof) from the provisions of
Florida Statutes ss.607.0902 and the Rights Agreement. If due to the Company's
issuance(s) of Common Stock after the date hereof, the total number of shares of
Common Stock which may be acquired by Purchaser pursuant to the Debentures and
the Warrants is less than 19.95% of the total shares of Common Stock then
outstanding, Purchaser may, at its option, elect to purchase additional shares
of Common Stock other than pursuant to the Debenture or the Warrants (the
"Outside Purchases"). Such Outside Purchases shall be exempt from the Rights
Agreement, so long as the total shares acquired through Outside Purchases, plus
the maximum amount of shares of Common Stock which have been or may be acquired
by Purchaser pursuant to the Debentures and the Warrants, does not exceed 19.95%
of the total shares of Common Stock then outstanding.
4. Representations and Warranties of
the Purchaser. The Purchaser represents and warrants to the Company as follows:
(a) Investment Purpose. The Purchaser is acquiring the Debentures and the
Warrants for the Purchaser's own account, not as a nominee or agent, and the
Purchaser is acquiring the Debentures and the Warrants for investment and not
with a view to the distribution thereof within the meaning of the Securities
Act.
(b) Restricted Securities.
(i) The Purchaser understands that the Debentures and the Warrants have
not been registered under the Securities Act; and that the Debentures and the
Warrants are restricted securities within the meaning of Rule 144 under the
Securities Act.
(ii) The Purchaser understands that the Reserved Shares issuable upon
conversion and the shares issuable upon exercise of the Warrants will not b
registered under the Securities Act (except as otherwise provided in Sectio 6)
and may only be sold or transferred in compliance with the Securities Act.
<PAGE>
(c) Accredited Investor. Purchaser is an Accredited Investor (as that
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act of 1933, as amended).
5. Conditions of Obligations of the Purchaser. The obligations of the
Purchaser to perform under this Agreement are subject to the satisfaction
of the following conditions at each closing unless waived by the Purchaser:
(a) Debenture and Warrant Certificate. The Purchaser shall have received
a duly executed Debenture or Debentures evidencing the principal amount of
Debentures purchased and a duly executed Warrant Certificate.
(b) Actions Authorized. All action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by the
Company, and the Company shall have full power and right to consummate the
transactions contemplated hereby. The Company shall have furnished to the
Purchaser such documents relating to its corporate existence and authority
(including, without limitation, certified copies of the Company's Articles of
Incorporation, Bylaws, resolutions and minutes of meetings of the Board of
Directors authorizing the Agreement and good standing certificates from the
Secretary of State of the states of Florida and such other matters as the
Purchaser or its counsel may reasonably request.
(c) Legal Opinion. The Purchaser shall have received an opinion dated the
Closing Date of Shutts and Bowen LLP, and/or Greenberg Traurig LLP, counsel to
the Company in the form of Exhibit D.
(d) Representations and Warranties; Compliance; No Default The
representations and warranties of the Company in Section 3 shall be true and
correct in all respects on and as of each Closing Date; the Company shall have
complied in all material respects with all obligations, covenants and conditions
required to be complied with by it pursuant to this Agreement on or prior to
each Closing; and the Purchaser shall have received a certificate at each
Closing signed by the Company's President and Chief Executive Officer to the
foregoing effect. No Event of Default under the Debentures and no event or
condition which, with the giving of notice or the lapse of time or both, would,
unless cured or waived, become such an Event of Default, shall have occurred and
be continuing.
(e) HSR Act. Prior to the Second Closing, the parties shall have received
clearance under the HSR Act to proceed with the Second Closing.
6. Transfer of Debentures.
(a) Restriction on Transfer. The Debentures shall not be transferable
except upon the conditions specified in this Section 6, which conditions are
intended to ensure compliance with the provisions of the Securities Act in
respect of the transfer of the Debentures. In addition, in no event shall the
Debentures be transferred to any person listed on Schedule 6(a).
<PAGE>
(b) Restrictive Legend. Each Debenture shall (unless otherwise permitted
by the provisions of Section 6(d)) be stamped or otherwise imprinted with
legends in substantially the following form:
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR QUALIFIED UNDER THE TRUST
INDENTURE ACT OF 1939. THIS DEBENTURE MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT. ADDITIONALLY,
THE TRANSFER OF THIS DEBENTURE IS SUBJECT TO THE
CONDITIONS SPECIFIED IN SECTION 6 OF THE DEBENTURE
PURCHASE AGREEMENT PURSUANT TO WHICH THIS DEBENTURE WAS
PURCHASED, AND NO TRANSFER OF THIS DEBENTURE SHALL BE
VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED.
(c) Notice of Transfer. Each holder of a Debenture (a "Holder"), by acceptance
thereof agrees, prior to any transfer of any Debentures, to give written notice
to the Company of such Holder's intention to effect such transfer and to comply
in all other respects with the provisions of this Section 6(c). Each such notice
shall describe the manner and circumstances of the proposed transfer and shall
be accompanied by the written opinion of counsel for such Holder, as to whether
in the opinion of such counsel such proposed transfer involves a transaction
requiring registration of such Debentures under the Securities Act. If in the
opinion of such counsel the proposed transfer of the Debentures may be effected
without registration under the Securities Act, the Holder shall thereupon be
entitled to transfer the Debentures in accordance with the terms of the notice
delivered by it to the Company. Each certificate or other instrument evidencing
the securities issued upon the transfer of any Debentures (and each certificate
or other instrument evidencing any untransferred balance of such Debentures)
shall bear the legend set forth in Section 6(b) unless in the opinion of such
counsel registration of future transfer is not required by the applicable
provisions of the Securities Act.
7. Registration of Registrable Stock.
(a) Shelf Registration.
(i) The Company shall within the earlier of 30 business days of (A) the
Second Closing and from time to time thereafter; and (B) delivery of a written
request to register Registrable Stock (as defined below) by any holder or
holders owning beneficially, in the aggregate, Debentures and/or Warrants
convertible or exchangeable into at least 51% of the Registrable Stock, file
with the Securities and Exchange ommission (the "SEC") a Shelf Registration
Statement (as defined below) relating to the offer and sale of the shares of
Common Stock or other securities issued or issuable upon conversion of the
Debentures or exercise of the Warrants (the "Registrable Stock") by the holders
of Registrable Stock from time to time in accordance with the methods of
distribution elected by such holders
<PAGE>
and set forth in such Shelf Registration Statement, and (y) use its best efforts
to cause such Shelf Registration Statement to be declared effective under the
Securities Act as promptly as practicable. "Register," "registered" and
"registration" each refer to a registration of Registrable Stock effected by
filing with the SEC a registration statement in compliance with the Securities
Act and the declaration or ordering by the SEC of effectiveness of such
registration statement. "Shelf Registration" means a registration effected
pursuant to this Section 7. "Shelf Registration Statement" means a shelf
registration statement of the Company filed with the SEC pursuant to the
provisions of this Section 7 which covers some or all of the Registrable Stock,
as applicable, on an appropriate form under Rule 415 under the Securities Act,
or any similar rule that may be adopted by the SEC, amendments and supplements
to such registration statement, includingpost-effective amendments, in each case
including the prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
(ii) The Company shall use its best efforts (x) to keep the Shelf
Registration Statement continuously effective in order to permit the prospectus
forming part thereof to be usable by the holders of Registrable Stock for a
period ending at such time as any holder could sell under Rule 144 under the
Securities Act, in any three month period, all of the Registrable Stock then
held by it, without any such Shelf Registration Statement being effective, and
(y) after the effectiveness of the Shelf Registration Statement, promptly upon
the request of any holder of Registrable Stock, to take any action necessary
including filing an amendment to the Shelf Registration Statement to register
the sale of any Registrable Stock of such holder and to identify such holder as
a selling securityholder.
( b) Registration Procedures. In connection with any Shelf
Registration Statement, the Company shall:
(i) prepare and file with the SEC a Shelf Registration Statement with respect to
the Registrable Stock and use its best efforts to cause such Shelf Registration
Statement to become and remain effective as provided in this Agreement;
(ii) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such Shelf Registration Statement effective and current and to
comply with the provisions of the Securities Act with respect to the disposition
of all shares covered by such Shelf Registration Statement, including such
amendments and supplements as may be necessary to reflect the intended method of
disposition from time to time of the prospective seller or sellers of such
Registrable Stock;
(iii) furnish to each selling holder of Registrable Stock
such number of copies of a prospectus in conformity with the requirements of the
Securities Act, and such other documents, as such holder may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Stock owned by such holder;
(iv) use its best efforts to register or qualify the
shares of Registrable Stock covered by such Shelf Registration Statement under
such other securities or blue sky or other applicable laws of such jurisdiction
within the United States as each
<PAGE>
prospective seller shall reasonably request, to enable such seller to consummate
the public sale or other disposition in such jurisdictions of the shares of
Registrable Stock owned by such seller; and
(v) furnish to each prospective seller a signed counterpart, addressed to the
prospective sellers, of (i) an opinion of counsel for the Company, dated the
effective date of the Shelf Registration Statement, and (ii) a "comfort" letter
(or, in the case of any such Person which does not satisfy the conditions for
receipt of a "comfort" letter specified in Statement on Auditing Standards No.
72, an "agreed upon procedures" letter) signed by the independent auditors who
have certified the Company's financial statements included in the Shelf
Registration Statement, covering substantially the same matters with respect to
the Shelf Registration Statement (and the prospectus included therein) and (in
the case of the "comfort" or "agreed upon procedures" letter) with respect to
events subsequent to the date of the financial statements, as are customarily
covered (at the time of such registration) in opinions of issuer's counsel and
in "comfort" letters delivered to the underwriters in underwritten public
offerings of securities (with, in the case of an "agreed upon procedures"
letter, such modifications or deletions as may be required under Statement on
Auditing Standards No. 35).
(c) Designation of Underwriter. In the case of any
registration effected pursuant to this Section 7, a majority in interest of the
holders of Registrable Stock shall have the right to designate the managing
underwriter in any underwritten offering. The Company agrees to enter into a
customary underwriting agreement with the managing underwritten in connection
with any such underwriter offering.
(d) Cooperation by Prospective Sellers.
(i) Each prospective seller of Registrable Stock, and each underwriter
designated by each such seller, will furnish to the Company such information as
the Company may reasonably require from such seller or underwriter in connection
with the Shelf Registration Statement (and the prospectus included therein). No
holder of Registrable Stock may participate in any offering unless such Holder
completes and executes all questionnaires, indemnities, underwriting agreements
and other documents reasonably required in connection with the offering.
(ii) Failure of a prospective seller of Registrable Stock to furnish the
information and agreements described in this Agreement shall not affect the
obligations of the Company under this Agreement to remaining sellers to furnish
such information and agreements unless, in the reasonable opinion of counsel to
the Company or the underwriters, such failure impairs or may impair the
viability of the offering or the legality of the registration or the underlying
offering.
(iii) The holders of shares of Registrable Stock included in the registration
will not (until further notice by the Company) effect sales thereof (or deliver
a prospectus to any purchaser) after receipt of telegraphic or written notice
from the Company to suspend sales to permit the Company to correct or update a
registration statement or prospectus. In connection with any offering each
Holder who is a prospective seller, will not
<PAGE>
use any offering document, offering circular or other offering materials with
respect to the offer or sale of Registrable Stock, other than the prospectuses
provided by the Company and any documents incorporated by reference therein.
(e) Expenses. All expenses incurred in complying with this Section 7, including,
without limitation, all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.),
fees and expenses of complying with securities and "blue sky" laws, printing
expenses and fees and disbursements of counsel for the Company, and one counsel
for the holders of Registrable Stock, and of the independent certified public
accountants shall be paid by the Company; provided, however, that all
underwriting discounts and selling commissions applicable to the Registrable
Stock, covered by registrations effected pursuant to this Section 7 shall not be
borne by the Company but shall be borne by the seller or sellers.
(f) Indemnification.
(i) In the event of any registration of any Registrable Stock under the
Securities Act pursuant to this Section 7 or registration or qualification of
any Registrable Stock pursuant to this Section 7, the Company shall indemnify
and hold harmless the seller of such shares, each underwriter of such shares, if
any, each broker or any other person acting on behalf of such seller and each
other person, if any, who controls any of the foregoing persons, within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which any of the foregoing persons may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any registration statement under which such Registrable Stock as
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or any
document prepared or furnished by the Company incident to the registration or
qualification of any Registrable Stock pursuant to this Section 7, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were made, not
misleading, or any violation by the Company of the Securities Act or state
securities or "blue sky" laws applicable to the Company and relating to action
or inaction required of the Company in connection with such registration or
qualification under such state securities or blue sky laws; and shall reimburse
such seller, such underwriter, broker or other person acting on behalf of such
seller and each such controlling person for any legal or any other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable (i) in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the registration statement, the preliminary prospectus or prospectus or in any
amendment or supplement thereof pursuant to this Section 7 in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by such seller or such underwriter specifically for use
in the preparation thereof and (ii) to any
<PAGE>
broker or other person acting on behalf of such seller to the extent that any
such loss, claim, damage or liability arises out of or is based upon any
representation or other statement of such broker or other person that is not in
conformity with the preliminary prospectus or prospectus.
(ii) Before Registrable Stock held by a prospective seller shall be included in
any registration pursuant to this Section 7, such prospective seller and any
underwriter acting on its behalf shall have agreed to indemnify and hold
harmless (in the same manner and to the same extent as set forth in (i) above)
the Company, each director of the Company, each officer of the Company who shall
sign such registration statement and any person who controls the Company within
the meaning of the Securities Act, with respect to any untrue statement or
omission from such registration statement, any preliminary prospectus or
prospectus contained therein, or any amendment or supplement thereof, if such
untrue statement or omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller or such underwriter, as the case may be, specifically for use in
the preparation of such registration statement, preliminary prospectus,
prospectus or amendment or supplement; provided that the maximum amount of
liability in respect of such indemnification shall be limited, in the case of
each prospective seller of Registrable Stock, to an amount equal to the net
proceeds actually received by such prospective seller from the sale of
Registrable Stock effected pursuant to such registration.
(iii) Notwithstanding the foregoing provisions of this Section 7(f), if
pursuant to an underwritten public offering of Common Stock, the Company,
the selling shareholders and the underwriters enter into an underwriting or
purchase agreement relating to such offering which contains provisions
covering indemnification among the parties thereto in connection with such
offering, the indemnification provisions of Section 7(f) shall be deemed
inoperative for purposes of such offering.
(iv) Each party entitled to indemnification under this Section 7(f) (the
"indemnified party") shall give notice to the party required to provide
indemnification (the "indemnifying party") promptly after such indemnified party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the indemnifying party (at its expense) to assume the defense of any
claim or any litigation resulting therefrom, provided that counsel for the
indemnifying party, who shall conduct the defense of such claim or litigation,
shall be reasonably satisfactory to the indemnified party, and the indemnified
party may participate in such defense, but only at such indemnified party's
expense, and provided, further, that the omission by any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under this Section 7(f) except to the extent that the omission
results in a failure of actual notice to the indemnifying party and such
indemnifying party is damaged solely as a result of the failure to give notice.
No indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, 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.
8. Covenants. The Company agrees that:
<PAGE>
(a) Information. The Company shall deliver to each Holder:
(i) (A) as soon as available and in any event within 5 days after filing of each
of the Company's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
with the Commission, copies of each of such reports; and (B) as soon as
available and in any event within 10 days after filing of each of the Company's
Annual Reports on Form 10-K including copies of the Company's Annual Report to
Shareholders and Schedule 14A with the Commission, copies of each of such
reports;
(ii) promptly upon the mailing thereof to the shareholders of the Company
generally, copies of all information (other than as described in clause (i)) so
mailed;
(iii) simultaneously with the delivery of each set of financial statements
referred to above, a certificate of the chief financial officer or the chief
accounting officer of the Company stating whether any Event of Default, as
defined in the Debentures, or any condition or event which, with the giving of
notice or lapse of time or both would, unless cured or waived, become an Event
of Default, exists on the date of such certificate and, if any Event of Default
or any such condition or event then exists, setting forth the details thereof
and the action which the Company is taking or proposes to take with respect
thereto;
(iv) if and when any member of the ERISA Group (i) gives or is required to give
notice to the PBGC of any "reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies
for a waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement or makes any amendment to any Plan or Benefit
Arrangement which has resulted or could result in the imposition of a lien or
the posting of a bond or other security, a certificate of the chief financial
officer or the chief accounting officer of the Company setting forth details as
to such occurrence and action, if any, which the Company or applicable member of
the ERISA Group is required or proposes to take; and
(v) from time to time such additional information
regarding the financial position or business of the Company and its Subsidiaries
as any Holder may reasonably request (it being understood and agreed that no
Holder shall be entitled to request
<PAGE>
any confidential or proprietary information of the Company and its Subsidiaries
pursuant to this clause (v)).
(b) Payment of Obligations. The Company will pay and discharge, and will cause
each Subsidiary to pay and discharge, at or before maturity, all their
respective material obligations and liabilities, including, without limitation,
tax liabilities, except where the same may be contested in good faith by
appropriate proceedings, and will maintain, and will cause each Subsidiary to
maintain, in accordance with generally accepted accounting principles,
appropriate reserves for the accrual of any of the same.
(c) Conduct of Business and Maintenance of Existence. The Company will continue,
and will cause each Subsidiary to continue, to engage in business of the same
general type as now conducted by the Company and its Subsidiaries, and will
preserve, renew and keep in full force and effect, and will cause each
Subsidiary to preserve, renew and keep in full force and effect their respective
corporate existence and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of business, provided that nothing
in this Section 8(c) shall prohibit (i) the merger of a Subsidiary into the
Company or the merger or consolidation of the Company or a Subsidiary with or
into another Person as permitted by Section 6(d) of the Debenture, or (ii) the
termination of the corporate existence of any Subsidiary if the Company in good
faith determines that such termination is in the best interest of the Company
and is not materially disadvantageous to the Holders of the Debentures.
(d)
Compliance with Laws. The Company will comply, and cause each Subsidiary to
comply, in all material respects with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities (including, without
limitation, environmental laws and ERISA and the rules and regulations
thereunder) except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings.
(e) Inspection of Property, Books and
Records. The Company will keep, and will use its best efforts to cause each
Subsidiary to keep, proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation to
its business and activities; and will permit, and will cause each Subsidiary to
permit, representatives of any Holder at such Holder's expense to visit and
inspect any of their respective properties, to examine and make abstracts from
any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants, all at such reasonable times, upon reasonable
notice and as often as may reasonably be desired (it being understood and agreed
that no Holder shall be entitled to request any confidential or proprietary
information of the Company and its Subsidiaries pursuant to this subsection
(e)).
(f) Prohibited Transactions. Neither the Company nor any agent acting on its
behalf will, directly or indirectly, sell or offer for sale or dispose of, or
attempt or offer to dispose of, any of the Debentures, Common Stock or any
similar security of the Company to, or solicit any offers to buy any thereof
from, or otherwise approach or negotiate in respect thereof with, any person or
persons, so as to require registration of the Debentures or the Reserved Shares
under the Securities Act.
<PAGE>
(g) Increase in Authorized Capital. At its next annual
meeting of shareholders which shall be held prior to July 1, 2000, the Company
shall propose to its shareholders an amendment to its Articles of Incorporation
which would increase the number of authorized shares of common stock to at least
200,000,000 and shall use its best efforts to cause such amendment to be adopted
by its shareholders.
9. Survival of Representations, Warranties and Agreements
Etc. All representations and warranties hereunder shall survive the Closing. All
statements contained in any certificate or other instrument delivered by the
Company or pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement shall constitute representations and warranties
by the Company under this Agreement.
10. Miscellaneous.
(a) Entire Agreement. This Agreement and the Schedules and Exhibits hereto
contain the entire agreement between the Company and the Purchaser with respect
to the transactions contemplated hereby and supersede all prior agreements or
understandings among the parties with respect thereto.
(b) Headings. Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.
(c) Notices. All notices or other communications provided for in this Agreement
shall be in writing and shall be sent by confirmed telecopy (with an undertaking
to provide a hard copy) or delivered by hand or sent by overnight courier
service prepaid to the address specified below.
If to the Company:
<PAGE>
CHS Electronics, Inc.
2000 N.W. 84th Avenue
Miami, Florida 33122
Attn: Antonio Boccalandro
Telecopy: (305) 908-7040
with a copy to: Shutts & Bowen
1500 Miami Center
201 S. Biscayne Blvd.
Miami, Florida 33131
Attn: Luis A. de Armas
Telecopy: (305) 381-9982
If to the Purchaser:
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11788
Attention: President
Telecopy: 516-342-4866
with a copy to:
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11788
Attention: General Counsel
Telecopy: 516-342-4866
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith.
(d) Counterparts. This Agreement may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement.
(e) Amendments. This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by each of (i) the Company, and (ii)
<PAGE>
the holders of 51% of the aggregate principal amount of the Debentures (or, if
the Debentures have been converted, the holders of 51% of the number of the
Reserved Shares issued upon such conversion). (f) Assignment. This Agreement
shall not be assignable by either party without the consent of the other party,
except that it, or the rights under this Agreement, in whole or in part, may be
assigned by the Purchaser to any party or parties who purchase the Debenture or
Debentures owned by the Purchaser (or, if the Debentures have been converted, to
any party or parties who purchase the Reserved Shares issued upon such
conversion). (g) Expenses; Documentary Taxes; Indemnification. (i) The Company
shall pay (A) all out-of-pocket expenses of each Holder, including fees and
disbursements of counsel for such Holder, in connection with the preparation of
this Agreement, (B) all out-of-pocket expenses of each Holder, including fees
and disbursements of counsel for such Holder, in connection with any waiver or
consent under this Agreement or under the Debentures or any amendment of this
Agreement or the Debentures or any default or alleged default under this
Agreement or under the Debentures and (C) if an Event of Default, as defined in
the Debentures, occurs, all out-of-pocket expenses incurred by each Holder,
including fees and disbursements of counsel, in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom. The Company shall indemnify each Holder against any
transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of this Agreement
or the Debentures.
(ii) The Company hereby indemnifies and holds
each Holder and its affiliates, shareholders, officers, directors, employees and
agents (collectively, the "Indemnified Parties") harmless from and against any
and all actions, causes of action, suits, losses, costs, claims, liabilities and
damages, and expenses incurred in connection therewith (irrespective of whether
any such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including attorneys' and other experts' fees and
disbursements (collectively, the "Indemnified Liabilities"), incurred by the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to (A) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds from the sale of the Debentures; or
(B) the entering into and performance of this Agreement and any other document
delivered in connection herewith byany of the Indemnified Parties, but excluding
Indemnified Liabilities arising under agreements entered into by the Purchaser
prior to the date hereof which are unrelated to this Agreement.
An Indemnified Party shall be entitled to be represented by the counsel of such
Indemnified Party's choice in connection with the defense (including any
investigation) of any third party claim against or involving such Indemnified
Party for which indemnification is sought under this Agreement and, on demand
(and as incurred), the Company shall pay, or reimburse such Indemnified Party
for, the fees and expenses of such counsel and all other expenses relating to
such defense. This indemnity shall survive repayment or transfer of the
Debentures, the conversion of any Debenture into Reserved Shares or the transfer
of any Reserved Shares. The Company's obligation to any Indemnified Party under
this indemnity shall be without regard to fault on the part of the Company with
respect to the violation or condition which results in
<PAGE>
liability of any Indemnified Party If and to the extent that the foregoing
undertaking is determined to be unenforceable for any reason, the Company hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities which is permissible under applicable law.
(h) CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(i) CONSENT TO JURISDICTION. EACH OF THE HOLDERS AND THE COMPANY HEREBY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE HOLDERS AND
THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE
HOLDERS AND THE COMPANY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH
PROCEEDING BY THE DELIVERY (BY OVERNIGHT COURIER) TO IT AT ITS ADDRESS SPECIFIED
IN SECTION 10(c) OF THIS AGREEMENT (OR IN THE CASE OF A HOLDER OTHER THAN THE
PURCHASER, TO ITS ADDRESS AS IT APPEARS IN THE REGISTER MAINTAINED BY THE
COMPANY). EACH OF THE HOLDERS AND THE COMPANY FURTHER AGREES THAT A FINAL
JUDGMENT IN ANY SUCH PROCEEDING SHALL BE CONCLUSIVE AND BINDING AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.
(j) WAIVER OF JURY TRIAL. THE COMPANY AND EACH OF THE HOLDERS
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
<PAGE>
IN WITNESS WHEREOF, this Debenture Purchase Agreement has been
duly executed by an officer of each of the parties hereto thereunto duly
authorized all on the date first above written.
CHS ELECTRONICS, INC.
By:/s/ Antonio Boccalandro
------------------------
Name: Antonio Boccalandro
Title: Chief Officer - Mergers and Acquisitions
COMPUTER ASSOCIATES INTERNATIONAL, INC.
By:/s/ Charles P. McWade
-----------------------
Name: Charles P. McWade
Title: Senior Vice President
Exhibit 2
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939. THIS DEBENTURE MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER THE SECURITIES ACT. ADDITIONALLY, THE TRANSFER OF THIS DEBENTURE IS
SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 6 OF THE DEBENTURE PURCHASE
AGREEMENT PURSUANT TO WHICH THIS DEBENTURE WAS PURCHASED AND NO TRANSFER OF THIS
DEBENTURE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
Floating Rate Convertible Debenture Due 2003
May 26, 1999
CHS ELECTRONICS, INC., a Florida corporation (the "Company"), for value
received, hereby promises to pay to the order of
Computer Associates International, Inc. or registered assigns, the principal
amount of
U.S. $14,900,000
on May 31, 2003 (or, if such day is not a business day (as defined in Section 9
below), the next succeeding business day) (the "Maturity Date"). The outstanding
principal amount of this Debenture shall bear interest from and including the
date hereof (the "Closing Date") to but excluding the Maturity Date (or, if a
Conversion Notice (as defined below) has been delivered pursuant to Section
3(a), the Conversion Date (as defined below)), for each Interest Period (as
defined below) applicable thereto, at a rate per annum (calculated on the basis
of the actual number of days elapsed over a year of 360 days) equal to the
Applicable Rate for such Interest Period. "Applicable Rate" means, for any day
during any Interest Period, the LIBOR Rate from time to time in effect plus
2.00%.
<PAGE>
Interest shall be paid semi-annually in arrears on each Interest Payment Date by
wire transfer to the account of each holder of a Debenture (a "Holder")
specified in writing to the Company. "Interest Period" means each period
beginning on and including an Interest Payment Date (or in the case of the first
Interest Period, the Closing Date) and ending on but excluding the immediately
succeeding Interest Payment Date (or in the case of the last Interest Payment
Date, the Maturity Date (or, if a Conversion Notice has been delivered pursuant
to Section 3(a), the Conversion Date)). "Interest Payment Date" means the last
business day of November and May of each year commencing on November 30, 1999.
The outstanding principal amount of this Debenture (together
with accrued interest thereon) shall be payable to the Holder on the Maturity
Date in lawful money of the United States by wire transfer of immediately
available funds to such account as the Holder shall specify in writing to the
Company.
SECTION 1. The Debentures. This Debenture is one of the
Debentures of the Company which are being issued in the aggregate principal
amount of $50,000,000 and are designated as "Floating Rate Convertible
Debentures Due 2003" (the "Debentures"). This Debenture was issued pursuant to
the terms of a Debenture Purchase Agreement, dated as of May 26, 1999 (the
"Purchase Agreement"), between the Company and Computer Associates
International, Inc. (the "Purchaser").
SECTION 2. (Reserved)
SECTION 3. Conversion. (a) At the option of the Holder, at any
time, subject to Section 3(e), the Debentures, in whole or in part, may be
converted on the Conversion Date (as defined below) at the principal amount
thereof, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of Common Stock, including the
associated Rights (as defined in the Debenture Purchase Agreement), at the
Conversion Price (as defined below), in effect at the time of conversion. The
price at which the number of shares of Common Stock to be delivered shall be
determined upon conversion shall be $5.50 per share of Common Stock (the
"Conversion Price"). The Conversion Price shall be adjusted in certain instances
as provided in this Debenture, including paragraph (d) of this Section 3.
(b) If the Holder elects to convert the Debentures, the Holder
shall provide written notice (the "Conversion Notice") to the Company (at the
Company's address) which states that the Holder elects to convert such
Debenture. In order to exchange the securities, the Holder shall surrender the
Debentures, duly endorsed or assigned to the Company or in blank. Subject to
Section 3(e), each conversion shall be deemed to have been effected immediately
prior to the close of business on the date the Holder delivers the Conversion
Notice (the "Conversion Date"). If such day is not a business day, and a day on
which the principal national securities exchange or market quotation system on
which the Common Stock is then listed or admitted for trading is open (a
"Trading Day"), then such conversion will be deemed to have been effected on the
next succeeding Trading Day. As promptly as practicable on or after the
<PAGE>
Conversion Date, the Company shall issue and deliver the certificates
representing the number of full shares of Common Stock, including the associated
Rights, issuable upon conversion, together with payment in lieu of any fraction
of a share, as provided in Section 3(c).
(c) No fractional shares of Common Stock shall be issued upon
conversion of Debentures. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of any Debenture, the Company shall
pay a cash adjustment in respect of such fraction in an amount equal to the same
fraction of the market price per share of Common Stock at the close of business
on the Conversion Date.
(d) The Conversion Price shall be subject to the following
adjustments:
(i) If, on any Conversion Date, the average closing price of
the Common Stock during the twenty trading days immediately preceding
the Conversion Date is less than the Conversion Price ($5.50, before
any anti-dilution adjustments pursuant to this Agreement including
Section 3(d)(ii)-(vii)), then the Conversion Price shall be reduced to
such average closing price (the "Market Conversion Price"). Adjustments
to the Conversion Price pursuant to this subsection (i) are referred to
as "Market Adjustments"; all other adjustments to the Conversion Price
provided in this Debenture are "Anti-Dilution Adjustments".
(ii) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and, conversely, in case outstanding shares
of Common Stock shall each be combined into a smaller number of shares
of Common Stock, the Conversion Price in effect at the opening of
business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(iii) In case the Company shall pay or make a dividend or
other distribution on any class of capital stock of the Company in
Common Stock, the Conversion Price in effect at the opening of business
on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or
other distribution, such reduction to become effective immediately
after the opening of business on the day following the date fixed for
such determination.
<PAGE>
(iv) In case the Company shall issue rights or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Conversion
Price, the Conversion Price in effect at the opening of business on the
day following the date fixed for the determination of stockholders
entitled to receive such rights or warrants shall be adjusted to such
subscription or purchase price, such reduction to become effective
immediately after the opening of business on the day following the date
fixed for such determination.
(v) In case the Company shall issue Common Stock (other than
shares of Common Stock issued upon exercise of rights, options and
warrants outstanding as of the date hereof), or rights, options or
warrants convertible into, or exchangeable or exercisable for, Common
Stock to any third party, or shall reprice or adjust the conversion,
exchange or exercise price of rights, options or warrants outstanding
as of the date hereof, at or to a price per share of Common Stock less
than the Conversion Price, the Conversion Price in effect at the
opening of business on the day following the date of such issuance,
repricing or adjustment shall be adjusted to such issue, conversion,
exchange or exercise price or, in the case of a repricing or
adjustment, such conversion, exchange or exercise price as so adjusted,
such reduction to become effective immediately after the opening of
business on the day following the date of such issuance, repricing or
adjustment, as the case may be, provided, no such adjustment shall be
made with respect to: (A) up to 3,833,333 shares of Common Stock to be
issued for $3 per share in connection with CHS's acquisition of SIS
Distribution Ltd.; (B) up to 2,653,000 shares of Common Stock to be
issued for $3 per share in connection with CHS's acquisition of Micro
Informatica Corp.; or (C) shares of Common Stock or Preferred Stock
issued pursuant to the Rights Agreement.
(vi) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness or assets (including securities, but excluding any rights
or warrants referred to in clause (iv) of this Section, any dividend or
distribution paid in cash out of the retained earnings of the Company
and any dividend or distribution referred to in clause (iii) of this
Section), the Conversion Price in effect at the opening of business on
the date fixed for the determination of stockholders entitled to
receive such distribution shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the date fixed for
the determination of stockholders entitled to receive such distribution
by a fraction of which the numerator shall be the Conversion Price on
the date fixed for such determination less the then fair market value
of the portion of the assets or evidences of indebtedness so
distributed applicable to one share of Common Stock and the denominator
shall be such Conversion Price, such adjustment to become effective
immediately prior to the opening of business on the day following the
date fixed for such determination.
<PAGE>
(vii) The reclassification of Common Stock into securities
including other than Common Stock shall be deemed to involve (A) a
distribution of such securities other than Common Stock to all holders
of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of stockholders
entitled to receive such distribution" and "the date fixed for such
determination" within the meaning of clause (vi) of this Section), and
(B) a subdivision or combination, as the case may be, of the number of
shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification
shall be deemed to be "the day upon which such subdivision becomes
effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or
combination becomes effective" within the meaning of clause (ii) of
this Section).
(e) If the Holder elects to convert the Debenture and deliver a
Conversion Notice to the Company which provides for conversion at a
Conversion Price which is lower than the initial Conversion Price, as
adjusted only for Anti-Dilution Adjustments, then the Company shall
have the right to redeem the Debenture intended to be converted 60 days
after delivery of the Conversion Notice. The Closing of the redemption,
if any, shall occur on the sixtieth day following delivery of the
Conversion Notice. During the sixty day period the Holder shall have
the right at any time to rescind the Conversion Notice by written
notice to the Company; and consequently such redemption shall
automatically be terminated.
(f) Whenever the Conversion Price is adjusted pursuant to
Section 3(d):
(i) the Company shall compute the adjusted Conversion Price and
shall prepare a certificate signed by the Company setting forth the
adjusted Conversion Price showing in reasonable detail the facts upon
which such adjustment is based; and
(ii) a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price shall
forthwith be prepared, and as soon as practicable after it is prepared
(together with a copy of the certificate referred to in clause (i)
above), such notice shall be mailed by the Company to all Holders.
The term "Person" shall mean an individual, a company, a partnership, a limited
liability company, a trust, an unincorporated association or any other entity or
organization, including, without limitation, a government or political
subdivision or an agency, instrumentality or official thereof.
(g) Notwithstanding anything to the contrary set forth in the
Debentures, unless and until the Company's stockholders have approved the
transactions contemplated by the Purchase Agreement, the Debentures and the
<PAGE>
Warrants, the Company shall not be obligated to issue more than the number of
shares of Common Stock permitted under the rules of the New York Stock Exchange
(as adjusted to reflect stock dividends, stock splits, recapitalization,
reorganization, stock exchange or other combination) (the "NYSE Limit") upon
conversion of the Debentures and/or exercise of the Warrants, on a combined
basis. If, on any Conversion Date, the Debentures are converted into a number of
shares of Common Stock that is less than the number of shares that the
Debentures would have been convertible into had the NYSE Limit not been in
effect, the Company shall, within sixty days after such Conversion Date, pay to
the Holder by wire transfer of immediately available funds an amount equal to
the product of (1) the excess of (A) such number of shares that would have been
issued upon such conversion had such limitation not been in effect over (B) such
number of shares that were being issued upon such conversion and (2) the closing
price of the Common Stock on the trading day immediately preceding the
Conversion Date; provided that the amount paid pursuant to this sentence shall
be applied to repay the unpaid balance of the Debentures which was unable to be
converted pursuant to the NYSE Limit.
(h) If (i) the Holder (A) elects to convert this Debenture as
provided herein; and (B) is unable to convert all of the outstanding principal
of the Debenture because of the NYSE Limit; and (ii) the Company fails to pay in
full the amount required to be paid by the Company to the Holder pursuant to
Section 3(f), then the Company shall call a meeting of its shareholders (the
"Special Meeting") for the purpose of approving the Purchase Agreement, the
Debenture and the Warrants (the "Transaction Documents") including without
limitation, the Holder's acquisition of CHS Common Stock in excess of the NYSE
Limit ("Excess Shares"), all in accordance with Section 312.03 of the Rules of
the NYSE. The Special Meeting shall be held within 120 days after the Company's
receipt of the Conversion Notice subject to compliance with SEC proxy
regulations. Notwithstanding anything to the contrary set forth in the
Debentures, in no event shall the CHS Board of Directors be required to
recommend to CHS shareholders that they approve, at the Special Meeting, the
Holder's acquisition of Excess Shares. If at the Special Meeting the CHS
shareholders fail to approve the Transaction Documents as provided hereby, then
(a) CHS shall be required to pay the Holder, in addition to the outstanding
principal due under the Debenture, the Make-Whole Amount defined below, (b)
Holder shall not acquire any Excess Shares, and, (c) the shareholders' failure
to approve the Transaction Documents shall not affect the Holders' (1) rights to
acquire, own or vote any shares of CHS Common Stock within the NYSE Limit or (2)
other rights under the Transaction Documents.
"Make-Whole Amount" means an amount equal to the excess of (x) the amount of
interest that would have been due on the original outstanding principal amount
of the Debentures from the date of issuance through and including the Conversion
Date and for such unpaid amount from the Conversion Date through the payment
datehad the Applicable Rate been equal to 21%, over (y) the amount of interest
that was actually due and paid on the applicable outstanding principal amount of
the Debentures for such periods.
<PAGE>
(i) The Company shall at all times reserve and keep available,
free from any pre-emptive rights, out of its authorized but unissued Common
Stock, for the purpose of effecting the conversion of Debentures and the
exercise of the Warrants, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding Debentures and Warrants (but in
no event less than 11,579,054 shares).
(j) The Company will pay any and all transfer, documentary and
similar taxes or charges that may be payable in respect of the issue or delivery
of shares of Common Stock on conversion of Debentures pursuant hereto. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of shares of Common
Stock in a name other than that of the Holder of the Debenture or Debentures to
be converted, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Company the amount of any such tax,
or has established to the satisfaction of the Company that such tax has been
paid.
(k) The Company covenants that all shares of Common Stock which
may be issued upon conversion of Debentures will upon issue be fully paid and
nonassessable and, except as provided in Section 3(j), the Company will pay all
taxes, liens and charges with respect to the issue thereof.
(l) All Debentures that have been converted shall be promptly
delivered to the Company to be canceled by the Company.
SECTION 4. Exchange or Replacement of Debentures. (a) The Holder
of any Debenture, at such Holder's option may in person or by duly authorized
attorney surrender such Debenture for exchange, at the office or agency of the
Company maintained pursuant to Section 6(a) of this Debenture, and receive in
exchange therefor a new Debenture in the same principal amount as the
outstanding principal amount of the Debenture so surrendered and bearing
interest at the same annual rate as the Debenture so surrendered, each such new
Debenture to be dated as of the most recent Interest Payment Date on the
Debenture so surrendered and to be in such outstanding principal amount and
payable to such person or persons, or order, as such Holder may designate in
writing; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any new Debenture in a name other than that of the Holder of the
Debenture surrendered in exchange therefor; provided, further, however, that the
Company shall not be required to so register the transfer unless the conditions
for transfer in the Purchase Agreement have been satisfied. The Holder shall
give to the Company 10 days' prior written notice of such Holder's intention to
make such exchange.
(b) Upon receipt by the Company of evidence satisfactory to it
of the loss, theft or destruction, mutilation of any Debenture and (in case of
<PAGE>
loss, theft or destruction) of indemnity satisfactory to it, and upon surrender
and cancellation of such Debenture, if mutilated, the Company will execute and
deliver in lieu of such Debenture a new Debenture of like tenor. Any such new
Debenture shall be dated as of the most recent Interest Payment Date on the
Debenture in lieu of which such new Debenture is executed and delivered. The
term "outstanding" when used in this Debenture with reference to the Debentures
as of any particular time shall not include (i) any Debenture in lieu of which a
new Debenture has been executed and delivered by the Company in accordance with
the provisions of this Section and (ii) any Debenture held or beneficially owned
by the Company or any of its affiliates.
SECTION 5. Amendments and Waivers. With the written consent of
the Holders of at least 51% of the aggregate outstanding principal amount of the
Debentures at the time outstanding, any covenant, agreement or condition
contained in the Debentures may be waived (either generally or in a particular
instance and either retroactively or prospectively), or such Holders, and the
Company may from time to time enter into agreements for the purpose of amending
any covenant, agreement or condition of the Debentures or changing in any manner
the rights of the holders of the Debentures or the Company; provided, however,
that:
(i) no such amendment or waiver shall change the Maturity Date
of this Debenture or reduce the rate or extend the time of payment of
interest hereon, or reduce the amount of the payment of interest
hereon, or reduce the amount of the principal hereof, or modify any of
the provisions of this Debenture with respect to the payment hereof,
without in any such case the consent of the Holder of this outstanding
Debenture; and
(ii) no such waiver shall extend or affect any obligation not
expressly waived or impair any right consequent thereon.
Any such amendment or waiver shall be binding upon each future
Holder of this Debenture and upon the Company, whether or not such Debenture
shall have been marked to indicate such amendment or waiver, but any Debenture
issued thereafter shall bear a notation referring to any such amendment or
continuing waiver.
SECTION 6. Covenants.
(a) The Company shall maintain an office where notices,
presentations and demands to or upon the Company in respect of Debentures,
including those relative to conversion of the Debentures, may be given.
(b) The Company shall keep at such office a register at its
expense, which shall provide for the registration and transfer of Debentures.
The Company and any agent of the Company may treat the person in whose name any
Debenture is registered as the Holder of such Debenture for the purpose of
receiving payment of the principal and interest on such Debenture and for all
<PAGE>
other purposes, whether or not such Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
(c) The Company agrees that so long as any of the Debentures
are outstanding, it shall not directly or indirectly (i) declare or pay any
dividend (other than a stock dividend) or make any distribution on its capital
stock or to the holders of its capital stock, (ii) purchase, redeem or otherwise
acquire or retire for value, or permit any of the Subsidiaries to, directly or
indirectly, purchase, redeem or otherwise acquire or retire for value, any such
capital stock (or options, warrants or other rights to acquire such capital
stock), (iii) except as provided under this Debenture, or required by the
Indenture dated as of April 9, 1998 by and among the Company, certain of its
subsidiaries and the Chase Manhattan Bank as Trustee relating to $200,000,000
principal amount of 9 7/8% Senior Notes due 2005 (the "Indenture"), redeem,
repurchase, defease (including, but not limited to, in-substance or legal
defeasance) or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment, Indebtedness of
the Company which is pari passu or subordinate (whether pursuant to its terms or
by operation of law) in right of payment to the Debentures and which is
scheduled to mature (after giving effect to any and all options to extend the
maturity thereof) on or after the maturity date of such Debentures (after giving
effect to any and all options to extend the maturity thereof).
(d) The Company agrees that as long as any of the Debentures
are outstanding, it shall not (i) consolidate with or merge into any other
Person or (ii) sell, lease or otherwise transfer, directly or indirectly, all or
any substantial part of the assets of the Company and the Subsidiaries, taken as
a whole, to any other Person unless (A) the successor formed by such
consolidation or the survivor of such merger or the Person that acquires by
conveyance, transfer or lease all or any substantial part of the assets of the
Company and the Subsidiaries as an entirety, as the case may be, shall be a
solvent corporation organized and existing under the laws of the United States
or any State thereof (including the District of Columbia), and, if the Company
is not such corporation, such corporation shall have executed and delivered to
each holder of any Debentures its assumption of the due and punctual performance
and observance of each covenant and condition of the Purchase Agreement and the
Debentures and (B) immediately after giving effect to such transaction, no Event
of Default and no condition or event which with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of Default, shall
have occurred and be continuing.
(e) The Company agrees that so long as any of the Debentures
are outstanding, neither the Company nor any of the Subsidiaries will in any
manner, directly or indirectly, incur or be liable in respect of any
Indebtedness senior to or ranking pari passu with the Debentures, except:
(i) Indebtedness of the Company represented by the Debentures;
<PAGE>
(ii)Indebtedness of the Company existing as of May 26, 1999;
(iii) other Indebtedness permitted by the Indenture,
but which shall not be senior to or rank ahead of the Debenture; and
(iv) extensions, refinancings, amendments and modifications of
any Indebtedness described in clause (ii) above, provided that the
principal amount of such Indebtedness is not increased.
"Indebtedness" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of such Person as lessee
which are capitalized in accordance with generally accepted accounting
principles, (v) all reimbursement obligations of such Person (whether contingent
or otherwise) in respect of letters of credit, banker's acceptances, surety or
other bonds and similar instruments, (vi) all obligations of such Person to
purchase securities (or other property) which arise out of or in connection with
the sale of the same or substantially similar securities or property, (vii) all
Indebtedness of others secured by a Lien (as defined below) on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, and (viii)
all Indebtedness of others guaranteed by such Person or for which such Person is
otherwise contingently liable.
(f) The Company agrees that so long as any of the Debentures
are outstanding, neither the Company nor any of the Subsidiaries shall create,
incur, assume or suffer to exist any mortgage, deed of trust, security interest,
lien or other encumbrance (each, a "Lien") upon any of its properties or assets,
whether now owned or hereafter acquired, except Liens in favor of holders of the
Debentures and Permitted Liens (as defined below).
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceeding promptly instituted and diligently conducted and for which a reserve
or other appropriate provisions, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
<PAGE>
obligations, bankers' acceptances, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
similar nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other irregularities that do not materially interfere with the ordinary
course of business of the Company or any of its Restricted Subsidiaries; (vi)
Liens (including extensions and renewals thereof) upon real or personal property
acquired after the Closing Date; PROVIDED that (a) such Lien is created solely
for the purpose of securing Indebtedness Incurred, in accordance with Section
6.6 of the Indenture, (1) to finance the cost (including the cost of design,
development, construction, acquisition, installation or integration) of the item
of property or assets subject thereto and such Lien is created prior to, at the
time of or within six months after the later of the acquisition, the completion
of construction or the commencement of full operation of such property or (2) to
refinance any Indebtedness previously so secured, (b) the principal amount of
the Indebtedness secured by such Lien does not exceed 100% of such cost and (c)
any such Lien shall not extend to or cover any property or assets other than
such item of property or assets and any improvements on such item and any
proceeds thereof; (vii) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property or
assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Subsidiaries relating to such property
or assets; (ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (x) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xi) Liens on property
of, or on shares of Capital Stock or Indebtedness of, any Person existing at the
time such Person becomes, or becomes a part of, any Restricted Subsidiary;
PROVIDED that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets acquired
and any proceeds thereof; (xii) Liens in favor of the Company or any Restricted
Subsidiary; (xiii) Liens arising from the rendering of a final judgment or order
against the Company or any Restricted Subsidiary of the Company that does not
give rise to an Event of Default; (xiv) Liens securing reimbursement obligations
with respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (xv)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(xvi) Liens encumbering customary initial deposits and margin deposits, and
other Liens that are either within the general parameters customary in the
industry and incurred in the ordinary course of business, in each case securing
Indebtedness under Interest Rate Agreements and Currency Agreements and forward
contracts, options, future contracts, futures options or similar agreements or
arrangements designed solely to protect the Company or any of its Restricted
Subsidiaries from fluctuations in interest rates, currencies or the price of
commodities; (xvii) Liens arising out of conditional sale, title retention,
consignment or similar arrangements for the sale of goods entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
in accordance with the past practices of the Company and its Restricted
<PAGE>
Subsidiaries prior to the Closing Date; and (xviii) Liens on or sales of
receivables, including related intangible assets and proceeds thereof. All
defined terms in this definition shall have the meanings set forth in the
Indenture.
(g) The Company shall deliver (by overnight courier) to each
Holder promptly following the occurrence thereof written notice of (i) an Event
of Default or of any condition or event which, after notice, lapse of time, or
both, could constitute an Event of Default, and (ii) the commencement of any
action, suit, claim, investigation or legal or administrative or arbitration
proceeding which could have a material adverse affect on the Company
Subsidiaries taken as a whole.
SECTION 7. Voting Rights. Holders of the Debentures holding at
least a majority of the aggregate principal amount outstanding under the
Debentures shall have the right, voting as a class, to designate one director to
serve on the CHS Board of Directors. The initial director shall be elected to
the Board of Directors by the Board of Directors promptly after receipt of
written notice from the Holder of a majority in interest of the outstanding
Debentures. Thereafter, so long as the Debentures remain outstanding, upon
expiration of such director's three year term, the Company's Board of Directors
shall nominate such director (or a replacement designated by Holders of a
majority in interest of the outstanding Debentures), shall use their best
efforts to cause the Company's shareholders to vote their shares to elect such
person as a director, and shall vote their own shares in favor of the election
of such person. During such time as the Debentures remain outstanding, the
Company shall maintain Directors and Officers Liability Insurance in an amount
of at least $20 million.
SECTION 8. Events of Default.
(a) The following shall constitute an "Event of Default"
under the Debentures:
(i) the Company shall fail to pay when due any principal of
or interest on any Debenture or any other amount payable
under the Debentures or the Purchase Agreement;
(ii) the Company shall fail to observe or perform any
covenant contained in Section 6;
(iii)the Company shall fail to observe or perform any covenant
or agreement contained in the Debentures, the Warrants or the Purchase
Agreement (other than those covered by clause (i) or (ii) above) for 15
days after written notice thereof has been given to the Company;
<PAGE>
(iv) any representation, warranty, certification or statement
made by the Company in the Purchase Agreement, in the Debentures or in
the Warrants or in any certificate, financial statement or other
document delivered pursuant to the Purchase Agreement or the Debentures
shall prove to have been incorrect in any material respect when made;
(v) the Company or any of its subsidiaries shall fail to make
any payment in respect of any Material Indebtedness (as defined below)
when due or within any applicable grace period;
(vi) any event or condition shall occur which (A) results in
the acceleration of the maturity of any Material Indebtedness or (B)
enables (or, with the giving of notice or lapse of time or both, would
enable) the holder of such Indebtedness or any Person acting on such
holder's behalf to accelerate the maturity thereof;
(vii) the Company or any of its subsidiaries shall commence a
voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action to
authorize any of the foregoing;
(viii) an involuntary case or other proceeding shall be
commenced against the Company or any of its subsidiaries seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Company or
any of its subsidiaries under the federal bankruptcy laws as now or
hereafter in effect;
(ix) any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $100,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent
to terminate a Material Plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
<PAGE>
decree adjudicating that any Material Plan must be terminated; or there
shall occur a complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c) (5) of ERISA, with respect to, one or
more Multiemployer Plans which could cause one or more members of the
ERISA Group to incur a current payment obligation in excess of
$200,000;
(x) Except as permitted by the Agreement a judgment or order
for the payment of money in excess of $1,000,000 shall be rendered
against the Company or any of its subsidiaries and such judgment or
order shall continue unsatisfied and unstayed for a period of 30
business days; or
(xi) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
(other than the Purchaser and its affiliates) after the date hereof
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 20% or more of the outstanding shares of common stock of the
Company; or individuals who were directors of the Company as of the
date hereof (together with any new director whose election by the
Company's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the
beginning of such period or whose election or nomination was previously
so approved) shall cease for any reason to constitute a majority of the
board of directors of the Company (a "Change of Control").
For purposes of this Section, "Material Indebtedness" means
Indebtedness (other than the Debentures) of the Company or one or more of any
Subsidiaries, arising in one or more related or unrelated transactions, in an
aggregate principal amount exceeding $10,000,000; provided that such term shall
not include the Indebtedness described on Schedule 3(n) of the Company
Disclosure Letter for so long as none of the following has occurred: (i) any
holder of such Indebtedness shall have either accelerated such Indebtedness or
commenced any enforcement action with respect thereto, (ii) any holder of such
Indebtedness shall have ceased to waive any default under such Senior
Indebtedness arising out of such failure to pay any Indebtedness described on
Schedule 3(n) and (iii) the aggregate dollar amount of all such outstanding
Indebtedness specified on Schedule 3(n) (other than fees, interest or penalties
thereon) shall have increased above the level so specified. As used herein, the
terms "ERISA", "ERISA Group", "Material Plan", "Multiemployer Plan" and "PBGC"
have the meanings set forth in the Purchase Agreement.
(b) In case of the happening of an Event of Default, then, and
in every such happening and at any time thereafter during the continuance of
such Event of Default, the Holders of at least 51% in interest of Debentures at
the time outstanding may, by written notice to the Company, declare the
Debentures to be forthwith due and payable, whereupon the Debentures shall
become forthwith due and payable, both as to the outstanding principal amount
<PAGE>
thereof and accrued interest thereon, without presentment, demand, protest, or
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or therein to the contrary notwithstanding; provided that in
the case of any of the Events of Default specified in Section 7(a)(vii) or
7(a)(viii) above with respect to the Company, without any notice to the Company
or any other act by the Holders, the Debentures shall become forthwith due and
payable, both as to the outstanding principal amount thereof and accrued
interest thereon, without presentment, demand, protest, or other notice of any
kind, all of which are hereby expressly waived, anything contained herein or
therein to the contrary notwithstanding.
(c) In case an Event of Default shall have occurred and be
continuing, then, (i) the Holders of at least 51% in interest of the Debentures
at the time outstanding may proceed to protect and enforce such Holders' rights
either by suit in equity and/or by action at law, whether for the specific
performance of any covenant or agreement contained in the Purchase Agreement or
the Debentures or in aid of the exercise of any power granted in the Purchase
Agreement or in the Debentures, or proceed to enforce the payment of the
Debentures or to enforce any other legal or equitable right of the Holders of
the Debentures and (ii) the interest rate per annum with respect to any
Debenture shall, for each day that such Event of Default exists, be
automatically increased to a rate per annum equal to the sum of (A) 3% plus (B)
the prime rate of interest as announced from time to time by Credit Suisse First
Boston Corporation for such day. Any overdue principal of or interest on this
Debenture and any overdue amount payable hereunder or under the Purchase
Agreement shall bear interest, payable on demand, and in lawful money of the
United States, for each day until paid at the rate per annum specified in clause
(ii) of the immediately preceding sentence. No remedy herein conferred hereunder
is intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or not or hereafter existing at law or in equity or by statute or
otherwise. No course of dealing between the Company or any of its subsidiaries
and any Holder of Debentures or any delay on the part of any Holder of
Debentures in exercising any rights hereunder shall operate as a waiver of any
rights of any such person hereunder or under the Purchase Agreement.
SECTION 9. Extension of Maturity. Should the principal of or
interest on this Debenture become due and payable on other than a business day,
the maturity thereof shall be extended to the next succeeding business day, and
interest shall be payable thereon at the rate per annum (calculated on the basis
of the actual number of days elapsed over a year of 360 days) herein specified
during such extension. The term "business day" shall mean any day that is not a
Saturday, Sunday or legal holiday in the State of New York.
SECTION 10. GOVERNING LAW. THIS DEBENTURE SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
SECTION 11. CONSENT TO JURISDICTION. EACH OF THE HOLDER AND
THE COMPANY HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE
COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THE DEBENTURES OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH
OF THE HOLDER AND THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH OF THE HOLDER AND THE COMPANY CONSENT TO THE SERVICE OF PROCESS IN
ANY SUCH PROCEEDING BY THE DELIVERY (BY OVERNIGHT COURIER) TO IT AT ITS ADDRESS
SPECIFIED IN SECTION 9(c) OF THE PURCHASE AGREEMENT (OR IN THE CASE OF A HOLDER
OTHER THAN THE PURCHASER, TO ITS ADDRESS AS IT APPEARS IN THE REGISTER
MAINTAINED BY THE COMPANY). EACH OF THE HOLDER AND THE COMPANY FURTHER AGREES
THAT A FINAL JUDGMENT IN ANY SUCH PROCEEDING SHALL BE CONCLUSIVE AND BINDING AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW.
SECTION 12. WAIVER OF JURY TRIAL. EACH OF THE HOLDER AND THE
COMPANY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE DEBENTURES OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
CHS ELECTRONICS, INC.
By:/s/ Antonio Boccalandro
------------------------
Name: Antonio Boccalandro
Title: Chief Officer-Mergers and
Acquisitions
<PAGE>
[FORM OF TRANSFER NOTICE]
For value received hereby sells, assigns and transfers unto, whose social
security or other identifying number is and whose address (including postal zip
code)is and does hereby irrevocably constitute and appoint attorney to transfer
the said Debenture of the within named Company with full power of substitution
in the premises.
Dated:
Transferor
NOTICE: The Signature to this Notice must correspond with the name as written
upon the face of this Debenture and every particular, without alteration or
enlargement or any change whatever.
CHS Electronics, Inc.
COMMON STOCK PURCHASE WARRANT
Void after May 26, 2004 Right to Purchase 2,000,000
(Subject to Section 18) shares of Common Stock
(subject to adjustment)
No. W-1
CHS Electronics, Inc. (the "Company"), a Florida corporation, hereby
certifies that, for value received, Computer Associates International, Inc. (the
"Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time before 5:00 P.M. New York time, on
May 26, 2004 (subject to Section 18), fully paid and nonassessable shares of
Common Stock, $0.001 par value, of the Company, at the purchase price per share
(the "Purchase Price") of $5.50 (the "Initial Purchase Price"). The Initial
Purchase Price as may be adjusted from time to time as provided herein is
sometimes referred to herein as the "Purchase Price"). The number and character
of such shares of Common Stock, the Initial Purchase Price and the Purchase
Price are subject to adjustment as provided herein.
This Common Stock Purchase Warrant (the "Warrants"), evidencing the
right to purchase shares of Common Stock of the Company, is issued pursuant to a
certain Debenture Purchase Agreement (the "Agreement"), dated as of May 26,
1999, between the Company and Computer Associates International, Inc., a copy of
which is on file at the principal office of the Company. The Warrants evidence
rights to purchase an aggregate of 2,000,000 shares of Common Stock of the
Company, subject to adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a)The term "Company" includes any corporation which shall
succeed to or assume the obligations of the Company hereunder.
(b) The term "Common Stock" includes all stock of any class or
classes (however designated) of the Company, authorized on or after the
date hereof, the holders of which shall have the right, without
<PAGE>
limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference, and
the holders of which shall ordinarily, in the absence of contingencies,
be entitled to vote for the election of a majority of directors of the
Company (even though the right so to vote has been suspended by the
happening of such a contingency).
(c) The term "Other Securities" refers to any stock (other
than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) which the holders of the Warrants at
any time shall be entitled to receive, or shall have received, on the
exercise of the Warrants, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 6 or otherwise.
(d) The term "Shares" means the Common Stock issued or
issuable upon exercise of the Warrants.
(e) The term "Securities Act" means the Securities Act of
1933, or any successor federal statute, and the rules and regulations
of the Securities and Exchange Commission thereunder, all as the same
shall be in effect at the time.
(f) The term "Securities and Exchange Commission" or
"Commission" refers to the Securities and Exchange Commission or any
other federal agency then administering the Securities Act.
(g) The term "Securities Exchange Act" means the Securities
Exchange Act of 1934 or any successor federal statute, and the rules
and regulations of the Securities and Exchange Commission thereunder,
all as the same shall be in effect at the time.
1. Registration Rights.
The rights of the Holders of Warrants to register Shares shall
be as stated in the Agreement
2. Restricted Stock.
2.1 If, at the time of any transfer or exchange (other than a
transfer or exchange not involving a change in the beneficial ownership of such
Warrant or Shares) of a Warrant or Shares, such Warrant or Shares shall not be
registered under the Securities Act, the Company may require, as a condition of
allowing such transfer or exchange, that the Holder or transferee of such
Warrant or Shares, as the case may be, furnish to the Company an opinion of
counsel reasonably acceptable to the Company or a "no action" or similar letter
from the Securities and Exchange Commission to the effect that such exercise
<PAGE>
transfer or exchange may be made without registration under the Securities Act.
In the case of such transfer or exchange and in the case of an exercise of a
Warrant if the Shares to be issued thereupon are not registered pursuant to the
Securities Act, the Company may require a written statement that such Warrant or
Shares, as the case may be, are being acquired for investment and not with a
view to the distribution thereof. The certificates evidencing the Shares issued
on the exercise of the Warrants shall, if such Shares are being sold or
transferred without registration under the Securities Act, bear a legend to the
effect that the Shares evidenced by such certificates have not been so
registered.
2.2 (a) The Company shall make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, at all times.
(b) The Company shall file with the Commission in a timely manner all
reports and other documents as the Commission may prescribe under Section 13(a)
or 15(d) of the Exchange Act so long as the Company is subject to such reporting
requirements of the Exchange Act.
(c) The Company shall furnish to a Holder and/or a prospective
purchaser of such Warrants or Shares designated by such Holder, forthwith upon
request, (i) a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 under the Securities Act and of the reporting
requirements of the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company, (iii) any other reports and documents necessary
to satisfy the information-furnishing condition to offers and sales under Rule
144A under the Securities Act, and (iv) such other reports and documents as a
Holder of any Warrants or Shares reasonably requests to avail itself of any rule
or regulation of the Commission allowing such Holder to sell any such securities
without registration.
3. Exercise of Warrant.
3.1 Exercise in Full. The holder of this Warrant may exercise
it in full by surrendering this Warrant, with the form of subscription at the
end hereof duly executed by such holder, to the Company at its principal office.
The surrendered Warrant shall be accompanied by payment, in cash or by certified
or official bank check payable to the order of the Company, in the amount
obtained by multiplying the number of shares of Common Stock called for on the
face of this Warrant, as adjusted, by the Initial Purchase Price, as adjusted.
3.2 Partial Exercise. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in Subsection
3.1 upon payment of the amount obtained by multiplying (a) the number of shares
of Common Stock called for on the face of this Warrant, as adjusted, as shall be
designated by the holder in the subscription at the end hereof by (b) the
<PAGE>
Initial Purchase Price, as adjusted. On any such partial exercise, subject to
the provisions of Section 2 hereof, the Company at its expense will forthwith
issue and deliver to or upon the order of the holder hereof a new Warrant or
Warrants of like tenor, in the name of the holder hereof or as such holder may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock equal to the number of such shares called for on the face
of this Warrant, as adjusted, minus the number of such shares designated by the
holder in the subscription at the end hereof.
3.3 Exercise by Surrender of Warrant. In addition to the
method of payment set forth in Sections 3.1 and 3.2, and in lieu of any cash
payment required thereunder, the holder of this Warrant shall have the right at
any time and from time to time to exercise this Warrant in full or in part by
surrendering this Warrant in the manner specified in Section 3.1 in exchange for
the number of shares of Common Stock equal to the product of (x) the number of
shares as to which the Warrant is being exercised multiplied by (y) a fraction,
the numerator of which is the average closing price of the Common Stock during
the 20 trading days ending on the day prior to the date of exercise (the "Market
Price"), less the amount of the Purchase Price, as adjusted; and the denominator
of which is the Market Price.
3.4 Company Acknowledgment. The Company will, at the time of
the exercise, exchange or transfer of this Warrant, upon the request of the
holder hereof acknowledge in writing its continuing obligation to afford to such
holder or transferee any rights (including, without limitation, any right to
registration of the Shares) to which such holder or transferee shall continue to
be entitled after such exercise, exchange or transfer in accordance with the
provisions of this Warrant, provided that if the holder of this Warrant shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford to such holder or transferee any such
rights.
3.5 Limitation on Exercise. The exercise of the Warrant is
subject to certain limitations set forth in Section 3(g) of the Company's
Convertible Debentures issued pursuant to the Agreement.
4. Delivery of Stock Certificates, Etc., on Exercise. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable Shares to which such
holder shall be entitled on such exercise, plus, in lieu of any fractional Share
to which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the then Market Price of one full Share as computed in accordance
with Subsection 5.1(d) hereof.
5. Adjustment of Purchase Price and Number of Shares.
<PAGE>
5.1 The Initial Purchase Price and any subsequent Purchase
Price hereof shall be subject to adjustment from time to time as follows:
(a) In case the Company shall (i) pay a dividend on its Common
Stock in Common Stock, (ii) subdivide its outstanding shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares, then, in such an event, the Purchase Price in effect immediately prior
thereto shall be adjusted proportionately so that the adjusted Purchase Price
will bear the same relation to the Purchase Price in effect immediately prior to
any such event as the total number of shares of Common Stock outstanding
immediately prior to any such event shall bear to the total number of shares of
Common Stock outstanding immediately after such event. An adjustment made
pursuant to this subdivision (a), (i) shall become effective retroactively
immediately after the record date in the case of a dividend and (ii) shall
become effective immediately after the effective date in the case of a
subdivision or combination. The Purchase Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein.
(b) In case the Company shall issue shares of Common Stock
(other than shares of Common Stock issued (i) pursuant to the Rights Agreement
or upon exercise of rights, options and warrants outstanding as of the date
hereof, or (ii) in payment of the purchase price for companies acquired by the
Company prior to the date hereof or listed as a pending acquisition in Schedule
3(b)(ii) of the Agreement, provided that such Common Stock is issued at the then
Market Price; if issued below the Market Price, then adjustment is applicable),
purchase rights, options or warrants with respect to shares of Common Stock
entitling the holders thereof to subscribe for or purchase shares of Common
Stock at a Net Consideration Per Share (as defined in subdivision (e) below)
which is less than the Purchase Price at the time of such issuance, the Purchase
Price shall be adjusted to an amount equal to such Net Consideration Per Share.
Such adjustment shall be made whenever such purchase rights, options or warrants
are issued and shall become effective retroactively immediately after the record
date for the determination of stockholders entitled to receive such Common
Stock, rights or warrants. In the event the Company shall subsequently cancel or
terminate such purchase rights, options or warrants, the Purchase Price shall be
readjusted to be the same as if the Company had not issued such purchase rights,
options or warrants.
(c) In case the Company shall distribute to holders of shares
of Common Stock Other Securities, evidences of its indebtedness or assets
(excluding cash dividends or distributions) or purchase rights, options or
warrants to subscribe for or purchase such Other Securities, evidences of
indebtedness or assets (excluding those referred to in subdivision (b) above),
then in each such case the Purchase Price in effect thereafter shall be
determined by multiplying the Purchase Price in effect immediately prior thereto
by a fraction, of which the numerator shall be the total number of outstanding
shares of Common Stock multiplied by the current market price per share of
Common Stock (as determined in accordance with the provisions of subdivision (d)
<PAGE>
below) on the record date mentioned below, less the fair market value as
determined in accordance with Generally Accepted Accounting Principles
("GAAP")of the Other Securities, assets or evidences of indebtedness so
distributed or of such rights or warrants, and of which the denominator shall be
the total number of outstanding shares of Common Stock multiplied by such
current market price per share of Common Stock. Such adjustment shall be made
whenever any such distribution is made and shall become effective retroactively
immediately after the record date for the determination of stockholders entitled
to receive such distribution.
(d) For the purpose of any computation under subdivisions (b)
and (c) above, the current market price per share of Common Stock at any date
("Market Price") shall be deemed to be the average closing price on the New York
Stock Exchange during the twenty trading days immediately preceding such date.
(e) "Net Consideration Per Share" shall mean the amount equal
to the total amount of consideration received by the Company for the issuance of
such shares of Common Stock, purchase rights, options, warrants or other
purchase rights or convertible or exchangeable securities, plus the minimum
aggregate amount of consideration, if any, payable to the Company upon any
exercise or conversion thereof, divided by the aggregate number of shares of
Common Stock that would be issued if all such purchase rights, options,
warrants, or other purchase rights were exercised, exchanged or converted.
(f) No adjustment of the Purchase Price shall be made if the
amount of such adjustment shall be less than $.02 per share, but in such case
any adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment, which, together with any adjustment so carried forward, shall amount
to not less than $.02 per share. In case the Company shall at any time issue
Common Stock by way of dividend on any stock of the Company or subdivide or
combine the outstanding shares of the Common Stock, said amount of $.02 per
share (as theretofore increased or decreased, if the same amount shall have been
adjusted in accordance with the provisions of this subparagraph) shall forthwith
be proportionately increased in the case of a combination or decreased in the
case of such a subdivision or stock dividend so as appropriately to reflect the
same.
5.2. Upon each adjustment of the Purchase Price pursuant to
subdivisions (a) and (b) of Subsection 5.1, the number of shares of Common Stock
purchasable upon exercise of this Warrant Certificate shall be adjusted to the
number of shares of Common Stock, calculated to the nearest one hundredth of a
share, obtained by multiplying the number of shares of Common Stock purchasable
immediately prior to such adjustment upon the exercise of this Warrant
Certificate by the Purchase Price in effect prior to such adjustment and
dividing the product so obtained by the new Purchase Price.
<PAGE>
5.3 In case of any capital reorganization of the Company, or
of any reclassification of the Common Stock, this Warrant Certificate shall be
exercisable after such capital reorganization or reclassification upon the terms
and conditions specified in this Warrant Certificate, for the number of shares
of stock or other securities which the Common Stock issuable (at the time of
such capital reorganization or reclassification) upon exercise of this Warrant
Certificate would have been entitled to receive upon such capital reorganization
or reclassification if such exercise had taken place immediately prior to such
action. The subdivision or combination of shares of Common Stock at any time
outstanding into a greater or lesser number of shares of Common Stock shall not
be deemed to be a reclassification of the Common Stock of the Company for the
purposes of this Subsection 5.3.
5.4 Whenever the Purchase Price is adjusted as herein
provided, the Company shall compute the adjusted Purchase Price in accordance
with Subsection 5.1 and shall prepare a certificate signed by its Chairman of
the Board, Vice Chairman of the Board, President or Vice President and its
principal accounting officer setting forth the adjusted Purchase Price and
showing in reasonable detail the method of such adjustment and the fact
requiring the adjustment and upon which such calculation is based, and such
certificate shall forthwith be forwarded to the Warrant Holder.
5.5 In case at any time after the date of this Warrant
Certificate:
(a) The Company shall declare a dividend (or any other
distribution) on its shares of Common Stock payable otherwise than in cash out
of its earned surplus; or
(b) The Company shall authorize the granting to the holders of
its shares of Common Stock of rights to subscribe for or purchase any shares of
capital stock of any class or of any other rights; or
(c) The Company shall authorize any reclassification of the
shares of its Common Stock (other than a subdivision or combination of its
outstanding shares of Common Stock), or any consolidation or merger to which it
is a party and for which approval of any shareholders of the Company is
required, or the sale or transfer of all or substantially all of its assets or
all or substantially all of its issued and outstanding stock; or
(d) Events shall have occurred resulting in the voluntary and
involuntary dissolution, liquidation or winding up of the Company;
then the Company shall cause notice to be sent to the Warrant Holder at least 20
days prior (or 10 days prior in any case specified in clause (a) or (b) above,
or on the date of any case specified in clause (d) above) to the applicable
record date hereinafter specified, a notice stating (1) the date on which a
record is to be taken for the purpose of such dividend, distribution or rights,
or, if a record is not to be taken, the date as of which the holders of shares
of Common Stock of record to be entitled to such dividend, distribution or
<PAGE>
rights are to be determined or (2) the date on which such reclassification,
consolidation, merger, sale, transfer, initial public offering, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of shares of Common Stock of record shall be
entitled to exchange their shares for securities or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
5.6 The form of this Warrant Certificate need not be changed
because of any change in the Purchase Price pursuant to this Section 5 and any
Warrant Certificate issued after such change may state the same Purchase Price
and the same number of shares of Common Stock as are stated in this Warrant
Certificate as initially issued. However, the Company may at any time in its
sole discretion (which shall be conclusive) make any change in the form of this
Warrant Certificate that it may deem appropriate and that does not affect the
substance thereof. Any Warrant Certificate thereafter issued or countersigned,
whether in exchange or substitution for an outstanding Warrant Certificate or
otherwise, may be in the form as so changed.
6. Adjustment for Reorganization, Consolidation, Merger, Etc.
6.1 In case at any time or from time to time after May 31,
1999, the Company shall (a) effect a reorganization, (b) consolidate with or
merge into any other person, or (c) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company within 24 months from the date of
such transfer (any such transaction being hereinafter sometimes referred to as a
"Reorganization") then, in each such case, the holder of this Warrant, on the
exercise hereof as provided in Section 3 at any time after the consummation or
effective date of such Reorganization (the "Effective Date"), shall receive, in
lieu of the Shares issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such holder had so
exercised this Warrant, immediately prior thereto (all subject to further
adjustment thereafter as provided in Section 5), provided that the successor
corporation in any such Reorganization described in clause (b) or (c) above
where the Company will not be the surviving entity (the "Acquiring Company") has
agreed prior to such Reorganization in a writing satisfactory in form and
substance to the holder hereof that this Warrant shall continue in full force
and effect and the terms hereof shall be applicable to the shares of stock and
other securities and property receivable on exercise after the consummation of
such Reorganization, and shall be binding upon the issuer of any such stock or
other securities (including, in the case of any transfer of properties or assets
referred to above, the person acquiring all or substantially all of the
properties or assets of the Company). If the Acquiring Company has not so agreed
to continue this Warrant, then the Company shall give 30 days' prior written
notice to the holder of this Warrant of such Reorganization, during which 30-day
period (the "Notice Period") the holder at its option and upon written notice to
<PAGE>
the Company shall be able to (i) exercise this Warrant or any part thereof at an
exercise price (the "Discounted Exercise Price") equal to the then prevailing
purchase price hereunder discounted at the Discount Rate (as used herein the
"Discount Rate" shall mean the then prevailing interest rate on U.S. Treasury
Notes issued on (or immediately prior to) the date of such 30-day notice and
maturing on May 31, 2004 (or immediately prior thereto), such rate to be
compounded annually through May 31, 2004, and in no event to be less than 10%
annually); or (ii) on the Effective Date, require the Company to pay to the
holder of this Warrant an amount (the "Merger Profit Amount") equal to the
difference between the fair market value per share of common stock of the
Company being purchased by the Acquiring Company in the Reorganization and the
Discounted Exercise Price described in clause (i) above and the Warrant shall
simultaneously expire. The Merger Profit Amount shall be payable in the same
form as the common stockholders of the Company shall be paid by the Acquiring
Company for their shares of common stock of the Company. By way of example only,
if the Acquiring Company is acquiring shares of the Company's common stock in a
stock-for-stock exchange and the Acquiring Company is paying such common
stockholders in shares of the Acquiring Company's common stock value at $5 per
share for each share of common stock of the Company held by them, then if the
Discounted Exercise Price is $1, the holder of this Warrant would be entitled to
receive 4/5 of a share of the Acquiring Company's common stock for each share of
common stock of the company he would have been entitled to receive upon exercise
of this Warrant at the Discounted Exercise Price. The fair market value of any
noncash property received from the Acquiring Company upon the Reorganization
shall be determined in accordance with GAAP. If, upon the expiration of the
Notice Period, the holder of this Warrant has not elected either option
described in clause (i) or (ii) of this Section 6.1, this Warrant shall expire.
6.2 Dissolution. Except as otherwise expressly provided in
Subsection 6.1, in the event of any dissolution of the Company following the
transfer of all or substantially all of its properties or assets, the Company,
prior to such dissolution, shall at its expense deliver or cause to be delivered
the stock and other securities and property (including cash, where applicable)
receivable by the holders of the Warrants after the effective date of such
dissolution pursuant to this Section 6 to the holder or holders of the Warrants.
6.3 Continuation of Terms. Except as otherwise expressly
provided in Subsection 6.1, upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this
Section 6, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in Section 6.1.
<PAGE>
7. No Dilution or Impairment. The Company will not, by amendment of its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value of any shares
of stock receivable on the exercise of the Warrants above the amount payable
therefor on such exercise, (b) will at all times reserve and keep available out
of its authorized capital stock, solely for the purpose of issue upon exercise
of this Warrant as herein provided, such number of shares of Common Stock as
shall then be issuable upon exercise of this Warrant in full and shall take all
such action as may be necessary or appropriate in order that all shares of
Common Stock that shall be so issuable shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, (c) will not effect a subdivision or split up of
shares or similar transaction with respect to any class of the Common Stock
without effecting an equivalent transaction with respect to all other classes of
Common Stock, and (d) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding up, unless the rights of the
holders thereof shall be limited to a fixed sum or percentage of par value in
respect of participation in dividends and in any such distribution of assets.
8. Accountant's Certificate as to Adjustments. In each case of any
adjustment or readjustment in the Shares issuable on the exercise of the
Warrants, the Company at its expense will promptly cause independent certified
public accountants of recognized standing selected by the Company (and not
objected to by the holders of 25% or more of the Shares) to compute such
adjustment or readjustment in accordance with the terms of the Warrants and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by the
Company for any additional shares of Common Stock (or Other Securities) issued
or sold or deemed to have been issued or sold, (b) the number of shares of
Common Stock (or Other Securities) outstanding or deemed to be outstanding, and
(c) the Purchase Price in effect and number and type of Shares for which the
Warrants were exercisable immediately prior to such issue or sale and as each is
adjusted and readjusted on account thereof. The Company will forthwith mail a
copy of each such certificate to each holder of a Warrant, and will, on the
written request at any time of any holder of a Warrant, furnish to such holder a
like certificate setting forth the Purchase Price and the number and type of
Shares at the time in effect and showing how it was calculated.
9. Reporting Requirements.
<PAGE>
9.1 Financial Information. Prior to the exercise or expiration
of the right to exercise this Warrant the Company shall furnish to each holder
the information required to be sent to each purchaser of Debentures pursuant to
the Agreement.
The Company shall permit any holder of a Warrant, or agents thereof, at
any reasonable time and from time to time to examine and make copies of and
extracts from the records and books of account of, and visit the properties of,
the Company and any of its subsidiaries, and to discuss the affairs, finances,
and accounts of the Company and any of the subsidiaries with any of their
officers or directors and independent accountants (but no holder shall be
entitled to review any confidential or proprietary information of the Company
and its subsidiaries pursuant to this paragraph).
9.2 Notice of Record Date, Etc. In case of
(a) any taking by the Company of a record of the
holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive
any dividend or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any
other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all the
assets of the Company to or consolidation or merger of the
Company with or into any other person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding up of the Company, or
(d) any proposed issue or grant by the Company of any
shares of stock of any class or any other securities, or any
right or option to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other
securities (other than the issue of Shares on the exercise of
the Warrants),
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up, and (iii) the amount and
<PAGE>
character of any stock or other securities, or rights or options with respect
thereto, proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue or grant
is to be offered or made. Such notice shall be mailed at least 30 days prior to
the date specified in such notice on which any such action is to be taken.
10. Exchange of Warrants. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or (subject to Section 2) on the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such holder or as such holder
(on payment by such holder or any applicable transfer taxes) may direct, calling
in the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. Expenses. The Company agrees to pay any and all stamp, transfer
and other similar taxes payable or determined to be payable in connection with
the execution and delivery of this Agreement and the Warrants and the issuance
of the Warrants.
13. Warrant Agent. The Company may, by written notice to each holder of
a Warrant, appoint an agent having an office in New York, New York, for the
purpose of issuing Shares upon the exercise of the Warrants pursuant to Section
3, exchanging Warrants pursuant to Section 12, and replacing Warrants pursuant
to Section 13, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by
such agent.
14. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
15. Negotiability, Etc. This Warrant is issued upon the following
terms, to all of which each holder or owner hereof by the taking hereof consents
and agrees:
(a) title to this Warrant may be transferred by
<PAGE>
endorsement (by the holder hereof executing the form of
assignment at the end hereof) and delivery in the same manner
as in the case of a negotiable instrument transferable by
endorsement and delivery, provided that the Company shall have
the right of first refusal with respect to any transfer of
this Warrant or any part thereof, which right of first refusal
shall expire five (5) days after notice of any offer is
presented to the Company by the Holder;
(b) any person in possession of this Warrant properly
endorsed is authorized to represent himself as absolute owner
hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser
hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in
favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to all
rights represented hereby; and
(c) until this Warrant is transferred on the books of
the Company, the Company may treat the registered holder
hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
16. Notice, Etc. All notices and other communications from the Company
to the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
17. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant is being delivered in the State of New York and shall be
construed and enforced in accordance with and governed by its laws. The headings
in this Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof. This Warrant is being executed as an
instrument under seal. All nouns and pronouns used herein shall be deemed to
refer to the masculine, feminine or neuter, as the identity of the person or
persons to whom reference is made herein may require.
18. Expiration. The right to exercise this Warrant shall expire at the
later to occur of (a) 5:00 P.M., New York time, on May 31, 2004, and (b) thirty
days after the debt evidenced by the Convertible Debenture has been paid in full
or converted into shares of Common Stock of the Company, such that no portion of
the Convertible Debentures are outstanding or unpaid.
<PAGE>
Dated: CHS ELECTRONICS, INC.
(Corporate Seal) By:/s/ Antonio Boccalandro
----------------------
Antonio Boccalandro,
Chief Officer - Mergers and
Acquisitions
Attest:
